Virtual world Second Life is out with its Q1 2009 Economic Report and things are looking up. In fact, Second Life economics look much better than the real world.
Users are spending much more time on the site despite a drop in land ownership. In an interview with CNET News, Linden Labs CEO Mark Kingdon estimated "user-to-user monetary transactions in Second Life may hit $450 million in 2009, up from $350 million."
An overall mood of increasing optimism - A number of factors drove the growth in the Second Life economy in Q1 2009: an increase in active users and user hours, a steady influx of new Residents, and continued improvements in grid stability. Anecdotal conversations with large estate owners and merchants point to a renewed optimism about the Second Life economy, while our recent business owner survey (as reported by M Linden on the Offical Second Life Blog), indicated that 68% of business owners are planning on maintaining or increasing their investment in Second Life in the next six months. And 61% of business owners are optimistic that their revenue from Second Life will grow. So despite the real life economic crisis, the Second Life economy continues apace.
Some obligatory statistics for all you numbers people:
- 124 million user hours, an increase of 42 percent from the same quarter last year
- Peak concurrent users of 88,200, an increase of 33 percent from the same quarter last year
- The value of user-to-user transactions was $120 million, up 65 percent from the same quarter last year
- The Island market has stabilized, although overall square meters of resident-owned Land has decreased
- Gross sales on the Xstreet SL marketplace grew 23 percent over Q4 of 2008 and 72 percent over the same quarter last year
What does this all mean? Well, it's a bit hard to tell since Linden Labs is private and doesn't disclose real dollars. It does however prove that there is money to be made in virtual goods, provided you have a user base with enough transaction volume.
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Upper Deck and Flying Lab Software launched a beta version of UpperDeckU, a new kids-oriented online virtual world where sports fans can create their own personal player and socialize and play games with other players.
The ultimate goal of UpperDeckU is to revitalize the dying art of card collecting, but obviously monetization would be great. According to Louise Curcio, vice president of marketing for Upper Deck, "the vision is that this is a marketing tool we're using to engage kids into collecting cards more. That being said, there's also the possibility that it could be a viable business,"
Upper Deck plans to monetize the new site in a number of ways:
- Special Access Codes - Upper Deck will still continue selling physical cards, but within the packs, collectors will find "Insider Access" codes that can be utilized within UpperDeckU. These codes will then allow users to access new features within the virtual world.
- Virtual Card Sets - In addition to the physical cards, users will also be able to purchase virtual sets as well
- Microtransactions - An in-game currency is expected to come online and allow users to buy any number of special items.
It's a good idea to make sports a focus area to connect the real and virtual worlds. Products like Webkinz also cross over, but do so only in the name of commerce, encouraging more dollars to be spent while receiving nothing in return.
I think the way to really make UpperDeckU a big business is to get Major League Baseball and other bodies to participate and integrate real players and game statistics into the virtual world. At that point, the crossover opportunities are boundless--TV, internet, physical toys etc.
Virtual Worlds Management today released its updated Youth Worlds Analysis with the latest data showing more than 200 youth-oriented virtual worlds live, planned, or in active development.
Strangely, the under-7 market (if there is such a thing) is the most heavily targeted with 107 worlds aiming for market share.This strikes me as a bit odd considering that the most you can hope for with kids under 7 years old is some brand recognition, with a subscription as the best-case scenario. Kids that age are notoriously fickle which makes it very difficult to monetize them. But teens appear to be a nascent market.
The teen market, and of course that of adults, seems relatively wide open, though, and potentially even easier to monetize. So while the youth market has been the booming growth space of the industry so far, and likely will continue to be to some degree, we might soon be spending a bit more of our time tracking adult offerings as well.
The report also suggests that "there is an increase in worlds aiming to serve families from the time their children are 3 years old and on" with a particular interest in educational content. That makes sense, and I suspect that trend will continue. The big question is how to make money?
Full report: 200+ Youth-Oriented Worlds Live or Developing
Virtual world and supporting companies raised more than $594 million in 2008, according to a new report from Virtual Worlds Management.
While this represents a small portion of total venture dollars, there are some large deals ($100 million and $70 million), as well as ones typical of early-stage companies ($500,000 to $4 million).
