Gartner analysts, in a recently-released assessment, warned that enthusiasm surrounding online worlds "must be tempered with a realistic assessment of the security and risk-management issues they expose enterprises to." Analysts advised companies sensitive to issues of branding, social and ethical positioning to "exercise particular caution in uncontrolled virtual worlds," citing Second Life as an example to watch, and preferring "heavily moderated, targeted alternatives" such as There, Kaneva and Activeworlds instead.

Gartner analyst and vice president Steve Prentice identified five categories into which major issues facing corporations can be grouped: IT-related security risks, such as the download of unverified apps and issues of firewall permeability; identity authentication and access management, concerning the potential for multiple characters and avatars that make it difficult to verify who a user really is; confidentiality in chat and stored information; brand and reputation risks, and lastly, productivity, which Prentice feels might decline, at least during the initial corporate adoption phases.

“The risks enterprises face as a result of their involvement in virtual worlds are real and can be significant. They shouldn't be ignored — but neither should the potential opportunities and benefits that arise from using these new environments for corporate collaboration and communications,” Prentice said. “When planning enterprise activities in virtual worlds, an enterprise's awareness of the risks, as well as a reasoned and objective analysis of them, will enable it to objectively evaluate the overall situation and offset risks against often-nebulous benefits.”

A new report from Strategy Analytics, titled "Online Games: Global Market Forecast", says the global online games market is already worth $4 billion and is expected to triple in the next five years. In particular, the report says the MMO games market, led by the World of Warcraft franchise, is "blazing the way for electronic sell-through and digital distribution of both PC and console games."

According to the report, the online games category is currently the largest category out of the three main online entertainment markets (music, games and video) in terms of revenue.

Strategy Analytics estimates that the global online games market generated $3.8 billion in 2006 and $5.2 billion in 2007, and projects that the market will grow at a rate of 25.2 percent annually in the forecast period spanning 2007-2011 -- reaching 11.8 billion dollars and representing approximately one third of the total games software market by 2011.

“The rapid growth of the addressable market for digital distribution of both PC and Console games will help clear the way for distribution of mainstream hit titles which has up to now been restricted to the physical retail channel,” comments Martin Olausson, director of digital media research at Strategy Analytics.

“The main driver for sustained growth in the online games market will be the continued uptake of broadband services around the world”, adds David Mercer, Principal Analyst at Strategy Analytics. “Additionally, the very lucrative revenue opportunity in both the massively multiplayer segment and the electronic sell through market will continue to attract new entrants into the online games market.”

[The preceding article originally ran at Worlds in Motion sister site Gamasutra.]

In a report forecasting virtual world adoption, research and consulting firm Strategy Analytics has predicted that 22% of global broadband users will have registered for one or more virtual worlds, resulting in a one billion registrant market with an eight billion dollar services opportunity.

The study, "Market Forecasts for Virtual World Experiences," indicates that online worlds represent a massive activity growin in Asia, North and South America, and Europe. Though the report shows that most teens services, such as Sulake's Habbo Hotel, focus on attracting children and teens, Strategy Analytics noted that virtual worlds for adults are emerging as well.

Said Strategy Analytics president Harvey Cohen, "Despite a multitude of challenges, virtual worlds present a unique marketing opportunity to target a highly sought demographic, and virtual worlds should be part of a company's marketing portfolio."

[In a pointed analysis piece, Joe Ludwig, producer at Pirates Of The Burning Sea developer Flying Lab Software, examines the barriers that make creating console MMOs more difficult than PC MMOs, from platform holders through certification and control devices and beyond.]

A few weeks ago, Dan Rubenfield posted this (as part of a larger rant putting all MMO developers on notice):

"If you continue to refuse to acknowledge consoles as the de-facto standard for AAA gaming, you will go out of business.

Quit making PC games. It’s a waste of time and money."

(NPD respectfully disagrees with the waste of money part.)

