082508 Kzero Metanomics Transcript


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Metanomics is a weekly Web-based show on the serious uses of virtual worlds. This transcript is from a past show.

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082508 Kzero Metanomics Transcript

  1. 1. METANOMICS: KZERO AUGUST 25, 2008 ROBERT BLOOMFIELD: Good afternoon, and welcome to the season finale of Metanomics and, in fact, the end of an entire year of Metanomics. We started in mid-September 2007, back when I thought the way to take advantage of Virtual World technology was to give a lecture in exactly the same way I would have in a traditional classroom. Well, the show’s progressed a lot over the year, as Second Life’s technology has improved and as we learned better ways to take advantage of that technology. So now, instead of lectures, we have interviews and panel discussions. Instead of just relying on our guests, we have extremely rich chat streams that we integrate closely into the event, with questions for speakers and the frequent debate among listeners. Instead of having voice over Skype or the telephone, we now use Second Life’s native in-world voice for our speakers, which has one huge advantage: Our lips move when we talk. We also made some major improvements to the production of the show during our summer season, including a consistent and striking look and feel with thematic elements like the "M", the graph and the dot that tie together our show content with a much improved website. And I’d like to give my tremendous thanks to Bjorlyn Loon and JenzZa Misfit for making all of that happen, along with Chase Marellan from InterSection Unlimited. Well, that’s a quick history of the year in Metanomics, but what about the year in the Metaverse, and what about the year ahead? This show is an opportunity to answer those questions in two key industry sectors in the Metaverse. Erica Driver, of ThinkBalm, will give
  2. 2. us her thoughts on the enterprise sector, while K Zero’s Nic Mitham will weigh in on the consumer sector and especially the issues surrounding marketing and branding. Metanomics is brought to you by Simuality, our primary sponsor, maker of SlippCat. And we also thank our four supporting sponsors: Language Lab, Kelly Services, InterSection Unlimited and my own institution, the Johnson Graduate School of Management at Cornell University. As usual, our live venue in Second Life is the Muse Isle Arena, and we welcome everyone who is at our event partners across the grid: Colonia Nova Amphitheater, Meta Partners Conference Area, Rockliffe University and the Outreach Amphitheater of the New Media Consortium Educational Community Sims. As usual, we ask you to join our Metanomics Group in Second Life so that you can get information on our show and also take our survey. We have been running for the last couple weeks a survey, with the help of Idea City and Metaversality, and all group members are strongly encouraged to provide their opinion. I’d also like to mention that, if you join our group, well, we just broke the thousand-member mark. We’re at a thousand and one members right now. So welcome, everyone, to the Metanomics Group and, of course, the more people in the group, the more chances for a network effects and plain old fashioned networking within the group. So please do join us. As I mentioned before, we at Metanomics believe that one of the signature advantages of live events in Virtual Worlds is the rich and varied discussions that you can have in text chat at the same time we’re having a more focused conversation in voice. We use InterSection Unlimited’s ChatBridge system to transmit local chat to our website and website chat into
  3. 3. our event partners. So backchat brings you in touch with the people around Second Life and on the web, who share your interests wherever you are. So please do contribute the backchat, and keep in mind that what you type will be public. Okay. Now on to the show. We start by putting Erica Driver On The Spot to talk about enterprise uses of Virtual Worlds. Erica, welcome to Metanomics. ERICA DRIVER: Thank you, Robert. ROBERT BLOOMFIELD: Last week, Erica, we had Microsoft’s Zain Naboulsi on the show, and he praised your courage in moving from the safety of a job at Forrester Research, a well established company, to your own independent research firm, ThinkBalm. So can you tell us why you made that move? ERICA DRIVER: Sure. That was kind of Zain. Well, over the last year in my role as an analyst at Forrester Research, began to include coverage and thinking about immersive internet in my broader research around enterprise collaboration, strategy and platforms, it became really clear to me that we were onto something huge, absolutely huge. And as I began to really think about it and investigate it, it became clear to me that what’s happening now, with this very, very early stage immersive internet coming on the scene, will just as big an impact on the way that we work as the web did. And so I wanted to spend my working hours focused on this area, which is why I’ve gone off on my own and co-founded a new company called ThinkBalm, with my husband, Sam, who’s a great brain, who I’ve been eager to have a chance to work with. So, so far so good. It’s been a great change for me.
