Impact of Virtual Worlds

The online destinationThe online destinationfor the next generation?for the next generation?

Dr. Pete MarkiewiczIndiespace/Lifecourse Associates

pindiespace@gmail.com

Topics

• What are virtual worlds?• How do vworlds differ from MMOGs?• Why are vworlds important?• Numbers and growth• What vworlds will need in 2019

– Follow the money…– Barriers to growth

• Unique features of US market• US teens – where will they go?

What are virtual worlds?

• Extend “sense of place” characteristic of cyberspace (Web, chat, MMOGs)

• Games may be present, but not a game• Virtual “land” or “rooms”• Social interaction like Web 2.0 (chat, friends lists,

exchange of virtual objects)• Customized avatars, for real-time interaction• Support for real work, education• Economic models for payment, barter, sales

Two kinds of vworldsTween and kid vworlds Adult vworlds

• ~25% of US teens• Web-based (2.5D)• Prebuilt• Social networking• PG-13

• ~3% of US adults• Custom browser (3D)• User-generated• Social networking• Commerce, Education

Cyworld Second Life

Virtual world examples (teen/adult)

Virtual World Examples (kids)

Virtual world environmentsThere

Empire of Sports

Club Penguin

Habbo

Sports-based vworlds

• Multiple sports-based worlds in development– Empire of Sports (teen/adult) multiple sports– Football Superstars (teen adult) virtual football

challenges– TechDeck Live (kids/teen) virtual skate park

Vworlds and RL “exergaming”

• Irwin Toys strap-on Me2 Hardware measures how hard kids exercise

• Plugs into computer for gameplay in the Me2 virtual world

• Kids expend as much energy in “active” games as in regular sports

SOURCE: http://www.nzherald.co.nz/health/news/article.cfm?c_id=204&objectid=10493847http://www.360kid.com/blog/?p=43

Virtual Worlds and Politics

Watching Obama in Second Life Jul 11, 2009http://foo.secondlifeherald.com/slh/2009/07/watching-obama-in-ghana-from-metaplacesecond-life.html

Virtual products

• Offered for sale or free• Used in-world

– Fashion– Buildings, furniture

• Connect to outer word– E-commerce– Teaching tools – Virtual phones

• Prototype real-world– CAD/CAM “prints” to

vworlds

Vodaphone virtual cellphone HUD

Vworld creation

• Development cycle similar to games

• Must create/maintain associated website

• 3-5 years needed to develop*

• $30-60 million required for launch of full 3D*

• ~$5-10 million required for 2.5D/Flash launch

• >200 competitors

*Mike Hirshland, Polaris Venture Partners

Google Lively

Vworlds are NOT MMOGs

• Members play “the game of life”• Members are themselves• Members define goals, scores, rank• Members reflect general population• Members may sell virtual products, own IP• Virtual economy tied to the real economy• Members can do “real” work (education, business)

Stardoll

Vworlds are not empty…

• Compared to MySpace– 300 million pageviews/day

~1 minute per page per day– 1/3600 pages being viewed at

any time– If MySpace pages are laid out

as “real estate” in a 60x60 grid, occupancy resembles the Second Life grid

– RPGs in Second Life look 10x-100x better than the average MySpace “real estate”

MYSPACE HONG KONG ISLAND

MIDIAN CITY RPG EVERWIND RPG

Take-home: Vworlds aren’t empty…they just look that way!

Vworlds are NOT MMOGs

“…The game industry may have created the idea of online entertainment, but the days of

orcs and elves ruling the online space is drawing to a close"

- Christopher Sherman, Executive director of the upcoming

Virtual Worlds Fall 2008 Conference

Vworlds versus MMOGsGoals, scores community created by members

Pre-defined goals, scores

User-created

Prebuilt

Virtual Worlds

Online Games

Goals, scores, community created by members

Pre-defined goals, scores

User-created

Prebuilt

Vworlds versus MMOGs

Second Life RPGs

Entropia

Kid & tween vworlds

(Club Penguin, Habbo, There

Gaia Online, Cyworld, Stardoll)

WoW and

Similar 3D RPGs

Kaneva

Second Life Web 2.0

MoiPal

IMVU

vSide

Kid/tween gaming(Neopets, Nicktropolis, KartRider)

Why are vworlds important?

