1. Ian Betteridge said on February 15th

   First of all, the caveat: I work for Redwood, which is part of the same group (AMV Group) as Proximity and ultimately part of Omnicom, which also owns part of Millions of Us.

   I think it’s worth remembering that, outside of the virtual worlds community, very few businesses have any kind of clear understanding of the realities of virtual worlds. And, even in those companies that do have an idea, the higher you get up the hierarchy the more likely it is that you’ll find the kind of views that Proximity’s report combats.

   This is partly because, at present, virtual worlds are cheap. Building an island in Second Life can be done for the kind of money which is little more than a rounding error in a corporate marketing budget. That means that virtual world presences are being created by mid-level marketing people, often with minimal knowledge from the people above them. In that sense, it’s a lot like the situation in the very early 90’s, such as when Adam Curry registered MTV.com basically without anyone senior at MTV knowing what the internet was.

   So having said all that, I think it’s vital that agencies like Proximity get involved with busting the myths which surround virtual worlds if we’re to get traction from the higher echelons of business. You might think what they’re saying is obvious: however, the fact that they’ve done the research, done interviews, and can back what they’re saying up with statistics is the kind of work which needs to be done if these myths are going to be combated amongst senior executives.

   What’s more, I think your criticism of the report is a little unfair, unless (of course) you’ve actually read the full report. Gwyneth hasn’t: she’s read John’s conference paper, and a summary of it from Meios & Publicidade. I’m not saying that what she’s saying is wrong, but simply printing the conclusions is only part of the story: it’s the work that’s gone into getting to those conclusions which is important. And it’s that work which is actually persuasive to the average senior marketing VP in a corporate - which is what makes it valuable.

   It’s not like Proximity hasn’t talked about virtual worlds, or done their research - some of which was picked up by Forbes last June (see http://www.virtualworldsnews.com/2007/06/brands-need-to-.html). So I don’t really understand what your criticism is all about. Unlike you and me, they’re not preaching to the converted - and that’s why what they do is important.

2. Gwyn's Home said on February 15th

   Sex, Lies, and Reality…

   This is the actual title of a white paper released by Proximity London, a well-known creative marketing agency in the UK. Last September, they have concluded a research on virtual worlds, and the purpose of their lead in-house researcher, John Urpeth, …

3. Rick van der Wal said on February 15th

   Hello Ian, thank you for taking the time to reply!

   First of all: You are right to point out I haven’t read the report and therefore my criticism on the report itself is somewhat unfair. However, I quoted from the summary, and only talk about the part about busting these ‘myths’ - apart from the claim they only researched within World of Warcraft and Second Life. (Which seems hard to believe given Proximity’s definition of virtual worlds - more on that below)

   Furthermore, on my blog there are a vast majority of the converted, but out in the field, and in my network I am heavily outnumbered in the people I talk to about the opportunities of Virtual Worlds. My blog is mostly a reference for those meetings.

   However, I am expressing an opinion on the way the Virtual World debate has been going for a while now, ever since 2006, - going from one extreme into the next, hype, bust, and all the excesses in between. Gwyns post was also on how a report like this didn’t appear in ‘the media’, and I am telling why I think that is not that remarkable.

   I feel these reports of busting ‘myths’ (thats what this article is about) keep swinging the pendulum from left to right, and make Virtual Worlds a wildcard. A wildcard is something thats hard to predict or understand - and the way the debate keeps going is alienating these ‘execs’ even more because of it. In my opinion, what they understand is what they are given a reason for to understand - not whether there are geeks or not, or whether people ‘act or behave differently’ - and I strongly feel the discussion should be about application. How to use the environment in meaningful ways that will contribute to the business these execs are running :)

   On the research Proximity has done before - Research about brand flexibility in social media (”virtual worlds, which it defined broadly as not just Second Life, but social networks, blogs and instant messaging”) is great - but it does not really support the point you are making on expertise in Virtual Worlds in my opinion. I am definitely not trying to knock Proximity - it is true what you say - they talk to the ‘unconverted’ and have the authority to and resources to get the word out, I just feel they push the discussion in a corner where no one will ever find resolution while there is progress to be made in other areas.

