I know I've sent some of you some information on Second Life in the past (bottom of this email), but I just read a litte piece about them again this morning (article just below). Besides Starwood Hotels, "American Apparel, Universal Music, and even the American Cancer Society have already set up shop in this cyberworld to push their brands". Keep an eye on this operation and others like it...its a taste of what's to come! Virtual worlds are going to be more and more pervasive. Their growth will be like all technology - exponential (not linear). "In 2006, there's a good chance $100 million USD dollars worth of transactions will flow through the virtual world of Second Life. Linden recently rolled out their own exchange, Lindex, meaning - they're almost a bank now." Lindex is Second Life's real world exchange between US dollars and the virtual Linden used in Second Life! Over $100 millian USD spent in one game on virtual land, clothes, etc! I can't remember the number, but I recently read an article that put virtual economies well into the billions of dollars, with people making their livings, often in the third world, by playing the games to get the better equipment or characters to sell to others on ebay and such. People are already choosing to live in the virtual world and it is so extremely primitive yet...just wait another 10-20 years!
Colin
BusinessWeek
SEPTEMBER 11, 2006
Up Front
Edited by Deborah Stead
INN CROWD Booking A Room In CyberspaceThink of it as a virtual focus group. Starwood Hotels (HOT ) is showcasing its newest hotel brand, aloft, in cyberspace, complete with a launch party on Sept. 18. The chain -- which owns Sheraton, Westin, and W, among others -- is now constructing a model of the hotel inside the world of Second Life, the virtual community visited by users who create digital personas, or "avatars," to interact with one another.Starwood's entry into Second Life will certainly build buzz about aloft, which will cater to design-conscious, tech-savvy travelers. Outfits like American Apparel, Universal Music, and even the American Cancer Society have already set up shop in this cyberworld to push their brands. But the real payoff, says aloft Vice-President Brian McGuinness, is the feedback about the hotel-in-progress from Second Life denizens, who post their reactions on SL's message boards. "It's the next generation of marketing," he says. Operated by Linden Lab, SL so far has about 595,000 "residents" (43% female, median age: 32). Behind each is a wallet Starwood hopes will open when real aloft hotels launch in five U.S. cities in '08.
By Diane Brady and Aili McConnon
I know I sent this out before too, but its where I got a quote I used above and quite interesting:
http://www.makezine.com/blog/archive/2006/03/the_future_of_credit_cards_ear.html
And here's a little sidebar from the coverstory of BusinessWeek on May1st, 2006:
(Here's the link to the cover story, but you probably need to be a subscriber to reach it - http://www.businessweek.com/magazine/content/06_18/b3982001.htm)
MAY 1, 2006
COVER STORY COVER STORY
Online Extra: Virtual Worlds, Virtual Economies |
| An economist talks about how online games can blur the line between fantasy and reality |
When economist Edward Castronova wrote his first paper in 2001 about the economies of online games, he did it mostly as a joke. But even by then, he realized that in online virtual-world games such as Sony Entertainment's EverQuest, people were creating new economies that were as good as real to millions of participants. His studies eventually drove him to write an entire book about the subject, Synthetic Worlds: The Business and Culture of Online Games, published last year.
Castronova, now associate professor of telecommunications at Indiana University, says the growth of online games, from the No. 1 World of Warcraft to Linden Lab's open-ended virtual world, Second Life, has happened even faster than he predicted in his book. He spoke recently with BusinessWeek's Silicon Valley bureau chief, Robert D. Hof, about why they're becoming so popular, as well as the real-world implications of entire new economies sprouting inside online games. Here are excerpts of their conversation.
What did you think of the virtual-world economy of EverQuest and other online games when you first saw it?
I thought it was a fake economy. I found out that it really didn't feel fake at all. When I saw how it connected to the real economy, as you can see clearly in Second Life with its translation of Linden dollars into real dollars, and then you imagine how big this phenomenon could get, it started to have real-world macroeconomic implications.
I thought a study of the video game economy would be an illustration of the deeper lesson -- the subjectivity of value in economics. In econ, there is no difference between reality and fantasy.
Were you surprised at the explosion of virtual economies?
For people born after 1985, there isn't any such thing as virtual reality. There's just another way that you talk to people. This business of having characters and buying and selling stuff for gold pieces -- it's very natural.
These products like Second Life, and the way that World of Warcraft broke out, have just shocked the hell out of me. I thought the big impact might take until maybe 2010.