  4. 4. ROBERT BLOOMFIELD: Well, I wish you the best of luck in that. Now ThinkBalm is specifically focused on enterprise uses. We have a graphic from a pre-interview that lists some of the key enterprise uses that you have been tracking. So for example, enterprises can learn and rehearse business activities, communicate and collaborate prototype products, recruit and interview candidates, visualize complex data and remotely manage systems and facilities. So in keeping with the theme that this is a sort of a look back across the past year and ahead to the coming one, where do you think enterprises, or the Virtual World technologies, have made the most progress in allowing and taking advantage of these types of opportunities? ERICA DRIVER: As I look back over the past year, the use cases where I’ve seen the most activity have been in learning and training, meetings and conferences. I would say those are probably the top two, with a lot of activity going on also in data visualization and recruiting and interviewing. And that will continue. We’ll continue to see these kinds of activities grow and continue to be adopted. The activities where I expect to see a lot of effort moving forward over the coming year would be collaborative design and prototyping and remote system and facility management. ROBERT BLOOMFIELD: Can you talk about that last one just a little more? So I’m going to use a Virtual World to handle my assembly line in a manufacturing plant, that sort of thing. ERICA DRIVER: Let me give you a couple of examples that have been done already, to kind of give you an indication for where things are headed with that. So many of you who are listening today are familiar with what Implenia has done. Implenia is a huge construction
  5. 5. company in Switzerland, and they’ve built a virtual facilities operation center, and you can see this in Second Life if you go to the EOLUS One Island, E O L U S O N E. What they’ve done is that they’ve integrated the virtual environment with their Real World facilities management systems. And they’ve been able to actually reduce the cost of managing their buildings, and we’re talking about skyscrapers and football stadiums. Huge buildings. They’ve been able to reduce the cost of managing these buildings, in their pilot projects, by 20 to 27 percent. So that’s huge. Another example is what IBM is doing with the virtual data centers, and you can see demos of this as well in Second Life if you go to the IBM Island and look for the green virtual data center. They’ve integrated a layer of immersive technology with their Real World data center system so that an administrator can be in that virtual environment and have access to a huge array of data centers and manage the energy consumption, the heating and cooling, can be apprised of any problems that might be happening and so on. So I expect to see more and more of that. And I think we’ll even start to see some remote vehicle operation in virtual environments. So this is very, very early on, but I wouldn’t be surprised to see integrated video with virtual environments and remote tractor operation or forklift operation on a factory floor and that kind of thing. ROBERT BLOOMFIELD: Fascinating. Now you also talk about challenges, so there are opportunities, but there are also challenges. So some of the ones that you have talked about are, I guess, starting with skepticism, unclear business value, technology immaturity and fragmentation and a lack of technology standards and a sharp learning curve. So which of those do you see as being the most important ones that enterprises and Virtual World
  6. 6. developers are going to need to address the soonest? ERICA DRIVER: Well, the hot one is business value. We can get past all the skepticism in the universe if we can demonstrate business value. And when I’ve written articles about business value or ROI, that kind of thing, on our website, those are the articles that, you know, traffic goes through the roof. Everybody is hungry for stories about what’s the business reason to make investments in immersive technology. So we’ve got a lot more work to do, as an industry, to uncover the examples of business value and to communicate those. So that’s the top one. Though certainly a lot of technology challenges that are common to pretty much any emerging market, but those will work themselves out. I really think it’s about the business value. ROBERT BLOOMFIELD: So I actually am going to be giving a talk at the Second Life Community Convention Educational Track, on trying to persuade your principals or your deans or your VP of human resources why to use Virtual Worlds for education. So maybe you can help me with this. What examples do you see that have been the most successful or likely to be the most successful in persuading the people who have the money to spend, that there is business value in using Virtual Worlds? ERICA DRIVER: Yeah, I’ll be talking about this as well at the Virtual Worlds Expo in L.A. next week. And the way I think of it, sort of the high level answer to your question is the same answer that I’ve given for five years to project team leaders working on enterprise collaboration strategies, which is, it’s focusing on a business process, an improvement to that business process. I’ve seen people over and over again try to use false metrics--my
  7. 7. term for them--for things like how many hits does a website get or traffic through a virtual environment. These are not real measures of business value. So the way I’ve seen the most successful organizations do this is to pick one problem and one target audience. I’ll give you a couple of examples of places [AUDIO GLITCH] so at Microsoft, you probably heard Zain give a lot of detail about this, so I’ll just summarize the financial highlights. So what they found is that, after building all of the digital assets that they need to do marketing type events or educational events in Second Life, they can do these at about a third of what it would cost them to do the traditional physical road show type of event. So a third of the cost. That is a big measure of business value. And another example is out of Accenture. So Accenture built the Accenture Careers Island for recruiting in Second Life. And while I don’t have very detailed specifics, they were able to say that that island paid for itself after just five or six in-world events and that they were able to find a significant enough number of new hires. Now they’re targeting what they call the Facebook audience so, again, if you look at both of these examples. And I’ll give you a third one. The third example is from Michelin. Michelin has used Second Life to create a training island specifically to teach IT pros about enterprise architecture concepts. And, here again, I don’t have the hard business numbers, but they found, by interviewing people who’ve gone through this that it’s an extremely satisfying and productive way for people to learn about these complex concepts that they had trouble with before. So we’ll see more and more of these kinds of examples come up.