• 2009– 15% of Internet users MMOG or vworld members (Mark Kern, team

lead, WoW)– Growth Q1 => Q2 2009: 39%– Average user age: 14 year old (Kzero)– MMOGs and S/N web make the most money– Vworlds populated by older early-adopters– Vworlds offer limited value compared to Web 2.0

• 2019– 80% of Internet users in virtual worlds by 2011 (Gartner)– Average user age: >20 – Vworlds make the most money– Vworlds replace the web for the new (“Millennial”) generation– Vworlds become Web 3.0

Vworld accounts in Q4 2008Virtual World Registered Users Monthly logins Technology Demographic

Yahoo 500 million 300 million Web S/N General audience

Facebook (web) 120 million 124 million Web S/N College students

MySpace (web) 150 million 114 million Web S/N Teen and adults

Neopets 60 million 12 million Web Flash Kids and teens

Cyworld (Korean) 30 million 21 million Web Flash Teens and adults

World of Warcraft 12 million ??? (high engagement) 3D Client Adult

Habbo Hotel 100 million 10 million Web Flash Kids and teens

Stardoll 18 million 6 million Web Flash Kids and teens

Gaia Online 15 million 7 million Web Flash Kids and teens

Webkinz 10 million? 6 million (high recurring) Web Flash Kids

Club Penguin (Disney) 17 million 4.5 million Web Flash Kids

Zwinky 16 million 4.5 million Web Flash Kids and teens

Barbie Girls (Mattel) 13 million 2.3 million Web Flash Kids and teens

Home 7 million ??? (high engagement) 3D Client Teens and adults

Nicktropolis 6 million 1 million Web Flash Kids

TOTAL VIRTUAL WORLD

~300 million (330 million in 2009)

~90 million

Virtual world simultaneous users

• Second Life (3D)– 150 users/island– ~70,000 simultaneous during Q3 2008 (up from

about 2,000 in early 2006)

• Gaia Online (2.5D)– 100,000 simultaneous (2007)

‘Kid worlds’ have high trafficMonthly Unique Visitor (millions in 2008)

0 1 2 3 4 5 6 7

WebkinzClub Penguin

ZwinkyNeopets

IMVUBarbiegirls

Gaia OnlineHabbo

RedlightcenterKaneva

Second Life

SOURCE: Patrick Collins of Brand Architecthttp://www.collings.co.za/2007/11/the-march-of-th.html

Vworld members skew younger

SOURCE: Kzero Blog - http://www.kzero.co.uk/blog/?p=2793

Predicted growth of “kid” vworlds

0%

10%

20%

30%

40%

50%

60%

2006 2007 2008 2009 2010 2011

Child &TweenVisitors

Percentage of US child/tweens (3-17)

Expected to visit a virtual world at least once a month

SOURCE: http://www.emarketer.com/Article.aspx?id=1006166

Time spent in vworlds

SOURCE: http://www.emarketer.com/Article.aspx?id=1006166

Provided to eMarketer by Linden Labs

0

5

10

15

20

25

30

35

Time Spentin SL

Total time spent logged-in by Second Life Users,

March 2007-March 2008 (millions of hours)

Growth was unaffected by

negative media stories in

Fall 2007, and economic

slowdown in “real” economy

Vworld members are engaged

• Wow (Aug 2007)– ~80-100 hours/month(!)

• Second Life (Aug 2007)– 24 hours/month (counting actual monthly logins)– 3.7 hours/month (counting unique accounts)

• MySpace (Aug 2007)– ~ 30-90 minutes/month per page (depending on how you

count)

• Habbo (Sept 2008)– 40 minutes/month

Take-home

Vworld audiences are small, but their members are MUCH more engaged

than Web 2.0 users

Second Life classroom

Monetization

• 2008 Dollar revenue, monthly users per month– Second Life: $9.30/mthly user/month

(higher due to virtual land sales)– Club Penguin: $1.62/mthly user/moth– Habbo: $1.30/mthly user/month– Runescape: $0.84/mthly user/month– Puzzle Pirates: $1.50/mthly user/month

• Average $1.40/mthly user/month*. • Excluding Second Life, $1.25/mthly user/month

SOURCE: Lightspeed Partners Bloghttp://lsvp.wordpress.com/2008/06/09/successful-mmogs-can-see-1-2-in-monthly-arpu/

Monetization sources

• Free Sites, optional subscription (“freemium”)– Virtual products – up to 85%– Subscription – 10%– Advertising – 5%