I for one would love to build a console MMO. It's not that MMO developers don't acknowledge consoles as dominant, it's that there are many barriers to building a console MMO that don't exist on the PC. I mentioned a couple of those in my comment to the post above, but wanted to expand on them here.

Barrier #1: Platform Holders Demand a Share

Assuming a moderate success, MMOs are almost unique in their ability to give game developers a revenue stream. Most studios live from milestone payment to milestone payment and rarely see royalties off the game after it ships. If they're smart, they make a little extra on each milestone and can build a buffer to help them tough it out between projects, but often failing to sign with a publisher for the next project drives the developer out of business. With a few very successful exceptions, just about all studios live on this edge.

Venture capital firm Lightspeed has posted Average Revenue Per User (or per avatar in some cases) statistics on popular MMOGs based on previously reported data. The firm found that popular virtual worlds were able to generate an average $1.25 per monthly user per month:

Club Penguin: $1.62/monthly user/month
Habbo Hotel: $1.30/monthly user/month
Runescape: $0.84/monthly user/month

These estimates were created by dividing each virtual world's reported revenue by the amount of active users on the virtual world.

Lightspeed went on to note that Second Life is monetizing at 5x higher than other casual MMOGs, taking into account revenue from land maintenance fees. The firm estimates that the virtual world averages around $9.30 per account per month, in line with "some of the more hardcore free-to-play MMOGs that companies such as Acclaim, Aeria, OutSpark, K2 Networks and IGG are importing."

In advance of its report on "How to Justify Enterprise Investment in Virtual Worlds," information and technology research and advisory firm Gartner has outlined a three-step, incremental approach that it believes will constrain costs and emphasize benefits for virtual worlds, helping companies gain needed funding and approvals.

According to the firm, business leaders are hesitant to invest in virtual worlds due to lack of clarity on their proven benefits. Said Gartner fellow and vice president Steve Prentice: “Despite understandable concerns about investment during a time of growing business uncertainty, we believe that the internal deployment of virtual worlds offers most enterprises significant benefits in cost savings and improved productivity.”

Gartner encourages companies to first emphasize their virtual worlds as training environments. Environments and scenarios can be replicated online for trainees to interact with each other and their trainers through avatars. "The benefits of improved employee knowledge and training can be clearly enumerated, and the savings (or transference of funding) compared with established training methodologies can be reliably calculated to build a credible and substantiated business case."

The firm then advises that companies extend their virtual-world deployment to support collaboration and employee interaction, enabling clients to cut down on travel and associated costs when gathering employees to a single site. Said Gartner, "The ability to show cost savings — for example, reduced use of expensive videoconferencing or telepresence facilities, as well as reduced international travel and "downtime" — to support and offset the initial investment forms the basis for a credible and defensible business case."

For the final stage, Gartner suggests adding a virtual world recreation of the social environment in workplaces, including seating areas, white boards, and even a water cooler. The contributions of these arrangements can be measured in their benefits to employee satisfaction, morale, retention, and innovation.

Prentice concluded: “The bottom line is to take a cautious and staged approach toward introducing virtual-world projects into the enterprise; moving too far and too fast will significantly reduce the chances of success, increase costs and make the benefits more difficult to quantify and attribute. By following the three-step sequence, virtual-world investments will have a greater chance of success and will lead the way toward future funding and deployment."

Outlining 27 emerging technologies in its latest report, "Hype Cycle for Emerging Technologies, 2008," analyst firm Gartner predicted eight technology trends, including public virtual worlds, that will have a transformational business impact and that should be strongly considered for adoption by technology planners in the next 10 years.

According to the firm, virtual worlds are currently in the "Trough of Disillusionment" stage of Gartner's five-stage Hype Cycle, and are suffering from disillusionment due to inflated, unrealistic expectations during their peak of hype in 2007. Gartner forecasts that in the long term, however, virtual worlds will "represent an important media channel to support and build broader communities of interest."

Other technologies predicted to have transformational impact include cloud-computing, green IT, video telepresence, and microblogging.