4. Rick van der Wal said on February 15th

   In fact, taking an even closer look on that last report you mentioned , it seems cven, a pretty ‘famous blogger’ on rebang posted the only comment ont he VWB website, and basically said the same as I did. Unimpressed with their findings.

5. Gwyneth Llewelyn said on February 17th

   I have read your post three times and don’t understand exactly what point you’re trying to make. So, ok, Proximity’s work was not “original” in the sense that it just reflected what we already knew. But as Ian pointed out, the whole work put behind the report is the important bit; that’s what research is about. The research could, for instance, have been inconclusive — in that case, Proximity would have either dropped any mention of the report, or just (honestly) assumed that “Virtual Worlds are a wildcard, it can go either way”. For me, it’s quite a difference; in my relationship with customers, they’re not seriously interested in “my” opinion. On the other hand, reports such as Proximity’s carry some weight in their decisions. In fact, from my experience, two factors are very critical for my customers to decide: what the popular media (uninformed and misinformed) say, since that’s what most people will read; and what the expert market analysts say, which is what probably is correct. They will weight both in their final decisions.

   Now, “myths” propagated by the popular media are dispelled with serious research, that uses a scientific method, and that can be validated by the researcher’s peers. I believe that the work of Proximity in this area is quite fundamental — more so, perhaps, than a thousand bloggers (including your truly) talking out loud about their ‘feelings’ on the virtues and advantages of virtual worlds. One good, scientific report is worth more than those thousand opinions. And the reason is simple: if someone wishes to debunk Proximity’s work, they have to do it scientifically, too — namely, go in-world with an open mind, do their own set of 4,000 interviews, and extrapolate their conclusions with statistical correlations that can resist peer review. So Proximity has raised the stakes for the virtual world debunkers — now they not only need to persuade us with clever writing on their blogs and newspapers, but they have to produce reports of their own, too — and use a similar scientific method to do so. If not, they’ll be just opposing an “opinion” (their own) against established fact.

   I have to assume the responsibility of saying that Proximity has “mostly studied Second Life and World of Warcraft”. Only these are mentioned on the documentation that I quoted, but this hardly means that they have studied only two cases. I don’t know, since I haven’t read more about it, and haven’t seen John Urpeth’s presentation in full. I do apologise if I managed to convey the idea that Proximity hasn’t studied any other worlds; still, we’re talking a population of about 22 million registered users out of an estimated 50 million, so it’s still quite a valid research even if it only covered 44% or so of all virtual worlds.

   Finally, it’s obvious that many comments (pro or con) can be easily dismissed as ‘religious fervour’. I always found it funny that companies hire ‘evangelists’ to promote their services and goods, ie. appealing to the masses through emotional messages. Well, one thing is PR, marketing and advertising — we don’t expect a lot of that content to be faithfully true to rational thought. The other thing are market studies, which are conducted with a clear goal in mind, and gather statistical data in order to make a point. While we can safely shrug off the ‘believers’ in Second Life and virtual worlds (including, of course, myself :) ), there is quite a difference in ’shrugging off’ a presented market analysis report, and that was basically my whole point ;)

6. Rick van der Wal said on February 17th

   13.000.000, of which just 1.6 million have logged in over an hour worth of time over the past 60 days, not taking into account the amount of overlap between WoW and SL accounts - having played both I know a lot of people from both communities. Its still a good amount of people, but its really not helping saying Wow + SL = 22.000.000 registered users out of a total of 55.000.000 - thats just not the case.

   I also think along these lines, and I realise this is slightly off-topic - noone has ever said any of the 5 ‘myths’ as listed above about WoW except the last one - and even that one is questionable at best in the marketing context of this research, so scratch another 10.000.000 of that list as far as I’m concerned. 44% is nowhere near accurate (its more like 4.000 respondents out of a segment/niche of 2.000.000 within a scope of 35.000.000 in a best case scenario if they didn’t include blogs, social networks and instant messaging like they did last time, then the number rises well over 10 times that 35.000.000 - see the link in Ian’s comments).

