The Otherland Group - Blog

Learning from with virtual worlds about the coming nano-based economy

A fascinating aspect in the economy of virtual worlds is the fact that - once a product has been designed - production costs are nearly zero. Some people usually wonder how an economy can work at all, when production costs (and distribution costs, too) fall to zero. Would this lead to everything being offered for free? Certainly not, as the economy in virtual worlds like Second Life, There or IMVU tells us.

But is this 'realistic"? Does this have any relevance for the 'real' (?) economy? Can we learn anything from virtual worlds economies under such unrealistic assumptions? We certainly can!

In many industries, productions costs are rapidly dwindling too, and there already is a flourishing industry selling digital goods like music, movies, ringtones etc. And all those items are NOT being offered for free. Why? And how will these prices will develop in the future? What will happen with other types of products which can be manufactured at ever dwindling costs (for different reasons)?

If you are interested in science fiction or some of the more futuristic technologies like nano-tech manufacturing you might have heard about the theory, that nano-assemblers will - one day - be able, to create ANY material object from raw materials available in abundance. The idea is to directly manipulate single molecules or molecular building blocks (like depicted in the picture to the right; Source: Foresight Institute).

While it is NOT certain, that nano-tech manufacturing will be possible ever ... if it became possible, it would certainly change the production industry in a dramatic way: the production cost for nearly all physical goods would shrink dramatically. Just Science Fiction? Maybe ...

But is interesting, to think about these ideas. If you want more food for thought, read Snowcrashing Into The Diamond Age 2 (Part Two) by Extropia DaSilva. Warning: Extropia, like Gwyneth Llewelyn, who published this text, has a tendency to produce long and winding texts. It is well worth the time to digest this essay, though.

While I am not saying that nano-tech manufacturing is right around the corner - it is certainly interesting to think about the parallels between such an economy and the economy of virtual worlds (or industries like music and entertainment already today). Virtual worlds might be an exciting training ground on which to test business models for the "real" world.

Technorati Tags: 3d web, augmented reality, metaverse, virtual worlds, web 3.d

New Dazzle Look for Second Life - Old wine in ...

Tonight I read about a new First Look Viewer for Second Life, Dazzle, downloaded it and played around with it a bit. For those who don't know Second Life in Detail: First Look Viewers are new versions of the client software, that you need to access Second Life, which are not ready for prime time yet. They usually change some basic features of Second Life (or just the front end) and users can try them out for a while, before the new features are integrated into the general release. First Look clients are not Market Research. All of the features, Linden Lab releases with First Look Viewers so far, have been incorporated into the main version later.

I was very much excited to test this out, as this new version was announced with words like:

We’re pleased to announce First Look: Dazzle, a “refresh” for the Second Life viewer’s appearance which makes the UI (User Interface) more accessible and pleasing.

It is my strong belief, that the shortcomings of the current user interface of Second Life are one of the major issues leading to the extremely low user retention especially in the first 30 - 90 minutes. Learning Second Life is NOT easy for the average internet user. ANY improvement of the client's usability would be extremely welcome to me. Alas ...

... after playing around with Dazzle for 30 minutes I can only say: deeply disappointing!

What has happened is basically nothing more than the application of a new skin and color scheme. Cosmetic changes. Pure facelifting. Some icons have been changed. The style of windows, buttons and other interface elements is now basically that of a "polished Windows NT/XP" and everything has been made a little brighter.

Nothing else was changed in a substantial way! The illogical grouping of commands into menus with arcane or misleading names is still the same. Some important commands are still well hidden, rarely needed ones appear in the menu top levels. I wonder, how one can say, that any of these changes improved usability or accessibility at all (some texts are more readable maybe; stronger contrasts).

This leads me again, to question the way this company, Linden Lab, is doing user experience design. I honestly wonder

• How many user interviews have been made (professionally done) before this project was started?
• Have the interim versions been tested with real users (especially newbies) in a controlled environment?
• Was there any comparative testing (old and new versions with different groups)?
• What were the goals of this project?
• Which measurable performance indicators have been defined to check, if (which) goals have been achieved?

To be honest, I very much doubt that anything like this happened. This looks like a bunch of enthusiastic engineers got together and attacked some weaknesses of the current viewer/client - guided by their own taste or suggestions in publicly available literature and eager to demonstrate the relatively new feature of "XML-based customizability" introduced to the SL viewer last year. Disappointing.