• Paid Sites– Subscription – 75%– Virtual products – 25%

• Coupled Sites (need real-world product to join)– Subscription – 50%– Real-world product – 50%

Virtual products are the key

• Emulate a real-world thing– Seeds– clothing– Housing– Pets

• Reproduced electronically– Near-zero costs

• Sold for real money– “Game money” bought with real currency– Direct credit card purchases

• Secondary barter economy– Users swap vproducts– Users design and sell custom vproducts

Virtual Products overview• In July 2009, analyst firm Frank N. Magid that found that 12%

of Americans had purchased a virtual gift within the past 12 months

• Most sales (around 80%) of sales occur within online games

• Over half of players in online games purchase virtual products

• Thirtysomethings purchase the most by revenue, while teens and twentysomethings purchase the most per user

• Players in online games typically purchase $60-75 dollars in virtual products each year.

• Virtual good buyers are often sellers – Playspan estimated that 31% of its buyers also sold virtual products

• Asia leads the virtual goods market, with the largest share coming from China

SOURCES: Frank M. Magrid 2009 Media Futures StudyLightspeed Partners blog, Virtual Goods News

Growth of virtual product sales

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

2007 2008 2009 2010

US SalesBillions

Global SalesBillions

SOURCES: Frank M. Magrid 2009 Media Futures StudyLightspeed Partners blog, Virtual Goods News

vProduct case studies• Zanga (October 2009

– FarmVille Players bought $500,000 virtual seeds, 50% of revenues were used to buy real seeds for nonprofits in Hati

• Ning (October 2009)– A new Virtual Gifts Incentive program will allow anyone creating a Ning site to sell virtual

products, with a common currency between all Ning networks• Facebook (June 2009)

– $75 million/year from sales of ~100 million digital gifts, or about 10% of total sales

• Stardoll (September 2008)– 1.8 million virtual products were purchased from the Kohl's “back to school” store within its first

16 days • Zwinky (August 2008)

– Sears sold more than 850,000 vproducts in Zwintopia during the first 16 days after launch • Habbo (Sept 2008)

– 2.5 million US users spend $18/month– 85% of revenue from sale of virtual products, only 15% from advertising

• Nexon (creators of KartRider) June 2007– Worldwide revenues of $230 million in 2007, – 85% of it from sale of virtual items

• IMVU (Sept 2008)– $4 million/month revenue – 90% comes from a “cut” from sales of virtual products between members

SOURCES: Lightspeed Partners blog, Business Week, Virtual Goods News

What teens buy in virtual worlds

0

5

10

15

20

25

30

35

Anything

Fun

Express

Myself

Give Me

More

Access

Make Me

Look Good

Not

Everyone

Can Have

Send To

Friends

SOURCE: WeeWorld Member Surveyhttp://www.virtualworldsnews.com/2009/07/weeworld-survey-teens-still-spend-girls-are-major-influencers-.html#more

For teens, branding in virtual worlds is effective

Media Type Millennial GenX Boomers Matures

Interactive web ads 66 68 68 73

Banner Ads 52 58 63 71

Video preroll ads 36 30 27 28

Video postroll ads 21 19 19 17

Embedded video ads 22 22 12 9

Ads in virtual worlds 23 19 14 7

Ad in videogames 23 16 8 8

SOURCE: http://www.emarketer.com/Article.aspx?id=1006166

Deloitte Development and Harrison Group, “The State of the Media Democracy Second Edition”

Link to K-Zero’s age breakdown:http://www.kzero.co.uk/blog/wp-content/uploads/2008/04/kids-world-ages001.png

By 2019, vWorlds will become the place the next generation lives and works…

…Web 2.0 and classic MMOGs will decline in importance

Take-home

There.com

What will virtual worlds need to succeed in 2019?

• Fit the audience– My generation, age group, gender, lifestyle, politics– I’m special here– My friends are all here– It’s a regular, normal part of my life

• Give the audience what it wants– I have control– I can find out what I need to know– I can buy anything I can find on the web– I can do my work here

Follow the money…

• Near-term– Virtual products NOW!!!– Flat-fee subscriptions– Advertising – Market research

• Long-term– Real product prototyping– MMOGs inside larger vworlds– Virtual education– Government/military use– Business work environments

Vproduct Store in Second Life

Barriers to growth

SOURCE: Thinkbalm - http://www.thinkbalm.com

Barriers to growth

• User interface is hard to learn (key commands and complex HUDs)

• If users are impeded from creating their own content, they don’t (Philip Rosendale)

• Flat fee structure assumed

• Massive infrastructure needed

Avatar configuration HUD,

Entropia Universe

Barriers to growth - US market

• Most users log in from home (less sense of community)

• Backlash from Second Life hype

• Limited mobile power precludes use of mobile vworlds

• Internet connections in US are slow

Where will US teens go?