Gartner also expects success for social computing platforms: "Following the phenomenal success of consumer-oriented social networking sites, such as MySpace and Facebook, companies are examining the role that these sites, or their enterprise-grade equivalents, will play in future collaboration environments. The scope is also expanding to incorporate the notion of social "platforms," or environments for a broad range of developers to build on the basic application."

Market research and consulting company Parks Associates has just released details of their new report, Virtual Worlds: the Internet of Avatars, and the main revelation is that the industry is to see incredible growth within the next five years -- reaching 33 million registered users by 2013.

According to their announcement, the report from Parks Associates details "the evolution of the virtual world value chain, profiles leading companies, examines industry and consumer trends and dynamics, forecasts market growth, and offers recommendations to large media companies, technology companies, consumer brands, marketers, and Internet companies."

Explaining the report, Yuanzhe (Michael) Cai, Director, Digital Media and Gaming, Parks Associates said "3D virtual world platform companies, world operators, and full-service agencies form the core of the virtual world ecosystem, providing services to consumers, media companies, advertisers, and enterprises, but content and application developers and service providers are becoming increasingly important.”

“Without appealing content and applications, virtual worlds are nothing but empty shopping malls,” Cai continued. “The industry needs to move beyond its obsession with user-generated content and make 3D virtual worlds more interesting to average consumers.”

According to a recent DFC Intelligence study, online gaming is set to reach $13 billion by 2010 -- from about $4.5 billion in 2007.

Numbers like these have stirred up a great deal of discussion around the different monetization models for online games, with two clear camps emerging -- subscription and free-to-play.

But each method comes with significant problems on actually collecting money online from consumers, thanks to chargebacks and other credit card problems.

Gene Hoffman, CEO of billing and fraud management company Vindicia, as used by companies such as Cryptic Studios, FireSky, Multiverse and Outspark, recently spoke to Gamasutra about MMO fraud, and he now returns to discuss the implications of different online game business models for publishers -- and the billing trade-offs that come with each.

"Taken as a given is that the gamer experience will be positive enough that people will want to play it independent of the business model chosen," Hoffman notes.

[As Quake Live launches, writer Michael Walbridge recounts his experiences with the closed beta for Id Software's free-to-play first-person shooter -- which blends casual gaming features with a hardcore, competitive userbase.]

"Man, it has been a long time since I played THIS game," I wrote, hoping to break the ice.
"Welcome to 1999," someone replied.

"The crazy thing is ... some people never left," another said.

We were all dead, waiting our turn; we're playing Quake Live's Clan Arena, a mode in which teams square off and each player's death merits no respawn until the next round. We all get maximum armor, health, and weapons, pounding each other into oblivion.

There's also Duel, which pits players one-on-one while the rest wait in line to face the challenger. The list of spectators is a virtual list of quarters lined up on arcade machine.

The atmosphere of the site, with its ladders and stats, is almost like a chess club. Quake Live is a bold and new move -- it is absolutely free, and it is better than the Quake 3 I repaid twenty dollars for about five years ago.

[What's it like inside the end of a game world? Gamasutra's Chris Remo visits NCsoft's Tabula Rasa in its final days, joining the community that turned out in throngs for a surprisingly kooky farewell party.]

Last Friday, I visited a doomed world for the first time.

That day, publisher NCsoft had announced that, as a parting gift to the remaining fans of Destination Games' sci-fi MMO Tabula Rasa, there would be a final, decisive conflict between the game's human players and their alien invaders.

Tabula Rasa, initially spearheaded by Ultima creator Richard Garriott, had been open to the public for 16 months, and during that time it failed to generated its intended success for NCsoft. But it did have a dedicated community that turned out in throngs to see it off.

The day before the shutdown, I created a new account -- by that point NCsoft had made the client and subscription free -- and entered the online world of Tabula Rasa for the first time.

Upon spawning, I amused myself with amiable introductory banter in the main chat channel, remarking on how I had just registered the game, looking for a new MMO experience, and how I expected Tabula Rasa to be a nice change of pace from the fantasy norm.