What accounts for Second Life's growth?
The inflection point for Second Life was this meeting in April, 2003, with me and [journalist] Julian Dibbell and Larry Lessig [the Stanford University law professor and author] and a couple of venture capitalists like Jed Smith and Mitch Kapor. They were basically talking about the idea of user-created content. What we told them was that ownership, and the ability to liquidate the value of your virtual holdings, would in theory spark economic development. If you let people capture the value of what they create, they're going to create a lot more.
So we told them to change their model from one of taxation and share-the-wealth to: "You pay us for the land, you can build whatever you want on the land, you can charge people Linden dollars to do things on your land, and you can take those Linden dollars and turn them into real dollars. And if you build something that's cool, you make money off it and we will too."
So what's the deal with the growth at World of Warcraft, which doesn't do that?
World of Warcraft, in terms of its structure, isn't different from the older games. But they threw writers at the product. There are just so many story lines that are interesting. You just spend all of your time going from one quest to another. Plus the art direction makes it a very pleasant experience to be in. It's the difference between the Mustang and the Edsel.
Do you see those as the two business models for virtual worlds, or are there other models as well?
If you're not in the position to be making that content yourself, like in World of Warcraft, you're thinking of a user-content model like Second Life. A hybrid would be something like Guild Wars, which is a game that doesn't have a lot of pre-made content in it and relies on player vs. player combat to do most of the entertaining.
Microtransactions is another possibility. The Xbox 360 model is apparently to get a bunch of people together and get them into a marketplace facilitated by the console. It comes as part of the product, instead of the current games where a lot of the commerce is basically leeched by third parties.
Given the surprising growth of online games and virtual worlds, what will be the impact on entertainment, or even society?
There's going to be a policy debate a lot sooner than I realized. The focus seems to be on single-player violence, but I don't think it'll be too long before they focus on this idea of toxic immersion -- the idea that people spend too much time in fantasy worlds.
Will the critique have an impact on games and the industry?
Every time there's another politician who doesn't know anything about it, who doesn't the play the games all the way through but just stands up and says all video games should be regulated, that creates a problem for me. That's like saying that everything that's on a moving picture image is bad.
Right now my job is talking to people and trying to peel away the dragon skin, and look at the underlying social networks and markets that are forming and then express [those] insights.
So who is inviting you to talk to them, and what's their interest?
There's this cadre of 20-something and low 30-something workers who keep talking to higher-ups. Every company, if they're smart, will give younger people an open-portfolio job and just say, investigate what's out there.
Best Buy (BBY) started exploring the opportunities for Best Buy to make a game like this, maybe sell product through a game like this, or set up their own affiliate fan site with respect to the game. They didn't go forward with that, but they're keeping an eye on these virtual world technologies. There's a broadening understanding of the uses of this technology for business applications both by blue-chip companies and by startups.
How far along are virtual worlds in terms of reaching a mass audience?
Every single gaming company and gaming platform is going online now. Actually, I keep wanting this not to happen so fast.
Why?
I like the games that you can escape into. The concept that it's becoming a global commercial phenomenon, that's intimidating to me.
What do you mean?
I like the body. I was watching a ballet recently. I was crying because I was thinking the bodies are so beautiful, and we're losing the body. I'm just afraid of losing the body.
At the same time, I love playing these games. Also, I have a kid. I also think, well, I should introduce him to these worlds at an early age so it's very natural for us when I'm older to go hang out together no matter where he lives.
As if that's not enough, do you have other concerns about online games?
I'm also concerned that this commercial impulse could swallow up the separateness of these places. I would hate to see all that lost because of unregulated profit-seeking.
I would like there to be some kind of provision, like a wilderness preserve sort of law, for these places. We would need to have a law saying that if you promise you will seal off this world so people can't money-launder with it and can't liquidate the returns, we won't come in and tax all the transactions, and we won't subject you to child labor laws.
Second Life seems to be embracing commercialization, though.
That's part of its core plan. This is where I would set Second Life apart. This is unique technology here. It would be really bad for Second Life to be closed off from the real economy. It's a big part of its raison d'être, to be an economic space that is well-integrated into the real economy. That's different from a fantasy world.
I think there should be a line between Second Life and World of Warcraft, and my concern is that judges and legislatures will draw a line that puts both in the same group.
What's the appeal of Second Life, in your view?
