Top 10 Opportunities in Virtual Worlds

Con­tin­u­ing in the series of exploratory arti­cles about the vir­tual world phe­nom­e­non, I will now explore the oppor­tu­ni­ties in that mar­ket. I would con­tend that this space is just a nat­ural evo­lu­tion of the Inter­net model and that this phe­nom­e­non may rep­re­sent, in the long run, the next step evo­lu­tion in the web. So, with­out fur­ther ado, here’s my list:

1. Access (aka Subscriptions)
2. Host­ing (aka Real Estate)
3. Plat­form (aka Client/Server)
4. Col­lab­o­ra­tion
5. Event Plan­ning
6. Edu­ca­tion
7. Building/Designing
8. Pro­fes­sional Services
9. Inte­gra­tion
10. Trade plat­forms

I will now go an and elab­o­rate on each of those points. They are divided into three broad cat­e­gories: oppor­tu­ni­ties for vir­tual world ven­dors, for users, and what I would call sec­ondary markets.

Oppor­tu­ni­ties For Vir­tual World Vendors

I would gen­er­ally group the oppor­tu­ni­ties for vir­tual world ven­dors into three broad cat­e­gory: access, host­ing, and tools.

Access (aka subscriptions)

At the cur­rent time, this is the oppor­tu­nity that most of the exist­ing play­ers have been min­ing the most. The basic model is sim­ple: sell monthly or hourly sub­scrip­tion ser­vices to users. This is really no dif­fer­ent than the busi­ness that AOL, Com­puserve, and early ISPs were into, charg­ing a fee to access an envi­ron­ment. Much like those early play­ers in the Inter­net space were pro­vid­ing easy to use tools to access the net, the sub­scrip­tion model is charg­ing an entry fee into a vir­tual world. This is the pre­dom­i­nant source of rev­enue for vir­tual worlds but, as trade is becom­ing more com­mon, some of the vir­tual worlds are start­ing to drop the sub­scrip­tion require­ment. For exam­ple, There.com and Sec­ondLife now offer free accounts, which come with a more lim­ited set of capabilities.

Host­ing (aka Real Estate)

Some worlds have also started going into the host­ing busi­ness, allow­ing users to essen­tially buy a por­tion of a server, through real-estate trans­ac­tions. Sec­ondLife is the world with the most devel­oped type of eco­nom­ics around that model, charg­ing a Land Use Fee, which can be equated to a host­ing plan charge on the web. The model is based on access to a shared server, scal­ing up all the way to hav­ing a ded­i­cated server (or sim, as they call it.)

Plat­form (aka Client/Server)

I would argue that the model for vir­tual world is basi­cally sim­i­lar to the model of web-browser and web-server or appli­ca­tion server. I would not be sur­prised to see a vir­tual world provider unbundling the ser­vice from their own server and start­ing to pro­vide cor­po­ra­tions or other enti­ties with the abil­ity to cus­tomize their own client and host their own server. In this model, the vir­tual world provider would essen­tially repeat the strat­egy ini­tially take by Netscape in the early 90s, sell­ing both client and servers.

As the space grows, I also fore­see some need for con­sol­i­da­tion relat­ing to this space, in order to ensure that the under­ly­ing code becomes the indus­try stan­dard. Because of how close their approach is in look­ing at that space, I’d fore­see Sec­ondLife and There.com to be the first to enter­tain such thoughts. Sec­ondLife already pro­vides a rich syn­tac­tic lan­guage for pro­gram­ming pur­pose. There.com pro­vides tools for cre­at­ing vir­tual goods. Both of them could ben­e­fit from such a merger and their com­bined effort could become the dom­i­nant provider in the space.

Oppor­tu­ni­ties for users

There also exists a num­ber of oppor­tu­ni­ties for denizens of vir­tual worlds. Most of those oppor­tu­ni­ties seem to cen­ter around the fact that there are places for peo­ple to meet and inter­act in an envi­ron­ment that is much richer than other elec­tronic col­lab­o­ra­tion platforms.

