The 2007 Supernova Conference was held June 20-22nd in San Francisco, where think tanks in government, enterprise and technology put heads together to discuss the effect decentralization and connectivity are having on the way we do business. The panel "Virtual Life, or Virtual Hype?" featured discussion by Raph Koster of Areae, Ruben Steiger of an ad agency called Millions of Us, and essayist Clay Shirky, and was liveblogged and transcribed in several places around the web, including Wonderland, the official Conversation Hub page for the conference, and Mama Musings.

The panel addressed the fundamental question: Are virtual worlds life, or just hype? Koster says that almost all of 35 million users of virtual worlds (by his estimation) are playing games, and that while the user base for other purposes-- such as advertising, business and creative development-- is small, it's rapidly growing. He theorizes that there's some grains of concrete forecasting in the "metaversey" hype around the idea of the "3D internet," particularly in the real estate arena, but "right now, we're in a bubble," owing to a "misunderstanding about what their real purpose is."

Steiger wants to see the real-versus-hype battle as a "non-issue," pointing out that virtual worlds are primarily about social communities and connections, and they have merit as "an adjunct to established online communities."

When Shirky notes Second Life as the exception to gaming's dominance over the 3D world space, highlighting visual appeal as a major driving force behind broad adoption of virtual worlds, all of the panelists seem seemed to agree that a virtual world like Second Life, as a "sim of space," is a game, because as Steiger says, "Life is a game." Check out the links for more on the thought-provoking discussion, including theories on virtual real estate, 3D society and why Second Life doesn't monetize well.

Here's an interesting read: some thoughts on the shelf life of MMOs. In the article, Celia Pierce-- a director at Georgia Tech's Emergent Game Group-- pegs the life of the average user within a virtual world at about 18 months, and discusses some of the challenges designers face in retaining their userbase and keeping them from losing interest.

While new online worlds are cropping up all the time, others-- like Motor City Online and Earth & Beyond (both by Electronic Arts), and Bandai-Namco's Gundam Online (set to go offline Dec. 15)-- get shuttered for good due to lost users. How to spot an online world on the decline? According to the article, abandoned homes and vast stretches of vacant land are a sure sign that the inhabitants are on the move.

Pearce suggests that the market for fantasy worlds might be a little oversaturated, with World of Warcraft squarely in dominance and flanked by the likes of Ultima Online, the EverQuest games, and, most recently Dungeon Runners.

She also cites what she refers to as an "addictive curve," wherein: "People are playing 40 hours or 30 hours a week and they get burned out and wonder, 'Why am I spending all this time doing the same thing over and over again?' Then they go into another game and 18 months later find that they're doing it all over again."

LucasArts producer Jake Neri, who works on Star Wars: Galaxies (now in its fourth year) notes that keeping content fresh and customers focused is "not an easy challenge." After a decline in users following some considerable systemic changes in 2005, Neri and his team had to come up with a fresh angle.

"What we wanted to do is figure out a cool way to help our player base gain access to that land," says Neri. A new initiative called the "galaxy-wide demolition plan" was forged, wherein players who mark virtual homes that have been abandoned by inactive players will be rewarded with points redeemable for in-game items, such as home furnishings and pet robots-- rewarding the players while making available the virtual land for current players to develop anew-- all with as little disruption as possible to the narrative flow of Galaxies' fantasy world. "What we came up with was this idea that Darth Vader and the Empire wanted to clear out abandoned homes on the various planets," Neri says.

Still, Pearce doesn't see an end to the high turnover rate for online property anytime soon-- as the article says, it's much easier to create a virtual homestead than it is to put down real-world roots, and even easier to abandon one. But it seems likely that users will keep creating fantasy homes just as quickly as others are vacating theirs-- for as Pearce says: "For many people, this is their only opportunity to own a vacation home."

[Via HamptonRoads.com]

[For more about Celia Pearce and the Emergent Game Group at Georgia Tech, which investigates how culture emerges from game design, check out the EGG's website, or dig an interview with Pearce from our sister site, Gamasutra.]

The Serious Games Institute announced its "first European conference on the practical application of virtual worlds," set to take place September 13th and 14th in Coventry (the SGI is an initiative out of Coventry University).

According to the announcement and draft program, this year's theme will be "The Reality of the Virtual World," and will focus on various ways businesses are using virtual worlds, promising an intro to the serious uses of virtual worlds for organizations considering jumping in.

A lot of the panels seem to be Second Life-oriented, though there are others like "The Economics of Virtual Worlds" and "Virtual Disaster Management." Still, the conference claims to be a "first," and invites corporate professionals, multimedia developers, and public sector organizations to attend-- for £395 per day (£295 for academics) not including dinner!

[Via 3pointD.com]

Just came across an interesting article in Wired by Clive Thompson, discussing some implications of an increasing trend-- the substitution of text-based chat in online gaming and virtual words with real-voice chat, via apps like Ventrilo.

The pros? Well, for one thing, speaking's a lot clearer, in a world where computer literacy varies, and linguistic proficiency when using a keyboard is still somewhat of an unrefined art. When exploring a virtual world, don't you wonder what that fellow typing "PPppppppp..;" is really trying to say? Not to mention that those who are less-than-speedy typists often find themselves struggling to keep up in a conversation, while high-speed keystroke wizards wait minutes for a response. Particularly in an action game like World of Warcraft, where large numbers of players commonly engage in high-intensity team play, an inability to keep up on the keyboard can actually be a barrier to participation.