   However, I shouldn’t really get into to much dept on this research as it was pointed out before neither of us read the actual research, this is just about the use of trying to debunk these myths, and whether its really all that remarkable what they did (mainstream media tends to focus on those things considered remarkable - and the summary had all the makings of something completely unremarkable)

   Besides this i find it rather odd how you can say your customers who hired you for your expertise on the matter do not care about “your” opinion - In the end it will still be you presenting these reports to the same clients, supporting your vision and opinions. But wouldn’t you much rather do so by presenting a case that shows how Virtual Worlds can be used appropriately rather then tell them whats not going on in Virtual Worlds (Second Life) and how you are clients are wrong to think so?

7. Ian Betteridge said on February 17th

   “I find it rather odd how you can say your customers who hired you for your expertise on the matter do not care about ‘your’ opinion”

   Because opinion isn’t the same as expertise. In the case of marketing, what you’re being hired for is your expertise at finding and presenting evidence - usually quite densely statistical - and giving recommendations based on that evidence. That, I think, is what Gwyneth means when she says that clients don’t care about “opinion”.

   Quite often, actually, it’s this reluctance to accept anything that isn’t based on quite meticulous research which makes larger companies quite conservative about marketing. Take blogging, for example: the majority of companies are still only dipping their toes in the water of blogs. Facebook, on the other hand, stands a decent chance of fast adoption as a marketing platform because it can produce concise, simple stats which demonstrate how niches can be targeted, and which can be used to measure ROI.

8. Rick van der Wal said on February 17th

   I agree Ian, but here is the thing - we form those opinions on a number of facts, figures, experiences, projections and predictions, and it is up to the marketer to combine these into a convincing case to both the client and the consumer. How to best approach this less o a science as we are dealing largely with predictions, and marketing strategies are formed out of these expert opinions BASED on the interpretation of these figures.

   The thing about these myths, debunked or not, is I don’t see them contributing to anything in this formula :)

   The adoption and application of facebook VS blogging is also more of an opinion rather then a fact, its your experience and your interpretations of certain trends and research. I agree with you on this analysis but one could just as easily argue corporate blogging has earned its place in strategies already, and has seen its successes and failures as where the last reports on ROI out of facebook are still in the negative (very interesting facebook case study made in 2006 over here by the way)

9. Ian Betteridge said on February 17th

   Yes: but all that implies they’re not paying you for your opinion, but for the research which lies behind it. If I say to you “Sex is only a small part of the Second Life economy” that’s an opinion, and I’m not going to get paid for it. If I say “Sex is only a small part of the Second Life economy. Of the 4,000 people we interviewed, only 20% had had a sexual experience in-world” - that’s not an opinion, those are facts. And that’s the point at which an agency gets paid :)

   (I made the above “facts” up, by the way :) )

10. Rick van der Wal said on February 17th

    Well even though this is not really on topic anymore i think its an interesting point, however, I simply don’t agree thats where a marketer gets paid or is hired to do. A company who would hire a marketer would never be satisfied with that as a result? The fact you provided is just one of many factors you could take into consideration in your marketing plan when you are building a case. So 20% had a sexual encounter… whats it to us? What if these 20% are the most dominant, the sneezers, but are also notoriously unreachable. Would you make a campaign to reach out to them, or focus on the other 80%, will these numbers shift over time and how likely are either of the 2 groups to engage with your brands? The myth debunking business is not going to answer those questions, and decisions will have to be made based on other resources.

    The job of the expert is to build a business case - this is when you get paid as a marketer. Just the numbers don’t mean anything to either client or consumer unless you present an opportunity, which is again, opinionated as its filtering trough trends, predictions, experience and research. Give 2 marketing agencies the same client/goal and its very unlikely they will come up with the same campaign. Why? Because the creative process of filtering these facts is opinionated and will lead to different results, spotting different opportunities and prioritizing different factors. So the opinion of the expert certainly should matter when choosing a specific marketer to create a campaign.