  8. 8. ROBERT BLOOMFIELD: So in our backchat, I saw a comment by Hydra Shaftoe, where he mentions a lot of the hurdles to establishing business value in Virtual Worlds is the single issue of employees not wanting to learn a new system. And you refer to a steep learning curve. Is that what you’re talking about, just getting the people to load the software for a Virtual World client or viewer and actually learn how to use it? Or are you looking more at the enterprise issue of figuring out how to manage Virtual World activities? ERICA DRIVER: I think it’s only partially about learning how to use a new piece of software. That people can figure it out. It’s more about the culture behind it and about people understanding why there’s value personally in it for them to use something new like this. So if you talk to the gamers, people who are out there playing massively multiplayer online games, they’ve built up a core set of understanding and skills for managing teams and for pulling people together and to solving quests together. Basically it’s team collaboration. Right? They’ve figured that out. But the everyday information worker isn’t a gamer, doesn’t have that experience. It seems like just a toy so there’s a huge hurdle to cross, a lot of learning that has to happen, for people to figure out, “Wow! Not only is it a new technology that could help me, it’s cool. It’s fun. It’s valuable and can help me do my job more quickly or effectively or learn more and have a good time doing it.” ROBERT BLOOMFIELD: Yeah, that’s fascinating and really echoes a report that I read a while ago, and I’m trying to remember. I think Seriocity might have been the authors of this report that looked at the gaming community at IBM--Byron Reeves, from Stanford, I believe, was one of the co-authors--and looking at how they are taking those leadership, you know, in different lessons and collaboration lessons from World of Warcraft into IBM. So maybe
  9. 9. someone who knows what I’m talking about can paste the link to that article into the chat. Erica, if I could, I’d like to close by just asking you a little about ThinkBalm itself and what you have coming up in the year. So one of the things you talk about on your website is the ThinkBalm Innovation Community. Can you tell us a little more about that? ERICA DRIVER: It makes my heart go pitter-patter to talk about this. The ThinkBalm Innovation Community is something that I’ve been dreaming about for a few solid months now. It’s a brand new community. We just launched it last week. It’s built on the Spigit Serious Game Engine. It’s called Innovation Spigit. It’s a web-based online community designed specifically for people who are the thought leaders, shakers and movers in this area of work-related use of the immersive internet. And what I’ve done is, we’re making an effort to pull all these people together. People can contribute ideas. They can help refine ideas. And there’s a whole market engine built right into this platform so that once ideas reach a certain stage, there’s a whole funny money currency system. People can begin trading stocks in these ideas and really help propelling things forward. And the mentality behind this community is very much in the line of sort of an open access type mentality where everyone who contributes to this community can gain value out of it. So with no proprietary IP or anything like this, it’s people putting their heads together to rapidly advance the immersive internet forward. So we’ve only been in production now for about three business days, and we’ve got more than 50 members who’ve joined. Eighteen ideas are percolating. People are posting blog posts, and it’s just a thrill to watch this take off. ROBERT BLOOMFIELD: Well, that sounds very exciting, and I look forward to seeing how
  10. 10. that progresses over the fall. Just in case anyone got the wrong idea, this is only the last Metanomics of this year. And we’re starting up again in the fall to go through the ’08-’09 academic year. Remember I am an academic so we follow the academic schedule. And so I look forward to covering again what the ThinkBalm Innovation Community can do. So, Erica Driver of ThinkBalm, thank you so much for taking your minute On The Spot in Metanomics. ERICA DRIVER: My pleasure, and thanks for having me. ROBERT BLOOMFIELD: Let’s move on now to our main event, an interview with Nic Mitham of K Zero, a Virtual Worlds firm with a focus on the consumer sector. Nic, welcome to Metanomics. NIC MITHAM: Hi, Beyers. How’s it going? ROBERT BLOOMFIELD: Oh, it’s going very well. Glad to have you here with us. Often I give a quick little bio of our guests before jumping in and asking them questions, but your story is such an interesting one, I thought I’d just let you tell it. It wasn’t very long ago that you had a traditional Real Life ad agency, and now you’ve got a Virtual Worlds focus company, K Zero. Can you just quickly tell us how you got from one to the other? NIC MITHAM: Yeah. No problem. Well, I spent seven years in the telecom sector originally, in kind of business planning and kind of strategic marketing roles and then moved over onto the advertising side of things, working for agencies. Set up my own agency in 2003. And