On the flipside, Thompson points out that many users tap into online worlds to become their avatar, ditching their mundane personae behind. But while using your own voice to communicate might be faster and easier than typing messages, it also pierces the veil of illusion that's part and parcel of becoming someone else-- in Thompson's experience, the aura of compelling power surrounding his competent WoW quest leader evaporated in a puff of smoke when Ventrilo revealed him to be a squeaky-voiced, foul-mouthed adolescent.

Worth noting that there are other implications if voice chat in virtual worlds becomes increasingly more prevalent-- voice can give away age, for one thing, a potential hazard in communities that endeavor to maintain child safety. How would voice chat be moderated? Voice can also betray one's nationality or gender; would the hulking orc soldier stand out as he abstains from the verbal confab-- for fear of being found out as a female? Thompson provides as example the story of Krista Lee Malone, a University of Wisconsin in Milwaukee student who, when studying the impact of voice chat on virtual worlds, found that women in particular, when using their voices, suddenly attracted lots more unwanted attention from younger men.

Overall, while the increasing prevalence of voice chat certainly has the prevalence to become, as Thompson says, "the latest culture-shock in online worlds," it remains to be seen, owing to all these factors, just how far voice can encroach on a world once governed entirely by text.

[Via Wired]

MTV's Jeff Yapp chatted about the media giant's future musings on virtual worlds at the recent Under the Radar Digital Entertainment and Media Conference in Mountain View, CA. "The scale and the scope of this thing is absolutely immense; we have fairly ambitious plans," Yapp said, amid footage of Doppelganger's Virtual Lower East Side and MTV's Virtual Laguna Beach being synthesized as mobile, web, and TV content. "We believe in 'one avatar, one world'; the ability to take your avatar-- that personality, that 3D representation of who you are-- anywhere you want to go." Check out the video at CNet (for all you gamers, there's Rock Band stuff, too!).

Yapp's presentation was a keynote separate from the virtual worlds group presentations at Under the Radar, where Doppelganger and Kaneva were the highlights. During the panel, Doppelganger (Virtual LES) CEO Tim Stevens said their service currently has 150,000 users, growing at a rate of 10% weekly. Kaneva, whose 3D social networking site just went public beta in April, said that despite its resemblance to MySpace and its ilk, it sees its primary competitor as television and movies-- go figure. Both of these companies glean their primary income from sponsorship and the sale of virtual goods.

Another participant in the group was Meez, an avatar specialist. Through Meez's website, users can design custom avatars that can then be exported to other services. Photobucket members, through a recent partnership with Meez, can now export and store their 3D avatars on Meez. Despite having 2 million registered users (and 425,000 newcomers each month) to Photobucket's considerably larger estimated 40 million, Meez apparently gets enough revenue from sponsorship, virtual goods, and their associated promo partnerships to be able to pull it off.

Finally, founder Corey Bridges discussed Multiverse, an MMO development platform that runs in a "world browser" (according to Bridges, that's like a web browser) and can be used by anyone to make their own online games. Multiverse is the platform University of Indiana prof Ted Castronova is using to build Arden, his MacArthur-funded Shakespearean world. In a round of fundraising led by hedge fund Sterling Stamos Capital Management, Multiverse recently snagged $4.175 million.

[Via Webware.com]

Interesting article from the LA Times' Alana Semuels, profiling some companies whose virtual outposts in Second Life might be losing their appeal-- if not their viability altogether.

Online retailers in Second Life are finding that users, already spending $6 a month for premium citizenship, just aren't prioritizing shopping to the degree that was anticipated-- making some marketers take a second look at their Second Life investments.

According to the article, other companies, like Best Buy, Sun Microsystems and Dell Island are also finding their virtual outposts going empty, devoid of visitors and staff. American Apparel's virtual store apparently now posts signs that it's closed up shop.

Advertisers have found a variety of problems in Second Life. Firstly, avatars don't have human needs, like food and drink; transportation is accomplished by teleportation and even clothing is optional. According to the article, Ian Schafer, chief executive of online marketing firm Deep Focus, said his recent tour of Second Life turned up empty retail outposts-- and packed casinos, brothels and strip clubs. Schafer said he found in his research that "one of the most frequently purchased items in Second Life is genitalia."

Another problem for some is Second Life's smaller userbase: "You're talking about a much smaller audience than advertisers are used to reaching," said Brian Haven, a Forrester Research analyst, who notes that despite its much-touted userbase of 8 million, only about 30,000 to 40,000 users are logged on even at peak times.

Additionally, many corporations have incurred the backlash of angry residents resentful of traditional storefronts and what they perceived as a prioritization of publicity rather than a genuine interest in virtual life.

With that in mind, the article says, companies like IBM Corp are expanding from Second Life into other virtual environments, like There and Entropia Universe.

Millions of Us, a consulting firm that helps brands enter virtual worlds, previously worked exclusively with Second Life-- and recently announced that it had formed a partnership with teen-targeted Gaia Online, a site popular with teenagers, and CEO Reuben Steiger said that more partnerships are expected in the future.

"It's not about whether Second Life is good or bad," Steiger said. "It's just that there are a lot of alternatives."