Technorati Tags: 3d web, metaverse, second life, virtual worlds, web 3.d

The Economy of Virtual Worlds - It’s got to be commercial and crazy!

I really hate it, when exciting conferences are happening without me participating - but then there's the blogosphere which usually reports "live and in full color" and gives you at least a little glimpse of what is happening. What excites me most on Worlds in Motion at GDC08 are all the discussions about the economy of virtual worlds. I think, that a working economy is one of the most decisive success factors for nearly every kind of virtual world. It doesn't matter if this world is "free to play", subscription based or sponsored/branded. A working economy always adds to the fun, the stickyness and fosters creativity.

It's big business, too. As John Swords of ESC reports from a session

Current analyst estimate that $1.8B+ is on the secondary market for virtual goods. IGE stated nearly $1B in gross transactions in 2005. ItemBay and ItemMania accounted for $974B in gross transaction volume in 2006. Economist projections are $5B in gross transactions by 2012.

And thats the secondary market. This is NOT including the transactions taking place inside virtual worlds (in Second Life, for example, the volume of inworld transactions is 5 - 10 times larger than the secondary market). Additionally, the 2012 prediction of $5B gross volume seems very conservative to me. Growth rates are much more dramatic. I would be very surprised if gross volume would not pass $10B before 2012.
The same John Swords reports (he writes the most concise summaries) from a panel with the bosses of Entropia and GAIA

Can a virtual world or MMO exist without an economy? Panelists agree it’s not likely because any time users perceive value in the world, a market will emerge regardless of terms of service.

Its my firm belief, that "economy" will play a growing role in the further development of virtual worlds, especially as users don't like paying subscriptions for their fun. If you take a look at the web now, nearly nobody pays for entertainment and news anymore. Everything is (seems) free. This is the direction, where virtual worlds are going to, too. There is no way around it. First, there will be a huge shift from subscriptions (still important for premium accounts and most MMOGs) to micropayments. In effect, the users won't pay less, than with subscription. It just feels better to them to pay their monthly 10 - 30 US$ in small payments for virtual goods. And the next step will be advertising based/sponsored models - like on the web today.

Bu there always has to be an "economy", where creativity is rewarded in a way, that "the creatives" take seriously. Because most

Price for the best quote from Worlds in Motion goes to Raph Koster (so far):

The kinds of dreams virtual worlds can achieve cannot come from just idealists or just commercial interests. It’s got to be commercial and crazy.

Sums it up nicely IMHO, that fun, creativity and economy are not diametral to each other.

Technorati Tags: 3d web, marketing, metaverse, second life, v-commerce, virtual worlds, web 3.d

Linden Lab bans Ad Farms - Great Idea, Bad Execution

Last week, Linden Lab, the company behind the virtual world of Second Life, finally decided to act against the ugly phenomenon of advertising farms on the so called "mainland". For those who are not Second Life users: ad farms are areas in Second Life, where the virtual land is cut into extremely small parcels, which are filled with very annoying advertisement displays - the infamous rotating cubes. And - while this is called "ad farming" - most of the Second Life residents doing this are not actually planning on making any money from "advertising". They are speculating on annoying the neighbors so much, that they will decide to buy the land - which is set for sale at astronomical prices - to get rid of the ads. (picture to the right CC by Ordinal Malaprop)

Linden Lab now announced that:

Using content, particularly advertising, to deliberately and negatively affect another resident’s view so as to sell a parcel for an unreasonable price, will be deemed unacceptable and dealt with as a violation of our community standards.

Hmmm ... While the idea of setting up limits against ad farms is not bad, I wonder if these rules will help much and how effective they will be. I think it was not a very good idea, to base the judgement if an installation is considered an "ad farm" on the INTENTION of the resident setting it up. Linden Lab might be able to monitor chats inworld but I doubt, if they can read their customer's minds. Certain limits about minimum parcel sizes and maximum land prices would have been a more practical solution IMHO - and less prone to subjective interpretation.