  11. 11. late summer of 2006 I was sent an email from one of my clients, by mistake, so it wasn’t meant to go to me. The client was talking about Second Life. I’d never really heard of Second Life before. Read the email, as I guess most of us would if they’re kind of sent emails by mistake and logged into Second Life. And about six or seven weeks later, I sold my agency to focus exclusively on Virtual Worlds and hence K Zero was set up and created. ROBERT BLOOMFIELD: Oh, that’s fascinating. And you’ve worked with a number of brands. Before we get to the specifics, I’d like to jump in with what might be a tough question, which is: We just heard Erica Driver, of ThinkBalm, talk about successes in the enterprise application sector of Virtual Worlds. But the brand plays, when we think about the brands that come into Virtual Worlds, and particularly Second Life, we typically see a very splashy introduction of their event, and then some silence followed by what is usually a quiet failure. Although sometimes when they pull out, it gets picked up by the media along the lines of, “Second Life is dying. Virtual Worlds are dying,” and so on. NIC MITHAM: Yeah. Empty desert islands and all that kind of thing. ROBERT BLOOMFIELD: Exactly. So what’s your take on that? Do you think that’s an accurate description, and, if so, what do you think is driving it? NIC MITHAM: Yeah. I would probably say it’s a fair point to say that about 90 percent of, say, the brands that went into Second Life in 2007 didn’t really create anything of value. There wasn’t much of a success. Having said that, I mean, of course, the media loves to talk about exaggerated points of the spectrum. So you know earlier in 2007, the media loved
  12. 12. Second Life, and then one or two reporters stopped talking about empty desert islands, and the media backlash suddenly cracks, and suddenly no one likes Second Life. But actually, there’s been several brands in Second Life where I actually think what they’ve done has been pretty good. And you could actually classify what they’ve done as a success. To give you a few names of some companies which I think have done a good job, I'd say Nissan was an excellent project and also one of the first clients in Second Life, which is worth pointing out. I think even before Nissan you had the loft project from Starwood Hotels. And just going back to a point Erica was making about the enterprise use of Virtual Worlds, with MPD, and kind of prototyping. The loft project was effectively testing the design, the layout, the patterns and the whole configuration of a hotel before it was built in the Real World. So I thought that was a very, very good project. Mercedes, again a good example of a brand that was willing to come in, and there’s been a few others. So of course, I’ve been quite vocal in pointing out quite a few of the errors or the issues or the failures in Second Life, as has lots of other people, but I think it’s really, really important to actually state that there’s been some brands that have done some good stuff as well. ROBERT BLOOMFIELD: Now you wrote a report providing sort of a seven-point plan for a successful marketing effort in Virtual Worlds. NIC MITHAM: Yeah. ROBERT BLOOMFIELD: And I believe we have a graphic of that. I think point number one
  13. 13. in your plan is, have a plan. NIC MITHAM: Always a good place to start. ROBERT BLOOMFIELD: I know you worked quite closely with L’Oreal on their campaign. So I thought maybe what we could do is walk through this, kind of hit the highlights of the seven-point plan by using the L’Oreal campaign as an example. So I guess, first, planning is planning. Is there anything about Virtual Worlds in particular that requires a different type of planning or that you just need to plan for different outcomes? NIC MITHAM: I think at the end of the day, and I say this quite a lot, but Virtual Worlds are just another marketing channel in the consumer sense. It’s not rocket science, and you can apply traditional, empirical and all those sort of tried and tested techniques that you’d apply to any other sort of marketing into a Virtual World. To tie that back to what we did for L’Oreal, the starting point was recognizing that the profile of a typical Second Life resident accurately matched the target market for L’Oreal, i.e., early 30s, high disposable incomes, well educated and all those kinds of things. So purely from a media planning perspective, there was a very good match and a fit between L’Oreal’s target market and the target market inside Second Life. Now just to kind of go off on a tangent really quickly on that: One of the mistakes lots of brands made going into Second Life was that their target market wasn’t the type market of a typical Second Life resident. That kind of explained some of the failures. Coming back to L’Oreal, they came to us and said, “We recognize the match in the target
  14. 14. markets. We’re quite keen to see if we can leverage some activity in the Real World into the Virtual.” And what that meant was, they used celebrity spokespeople such as Scarlett Johannson and Penelope Cruz to basically model their cosmetics in the Real World. So they gave us some pictures, Real World pictures, which was basically combinations of lipsticks and mascaras and eye shadows and all of those kinds of things. As a starting point- -okay, that's what we want to try and promote inside Second Life so, from there, the question was: How do we get this message out? What do we do? And, of course, I was adamant that the last thing that we would do is actually build out a private island, a dedicated island, because everyone else was doing it, and it just was not working. So instead, well, to the starting point, was that we took the Real Life makeup looks and created skins, so we color-matched the colors, the lipsticks and all the different shades, and actually made wearable skins for female avatars inside Second Life. That is kind of the easy way. Then what happens was, now that we’ve got these skins, we have these L’Oreal branded products, we need to actually push them now into the Virtual World. So the approach that we took was to basically negotiate and partner with existing virtual brands and virtual store owners inside Second Life. We ended up basically going with six stores, which, they [AUDIO GLITCH] have a customer base. They already have a distribution channel and a brand. And all that we did--and again, it’s not rocket science. This is just another marketing channel. We very simply just put the L’Oreal products into their stores. So from day one, we tapped into a really, really large distribution network, which would have been totally impossible if we’d basically gone down the private island route. So that was kind of the mechanics to get the products out.