11. Gwyneth Llewelyn said on February 18th

    Great discussion here :)

    Well, to lend my support to Ian… most (recent) meetings with the customers begin with: “I’ve seen on TV/read on a magazine that virtual worlds have [insert nasty fabricated myth here]. Why should I invest in that, then?” and basically I have two options:

    1) Just replying: “It’s just a myth. Trust me. I’ve been around for several years and know what I’m talking about, and all what you read is simply not true.” and, well, leverage on my “opinion as an expert”, my reputation, and the trust the customer has in me… but, ultimately, the decision will be made depending on how good I am at “selling an idea” against an established mindset which was forged by the media.

    2) Or I can use the reverse approach and say, with some humbleness: “I don’t know where the media got those ideas. Here are a list of researchers that have studied the issue thoroughly, and this is what their reports say.” That way, the customer has two options: they can either look up where the media has come up with their “opinions” and contrast them with published research, and see what is more compelling when making a decision.

    In my mind, given the choice of several opinions, and picking one depending on an emotional bond with the opinion-maker (be it a newspaper journalist or the person sitting in front of you), or, instead, presenting established research and its results and recommendations, I prefer the latter by far :) And so do my customers… who will very likely need to get an approval from their own board, and the better-documented they are, the more likely they will come back with an approval.

12. Rick van der Wal said on February 18th

    Well I think we take a different angle on things here, and I think that rather makes my case of the value of opinion and is at the heart of this article.

    “I’ve seen on TV/read on a magazine that virtual worlds have [insert nasty fabricated myth here]. Why should I invest in that, then?”

    Both your given options focus on the first part, the excesses, which is where the discussion has been so far. My point is, why not focus on the second part? Why should I invest? Present them application and opportunity and support that. That’s the point I’ve been trying to make throughout this article ;)

    So you tell them these facts and figures, but 1 week, or maybe a month later the WSJ reports on terrorists in SL again, and is able to support this with a testimonial, another griefer disturbs presidents Obamas virtual victory speech or virtual world sex ’scandal’ number X hits the courts and thus mainstream media. How are these execs to see this in the light of this ‘research’? It is all true, but we are none the wiser on the application of Virtual Worlds. swing… swing…

13. Ian Betteridge said on February 18th

    Well before you can get to the positives, you need to overcome the negatives. You can present the most positive case in the world, but if the CEO believes his company island is going to be used as part of a child sex brothel, he’s not going to sign on on the project :)

    But also, part of the problem with focusing on the positive is that, at the moment, the positives aren’t actually particularly compelling - at least not in terms of hard ROI. There is no way of tracking engagement in virtual worlds at the moment which gives you specific, measurable results - something which is a vital part of any brief for a marketing project.

    Unlike a web page, I can’t make a direct correlation between visits and sales. The best you can get is “soft” values, such as increased brand awareness. And the problem with those is that, because of the relatively low number of customers exposed to virtual worlds, it will be very very unlikely that anything would show up in your regular brand tracking surveys. You could just survey the people who’ve been exposed to your Second Life presence - but that’s a very self-selecting group, and unlikely to give you any usable results.

    What I tend to say to people is not to expect any ROI at all - treat it as a PR exercise and a learning process, both of which give you results you actually can measure.

14. Rick van der Wal said on February 18th

    Fast reply Ian! I added one more argument to my last reply, hope you’ve seen that too - about the use of the ‘debunking’ or wether we will really ‘overcoming the negatives’ by saying what’s not in SL.

    I definitely agree with you on the ROI part concerning brand awareness, however, it also supports my case -we keep going trough the motions (since 2006) of trying to fight this image instead of focussing on application and realising realistic, measurable ROI.