[Via LATimes.com]

As co-creator of the original MUD (Multi-User Dungeon) set up on the PLATO system at the University of Essex, Richard Bartle has an interesting perspective on the current state of online worlds. In an interview with the UK Guardian's Keith Stewart, Bartle shares his thoughts on a variety of relevant topics -- whether social interaction in online worlds can be compared to the real-world (Bartle says yes), the evolution of computer-controlled NPCs (versus the volunteer altruists Bartle remembers) and on the power of virtual worlds in light of their relatively limited individual shelf lives.

Stewart asked Bartle, "If you could take over control of one major MMORPG - which would you choose and what would you do with it?" His answer?

I'd take over World of Warcraft and I'd close it. I just want better virtual worlds. Sacrificing one of the best so its players have to seek out alternatives would be a sure-fire way to ensure that unknown gems got the chance they deserved, and that new games were developed to push back the boundaries.

Er, I would get to do this anonymously, wouldn't I?

For more from Bartle, including thoughts on social networking and the "Web 3D" idea, check out the interview!

[Via GuardianUnlimited]

An article in the San Jose Mercury News says IBM will publish official guidelines this week for some 5,000 employees who have presences in Second Life and other virtual worlds, where the company hosts meetings with clients and partners.

The guide will reportedly be a sort of "code of conduct" that will govern avatar behavior and appearance in virtual worlds, and it seems IBM's the first to present such a rule set, keeping in mind that many companies currently use virtual worlds to advertise brands and communicate on behalf of their corporate identity.

While, as the article says, critics are skeptical as to the rules' efficacy-- or their necessity-- IBM execs argue that creating a code of conduct is more like a corporate green light encouraging workers to explore the possibilities of the 3D web.

Seems IBM also hopes to earn money consulting other businesses on virtual worlds strategies. According to the article, IBM executives say clients are already approaching them for assistance crafting their own set of guidelines.

"The 3D Internet will have a big impact on business, on IBM and on our clients, and the only way to figure it out is to use it," said Irving Wladawsky-Berger, chairman emeritus of the IBM Academy of Technology and an engineering advertisement professor at Massachusetts Institute of Technology.

Intel Corp. is also drafting a tip sheet, and apparently plans to offer a voluntary course this year for its employees on the use of blogs, social media sites and virtual worlds.

"For those employees who may be hesitant, guidelines can provide the encouragement and Intel philosophy they need to actually dive in and start anticipating," said Bovara, who maintains Intel's Second Life mailing list.

IBM's rules seem to be mostly common sense-- observe nondisclosure agreements, and refrain from harassing other citizens. While there's no specific dress code, the guidelines suggest employees be "especially sensitive to the appropriateness of your avatar or persona's appearance when you are meeting with IBM clients or conducting IBM business."

"Building a reputation of trust within a virtual world represents a commitment to be truthful and accountable with fellow digital citizens," IBM says. "Dramatically altering, splitting or abandoning your digital persona may be a violation of that trust. ... In the case of a digital persona used for IBM business purposes, it may violate your obligations to IBM."

It's unclear what, if any, repercussions await workers who violate the rules.

[Via San Jose Mercury News/AP]

Earlier today we reported that social scientists are looking at online societies as helpful representations of real-world ones; now, a Rome-based Jesuit magazine called La Civilta Cattolica reviewed by the Vatican Secretariat of State before publication has released an article identifying virtual worlds as an important new frontier for evangelism.

According to the Catholic News, which also identified "great dangers to faith" in virtual societies, Jesuit Father Antonio Spadaro says it is not "possible to turn a blind eye to this phenomenon, or offhandedly pass judgment glorifying it or condemning it."

Spadaro surmises that the widespread popularity of online worlds may be a reflection of humanity's need to become better people by seeking another life, and that with so many users finding meaning in the intangible world, "at heart, the digital world may also be in its own way considered to be mission territories."

Spadaro also fears that people might become alienated from reality in an imaginary world, where the transient nature of identity fosters a "spontaneity that knows no limits or discretion."

Though the article suggests that residents of worlds like Second Life, which was its primary focus, might soon see more churches, missionaries and informational pamphlets, Spadaro also had some interesting insights, as he wondered if those who "[opt] for the simulated" might be expressing "a kind of diffidence and resignation" regarding real life -- and he also wondered whether online worlds, by creating low-risk environments where everything is "under control and reversible," make the real world seem frightening and result in "worrying emotional and affective consequences."

[Via CatholicOnline]

Great discussion going on at the Terra Nova blog, started by Robert Bloomfield. He's set to moderate a panel called "From the Laboratory to the Virtual World" at the annual meeting of the American Accounting Association, and he's prepping for the big question: "I figure that over the three days of the conference, I will be asked 300 times 'What in G-d's name is a virtual world??'"

Bloomfield and lots of others struggle to describe the phenomenon in less than 100 words, and I think he makes a good run of it:

You can think of many virtual worlds as video games that thousands of people can play at once, together. Each player controls an animated character, called an "avatar." But other virtual worlds don’t even have something you would recognize as a "game." Instead, they are more like three-dimensional spaces in which you can get together with friends to talk, watch movies or listen to music. These worlds tend to have very active economies, because they allow residents to create and sell their own content, from clothing for their avatars to software that will animate objects and store data.

A little more tongue-in-cheek (but perhaps no less accurate), blogger Jeffrey Freeman suggests: "Tell 'em they could get rich by investing in virtual property, if they play their cards right."