  15. 15. And then, to support and try again make another link to the Real World, we actually then negotiated with Greenies Kitchen, which is a super-size kitchen run by Rezzable, and built a giant handbag and then put some near photo realistic recreations of Real World products into the kitchen. And the kitchen actually became a social focal point, if you like. So a product placement element and then a distribution mechanic and then a product-based approach to getting message out and doing some marketing. ROBERT BLOOMFIELD: I think we have a graphic of the Greenies Kitchen build, where you have this sort of like a Land of the Giants thing. You have this enormous handbag filled with L’Oreal goodies. So I thought a very interesting way of engaging directly with your possible consumers. I see Linda Sautereau, in the backchat, is mentioning that ad campaigns never last forever. So I’m wondering if you think that some of this so-called backlash is really just making a lot out of not very much. There isn’t a front page article every time someone ends a three-month advertising campaign saying that there was some fundamental failure. They usually do have limited timeframes. Do you think that’s part of what’s going on, just a sort of negative spin on what is often just a normal end of an advertising campaign? NIC MITHAM: [AUDIO BLANK] ROBERT BLOOMFIELD: Let’s see. I am not hearing. I may have lost sound. NIC MITHAM: I’m still here.
  16. 16. ROBERT BLOOMFIELD: Ah, there we go. Okay. NIC MITHAM: You got me? ROBERT BLOOMFIELD: Yes. Did you hear my last question? NIC MITHAM: Yes, I did. So I think it’s quite important to point out that a lot of the journalists and the media that wrote the stories about the whole kind of negativity of our marketing in Second Life, you kind of actually wonder have they ever even logged in. Do they really understand it? And you kind of saw the way some of these stories were amplified around the internet. Everyone likes a bad story or a negative story. These things tend to snowball. The marketing that’s happening now in Virtual Worlds hasn’t been held back at all by the press backlash, so it’s a storm in a teacup. ROBERT BLOOMFIELD: Okay. A couple other things I’d just like to touch on in the L’Oreal campaign. And one is that I guess I’d like to figure out how to track the money. We have this one graphic here where you can buy the four skins at some store that sells a bunch of things, shoes and so on. So it’s obvious to me what’s in it for L’Oreal. They’d be glad to just give this stuff away for free because they’re just looking for a way to engage their consumers. NIC MITHAM: Sure.
  17. 17. ROBERT BLOOMFIELD: So you mentioned there were half a dozen distributors that also sell other stuff. What was in it for them? And then sort of, I guess, what economists would call a negative externality: Now L’Oreal is giving away free skins. What about the skin designers? How do you make sure you don’t upset the skin designers more than you please the prospective consumers? NIC MITHAM: Sure. So again, this is marketing so you need to have a plan. This was quite an important piece of the initial planning, which was the last thing that we wanted to do was step on the toes or annoy the existing designers and retailers in Second Life that sell skins. And, of course, there’s dozens and dozens of them. So when we’re actually choosing which stores to put our products into, on purpose we did not go into any stores that sold other people’s skins. So that was really the main driver for it. Just to basically make sure because we wanted to promote these. We wanted to kind of uplift the focus on cosmetics and looking good in Virtual Worlds. So we were very, very cautious to actually not get too involved with the other skin designers. In terms of what was in it for them, we actually did quite a lot of advertising as well so we produced virtual printouts, which went into magazines such as Second Style. And all of the stores were actually referenced in the ads so they got some awareness of that. And then also through the rest of the campaign, all of the store owners basically tagged their land with L’Oreal Paris. So when people were searching for the skins, their stores actually came up. So in a way, we were kind of pushing and directing extra traffic to their venues. ROBERT BLOOMFIELD: Okay. That’s a classic model within, I guess really, any type of
  18. 18. advertising, and certainly within Virtual Worlds. NIC MITHAM: Yeah. ROBERT BLOOMFIELD: So let’s, if we could, just move on, change gears a little bit because I understand that you are getting some new types of business now instead of just running brand campaigns along the lines of what you did for L’Oreal. You’re also doing due diligence analyses in the venture capital space. NIC MITHAM: Yeah, basically we’re kind of doing a ton of stuff now. We’re doing less and less work directly with brands and more and more work with either Virtual World owners and operators, companies that have Virtual Worlds which are live or in development, and, at the same time, we’re doing a lot of work with VC’s, in terms of giving them insight into the sector as a whole because certainly, on the European side of things, and I guess Europe’s slightly behind North America, there’s an immense amount of interest from a VC perspective in looking into Virtuals, but the knowledge base isn’t there. So we provide a lot of insight, analysis, real numbers on a simplistic basis and on a more involved basis, due diligence services, to actually better explain potential opportunities to VC’s based on the business plans they’re presented with. ROBERT BLOOMFIELD: So now are these VC’s that are focusing specifically on the Virtual World space, or they’re just getting drawn into it because people are sending them Virtual World plans? NIC MITHAM: Yeah, it’s a lot of everything. My perspective in terms of a VC community in