    Its easy to say ‘present the best case in the world and they won’t buy it because of X…’ but that sounds like pure speculation and nothing like RRR at all. RRR is one of the leading platforms to provide application and crystal clear ROI - through the focus on the Virtual Office. Hours saved * wages - virtual investment = profit.

15. Gwyneth Llewelyn said on February 18th

    Ah, excellent arguments. Yes, in fact, a year or so ago people would not bother with the “alleged negative effects” — they would (correctly) assume that once a decision was made, these would be secondary to the whole discussion process. The important bit was managing expectations, and this is still very high on the list.

    ROI is basically very hard to get — unless you’re using Second Life to reduce training and meeting costs, by cutting down travelling expenses, equipment rental, and the like. For the average corporation, this is one of the very few areas that get immediate return.

    But almost all areas will not have a measurable “return” — in terms of getting back your investment at some point in the future. During the positive-media days of 2006 and early 2007, you could get a very measurable ROI based on media coverage (and counting how much space the news about your virtual presence covered, you could effectively attach a value, based on the ads that would occupy the same space).

    Since mid-2007, with the media turning to VW-bashing instead, this strategy is naturally failing completely. Now managing expectations is way harder. In effect, virtual worlds are as good as small-scale events for promotion (if promotion is teh ultimate goal). So if a company is used to do a small-scale event for US$10k, attracting perhaps a few hundreds of people to, say, launch a new car or something like that, the same cost could effectively be used to create an equivalent virtual presence in Second Life, with about the same impact — but with a twist: the virtual presence could remain “visitable” for a large amount of time; one could conceivably do some videos of it (over a larger period of time); and for little cost, a series of events could be held there without needing additional preparation/equipment rental costs, etc. So this is usually the kind of expectations that most companies have right now. A virtual presence won’t attract “millions of people” — not any more. They have to compete with literally millions of other places that people will visit, and dragging customers/visitors to your spot will be hard — specially with the (real world) media mostly ignoring your work these days. And the specialised media reading about virtual worlds reaches an audience of only a few hundred thousands, scattered and spread over hundreds or thousands of blogs, e-Zines, PDFzines, and similar sites.

    There are metrics in SL that can sustain a well-presented marketing plan. You can track visitors quite accurately — even to the detail of understanding what parts of your virtual presence are actually interesting for your visitors, and what parts are mostly ignored. (I admit that the funniest metrics system I helped to develop was to feed statistics gathered from Second Life into the popular AWstats application, thus making them “look like” Web statistics, which instantly made marketeers very happy with something they’re familiar with!)

    So, well, I disagree that there are absolutely no metrics you can track down. The issue is just that there is no one-size-fits-all solution to present a customer hard facts justifying their investment. Each project has a different target, a different audience, and different expectations. Universities, for instance, have instant ROI — virtual classrooms and e-Learning tools give immediate advantages in cost saving, and, marginally, all research shows that students get more engaged, shy students are more participative in the virtual classroom, disruptive students are more moderated… no wonder the academic world has embraced virtual worlds so quickly and eagerly. Companies experimenting with internal training, workshops, keynote speeches delivered in virtual worlds, all of them have “almost instant” ROI too. The difficult bit is measuring a “promotional event” to launch a new product or service. Then again, when doing it on the Web, the only thing that really gets measured is: “How many people viewed my site? How high does it rank on Google/Yahoo/Live Search?” It’s also hard to track down sales directly related to a new website — one among 6 billions — although it’s not impossible. The equivalent metrics on, say, Second Life, would be figuring out how many people visited the virtual presence — but probably as a percentage of the overall active population, since on absolute terms, the results might often be disappointing (only 4% of all Internet users registered for an account on a virtual world).

    Again, “managing expectations” — that’s the key!

    Unfortunately, however, before expectations are managed, there is now a new barrier to overcome first: dispel the myths. And that’s why Proximity’s report (as well as others, of course) are so important. They undermine the media’s pseudo-authority that basically just debunks VWs for the sake of selling more ads on the newspaper (bad news sell way more than good news). But they also forge a mindset and manipulate their audience that way — “if it’s on TV, it has to be true, or they wouldn’t report it”. Battling against this mindset is increasingly harder, and as long as the “bad news” continue to sell ads on the media, I think the trend will go on for a while.

