One of the current trends being debated on the Internet is the rise of the virtual economy – the trade of virtual goods that only exist online. And often only exist within a specific platform online. If the platform goes away, so do all the virtual goods. This leads many academics to ask why do people buy virtual goods? I assume they wonder why people buy tickets to the theatre or cinema too, since once you’ve attended and watched the performance, you have nothing left but the memory. The ticket doesn’t buy you anything physical that you can keep, other than a piece of paper with your seat number printed on it.
In December 2009, BBC News reported that the US virtual economy is predicted to be worth up to $5 Billion in the next 5 years, and that sales in Asia are already at the $5 billion mark and growing. They are predominantly being driven by games played in online social networks, from massive multiplayer online games (MMOGs) such as World of Warcraft and 3D virtual worlds such as Second Life to web-based sites like Facebook.
One of the key traits of virtual goods at the moment is low cost – individual items usually cost pennies/cents to purchase. That might not sound like much of a business model. But people are far quicker to handover money for cheap goods than expensive ones. And thanks to social networks, virtual products can benefit from viral marketing, leading to 000,000’s if not millions of sales. Those numbers start to add up.
This all sounds wonderful for the business selling the product. However, we are beginning to see that viral growth can have a sting in the tail. As demonstrated last year in Second Life with the plight of the digital chicken:
The trouble with exponential growth is that it rarely persists. An exponential curve will either flatten out or, as seems to happen more often, will plummet. It seems social networks are increasingly driving behaviour towards viral purchases. If you’re betting your business on viral sales, be careful with your forecasts and be prepared for the drop.
Hat to New World Notes for this case study and referencing the above video. His post covers the impact this trend and resulting revenue had on Second Life’s economy.
During February 2010, the BBC broadcast a 4-part series titled The Virtual Revolution.
I have mixed views about the series. I do think it focused a little too much on sterotypes rather than depth given the emphasis placed on the presenter’s Ph.D in the subject. But maybe it just conformed to the way TV documentaries want to be made these days: headlines set to a booming soundtrack with bias towards shock stories to hold your attention. Regardless of my gripes, it covered some good content and I’d recommend watching.
As I tweeted at the time the programme was first broadcast, for all the academics and ‘expert’ authors quoted on the programme, the two I found to have the most thoughtful views (i.e. some balance between sweeping generalisations) were Stephen Fry and Tim Berners-Lee. The BBC have shared some of the interviews online, along with transcripts. Links at the end of the post.
Given the subject matter, full marks to the programme makers for practicing what they preached and integrating as much social media into the series as possible. Each programme included the Twitter hashtag #bbcrevolution in the opening titles and closed with follow-up activities taking place on the web site. The presenter Aleks Krotoski was usually tweeting along too.
Here’s Stephen Fry’s interview, made available on the Virtual Revolutions web site. Quite honestly, I’d have been happy to listen to an entire programme, if not series, of just Stephen Fry talking based on these 10 minutes:
One great quote towards the end:
It used to be that if you were a politician or celebrity wanting to set the record straight or sell something, you had to court the newspaper. Now you don’t have to. If you’re a big star you’ve got over a million followers. No newspaper can provide you with the kind of coverage you can provide yourself and you’re in control. Newspapers hate that. It takes away their power…
It’s a shame that the entire interview isn’t published. Some great quotes about Wikipedia were included in the series but are not in the interview published online. Hey-ho.
Teleporting is to SL Advertising What the Channel Clicker is to TV Ads
The standard means of travel in SL is point-to-point teleportation, near-instantaneous transit from one location to another. P2P teleporting renders billboards and most other location-based advertising useless
Advertisers want to hang on to your eyeballs. In the old days of a few TV channels, it was considered an easy task – insert ads between the TV programmes. As the number of channels increased, we all became channel hoppers. Adverts start and off we click. In Second Life, the clicker is replaced with the teleport. People do a ‘beam me up Scotty’ and go direct from one destination to the other, making it hard to insert ads along the way.
