May 4, 2006 SDF Virtual Worlds

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All this talk about labeling people and telling them where to go brought to mind a recent virtual reality event that will give the some people nightmares. Imagine, everyone being who they want, going anywhere and doing whatever they want. Horrors!

Virtual Worlds –The Rules of Engagement

On Thursday May 4, 2006 at the Computer History Museum in Mountain View, SDForum sponsored an all day event on Virtual Reality. While there was a fair size crowd of about a hundred in person, there were more than twice that number attending online through the day. This only drives home the advantages of virtuality.

The Rules of Engagement

Philip Rosedale of CEO Second Life talked about the implications of that extraordinary virtual reality community. Attempts to directly by businesses to make money in this space do not work as well as people playing and learning how to interact with each other. In Second Life people live, work and make money selling goods and services to one another. They can create spaces that are complete fantasies or mirror the real world. This real world simulation allows you to experiment with doing things that are difficult to do. You could test a fire drill of a hospital without disrupting patients or staff. You could work out the logistics of delivering drugs to an epidemic. The only limits in the real world are money, and server space to support the community.

In-World Culture

The first panel discussion was on In-World Culture moderated by Daniel Terdiman a reporter from CNET The panelists included Wagner James Au an In-World Journalists for Second Life, Danah Boyd from Social Media Research at Yahoo, Susan Choe CEO of Strayfish, and Nicole Lazzaro, President of XEODesign.

Increase in bandwidth and social interaction allows more people to participate virtual realities like In-World and MySpace. Nicole Lazzaro talked about how the more control players have in an environment; the more they will interact or co-create. Creating identities, landscapes, art and music has a snowball effect. One side effect is virtual reality seems to leading to interacting with members in the real world. For instance, Wagner Au talked about a virtual Camp Darfour to bring attention to refugees. This led to the creation of the Green Lanterns who patrol and protect virtual worlds. Of course real world corporations like Coca Cola, MTV and Disney are trying to move into the space as well. Danah Boyd says that users are encouraged to challenge their environment and how they want to be perceived versus being controlled from without. Stopping innovative, emergent or viral behavior only creates more emergent behavior, as anyone who has a teenager knows. Susan Choe says that events that happened in Asia are now happening in the United States. Strayfish imports games from Asia that can have at least 50,000 users interacting with each other. Most intriguing are users that bet on how other users will perform in an online game.

The Virtual World Value Chain

The second panel discussion was on the Virtual World Chain moderated by Sharon Wienbar, Managing Director of BA Venture Partners. The panel consisted of Will Harvey, CEO of IMVU, Daniel James, CEO of Three Rings, Shital Mehta, Founding Partner of Shanth Interactive, Alex St. John, CEO of WildTangent, and Sibley Verbeck, CEO of Electric Sheep.

Daniels said users initially funded Three Rings, so you may not have to start with venture capital or advertising from Madison Avenue. Alex St. John said that value chains in the real world are created in the virtual. His company sells the tools that help add value to users. Virtual goods have no real cost of production and branding becomes more important than physical factors like geographical distance or transportation costs. Shital Mehta talked about the current debate on marketing in virtual reality. How should MTV or Wells Fargo operate in virtual worlds? What is appropriate in what setting? Will users rebel? Will Harvey said there would be more islands but more bridges between those islands.

Navigating The Road Ahead

Kevin Efrusy, General Partner Accel moderated a third panel talking about Navigating the road ahead. The Panel consisted of Jerry Paffendorf, Futurist in Residence for Electric Sheep, Reuben Steiger, CEO of Millions Of Us, Jeff Sandquist, GM Developer Platform Evangelism for Microsoft.

MySpace qualifies as a virtual world not so much in the special effects as in its interoperability for users. To expand the features of the MySpace experience one has to develop that are easy to use as seen in GoogleMap. The results have to tangible and useful immediately. The challenges of a user managing multiple identities online or moving their data from one virtual reality to another will be opportunities for developers. Reuben talked about the Las Vegas monorail system where successful casinos don’t want their customers to leave easily so they did not want a station at their casino. The top players in the virtual environment may not want to make it easier to move out of their space. Still, they thought the most open standards should be receiving the broadest support. The more your space can accept standardized data outside, the more traffic you might expect.

The virtual world will not be free of problems. Polluting elements in the virtual world could be things like identity theft, self-replicating objects, viruses, spam, restrictive IP and social predators. Any real problem can be mirrored in virtual.

Business Models and Monetization

Michael Kim, Partner at Rustic Canyon, hosted the fourth panel on business models. The panel consisted of Corey Bridges, Co-Founder of Multiverse, John Welch, CEO Playlist, Shawn Carolan, Managing Director of Menlo Ventures, Sean Ryan, CEO Donnerwood Media. Corey Bridges’ Multiverse software and network is free to encourage content development. If the game starts to make money, then Multiverse starts charging. John Welch’s presented his company Playlist, which makes casual video games like Diner Dash. Shawn Carolan’s Menlo Ventures looks for good business models that can take advantage of broadband access. Sean Ryan’s Donnerwood Media licensed Tringo in Second Life and then ported it to game consoles like the Sony PlayStation. They are interested in developing avatars that can be transported to other environments like cell phones or game consoles.

As a business model, the game industry is an example of a fragmented market, with ultimately limited financial returns. Attempts to create large markets are met with user resistance. We are headed not for one unified virtual reality but a fractured world moving from one state to the next. Multitasking behavior like listening to your iPod, watching TV, surfing the web and playing a game, while working on your homework will be more common. People want to control how they exist and function in virtuality and not be hassled.

IMVU Keynote

IMVU CEO Will Harvey gave a keynote address about his company’s 3-D instant messaging service targeted toward teenagers. They have successfully found a happy medium between lots of users (MySpace) and lots of money per user (downloaded video games). IM is extremely efficient communication compared to avatars but it is not as full an experience. Avatar with IM is a business model that people will pay real money for virtual items. One interesting lesson Harvey learned is that each employee you hire makes you less nimble; creating a bureaucratic inertia that resists changes in direction. Another lesson is that developers will tolerate bad tools if they were powerful. Credit reselling works in their business model. Ultimately, Harvey thinks the Internet is evolving into the metaverse.

Future of the Metaverse

Joi Ito, VP of International and Mobility, Technorati and Chairman of Six Apart Japan talked about his view of the future of the metaverse. He thinks the American concept of cyberspace as sitting in front of computer does not work. In Asia, children can text message without looking at the cell phone keys. The divisions are becoming more vague. Spending the day in multitasking polychronic time is more useful versus monochronic time. Traditional conversations between two people with a beginning, middle and end cannot compete with Second Life’s Teamspeex where the group conversation threads lasts all day. He uses Warcraft like instant messaging, which was not its original intent. Overtime he suspects that most of the activity will occur off the desktop and onto other devices. The most fascinating point was that there is no correlation between ones social status and real world status. Virtual work environments require leadership from the bottom up rather than top down. People only follow leaders only if they want to. He talked about to create this kind of 3-D wiki-style consensus workspace. Creating a sense of place adds value. He expects a convergence of technologies, users and environments. Most people will expect heads-up display game style interfaces as the easiest virtual reality experience.

In the end the divisions between reality and virtuality will blur and complement each other, creating new experiences and opportunities for all.

DJ Cline
Copyright 2006 All rights reserved.