    Until, of course, the technology becomes ubiquitous :) We don’t read any reports on the media debunking the telephone and how it replaced physical contact in the past 120 years or so. But, well, it took several generations to fully absorb and integrate that technology into our societies. Virtual worlds will take some time to become as ubiquitous as the telephone…

16. Ian Betteridge said on February 18th

    Gwenyth, you’re totally correct to highlight the need to manage expectations. I think that actually, though, managing the myths will be increasingly easy as more and more execs actually have some experience of virtual worlds - just as the same was true of the web circa 1994. And, interestingly, it was pretty much the same bunch of myths back then too! :)

17. Rick van der Wal said on February 18th

    I strongly feel that barrier won’t be broken Gwyneth, not until enough people start developing applications of Virtual Worlds and show there is money to be made.

    Lets not ignore the fact that the myths are just overstatements of what’s actually happening at the moment. This is not the Yeti where we say ‘we (re)searched but it doesn’t exist’- its just misinterpretation and focussing on the excesses. I don’t need to tell you how 95% of the keywords in SL will result in at least half of your results being flooded with adult content (amazingly, even with the ‘adult content filter on’). No matter what research will say - those ‘accusations’ will always be there.

    The thing I notice is when I read about ROI and measurable results in your argumentation is it’s usually about brand awareness - which in itself is still very hard to measure within any type of media (unlike conversion).

    This feels like the same kind of thinking that caused the internet bust in 2000 - make a website and people will come. If not, send out banners, interrupt them, and ‘make’ them visit you and of course, more visitors is more sales! A model copied directly from the TV-Industrial-complex. (Seth Godin: Advertise > more visibility > more attention > more sales > more advertisements etc) except there was no reason to be on the web - no users > bust!

    Since the bust of the web we started to see development in terms of applications, using the usp’s of the web to contribute to the lives of the consumer. We saw new information filters which listed you on ‘remarkability’, publishing became public domain, we found friends and like-minded people by being able to ignore physical distance and use new social beacons and filters, able to get our messages across instantly or time-lagged, share, download ‘free’ entertainment, collaboration, forums etc. Eventually this set of the positive spiral of application > applications have added value > more consumers/corporations find use for the medium > more people join the medium > more reach and ROI in the medium > more applications get developed etcetera.

    ICQ, games.com, Napster, Hotmail, Geocities, Yahoo, Bittorent, MSN, xxx, mySpace, MP3.com, Facebook, Google, Youtube - these where all start ups developing applications and eventually showed business there is money to be made, many of whom now feel they have been missing out (and thus responsible for the run on virtual worlds before platform maturity in 2006). These start ups and applications are responsible for the mainstream and ubiquitous status of the web today - because they focussed on application - these were(!) NOT major brands seeking ‘brand awareness’ and believing in ‘myths, lies and fairytales’.

    —

    The reason why the media attention has cooled down is because very few corporations have managed to be remarkable (Seth again). Its not because of an automatic reluctance by the mainstream media (especially business oriented media) to block out ‘anything virtual’ - but Mercedes giving out free cars in Second Life to and audience of 2 million people is hardly more noteworthy as Vodaphone advertising on the Yahoo frontpage anymore. (I also think media is starting to become more and more positive of SL as of late - nov 2007, though this is just a feeling).

    By the way - One campaign that did manage to find both application and be remarkable within its niche is the successful L-Word community - where Showtime/ESC and did get measurable results over last year.

18. Kaye Vivian said on February 18th

    Thanks all for a lively and very interesting discussion. I’m especially interested in your further opinions about where you think money is to be made with virtual worlds. Now or a few years out. Leave aside training/learning/travel expense reduction, etc. Corporations are already all over that with webinars, podcasts and NetMeeting type gatherings.