It's definitely an issue we should expect to confront a lot in the coming months, as virtual worlds don't seem to be ceasing growth -- what are the most salient points about the use and value of virtual worlds for play, socialization and enterprise, and how will we explain them as more and more users inevitably catch wind?

Though, if growth takes place at the rate some predict, it could be that they'll just learn by doing!

At the panel, Rosedale predicted that in ten years, virtual worlds will outpace the Web as the primary form of connection and access. “The technical infrastructure will be some sort of highly open and decentralized architecture,” he said. “The network of machines will be larger than the Web architecture today. Google has a couple hundred thousand machines–the virtual world will have tens of millions of hosts.”

Panelists discussed the hot-button question: whether virtual worlds will truly become a "real" business, or merely a tool for socialization and casual play. "Meetings, learning and training may be the killer apps of the virtual world. Don’t underestimate any technologies that help us do that in a more human way,” Wladawsky-Berger advised."As a result, we'll be able to do a tremendous amount more. Enterprise resource planning will be reinvented for virtual worlds."

Melissinos agrees, calling virtual worlds "critical to adoption of next-gen services," and "a multimillion-dollar marketplace across the board."

Lanier asserted that people are more courteous and better-behaved in virtual worlds-- as opposed to chat rooms, blogs and IMs-- because economic or deeply-vested emotional ties to their property means "more to lose if they're creepy," he said. He also theorized that seeing others, even as avatars, causes an empathetic response.

So, what's the big "killer app" of the virtual world? According to Lanier, it's that human civility.

[Via CNET]

A new article in BusinessWeek introduces the 3D-Web idea that's already been heavily discussed in the thick of the online worlds space:

Google, Second Life creator Linden Lab, IBM, and a bevy of additional companies are moving toward the day when you can stroll around a 3D Web--and not just their own sites--using a virtual replica of yourself that you've created. They are working to establish technical standards, open to all programmers, that would allow the entire Internet to become a galaxy of connected virtual worlds.

The article also highlights some challenges to the concept:

For all the flurry of excitement, there's still a lot of skepticism among tech experts about whether companies can agree on standards that would allow an open 3D world to exist. After all, look at the battle still raging over the HDDVD and Blu-ray DVD standards. For now, Second Life, There.com, and other virtual worlds are fenced-in spaces where one company calls all the shots. If a consumer creates an avatar or a company creates a virtual storefront, they're stuck in that site. Avatars can't stroll from an American Apparel store in Second Life to Wells Fargo's (WFC ) stand-alone virtual-world bank... So it could take up to a decade before anything like this becomes mainstream.

Rita Turkowksi, executive director of the Web 3D Consortium, told BusinessWeek that they hope to launch an avatar that can jump between sites in about eighteen months. The article also cited the newly-launched Multiverse Network platform, whose avatars can move from world to world -- but only within Multiverse's own "world browser," which means they can only surf within worlds created with Multiverse's software platform.

It's an informative article that nicely rounds up what the major players are doing in terms of forward-looking in the arena, though it does allow:

Most agree it would not eliminate the Web as we know it. Rather, it will be possible to move back and forth between Web sites and virtual worlds, just as we now switch between reading a news article and watching a video clip on YouTube. For searching or reading text, today's sites work fine and will continue to do so. But a 3D Internet could make possible a virtual version of activities you might do in real life with like-minded people. You could buy tickets to a baseball game on a standard Web site, for instance, but then go to a stadium in a separate virtual world to meet up with your friends and watch the game (at a lower price than the real thing, one hopes).

[Via BusinessWeek]

Worlds in Motion sister site Gamasutra looks at a recent study conducted by researchers at Nottingham Trent University in the UK, and published in U.S. journal CyberPsychology and Behavior, examining social behavior in the MMO worlds. Apparently, three quarters of online role-playing gamers make good friends with the people they meet in their virtual worlds, with almost half meeting in real-life situations and one in ten going on to develop actual physical relationships. More than 30 percent get crushes on other players, and 40 percent would rather discuss emotional issues with their virtual pals than their real ones.

From the article:

One in five participants believed that massively multiplayer role-playing games (MMORPGs) had a negative effect on their relationships if their partner was not a player, while more than two-thirds felt they had a positive effect on their relationships with those who did play.

Women were significantly more likely than men to be attracted to other players and were far more likely to go on to date them. Most women gave “therapeutic refreshment” as their main reason for playing, whereas most men stated “curiosity, astonishment and interest” as their reasons. Around a third of gamers suggested they could be more themselves in the game than in real life.

Another article at Gamasutra explains the way Chinese MMOs help celebrate Valentine's Day with in-world events, romantic giveaways and a boom in virtual weddings.

Speaking of weddings, some think the increasing complexity and importance of virtual relationships may have further implications. A recent Wall Street Journal article takes a snapshot of how one man's real-life marriage is challenged by his relationship with his sexy, redheaded virtual wife. "It's really devastating," the flesh-and-blood wife tells the Journal, "You try to talk to someone or bring them a drink, and they'll be having sex with a cartoon."

The Journal article is a fascinating read, giving a bit of a sensationalized glimpse into the ways that virtual relationships may affect and challenge real ones. There were similar fears back when online chat, IMs and cybersex were still new, but in the era of 3D avatars and lifelike online worlds, it seems they have much more potential to do this than ever. It's not too farfetched to hypothesize a day when courts could consider a protracted virtual affair like the one profiled in the Journal piece as grounds for divorce, maybe even adultery in the eyes of the court. Who knows?