Col­lab­o­ra­tion

As such, the ini­tial oppor­tu­nity for indi­vid­u­als and com­pa­nies in vir­tual worlds is around the area of col­lab­o­ra­tion. Busi­ness Week recently reported that Rivers Run Red saved $175,000 last year by hold­ing meet­ings in Sec­ondLife. This is no small amount of money for a small busi­ness and, in this age of increas­ing secu­rity check­lines at air­ports adding to the length of travel, vir­tual worlds may be the best col­lab­o­ra­tion plat­form yet. At the cur­rent time, no com­pany has focused on that angle but there is an oppor­tu­nity for a com­pany that would focus vir­tual worlds away from the gam­ing aspect and start offer­ing a cor­po­rate vir­tual world where com­pa­nies could hold vir­tual offices.

Event Plan­ning

Increas­ingly music stars are mov­ing in that space. Suzanne Vega and Duran Duran recently made announce­ments relat­ing to their entry in the space. The BBC, MTV, and Fox have already held events in vir­tual spaces. Tech­ni­cal con­fer­ences have had vir­tual world com­po­nents. Major League Base­ball has dipped its toe in the field. Orga­niz­ing events, prepar­ing the space, pub­li­ciz­ing, book­ing and train­ing speak­ers are all jobs that require some level of exper­tise and there are dol­lars asso­ci­ated with pro­vid­ing that expertise.

Edu­ca­tion

Edu­ca­tional orga­ni­za­tion, from Har­vard to the New Media Cam­pus, have cre­ated vir­tual train­ing grounds to explore devel­op­ment in those spaces. There are also oppor­tu­ni­ties around teach­ing classes in build­ing vir­tual assets. In Sec­ondLife, on most night, you can find peo­ple teach­ing how to cre­ate and pro­gram the basic build­ing blocks avail­able in the space. One can envi­sion peo­ple get­ting paid for this type of work fur­ther down the line.

Pro­fes­sional Services

Sec­ondLife has cre­ated an eco-system where pro­fes­sional jour­nal­ists, DJs, ad agen­cies, and other types of ser­vices (some of the more risqué ones involv­ing the sex trade) are inter­act­ing on a daily basis. Once again, economies are being cre­ated around this space, mir­ror­ing tra­di­tional world equiv­a­lents in the vir­tual realm.

Building/Designing

Another inter­est­ing area, in terms of oppor­tu­ni­ties is in the realm of cre­at­ing new dig­i­tal goods and sell­ing them in the vir­tual space. There are already a num­ber of peo­ple (claims of 3,000 entre­pre­neurs each mak­ing at least $20,000 a year in Sec­ondLife have been wide­spread) who are mak­ing a liv­ing at this. Most goods from the real world can have a dig­i­tal equiv­a­lent and com­pa­nies like Amer­i­can Apparel have noticed the space, offer­ing vir­tual equiv­a­lent of their goods, hav­ing sub-contracted the devel­op­ment of those goods to a third party.

Sec­ondary Mar­kets cre­at­ing new opportunities

Another set of oppor­tu­ni­ties exist out­side of the vir­tual worlds them­selves, which should prove that the space is devel­op­ing but here to stay.

Inte­gra­tion

Vir­tual Worlds are gen­er­ally closed spaces. Some, like Sec­ondLife, have started open­ing up to the wider net. For exam­ple, users can now visit Amazon.com in Sec­ondLife, thanks to the Ama­zon API and SecondLife’s abil­ity to call on it from inside its vir­tual world. Those oppor­tu­ni­ties rep­re­sent a new space and inte­gra­tion houses with exper­tise in both the vir­tual world and the wider web will be well posi­tioned to take advan­tage of those oppor­tu­ni­ties. If my belief that a next gen­er­a­tion browser will arise out of the vir­tual world space is cor­rect, those inte­gra­tion houses could be well posi­tioned to be the next big pow­er­houses in online marketing.

Trade plat­forms

Another por­tion of the sec­ondary mar­ket is sur­round­ing the thin link between the trade that hap­pens in those vir­tual worlds and real dol­lars. Com­pa­nies or indi­vid­u­als who man­age to cre­ate a plat­form that offers a way to trade from one of the vir­tual worlds into another might find them­selves as the new middle-men in a space that is bound to grow eco­nom­i­cally and profit from mak­ing a small per­cent­age on every inter-virtual world transaction.

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