    The dilemma I have in talking with business leaders about virtual worlds is exactly what Ian said about mid-level marketing people creating virtual worlds because they are cheap. The mid-level people who can be advocates to support a virtual world business concept, don’t usually control the budgets. The senior level people who do want some convincing based upon facts and value.

    It’s not enough to say “Trust me, I’ve been involved in this field for 25 years, and some great things are going to happen.” It’s not even enough to present them with a research study like Proximity London’s, though that helps. Unfortunately, business leaders want to know what the New York Times, Fortune, Wall Street Journal, Harvard Business Review (or other countries’ equivalents) have to say about the future of virtual worlds and where it’s likely that companies can make money from them. I don’t think they are wrong in asking that, either. That’s their job function.

    I would like to be able to give a compelling view of the future of virtual worlds in business. I read a lot, and don’t yet have it. Maybe it’s still too soon? Or worse…maybe there isn’t one beyond learning/training?? Maybe the real myth is that virtual worlds can be more than a social platform. I am a believer that they are, but it is sure hard providing credible evidence. Thanks!

19. Rick van der Wal said on February 19th

    Thats the million (billion) dollar question isn’t it Kaye ;) I think there are many answers but none everyone will agree on one ‘killer app’. Key is as Gwyneth pointed out - expectation management. When dealing with clients find applications for the here and now and think of how they would grow/scale with upcoming trends while remaining realistic (though optimism doesn’t hurt if you believe in your concept)- thats where the money is.

20. Gwyneth Llewelyn said on February 20th

    Ah well, Kaye, that is indeed the question.

    Over a decade ago, we also had the same issue with the Web. What was going to be the “killer application” on the Web? If a company invests, say, half a million USD on their “virtual Web presence”, what was the expected ROI?

    Well, the first argument was always cost reduction and not direct revenue. People would get information from your site instead of forcing you to print down catalogues, pamphlets, and books — consultants claimed. You’ll be in touch with your audience faster, you can inform them better, and keep them up-to-date for little or no extra effort beyond the initial investment.

    At some stage people would then ask: “yes, sure, but how do I make money out of the Web?” And here the consultant was stumped. Even after the Amazon and eBay era, you couldn’t tell, say, an accountant that “all your income will come from the Web soon, like eBay and Amazon”. You could obviously give a lot of examples on successful cases — however, they would never relate to your poor accountant, who just wanted to know what was in the Web for her. She couldn’t care for how many billions eBay was making every day. She was just an accountant, doing accounting services, and did not want to set up an auction site! Sure, auction sites were “proven” to be a “killer application on the Web”, but… what if you had no wish of setting up one of these?

    Then we entered the advertising spree on the Web. During the dot-com era, so long as you got an idea, you could sell advertising on it, and advertising would push your model, so long as people would visit your site to see ads. So the “Internet killer application” was, in fact, generating traffic to sell ads. The bubble burst, and a winner came out of it: Google, with an almost-effective-monopoly on large-scale web advertising.

    Most of the examples you give (the more notorious being YouTube, which allegedly just has a revenue of about half a million US$/month — which didn’t prevent Google to buy it for US$ 1.6 billion!) live from Google AdSense (or from a competing advertising product, which Google is buying out anyway). So, when you come to a customer who does not want to set up an auction or e-commerce site, but just put up some information out there about their products and services, you can tell them: “make it interesting, people will come, and you’ll get some return out of Google AdSense”. In fact, some new media agencies are now “Search Engine Optimisation” consultants — making sure that you get all traffic you deserve, and that means higher income from the displayed ads.

    So, yes, well, we’ve found out about at least two killer applications for the web: e-commerce (or at least driving sales out of your web site) and advertising (which, frankly, is the only reason why Web 2.0 sites are so popular — even if they don’t exhibit ads, they’re used for profiling data [like Twitter] which are then fed to web ad companies). It took us some time, however — at least half a decade until people realised that the Web could be effectively employed for making money that way.