We've been seeing how companies like IBM are embracing the virtual world as a useful part of modern business -- they've established guidelines for online behavior, for one thing, while scores of companies have already started consulting with agencies like Metaversatility and Millions of Us to create a professional virtual presence. A recent article in BusinessWeek examines this issue as part of a larger trend around technology evolving our workplaces (again)! From the article:

Even before these $80,000-and-up systems become standard office fare, other new technologies will reshape the workplace. The online virtual world Second Life, where people play using avatars (graphic representations of themselves), is starting to become a real workplace, at least for a few telesales agents at 1-800-Flowers.com Inc. (FLWS ) The online flower vendor is experimenting with a "virtual greenhouse" in Second Life, where a dozen or so workers log in and interact with Second Life residents. 1-800-Flowers Chief Executive Jim McCann plans to use it to get customers to suggest new products—far more direct feedback than focus groups or surveys, he says. "The line between our customers and our staff continues to blur."

It's an emerging dynamic variously dubbed mass collaboration, peer production, or crowdsourcing. Whatever the name, collective efforts are exploding online—from the volunteer-written reference site Wikipedia to Google's search engine, which mines the billions of links that Web site owners make to other sites to produce its results. They are producing incredible value, even though they aren't traditionally considered "work." Says Thomas W. Malone, a professor at the Massachusetts Institute of Technology's Sloan School of Management and author of the 2004 book The Future of Work: "Google and Wikipedia are just scratching the surface of whole new kinds of economic organisms."

It's an interesting read that paints a picture of the role professional virtual worlds play in the larger tech evolution.

When we recently heard that CSI TV producer Anthony Zuiker would be keynoting the upcoming Virtual Worlds Conference and Expo, we wondered whether a crime scene investigation virtual world could be in the works! Turns out a rather intriguing crossover between the show and Second Life is planned -- but there's actually a real-life CSI tool that's about to go virtual.

The Western Mail is reporting that software developers at the University of Wales, Aberystwyth, are at work on a virtual world aimed to allow juries to visit crime scenes. Academics believe that letting jurors stroll through the blueprint (still not built as of yet) might help them gauge the "real-life impact" of a crime scene. Jurors could "see" the victim and their position relative to the perpetrator or murder weapon.

Peter Farr, of the Judicial Communications Office which represents judges, told the Western Mail:

“The courts are using increasing amounts of new technology, such as hi-tech evidence from video links with witnesses and CCTV footage,” he said.

“This is the first I’ve heard of this software and if it were to be used in courts in future, it would need to be with the agreement of the Crown Prosecution Service and others, as well as judges.”

[via icWales]

Business 2.0 recently laid out the "five commandments of gaming," written by Amy Jo Kim (shown) of design firm Shufflebrain to help illustrate how game-like content is helping community-oriented sites like eBay, Digg and Flickr stay sticky, and here's an abridged excerpt:

1. Collecting. Hoarding stuff is a fundamental instinct. That's why one of the first words to come out of a two-year-old's mouth is "Gimme."

2. Points. Earning points is a way to keep track of your nerd score. Points give users incentive to improve their standing and serve as a reward for new privileges, access or power. It's also a big motivation to compete for points when you find out someone has more than you.

3. Feedback. There are parallels between the gaming community and the Digg community. Like gaming, a reward system is used to keep people pecking away," says Digg VP of marketing Mike Maser. "One reason that Digg members are so passionate is because our site gives them a unique way to gain recognition. A user's contributions to the overall community are worthwhile, and it keeps people coming back for more."

4. Exchanges. Explicit and implicit exchanges, like taking turns in a chess match (explicit) or giving someone a virtual Facebook gift (implicit), encourage interactive behavior.

5. Customization. Letting your user have some control over preferences (ie. being able to personalize your MySpace page or Google homepage) increases their investment and creates barriers to exit. The more you let users try to exploit the system, the more interested they'll be in sticking around.

Kim is definitely on to something with this!

[Via Business 2.0, by way of Raph Koster's website]

Charles River Ventures is a firm with keen eyes on the virtual worlds, social gaming and social networking spaces -- in particular, with an eye on entrepreneurs seeking to bridge gaps and coordinate elements from all of these kinds of ventures into a single integrated product. One such company in which CRV has invested is Raph Koster's Areae, and successful real-time networking tool Twitter is another. Worlds in Motion recently spoke with Nabeel Hyatt on his Conduit Labs project, the latest startup to receive CRV's vote of confidence. We chatted with CRV's Susan Wu, who focuses specifically on working with these products (she also was special advisor to the first Virtual Goods Summit), and got further comment from her on bridging the gaps in the space that Hyatt mentioned earlier.

"The distinction between what Facebook and an MMO looks like is going to disappear," Wu says. "All social interaction online will be driven by game mechanics. My goal in doing these conferences and blogging about this subject and trying to find companies to invest in is, how do I bring these two segregated universes together? There are all these Web 2.0 conferences, and Web entrepreneurs basically talking amongst themselves in this insular environment, and I see the same thing in the gaming industry, which has always been a cottage industry and very segregated. I see so many different parallels going on in these two communities, and my goal is to bring them more closely together."