  19. 19. Europe is that it’s about three or four months behind North America. [AUDIO GLITCH] billion dollars or so, I think Virtual Worlds, you know Virtual Worlds in these quotes is investing in Virtual Worlds. So only a sliver of that has come out of Europe so there’s kind of a time lag, if you like, between what’s happening in North America and what’s happening in Europe. So that’s kind of one of the main reasons. ROBERT BLOOMFIELD: Now to do what you do, then you need to have sort of a very high level view of the landscape of Virtual Worlds. And I know that you have gotten a lot of play out of some graphics that you have created that map out the sectors in the space and also map out by age groups. We’re going to pop these up-- NIC MITHAM: [CROSSTALK] ROBERT BLOOMFIELD: Yeah. We’re going to pop these up on the screen now. I do warn our viewers they’re pretty detailed. There’s a lot in there, and so we’ll be sending people to links through our backchat so they can look at something that’s a little more legible. But we’re going to start with the Virtual Worlds by sector, where you have split things by, for example, sports, education, fashion, lifestyle, music and so on and so forth. I’m wondering what sectors you see for the coming year are going to be the particularly hot ones. NIC MITHAM: Well, the quick and dirty answer is probably all of them because there’s just so much interest and of course that’s an easy thing to say, but obviously, the kid sector also, KT&T, Kids, Teens and Tweens as we refer to it, has still got an awful lot of mileage in it. There’s just so many companies which, say, in the next seven to 14 days they’re going to be
  20. 20. launching their World. So you can kind of break those down into two groups. ROBERT BLOOMFIELD: I just want to make sure I heard you correctly. You said in the next seven to 14 days. NIC MITHAM: Yes. ROBERT BLOOMFIELD: That’s because they’re all going to go to the Virtual Worlds Conference and Expo in L.A. and make their big announcement. NIC MITHAM: You got it. Absolutely. Absolutely. Now you can break the kids’ Worlds into--well, you can slice them and dice them in many ways, but how we kind of break them up, to look it at an opportunity basis, is Virtual Worlds which are created from scratch, with no Real World brand, and Virtual Worlds which are basically leveraged off existing products or brands. So an existing product or brand would be, for example, say, Barbie Girls. Or the upcoming Lego Universe. Now there’s huge, huge growth for those sorts of companies, where they’re basically taking a Real World product, which, in some cases, has been around for dozens and dozens of years, they’ve got huge brand recognition. They’ve got advocates. They’ve got all these people and all these boys and girls that know their product. And, in some cases, creating a Virtual World for those makes perfect sense, absolute perfect sense. The flip side to that is Worlds which are set up from scratch so those guys and girls have kind of got a bigger challenge because they--well, actually, there kind of three reasons.
  21. 21. Firstly, the market is very competitive in the first place. B: They have to build their business model very, very quickly because typically it’s driven by vested accounts, and there’s only so many eyeballs around. And thirdly, they have no brand so this is often overlooked by Virtual Worlds, the importance of building a brand. So that’s kind of a big issue for all of these dozens and dozens of Worlds which we’re going to kind of see launched up in the next couple of weeks. And then when you kind of go through the set because, in the map, you can see areas such a Mirror Worlds, which I think is going to be very, very successful, and I think then Mirror Worlds will work is actually tapping into older audiences. So Mirror Worlds less kind of tuned into the teenagers and the children and actually more in tune with older people. ROBERT BLOOMFIELD: Okay. Can I just get you to describe what a Mirror World is? NIC MITHAM: Yeah. Sure. So a Mirror World is basically recreating a real life place virtually. So a good example of that would be Twinity, the German-based World, which is mapping out Berlin. There’s a company based in London called Mirror, and they basically built a recreation of central London. And this is quite an important thing to kind of think about for older people. If you look at, for example, Second Life, from, say, an urban planning perspective, it’s chaotic. You don’t know what’s around the corner. You don’t always know where you are or which landscape you’re in, so it doesn’t really bring too much comfort. A Mirror World, on the other hand, actually _____cally and symbolically you know what’s around the corner because it’s a place that you’ve been to before. You might even live there. So Mirror Worlds is just simply recreating an existing city or venue or destination and
  22. 22. creating a Virtual World for it. ROBERT BLOOMFIELD: So new fantasy spaces for young kids and familiar tourist and residential spaces for the grownups, is that the idea? NIC MITHAM: Yeah. Kind of. But again, the wonderful thing about Virtual Worlds is that no one really knows what’s around the corner at a high level. We don’t really know where this sector is going, but one thing’s for sure, it’s going to get someone because there’s so many people and so many companies and so many organizations, such as yourselves, committing effort and brainpower to it. So we’ll end up where we should be. ROBERT BLOOMFIELD: Now we have a question in the backchat, and let me just make sure I can find who that is, from Dancer Morris: Where do Worlds like Virtual MTV fit into your taxonomy? NIC MITHAM: So I would basically slot Virtual MTV, in terms of the [graphicness?] of TV, films and books. And I think VMTV has done a fabulous job, a really, really fantastic job. For anyone in the audience who doesn’t know what VMTV did is they actually took their TV products, so the like of The Hills, Laguna Beach, Pimp My Ride, and then recreated those Real World places and settings and scenes inside a Virtual World environment. The main objective for that is something I call hand-holding, which is you watch the show on TV, and then you go online to be part of the show. And that’s all about kind of expanding and extending the relationship with the viewer and actually bringing them closer to the product. So I think they’ve done a really, really good job.