    We’re not yet there with virtual worlds :) Advertising still doesn’t generate a huge profit; brand awareness is “hard to measure”, although reports like this one show that people are trying hard (the interesting bit is that brands that had declining page views, like, say, Coca-Cola or MacDonald’s, turn to virtual worlds because they’re a novelty and thus drive new visitors to learn about their (new) branded strategy. These early adopters from 1995 or so have little to tell the Web audience; they’ve exhausted the Web as a brand awareness medium half a decade ago, and need new venues to explore; “newer” brands are probably safer off creating something new on the Web). A few VW-specific money-generation-applications, almost all focused on learning, have also popped up, and their creators/promoters are making enough out of it to cover their costs and make enough profit to warrant further investment. Live music, for instance, is guaranteed to give a return (specially if it’s legally done, ie. the artists themselves playing live, as a form of self-promotion for their music, which might be bought elsewhere — but in the mean time, they’re accepting contracts to play on a virtual club, auditorium, or similar venue, and getting paid real money for it). Some small-scale conferences/workshops/seminars work better inside virtual worlds, where a richness of medium is available (slideshows, voice, video — just like in real life) and allows interaction between the keynote speakers and the audience, in a way that real, physical, in-the-flesh conferences often cannot (and also allow for between-the-sessions chit-chat, which many believe is the real value of attending a conference anyway) — all that for a fraction of the cost of setting up a “physical” conference. Financial services (even the simple L$-to-some-currency exchange) might also be an opportunity, specially in Second Life where this kind of services are tied to companies having the proper legal clearance for offering them. And definitely digital content creation is a growing market, with thousands of small companies offering their services, and dozens of thousands of freelancers already very active in that area — and living from that.

    But, yes, I totally agree: this is the multi-million-dollar question that remains unanswered!

    I’d say that we’re at the “experimenting phase” still. The “new opportunities” in virtual worlds have not yet surfaced; it requires testing to see what might work. This requires an open mind, and will draw mostly from a marketing/public relations budget. It’ll be mostly about brand awareness, and perhaps some form of technical support (some telecom operators, banks, or government agencies, use virtual worlds as an easy way to give 24/7 support where you’re talking with “real people” as opposed to sending an email which gets answered, who knows when, by an ‘anonymous’ employee). It won’t drive sales (not directly) but at least promote your corporate culture, showing off a different side of your company that might be difficult to convey under different circumstances. It might cut travel/communication costs (an in-world meeting with a prospective customer, or a status report about a current project, is much better handled with a virtual world meeting, as opposed to a conference call where you rarely have visuals and cannot show multimedia elements — like slideshows, videos, images. And it will be usually cheaper than using the phone — specially if dealing with an international community. Granted, you an use Skype and upload files between participants, but it’s simply not the same thing).

    But there is as yet “no magic”. There is still no way you can sit down with a random customer, smile, open your laptop with a presentation, and tell them: “Here is how you’re going to make money in Second Life. Let me tell you how to invest, and how soon you can expect a return.”

21. Rick van der Wal said on February 20th

    I think you are selling it a bit short by saying its just ‘adSense’ (banner models) that’s making the money in these start-ups - but it is the overly large chunk of revenue (but don’t forget affiliate programs, product placements, premium services, micro payments, merchandise etc.)

    —-

    Boo! We’ve gotten to that stage were I feel we basically agree again Gwyneth, thank you so much for some great, in depth responses (and you too Ian), we just use different tactical approaches.

    To elaborate a bit more I posted the ’slides’ I often use in presentations of ‘15 applications for the Metaverse‘. In any of these is or will be money, question is when, where and for whom.

22. Ian Betteridge said on February 20th

    ARGs are very big in the online ad world at the moment - it’s only a matter of time before someone has the bright idea of building an ARG ad with a Second Life element…

23. Rick van der Wal said on February 20th

    @Ian - Oh yeah, I played the Guiness one (golden domino) and it was a really cool experience involving Flickr, myspace, youTube and more - and nine inch nails’ Year Zero’ had a great article in Wired.

Join the conversaton!