Wu elaborated on where these two key industries are failing to connect. "There're a lot of virtual gifting apps and lightweight casual games developing on Facebook. And I spoke with a lot of these Facebook developers and they're all trying to reinvent the virtual economy," she explains. "And there’s a limitless body of empirical data out there – it doesn’t make sense for Web 2.0 folks to invent it from scratch. It results in an inferior customer experience. There’s been virtual economies and mass market since Ultima Online; that’s 12 years of learning that these guys just aren’t picking up on. That sort of frustrates me."

So she zeroes in on those ventures she feels "get it." "I try to bridge this gap -- Raph gets it, and Conduit does too—I've seen 100 or so startups in the space in the last year or so, and as Nabeel said, there’s such a dichotomy in the two communities, and there are very few teams that have been able to merge both disciplines in immersive gaming environments."

How to start bringing these teams from different sides of the field together? "When I put together the Virtual Goods Summit, it would have been easy to populate all of the speakers and attendees from the gaming industry," she recalls. "There's a lot of established success in virtual goods there. But I made sure there was a panel around mainstream virtual gifting -- companies like SixApart and Dogster and all of the folks who are experimenting with virtual goods, and I wanted to put them in an environment with folks from places like Neopets and Nexon so they could have a real dialog about what's going on on both sides of the fence."

She continues: "One of the hallmarks of a successful Web company is -- if you look at the track record of the most successful companies that have stayed independent and sustainable, like eBay, Google or Amazon -- they have built platforms [which can] foster entrepreneurs. There are ecosystems that spawn innovation from the community members themselves, and Facebook is falling in with that too, with the new platform launch. Few gaming people understand this intuitively -- though, Xbox Live Arcade really fosters an entrepreneurial ecosystem, too. That's something Areae is trying to focus on – how to build an actual ecosystem and a real web platform for people to work in."

Wu elaborates further on the Conduit and Twitter investments on her blog, reality.org.

The Guardian has made an interesting future prediction -- that in the future, the number of avatars living in virtual worlds will eventually outnumber humans living in the real one. The projection, in an article by Victor Keegan, is based in Gartner research that says that over 80% of internet users will have avatars in about four years' time -- and most people have more than one virtual self.

Keegan says that despite the rough days Second Life's been having of late, the race is on to see which virtual world space (or spaces) will emerge the biggest; the article points to Entropia's new deal with the Beijing municipality to allow it to handle 7 million users simultaneously, as an example. As for Keegan, he's betting on Google Earth, which as he says, "recently added photographs of streets to its zoom-in model of the planet. It already has 250 million users who add content and interact with each other. It doesn't take a big leap of the imagination to envisage your avatar talking to friends and strangers in your own street in a few years' time."

[Via The Guardian]

A mysterious blog, "Confessions of an Ex-Arena.Net Employee" -- sniffed out by the folks at WarCry -- has set tongues wagging. Arena.Net is responsible for the popular MMO Guild Wars, which only charges for the game itself and is free-to-play thereafter. Gold-farming or the exchange of real-world money for in-game items or gains is a ban-able offense -- but the self-styled ex-employee is claiming that the folks behind the scenes are actually working with the gold farmers to profit secretly from those sales.

There's no way of knowing whether the ex-employee is for real, but as the folks at Metaversed point out, it raises the issue of security in virtual worlds administration. Users with connections on the inside or a way of accessing employee information could be devastating to a virtual economy, especially if security is not strictly ensured at every level. To that end, Steven Davis of security software developer SecurePlay responded at his PlayNoEvil news site by highlighting five major ways in which he feels virtual economies might be leaving themselves open to exploitation (as paraphrased here from Metaversed):

1. Companies whose model involves profit from sign-ups could possibly benefit by mass-banning users for gold farming related offenses.
2. Employees at any level may collude with gold farming companies. (It's happened before.) Securing access privileges, auditing, and staff management are critical.
3. Larger gold farming companies could target smaller ones for banning with a little help from game company employees to eliminate competition.
4. A game company could give a "head's up" to preferred gold farming companies about upcoming mass bannings. The farmers can switch accounts and lay low for a bit and stay in business while the game company looks great in public.
5 Employees know the technical vulnerabilities of the system better than anyone, and can advise select individuals of how to best exploit the system.

[Via Metaversed]

When we talk about the future of online gaming, it's impossible not to think about microtransactions and Web 2.0. And not everyone quite agrees with what that future will look like -- so, when some experienced online gaming folks got together to share future predictions at Austin GDC, some sparks flew, as you'll see in the following feature which originally ran at Worlds in Motion sister site Gamasutra.

On the final day of the 2007 Austin Game Developers conference, GoPets' Eric Bethke, Areae's Raph Koster, EA Mythic's Marc Jacobs and Sony Online Entertainment Austin head John Blakely convened to answer a question, in a panel of the same name: What are the biggest online gaming opportunities?

Microtransactions

Jacobs raised issues with microtransactions relating to the value of the items sold, and Bethke chimed in: "Whatever you write in your EULA is your best wish, but we have hundreds of years of English common law about transactions."

"We really really really have to make a distinction between the concept of microtransactions -- which means spending a tiny amount of money -- and the ownership of digital assets," Koster stressed. "They are not the same thing. We cannot equate them." He added, "Betting the farm on business models instead of audiences and consumer needs is always a bad idea."

"Out of the top 10 MMOs in USA and Europe, WoW is probably the only subscription-based [game], and the only one that comes on a CD. Habbo is bigger than WoW in Europe." Koster noted.

"You don't go to The Gap and buy a $99 monthly subscription to clothes," Bethke added.