But the Internet is no different. The only successful placement of ads has been discretely embedded alongside search results and web parts. The indiscrete ones are so in your face they cause an instant channel hop/teleport/link to another digital location, be it 2D web or 3D virtual world. And increasingly we hop direct via our social networks, receiving a message or shared link from someone we trust. Ads in their traditional format will struggle to succeed in this environment. It is telling that a non-advertising company (at the time) – Google – invented the current profitable form of web advertising. Advertisers did not believe a simple text box would work…
Death by Green Dots (or lack thereof)
“Every avatar in-world is represented by a green dot…Any noticeable clump of green dots attracts more dots, and as those grow, more follow– a feedback loop colloquially known as “the green dot effect”. Second Life’s most successful entrepreneurs sustain this flurry of dots by holding constant events, giveaways, and games, and even go so far to pay Residents to visit. Amazingly, corporate marketers have been slow to replicate these homegrown strategies.”
As GigaOM highlights, the challenge to advertisers here are good old fashioned network effects – dots attract dots. And where else do we see network effects? Everywhere in Web 2.0, be it MySpace, Facebook, Twitter, Bebo or any other social site. All are affected by exponential growth or complete lack of growth, there’s little in between. To sustain interest requires effort. It’s not just advertisers who are affected by this phenonemon. Journalists and other professions are also struggling to compete against newcomers often dismissed as amateurs but who offer more to their audience.
A Failure of Imagination
“To play in Second Life, corporations must first come to a humbling realization: in the context of the fantastic, their brands as they exist in the real world are boring, banal, and unimaginative”
Second Life is not the only place on the web that makes traditional brand advertising seem boring and bland. The same is true of every single site that has enabled people to have their say, contribute and be creative. Look at the videos on YouTube, compare the mash-ups being made by individuals compared to professional speeches, fan pages on Facebook versus staid corporate web sites. None of them remotely resemble traditional marketing designed for mass consumption and yet they attract viewings by the million.
Here’s a simple example. When United Airlines lost a passenger’s luggage, the passenger made a song and posted it to YouTube. It achieved 3.5 million views in 10 days. Few adverts achieve such a voluntary audience. The net effect – it wiped 10% ($180 million) off the value of United Airlines. But full marks to them, apparently United Airlines are now going to use it as part of their training.
These marketing lessons dished out to companies trying to succeed in Second Life are equally relevant to companies trying to succeed in this new Web 2.0 world that the Internet has become.
To summarise what brands need to do to in Web 2.0:
Find ways for your product or service to become part of the story. Product placement in a film trumps an advert in the coffee break. Sometimes, the ads in and around the search results are the result you were looking for. They succeed because they look part of the search results (i.e. mostly text), rather than trying to bling their way annoyingly into your now disrupted attention.
Reinvent your marketing department. Stop outsourcing work to agencies and staring at campaign statistics. Learn from individuals who have leveraged Facebook, MySpace, Twitter and others to create an incredible personal brand. Apply their lessons and understand it will take effort to achieve those network effects. (It usually involves a story…)
Be prepared to not understand what someone is proposing but let them do it anyway. Imagination and creativity are valuable commodities, don’t clip their wings so much. I would go so far as to say, if your marketing department doesn’t frighten you with their ideas, they aren’t good enough.
And having written this, I’m guessing less than 5% of companies will follow the advice. More may try but few will actually follow it to the letter. Instead they will customise the advice to make it feel safer, and most will fail because they failed to change. Here’s a simple example…
Reverse Marketing – Start with the discount and increase the price of products
In the real world, when new clothes come out they are sold on the high street at full price. Then, as the season ends or a new collection is due, the clothes go on sale at a fraction of their original price.
In Second Life, a virtual retailer lauches new clothes on sale for 48 hours (L$99, about $0.36) before raising them to full price (L$299, about $1.11) where they remain for as long as she wants to sell them. It is the reverse situation. She doesn’t actually call it a sale, rather a promotion. To get the promotion, you have to be a member of her group and will receive a notice when new clothes are available. Within seconds of a notice being issued, her shop will be so packed with avatars nobody else can teleport in. I am guessing more than 80% if not more of her sales of new items come from within that 48 hr period. Without the promotion, far fewer would bother to turn up on a regular basis and check out new items. The price is cheap enough many automatically buy regardless of whether they really want the item, knowing it is the only time it will be available at such a large discount.