It's an infinitely scalable content creator's dream. It's an extension of the land mass of the Earth. As long as somebody wants land to build on, Second Life will make land. If you're into creating content -- whether it's a building or a logo, anything -- it's just a dream space. That's what explains how it's growing.
I think the question is the ratio of content creators to content consumers, and keeping that healthy. You want to have enough creation, but you also need to have consumption. You need to have creation that people consume for the world to be lively.
Subject: The Virtual Rockefeller
I thought this article was interesting. It is more evidence that we are moving towards, and beginning to develop, a virtual world where people will choose to live more of their waking, spare (and eventually professional) time than in the "real world". The success of games like the Sims being a top selling game, people now making money developing virtual real estate - living and earning in a virtual world... I always liked many of the premises of the Matrix movie, but never liked the premise that we were forced or captured in the virtual world while our bodies are being used as batteries. I believe one day we will choose to live there. I'm not attributing we should or that it'll be better, but it will happen...
Colin
The Virtual Rockefeller
Anshe Chung is raking in real money in an unreal online world.
By Paul Sloan
December 1, 2005
(Business 2.0) – To understand the lucrative real estate empire Anshe Chung has created, it helps to spend some time with her "in world." There, she might teleport you to one of her islands, on the continent she's named Dreamland. You can stroll through the floating city she built 700 feet above a desert, walk through elegant Arabian-style homes on land she leases, strike up a conversation in Japanese amid her Asian gardens, or shop for a grand piano in one of her 600 boutiques.
It's all virtual, of course--part of a flourishing online universe called Second Life. And if it sounds absurd, consider this: While Anshe won't talk about how much money she's making ("I'm careful not to stir animosity," she says), Philip Rosedale, the founder and CEO of Linden Lab, which runs Second Life, estimates that she's bringing in around $150,000 a year--in real, hard cash.
First, a primer. About 70,000 people "play" Second Life, though it's not really fair to call it a game. People don't rise through the ranks by slaughtering sinister beasties, for example. No score is kept. Linden Lab, based in real-world San Francisco, simply sets up computer servers and creates a limited supply of undeveloped land. Then it auctions off parcels, typically to developers like Anshe. Rosedale, who launched his virtual universe more than two years ago, characterizes Anshe as the "Rockefeller of Second Life."
She has many schemes, but here's one basic play: Anshe buys up Second Life land, paying Linden Lab roughly $200 a month for each 16-acre plot, plus a one-time fee of $1,250. Then she develops the land, using Photoshop to add rivers, mountains, and forests. Sometimes she hires subcontractors to improve the acreage by designing or building houses. Then she sells or rents to other Second Lifers, who pay good money to inhabit her creations. As in the real world, prices vary by location. But often someone will pay Anshe $100 up front to buy a one-acre plot, plus $20 a month in land tax. In a case like that, Anshe makes $112 in her first year. She's done more than 10,000 various real estate deals. "I'm like Wal-Mart," she says. "The margins are small, but the volume isn't."
Anshe's real-world name is Ailin Graef, though in Second Life she has Bono-like notoriety and is known simply as Anshe. She grew up in China and now lives outside Frankfurt, Germany, where she teaches Chinese, English, and German. But her main gig is running her Second Life empire with her husband. When she joined Second Life just over a year ago, she did so out of curiosity about virtual worlds--to explore how people behaved there and how the experience was different from, say, playing a videogame. "What I found were real people with real emotions and real friendships," says Anshe, 33. "I also found the economy was very real."
Like any good businessperson, Anshe researched the market. She began chatting with participants to figure out what they were looking for. She found that people were frustrated with land developers who asked huge prices and wanted to negotiate, so Anshe began brokering land at fixed prices. Players also wanted neighborhoods that amounted to more than drab slabs of virtual turf, and they wanted some order. So she began creating the equivalent of gated communities, complete with zoning rules. She doesn't allow malls or clubs in certain regions, for instance, and limits the heights of buildings. "She is the government," Rosedale says.
Second Life is still an emerging nation, and Anshe believes it's rife with moneymaking opportunities. The key is to find a niche. As in the real world, for instance, Anshe discovered that people want to spend time with those who are like-minded. So she created specialized areas--places for people who like Asian architecture, for example, and a community for gays and lesbians. She also owns stores that she leases to other virtual merchants.
A strange way to make a living? Perhaps. But for Anshe, it's no stranger than spending tens of thousands of dollars on a designer piece of clothing. It's just a lifestyle, she says, "and I make customers happy."