Jacobs disagreed. "I think RMT doesn't work in a lot of games. I think it's bad for the players and bad for the consumers," he suggested. "I think anyone who says there is 'one model' is wrong. Eric, if you say simply, 'this is bad and there is only way we should be doing it,' then you are engaging in the same thing you accuse me of doing."

So will a big RMT game come? "Yes, it will happen -- of course it's going to happen that someone is going to do a great game that will involve heavy RMT," Jacobs answered. "When it's going to come, God only knows. I don't think it will open the floodgates. I think, like the subscription model, it's just a model and people will try it and, like most MMOs, it will fail."

A possible success route, as Blakely suggested: "Engage your consumers in meaningful ways and give them choices. I'm a consumer, I love choices."

"The thing that is confusing is that RMT is not a model, it's thousands of possible models," clarified Bethke. "I love that, in Nexon's KartRider, if you want to switch [your user interface] you can buy 100 switches for a buck. If you want to be a competitor, you put in 4 cents."

"Think about your life; we are consumers, we thrive as consumers," added Blakely. "Whenever you bring people together, they'll participate in transactions."

"You look at the ecology that's been built up around The Sims, where people have item-based sites -- that is the exact same thing... as somebody selling epic mounts," Koster pointed out.

User-Generated Content

The panelists discussed Web 2.0 and the advent of user-generated content. "It's almost a bizarre question. This feels like two conferences going on at once with two distant branches of the family who don't like each other," Koster said. "To some degree, that used to be the coolest thing about the game industry. Richard Garriott was UGC at one time. We can't be snobbish about UGC. We are all users. There is a category error here."

He continued, "The technical sophistication to make content has gotten too damn high for the typical user. How many of you used to like playing mods? Seen any good ones lately? People can't even make a texture anymore -- it's making eight of them. 50 percent of Americans are creating content on the web... that's only if you count uploading their own photos, writing a blog or contributing to a community site. If you add in [things like rating on eBay] it's 100 percent of users! If you look at something like Facebook... it has levels, it has points, it has items, it has reputation systems, it has kabillions of users... there it is!"

"I hate the distinction between virtual worlds and games," agreed Bethke. "You want directed content to get them started -- they don't know what to do in your world. This is the skeleton? The user-generated content becomes the flesh between the bones. A great game would be a virtual world people could have a full existence on, and enjoy interacting on."

"You mention polish and quality -- which I agree, for seed content, [is] incredibly important, but we need to throw in some words like 'empowerment'." Koster suggested. "From what we see, the huge area [where] user-generated content flourishes is in fansites."

"I think Blizzard should sell gold -- I would buy it," Bethke noted.

Xbox Live Arcade

The topic turned next to Xbox Live Arcade. "Xbox Live is one of the most successful stories in the game industry," Jacobs pointed out. "Look at what Microsoft has done with it, and what people said when they launched it."

"The issue is that on the web, there is such a noise level -- and not just a noise level, a noise level of totally kick-ass product," Koster added.

"I think that the future of gaming will be large virtual worlds with RMT transactions," Bethke suggested. "I think the Web 2.0 guys are failing by not putting in good content," he added, as opposed to content-rich MMOs. "When I'm in the web space, I go 'you web guys, do you not realize you suck at content, you suck at fun?'" Koster agreed -- suggesting MMO guys are missing the boat as well.

"Subscriptions are one big thick chunky tool, it's hard to make them work for that user," Bethke said.

"There is a balancing point with [the value of microtransactions items]," Koster said. "And believe me, your customers will tell you about it."

More tussling over RMTs. The New York Times has run a piece on virtual goods, focusing solely on the buy-sell experience in Second Life, much to the chagrin of Conduit Labs' Nabeel Hyatt:

This is a piece focused on the buying and selling of virtual items, and there is no mention of Maplestory, Habbo, or even Facebook and Hot or Not. For the press to remain ignorant of this being an industry and not simply a single product is now journalistic irresponsibility and they should be ashamed.

This is a member of the mainstream press that has not even managed to type "virtual goods" into Google. If they did, they would see the first three stories currently point to:

1) Sony getting into the game.
2) Susan Wu's article on Techcrunch about Virtual Goods being the next big business model for the web.
3) A link to the friggin' Virtual Goods conference, which would have mentioned all the above companies and many more.

He's got a point. With all the events going on this year discussing the RMT world, frequent venture capital investments in start-up efforts with a virtual goods component, and success stories from major companies like Nexon hitting the news so often these days, it seems like a huge miss for the Times -- especially when, as Hyatt also points out, the Nexon prepaid card is the #2-selling card at Target (where Habbo cards are also sold) behind iTunes.

The Napa Valley Register is reporting the results of a survey conducted by the Pew Center for the People and Press' continuing Internet Project, which asked a panel of "experts" -- those who lead in the industry or have a major stake therein -- to predict the future of the Internet in 2020.

Among other Web predictions, the respondents said that virtual worlds will gain in prevalence, which seems a solid forecast. Interestingly, though, the respondents said users will become "increasingly engaged" with them, indicating they feel virtual worlds will play a stronger role in people's lives than they currently do. Though the survey seems to indicate that some of the panelists felt that virtual world connectivity will have a positive impact on workflow and socialization, others felt that "much productivity will be lost" to a growing epidemic of virtual world addiction.