  23. 23. ROBERT BLOOMFIELD: Now one of the things that I see that’s striking in your graphics is that, in some of them, especially the ones for the kids, you use the size of the dot for each Virtual World to indicate their population. I guess what--so we’d have something like Habbo Hotel now. We’re up in the nine-figure numbers. Is that right? NIC MITHAM: Mm-hmm. ROBERT BLOOMFIELD: They’re closing in on a hundred million. NIC MITHAM: Yeah. This is something that we discuss a lot in terms of the transparency of numbers in the sector and being able to frame things. The first point there is that most Virtual Worlds are very reluctant to actually give out numbers. And, if they do give them out, they’ll tend to grab the biggest one possible, which is total wasted accounts. So in the graph that you’re referring to, where we’re kind of trying to demonstrate the size of the Worlds, we’re using the most easily attainable number, which is often, in some cases, a little bit misleading. I mean the value numbers, the unique accounts, and the active accounts. But rarely do you get a Virtual World give out those numbers. ROBERT BLOOMFIELD: So going back to what we were discussing at the top of the show with Erica Driver of ThinkBalm, we were talking about establishing business value for your Virtual World activities. So if you don’t have those numbers, that’s got to be very difficult to do.
  24. 24. NIC MITHAM: Yes, for sure. That’s one of the roles that K Zero plays and the roles that other companies plays, you know, is in the first instance when we’re speaking to brands, it’s just attempting to flame the media landscape and actually demonstrate to people the range of Worlds, the target markets and the opportunities available. ROBERT BLOOMFIELD: So I guess this is probably an opportune moment for me to just give a quick shout out to some colleagues of mine, who are the leadership of the American Accounting Association, a group of accountants who are thinking about using Second Life for some of their enterprise activities. And I just point out that getting good information on these numbers for the Virtual Worlds is a very interesting accounting problem, so might be something the accountants would want to tackle directly. So you’ve been working pretty actively with these different Worlds, trying to get inside, private information on exactly what is going on. Is that right? What their active user numbers are and things like that? Are you making any progress? NIC MITHAM: Yeah, absolutely. I mean we actually consulted several Virtual Worlds anyway so we’d get very good access to all of their metrics, which, obviously, we’re not allowed to publish. And then a good majority over and above that. We’re actually aware of and in possession of their metrics, but they’re provided to us on the basis that we don’t publish them. So we have a pretty good handle. Moving forward and kind of thinking slightly more medium term, as a sector and as an industry, we will have to get to the point soon where there’s some sort of organization that’s tracking World by World, metric by metric, month by month, all of these numbers. So there’s a bit of a hurdle for these Worlds and a bit of a mindset change for these people to get over, which is, it’s in the interests of the sector
  25. 25. as a whole for numbers to be shared so we can understand the dynamics and frame what’s going on. ROBERT BLOOMFIELD: Okay. So we’re coming to the close of our hour, and we’ve got a bunch of questions. I’d like to ask one actually from our producer, Bjorlyn Loon, Lynn Cullens, which is a two-parter. One is: Is your move toward doing things like due diligence for venture capitalists and being on retainer with Virtual World developers, do you see that crowding out your brand-marketing related business? NIC MITHAM: Sorry? ROBERT BLOOMFIELD: And, if so--sorry? NIC MITHAM: Sorry. I just didn’t quite catch the start of the question. ROBERT BLOOMFIELD: Well, the question is: As you move into more of this due diligence type of work for venture capitalists and then partnering with Virtual World developers, does that mean you’re moving out of the more traditional branding and marketing types of consulting work that you’ve been doing with, for example, L’Oreal? NIC MITHAM: Through design, no. Through just the sheer volume of inquiries and the kind of inbounds requests for insight that we get, we’re just kind of naturally moving that way. Having said that, K Zero nicely kind of fits in between various aspects of the sector so we still provide a lot of data to brands, but we do most of our work with the Worlds. But that
  26. 26. doesn’t mean that when a brand comes to us, we wouldn’t work with them. Actually, it probably makes their situation even easier because we’re really best placed to understand which World is best for the brand. ROBERT BLOOMFIELD: Okay. And then the second part of Bjorlyn’s question here is: So if they’re probably not going to go to K Zero, where would you see these people going? Who is going to be there to provide the type of planning and intelligent marketing initiative that they would need to succeed in a Virtual World? NIC MITHAM: Well, I think three or four years down the line, you’ll see most major ad agencies, just as they have social network and the Web 2.0 specialists in-house, they’ll have Virtual World consultants in-house. So I think that’s kind of where it’s moving. In terms of right here, right now, you still have companies like Millions Of Us, the Electric Sheep, guys that have been there and done it. So it’s a small number, but there’s a small number of quality people that can give advice, but I think, moving forwards and as the sector grows, it would just be a natural function inside an ad agency or a media agency or a marketing function. ROBERT BLOOMFIELD: Okay. Great. We’re pretty much out of time. I guess I’d like to close just by asking you we are going to hear a bunch of announcements, you indicated, over the next couple of weeks. And while I would never want you to break a nondisclosure agreement that you had signed and notarized by a lawyer, I’d love to hear your view of what we might keep our ears open for over the next couple weeks.