OTOH I think its a very promising movement in principle, that the Lab finally seems to care for the mainland again: If successful, this new policy should lead to more attractive residential areas on the Linden-operated mainland. And the newly formed "Department of Public Works" will hopefully add to the attractiveness of the mainland in another way: with more realistic (and fun) infrastructure and new and interesting public buildings.

Those who know, that The Otherland Group is active in the (non-mainland) real estate business and is operating an advertisement network within Second Life might be surprised to learn that we are so happy about these new projects. Why should we care about the mainland? And why should we like a ban of advertisement? The answers to these questions are rather simple:

1. Ad-farms with their horrible rotating displays are one of the main reasons advertising is so much discredited in virtual worlds in general and in Second Life specifically. Anything that reduces these eyesores (which actually isn't "advertising" at all in many cases) will make our job easier - to provide a platform for professionally done, effective outdoor marketing.
2. Anything that makes Second Life more attractive for more target groups is good for our business in the long run - even for the business in the other virtual worlds we are covering because SL is still a kind of flagship product. And a reduction of the large trailer-park-like regions in Second Life and the addition of infrastructure and pubic buildings will certainly make Second Life more attractive. :)

So Linden Lab is moving in the right direction. A little more fine tuning might help even more, though.

Technorati Tags: 3d web, advertising, marketing, metaverse, second life, virtual worlds, web 3.d

Protecting property rights in Virtual Worlds - interconnected Virtual Worlds

Among the attributes, which separate Second Life from other virtual worlds, is the fact, that every resident owns the full IP rights of his or her creations. There has been some debate, how "real" this assertion by Linden Lab, creators of Second Life, is. But it is at least real enough that there are many very real businesses based on the creation and sales of digital goods. And - like with all digital goods - there have always been attempts, to "steal" them i.e. circumvent the permissions system, which protects property rights and controls what other users can do with your objects.

Lately a new solution, SecondInventory, came onto the market, which allows Second Life residents to make backups of their own items to the local disk - a functionality sorely missing from the Standard Second Life. And soon this product was accused of being a thief's tool. As the debate raged on, some technically oriented Second Life residents began to argue, that any such permission system is superfluous, because if can't offer real protection, anyway - "no technical solution is bullet proof" ... "and code wants to be free"

I think this is a very simplistic view.

While no technical solution is bullet proof ... and I don't believe, that any technical solution will keep people from stealing other peoples property (physical, digital, virtual, intellectual whatever) in the long run, there is a huge difference, though, between "some sensible protection" and "I don't care/I do nothing". Stealing is not OK.

Let me try to put this product "second inventory" (and the old copybot etc.) into perspective. Because the questions arising here are actually questions, which are important for many developments surrounding virtual worlds technology these days, especially the growing number of "alternative grids". What will happen, when the long awaited "interoperability" arrives and our avatars (and their possessions?) move freely from grid to grid, from world to world?

Read on ...

Technorati Tags: 3d web, metaverse, second life, trust, v-commerce, virtual worlds, web 3.d

Podiumsdiskussion "Banking in Second Life" heute, Mittwoch, im ComMeta CC

Für alle, die noch nichts Besseres vorhaben und sich für Business in virtuellen Welten interessieren:

Podiumsdiskussion heute Abend, 20:00 Uhr im ComMeta CC (in Second Life). Der Obertitel lautet "Auswirkungen der Bankenkrise auf SL Nutzer" aber im Grunde geht es um "Banking in der virtuellen Welt - nur ein Spiel der ernsthaftes Geschäft?"

Geleitet wird die Diskussion von Andreas Illman (von Schaltzeit, dem Betreiber des ComMeta CC). Die juristische Expertise bringt Iris Speiser ein. Und ich werde den Experten für virtuelle Welten simulieren. ;)

Themen:

• Wie kam es zu der neuen Regelung zu Bankgeschäften in Second Life (die nahezu auf ein Verbot von Banken hinausläuft)
• Wie schwerwiegend waren die Pleiten der Vergangenheit?
• Wer sind die Geschädigten?
• Wie genau lauten die neuen Regeln?
• Was bedeutet das für „Business in Virtuellen Welten“?

Das wird bestimmt eine spannende Diskussion. Ich habe jedenfalls ein paar sehr dedizierte Meinungen zu diesem Themenkomplex ;)

Technorati Tags: 3d web, metaverse, second life, v-commerce, web 3.d