Virtual Worlds, Real Opportunities
By: John Gartner
Having brand recognition in a virtual world translates to
big business in the real world.
They hang out for hours on end, actively
seeking out new people and things to experience.
These "residents" of online worlds –
who also aren't afraid to buy online – match
the definition of a desirable audience. With millions
of registered users and thousands of dollars
changing hands every minute these virtual
worlds provide ample opportunity to enhance
e-commerce and bolster your brand.
However, marketing to virtual-world participants is very different
than in the real world. It requires carefully assimilating
into the community of pixilated people and tactics that are more
about nuance than numbers. Those who buy not-so-real estate
before understanding the culture could cause damage to their
brands that carries over into the real world.
Virtual worlds enable people to escape the doldrums of school,
work and home life by using altered egos (avatars) to navigate terrain
where almost anything goes. Virtual worlds such as Second
Life, World of Warcraft, There.com and Kaneva are among the
fastest-growing (and most-hyped) destinations for online entertainment,
and marketers have been quick to stake their claim.
Second Life has grown from 100,000 to more than 4.4 million
registered users within a year, and often has more than 40,000
people online simultaneously. World of Warcraft, a massive multiplayer
game, has more than 8 million subscribers.
Console makers are getting into the act as well, creating virtual-
world extensions of their gaming platforms to retain their
customers when they take a break from killing or competing with
each other. The Sony Playstation Home world will launch later
this year, while Nintendo has developed a virtual world for owners
of the Wii console.
Buying In
Today most of the money to be made from virtual worlds comes
from subscriptions and selling virtual real estate. According to
analyst firm Screen Digest, online virtual worlds surpassed $1billion
in revenue in 2006, but most of it (87 percent) stems from
subscriptions paid to the worlds' creators.
Marketers are spending on in-world events to increase their
reach, and most importantly, to get access to a desirable demographic. If you imagine that these worlds are primarily a respite
for socially awkward teens, think again. Because the sites require
a faster-than-average computer and broadband Internet access,
users tend to be somewhat computer-savvy and more educated,
according to marketing consultant Sam Harrelson.
"They are not your typical audience,"
says Harrelson, who counsels clients on
marketing strategies for Second Life. Participants
tend to also use many social networking
sites such as Flickr and del.icio.us,
and because they buy virtual goods such as
clothing for their avatars, they are comfortable
with spending online. Screen Digest
projects that commerce (both business
to consumer and consumer to consumer)
transacted through these sites will top $1.5
billion annually by 2011.
There.com, a virtual world created by
Makena Technologies, has more than
600,000 registered avatars, with participation
equally split between males and
females, according to Betsy Book, director
of product management. The median
age is 22, and 70 percent of members are
between 13 and 26, she says. Shopping for
items for avatars is one of the most popular
activities, according to Book.
Learning the audience
Before deciding whether to establish a corporate
presence, companies should create
avatars and join the virtual world as individuals
to learn how people communicate
and what their tolerance is for marketing.
Virtual-world residents have developed
their own culture that must be understood
before marketers establish a presence, according
to Harrelson. Residents would
prefer to learn about companies from their
peers rather than be approached by advertisers
or overwhelmed with graphic ads.
"If you buy a building without a marketing
plan you can be wasting a lot of money,"
Harrelson says.
Opening a storefront and expecting avatars
to cruise by and start shopping is an
unreal expectation. Sporting goods and
apparel company Reebok did just that and
had their store defaced by Second Life activists
who are rebelling against the commercialization
of their escapist distraction,
according to Harrelson. (Buildings can be
reset in Second Life, so the damage was
only temporary.) The company erred in
not doing any community outreach before
setting up shop, he says.
Companies must be sensitive to what are
considered acceptable levels and aggressiveness
of advertising in virtual worlds.
"If brands go in and assume that you can
have 'in your face' advertising, it could
potentially be very damaging," says Greg
Verdino, who blogs about online marketing.
Companies must "join the community
and add value" or risk anti-brand backlash,
he say. "A bad brand impression in Second
Life can follow you into real life."
A virtual presence must be interactive
and offer some entertainment or incentive
to be accepted by the community and to
garner traffic, Harrelson says. Just as in the
real world, free music, sporting events and
item giveaways are the best methods for attracting
a crowd.
"If you are not authentic and do not offer
anything to the community, you are
likely to be ignored, at best," according to
Catherine Smith, director of marketing for
Linden Lab, which operates Second Life.
"However, those firms who commit to a
long-term, creative presence in Second Life
have an opportunity to interact with their
community in new and innovative ways."
American Apparel, a Los Angeles-based
casual clothing company, was the first retailer
to establish a Second Life store, in
June of 2006. The younger audience of
people who "are into leading-edge stuff"
was a good match for American Apparel's
customer base, according to Web director
Raz Schionning.
American Apparel held several events to
generate attention on Second Life, including
a launch party that surpassed expectations.
Avatars were lined up outside their
store in a four-hour queue, according to
Schionning.
He says the company thought a Second
Life storefront would be a better investment
than advertising in an online game.
"I'm not sure that a billboard in a racing
game would get us much notice" because
of the speed of video games, he says. The
virtual storefront is modeled after a Tokyo
store and costs a few hundred dollars per
month to maintain, Schionning says.
Revenue Slow to Grow
Virtual worlds sell real estate in the form of
buildings and islands, which can cost tens
of thousands of dollars to set up and maintain.
IBM purchased 24 islands on Second
Life and has committed to spending $10
million on virtual-world marketing. Continued on Page 2...
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