I'm not sure why it takes so much money to build these popular virtual worlds, but it seems that investors still have an appetite to provide money. The fourth quarter saw $101 million in investment, with Gofish, Playfish, and Playspan grabbing $22.5 million, $17 million, and $16 million, respectively.
The biggest virtual-world investments of '08:
- 9You (China): $100 million
- Realtime Worlds: $50 million
- Turbine: $40 million
- Trion: $70 million
Those are some pretty significant bets from the investment community. It will be interesting to see how this pans out in light of the decrease in consumer spending.
As a side note, if anyone can explain why all these virtual-world companies have the word "fish" (Playfish, Gofish, TwoFish) in them, I would appreciate it. Hit me on Twitter @daveofdoom.
As reported earlier on Webware, FremantleMedia, co-producer of American Idol, announced it has teamed up with Habbo to create an Idol-branded community within the Habbo virtual world.
Habbo claims 11.5 million unique users on a worldwide basis and more than 121 million characters have been created. VentureBeat reports "about 90 percent of its users are 13 to 18. They spend an average of 45 minutes on the site per visit."American Idol and its show sponsors will post their signs and merchandise throughout the Habbo environment. They will hold events on stages and use spaces that resemble those in the show.
Those are some staggering numbers, especially when you consider a network Tv show of one hour is about the same length. In theory that means American Idol can double its brand imprint with each visit to the site.
For the record, I don't watch American Idol or have a character on Habbo, but I do find the brands and the massive communities to be fantastic examples of how to build across multiple media channels and create continuous momentum for products that haven't really changed over their lifetime.
There are some lessons to be learned here for software companies as well. If you can extend your brand through the right partners and channels, you too can effectively double your audience. Instead of spending a ton of money on your own branding, find a way to leverage a partner community that's mutually beneficial.
Of course, that's easier said then done, but if we look at companies that have built successful channel programs (Oracle, MySQL, Salesforce.com) you start to see a pattern where customers and partners become the primary branding mechanism.
The new section of Habbo will open on Jan. 30. I will be in Hawaii (real not virtual) if you want to hang out with my avatar.
The big challenge? Figuring out what can/should be taxed and what rules generally apply. The National Taxpayer Advocate suggested this week that the "IRS issue guidance addressing how taxpayers should report economic activities in virtual worlds."
"Economic activities in virtual worlds may present an emerging area of tax noncompliance, in part because the IRS has not provided guidance about whether and how taxpayers should report such activities," states the report's Executive Summary.
A big part of the fun of reading government reports are the gems of wisdom that is cranked out, including The Most Serious Problems Encountered by Taxpayers which gives top billing to "The Complexity of the Tax Code."
IRS data show that taxpayers and businesses spend 7.6 billion hours a year complying with tax-filing requirements. To place this in context, it would require 3.8 million full-time employees to work 7.6 billion hours. In dollar terms, we estimate that taxpayers spend $193 billion a year complying with income tax requirements, which amounts to 14 percent of aggregate income tax receipts.
So, the report simultaneously suggests guidance for new taxation while stating that tax codes are too complex. I just love irony.
Via VirtualWorldNews
The government of Decatur, Georgia, is thinking of creating a virtual world of the town in order to encourage "community networking, civic engagement, (and) economic development."
Similar to other social-networking tools, Virtual Decatur will provide an environment in which residents, businesses, institutions, and visitors can interact and connect around a common interest. However, it is it is imperative that the project go beyond the features of traditional virtual environments.
The overarching purpose of this project is to allow users to interact with the city in new and innovative ways that are not possible in the real world. It is envisioned that the real-world experience may be enhanced through participation in Virtual Decatur.
That all sounds well and good, but considering that major technology companies haven't seen much virtual-world success with the savviest of users, it's hard to see why Decatur would be more successful. And considering the inevitable porn of Second Life and even the new PlayStation home, I highly doubt that the residents of Decatur are prepared for the pleasures of the Internet.
I'll see you at Town Hall as I pay my virtual parking ticket.
Via GamePolitics.
Follow me on Twitter @daveofdoom.
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