  27. 27. NIC MITHAM: Sure. Okay. I’ll throw some bait out for you then: Football Superstars, a UK-based Virtual World integrating the soccer game in London is coming down the pipe. Currently in closed Beta. And we don’t work for those guys so I can actually speak very briefly. Although we have a relationship with them, they don’t pay us. I think that’s going to be colossal. I think it’s going to be an extremely popular World because of the relevance and the popularity to football and also say tap into the early ’20s all the way up to ’50s and ’60s. I think that’s going to be a great tool to actually start getting some older people into Virtual Worlds. On the younger side, a couple little ones which I think are going to do very well: The first one is Franktown Rocks, which is actually [soft load?] so it’s already live. My kids fight. I have a Franktown Rocks. Not really well known, but an intriguing product. And then the third one, which is coming onboard kind of late September sort of early October is Digital Doghouse, which, again, is kind of an immersive toy space or a brand space. But, hey, what do I know? There’s no experts in Virtual Worlds, but there’s an awful lot happening, and that’s the great thing about the sector. ROBERT BLOOMFIELD: Yeah, that’s right. You can look at me, from accounting professor to instant Virtual World expert. Just add water and SLCN. Well, Nic, thank you so much for joining us today on Metanomics, and I look forward to seeing you in Los Angeles at the Virtual World Conference and Expo. And I look forward to hearing about the announcements that you couldn’t say anything about because you’re under nondisclosure agreements.
  28. 28. NIC MITHAM: Sure. Well, thanks for the invitation, Beyers. It was great to be here, and the coffee was lovely. ROBERT BLOOMFIELD: Thank you. Well, now it’s time for the segment that we always use to close our show: Connecting The Dots. Now you might think I’m going to connect the dots from last September until today, but instead, I’m going to use another milestone, the Virtual Worlds Conference and Expo last October in San Jose. The reason is that we’re getting ready to head off to two conferences next week, the Virtual Worlds Conference and Expo in L.A., put on by Virtual Worlds management, and then immediately on the heels of that, the SLCC in Tampa. So it makes sense to ask: What was the Metaverse like last October? How is it different today? And what can we learn from that? So let me pick just a few specific examples. The day before the conference, I attended a full-day meeting of the Interoperability Working Group, which included representatives of just about every company you can think of working in the Virtual Worlds space. All the tech giants, the Virtual World developers, makes of key hardware. So, for example, Motorola there representing their cell phone mobile device division. Software, for example, Adobe there interested in what interoperability will mean for their 3D graphics packages. Well, that process has been more or less tied up with lawyers trying to sort out intellectual property issues. Meanwhile, IBM, Linden Lab and countless Open Source volunteers have made tremendous progress toward interoperability through the OpenSim project. So a little bit of a surprise there. That same week of the Virtual Worlds Expo in San Jose, I hosted Metanomics from Cisco’s
  29. 29. headquarters, and my guest that week was Dan Miller, senior economist with the Joint Economic Committee of the U.S. Congress. We talked about the entire panoply of legislation that might cross the desk of a President, but other than a good four hours of Congressional testimony on April Fool's Day, there wasn’t any legislative process to be seen. Which may be a good thing or a bad thing, depending on your views. But the state of Vermont took some legislative matters into their own hands, and it’s now possible to have an entirely virtual business incorporated in Vermont. That same week of the October conference was a quiet time in Second Life’s volatile financial sector. The scandals of the summer were over, and Linden Lab’s banking regulations, which eliminated dozens of small Second Life banks, were still months away. But those regulations led to a couple of fascinating panel discussions on Metanomics that caught the attention of the Federal Reserve Bank of Atlanta, who is now actively involved in studying Second Life’s banking system. They’re working, I believe, with Ted Castronova on some further research, and now I’ve had a chance to develop a relationship with the Fed that might lead to some interesting productive outcomes. So Connecting The Dots, what do we learn here? I think the lesson I take away is that the Metaverse is making great progress. It’s just not where we’re expecting it. While people are talking about an industry-wide consortium for interoperability, OpenSim makes it happen on their own. While eyes are focused on the U.S. Congress, here comes the state of Vermont. And while every newspaper in the country seems to want to talk about banking failures in Second Life and Linden Lab’s banking policy, there’s the Fed quietly laying the groundwork for exploring Virtual Worlds, to use to study Real World banking and in-world banking. So I
  30. 30. think we can look forward to a very interesting year in the Metaverse, in this year coming up, with the only predictable outcomes being that we’ll be surprised not necessarily so much by what is happening, but by who it is that actually ends up making these things happen. Thanks for being part of the first year of Metanomics, and I look forward to seeing you again to start our second year on September 22nd, where I will be doing a show live from Denmark. So that will be our kickoff, and we’ll have lots more information about what will be happening in the year to come. This is Rob Bloomfield saying goodbye and so long to the first year of Metanomics. Bye bye. Document: [insert job #].doc Transcribed by: http://www.hiredhand.com Second Life Avatar: Transcriptionist Writer