Gaming ->Themed Shopping -> Social NetworkingDre

ssup

->

Vpr

oduc

ts -

>U

ser-

crea

ted

Second Life (Social)

KanevaMost tween &

teen 2.5 vworlds,

e.g.Stardoll, Habbo,Whyville, Club Penguin,

Virtual pet sites

Entropia

WoW

IMVU

MySpace

There

Moove

User-C

reated <- V

products <-D

ressup

Second Life (RPGs)

Second Life (shopping)

Sources for Virtual Worlds

• Virtual Worlds News – general newsfeedhttp://www.virtualgoodsnews.com/

• Virtual Goods News – virtual productshttp://www.virtualgoodsnews.com/

• Virtual Economy Research Networkhttp://virtual-economy.org/

• Pearl Research – China & Asian markethttp://www.pearlresearch.com

• Kzero - #1 virtual vorlds consultancyhttp://www.kzero.co.uk

• Thinkbalm – “The Immersive Web”http://thinkbalm.com/

References• Virtual Economy Research Network

http://virtual-economy.org/ • LightSpeed Partners Blogs• http://lsvp.wordpress.com/?s=RPG+Second+Life&searchbutton=go! • http://lsvp.wordpress.com/2008/09/02/facebook-selling-digital-gifts-at-a-35m-run-rate/ • Business Week

http://www.businessweek.com/magazine/content/07_13/b4027047.htm?campaign_id=rss_daily• Virtual Goods News

http://www.charleshudson.net/?p=512 http://www.virtualgoodsnews.com/2009/11/asia-driving-the-virtual-goods-marketplace-.html#more http://www.virtualgoodsnews.com/2009/09/over-half-of-gamers-purchasing-in-freemium-games.html http://www.virtualgoodsnews.com/2009/10/ning-launches-virtual-gifts.html#more

• Online traffice at compete.comhttp://siteanalytics.compete.com

• Cnet - Neilsen 2008 results for social networking siteshttp://news.cnet.com/8301-13577_3-9948219-36.html

• Why virtual worlds are overtaking the game industryhttp://www.virtualworldsnews.com/2007/10/why-virtual-wor.html

• New World Notes - New World Notes' True Community Search: Top Twenty Popular Second Life Sites, September 20http://nwn.blogs.com/nwn/2007/09/new-world-notes.html

• “Total minutes” netratings for web 2.0 siteshttp://www.netratings.com/pr/pr_070710.pdf

• MySpace real pageviewshttp://www.mikeindustries.com/blog/archive/2006/04/myspace-click-factory

• Fun with numbers: Do New Ratings Mean New Valuations?http://voices.allthingsd.com/20070712/robert-seidman/

• Second Life statisticshttp://secondlife.com/whatis/economy-graphs.php

• Second Life engagement “Second Grade Math”(Oct. 5th 2007)http://blog.secondlife.com/category/economy/

• Kid’s worlds poised for growth spurthttp://www.emarketer.com/Article.aspx?id=1005410&src=article_head_sitesearch

• Harvard Business School Conference, Nov 2007http://www.gamasutra.com/php-bin/news_index.php?story=16326

• There.com demographics (2004)http://findarticles.com/p/articles/mi_m0PJQ/is_6_2/ai_114573226

• Daedalus Project - The Psychology of MMORGshttp://www.nickyee.com/daedalus/archives/001369.php http://www.nickyee.com/daedalus/archives/pdf/3-4.pdf

• Comparing virtual worldshttp://www.kzero.co.uk/blog/?p=978

• Virtual World Growth Projectionshttp://www.slideshare.net/nicmitham/virtual-world-growth-projections/

• Round-up of 50 virtual worldshttp://fabricoffolly.blogspot.com/2007/10/second-life-in-perspective-round-up-of.html

• eMarketer report on virtual worldshttp://www.emarketer.com/Article.aspx?id=1005410&src=article_head_sitesearch