Imagine if a retail shop could be bothered to do the same. Some do offer special store discounts on occasion, but usually for no more than 20%. It needs to be a better deal and a systematic approach to attract customers to buy on a regular basis. Create a Fan page on Facebook to announce promotions for new collections, with 40%* discounts during a 24 hour period when the stores are open. And make it a regular activity, not an occasional event. Good or bad for business? (* I’m guessing here the mark-up is more than 40%)
Side note: To embed the video above, I had to go find it on YouTube. The version included in the BBC article appears to be a copy that doesn’t let you embed it anywhere else. (They do include a ‘video courtesy of YouTube’ reference.) A blogger wouldn’t make it so difficult to share…
[Update: 10th March 2010] Bryn has created a great machinima telling the story, embedded below
Bryn Oh has been at it again. An amazingly talented artist specialising in immersive experiences in Second Life, this time has been let loose on one of IBM’s regions, creating an interactive story about the Rabbicorn (and a great example of NPIRL – not possible in real-life)
If you have a Second Life account, I highly recommend visiting both it and Bryn’s own region Immersive: (these links will launch a teleport within Second Life if you have the viewer software installed):
The common perception is that online or virtual training courses are no substitute for the real thing: a classroom with a teacher or professional. Yet research published in the New Scientist begs to differ.
A programme in West Africa created to pass on new technologies and techniques to women farmers adopted two approaches: 1. watch a training video; or 2. attend a training workshop. The results speak for themselves:
74% of women attended the video, just 22% attended the workshop
Uptake of the new technique was 72% of those who watched the video and 19% of those who attended the workshop
To put that into context, imagine 2 villages each containing 100 women farmers. Village A is shown the training video, village B runs a workshop. In village A, 53 out of 100 women adopt the new technique. In village B, 4 out of 100 women change how they work.
Why such a difference?
The study comes up with some reasons that should be of interest to any organisation looking to improve training:
Democratised access to knowledge beyond the usual elites
The video was shown communally in early evening so that everyone could attend. With limted places at a workshop, a selection process is inevitable
Storytellers were fellow workers and trusted more than the experts
The video differed to the workshop in that it used fellow women rice farmers to demonstrate the technique. Viewers trusted the message. The workshops were delivered by outsiders – scientists and NGO* workers
Videos were designed to make the principles of the technique obvious
67% of the women who couldn’t afford the equipment created alternatives. Attending a workshop, you do what the expert tells you… if you can.
“When they understood that rice shouldn’t touch the water, they provided their own solutions.” Paul Van Mele, Africa Rice Center
These 3 lessons could also be invaluable in any organisation. Online training can be made available to anyone, anywhere at anytime (even those who don’t use a computer as part of their normal working day). When introducing new ways of working, peer demonstrations trump management objectives. If there is no expert to give all the answers, people will innovate and provide their own solutions. And some of those innovations could lead to new opportunities…
As for the programme in Africa, the video has since been translated into 20 African languages. Five additional rice-related videos have been produced and more are planned for other crops. Brilliant!
One of my pet research projects during the past 10 months has involved dabbling in virtual worlds to understand if/when they will become a mainstream technology. The outcomes from the research will be publishd at a later date. In the meantime…
If you have heard about Second Life, it’s more than likely you’ll have seen it gain press attention for all the wrong reasons (if you really want to know, see here and here for examples but be warned, one link involves flying genitalia).
Beyond the simple fact that any world, real or virtual, will bring out the good and bad in human nature, virtual worlds offer a range of interesting possibilities. From copying real life to doing stuff not possible in real life to integrating and complementing real life, virtual worlds can assist education, communicatio, process simulation and prototyping new ideas. The research I am currently working on includes experimenting with 3D taxonomy management and syncing data between a virtual office and SharePoint site…
Here are some examples of the work people have created using virtual worlds:
World Builder from Bruce Branit
An aware winning example of integrating the virtual and the real including Minority Report style user interfaces
Attaining Presence: 4Jetpacks4 and Bryn Oh
A great example of ‘not possible in real life’. Both movies show how much easier it has become to create professional looking short animations with everyday tools. Bryn Oh is an amazing artist/builder
NHS Training for Innovation
Not as professional looking as the previous examples (devil is in the details, as usual), this is a video of the NHS training hospital in Second Life (developed by Imperial College, London)