Lately there have been many reports on virtual worlds being developed specifically for business purposes, to enable interaction and connectivity within the professional workplace. IBM is a major pioneer in these kinds of efforts, as their "code of conduct" for employees in virtual worlds indicated that they see the potential in the space for business uses.

Virtual worlds and online games are developed specifically with encouraging high levels of user engagement in mind -- high average-time-spent numbers are a measure of an online world's success. It seems that even the experts are concerned, though, that these coveted high engagement levels might translate to social or professional problems.

[Via Napa Valley Register]

It's easy to get confused by virtual worlds metrics. After all, there are many different ways to track population. Will you choose total registered users, total active users, total concurrent users, number of hits to the launch website, number of total accounts registered... you get the idea. To make matters more difficult, companies that own virtual worlds are typically mum, or at least, very selective, about the types of data they release (recall Ryan Olson's exercise in frustration at Red Herring earlier this year).

In the comments section here at Worlds in Motion, reader "darniaq" correctly pointed out:

And yet, I wonder: what advantageous do companies have to report numbers in a consistent and comparable format? Each companies' business needs are slightly different. Their first audience for such data may be publishers, hosts, share holders, management, whoever. The data they prepare for these audiences is tailored to what is most relevant to them.

It's nice to have subscriptions and uniques and registrations in press releases. But in the end I feel these numbers matter most to folks with the least stake in the success of a game: analysts and players.

So numbers are clearly a poor way to study virtual worlds. Nonetheless, Renaud says, it is essential for the industry to start defining some kind of taxonomy:

You can slice and dice the market by 2D vs. 3D, web-based vs. client software, apples vs. oranges, but we need to find a common set of language by which to differentiate the QQ and Cyworlds from the ActiveWorlds and Kanevas from the Metaplaces and Toontowns. Until then, you have emoticon-on-steroids avatar chat in IM and Social Networking sites being compared apples to apples with narrative driven virtual worlds like World of Warcraft or Runescape. It’s not apples and apples at that point, it’s apples and orangutans.

Raph Koster agrees somewhat, irritated at seeing the user-generated worlds of Areae's Metaplace put into the same category as Disney's kid-focused minigames-for-jellybeans world of Toontown ("OK, we get the message, we’ll redo the site’s graphics!" he says). Nonetheless, Koster says, perhaps it's not sensible to differentiate them totally when they share "99% of their core architecture."

On the other side of the coin, trying to press certain products into the category of either "virtual world" or "game" doesn't make much sense either; oddly, it looks like MMO designer Steve Danuser says that World of Warcraft is the virtual world, while Metaplace is the game.

So if numbers are useless, "game" is subjective, and client display, as Koster adds, doesn't determine purpose, what factors will we use to segregate and study virtual worlds as their very own entity, in a world where "game" is a subjective term, and virtual worlds for business and retail purposes are on the rise? It's an interesting question, and one to which a clear answer has yet to surface.

[Via Raph's Website]

At the Virtual Worlds Forum in London, film producer and politician Lord David Puttnam said that virtual worlds are changing the face of broadcasting, and that the TV industry needs to adapt to meet the growing need virtual worlds have fostered among viewers for ongoing engagement and interaction.

Specifically, as reported by the Guardian's Jemima Kiss, Puttnam said that broadcasters have historically marginalized the MMO industry, but that its impact on the ways in which people relate to their media should not be underestimated. today opened the Virtual Worlds Forum in London by saying that broadcast "is only half an industry", and needs to do more to match viewers' default expectation for interaction.

He spoke highly of the creative potential in online worlds, saying, "People have always tried to create imaginary or visionary worlds to inspire and educate those with less imagination, and now we can build more immersive and compelling worlds than ever before."

He did acknowledge that there will probably be couch potato types who aren't seeking interactivity, and raised some of the issues plaguing virtual worlds -- such as security, privacy, and the "Internet addiction" concept, but said that the perception of such negative issues hasn't been debated constructively, and may be over-hyped.

Puttnam said the biggest priority for the industry now must be children's safety. "Sites like Habbo Hotel and the BBC's Adventure Rock have the highest respect for children's safety and privacy, but is this enough to shelter children from inappropriate speech and to hide email addresses?" He asked, encouraging virtual worlds builders to focus on creating products that encourage real world skills, rather than "a space that encourages children to spend money."

He added, "We have to ensure that virtual worlds are a place that offers people meaning, and greater agency in their education and working lives. At their very best, human being are essentially social beings and it is our job to nurture that."

[Via The Guardian]

One of the issues that came out of the recent Virtual Worlds Forum in London is, rather sensibly -- how to categorize virtual worlds? It's clear there are a lot of players in the space, and not all of them are "true" virtual worlds -- in other words, 3D environments with an avatar. At her Wonderland blog, Alice Taylor muses on the different classifications that are emerging in the space, in the hopes of defining "camps" into which the broad offering at present can be currently defined.

She correctly notes that 2 and 2.5-dimensional worlds are one of the most populous categories -- some of the largest, thriving and most widely known virtual worlds (Habbo, Club Penguin, BarbieGirls) fall into this category.

Then, there are the realism-focused, 3D worlds, where as Alice says the avatars are "almost humanoid" -- In this camp we've got Second Life, HiPiHi, Kaneva, There.com and others. 3D worlds for business purposes are another camp, and finally, MMOs, which are less represented in the space because they've got a foot in the video game world, too.

Other key facts Alice gleaned from the event: as Lord Puttnam pointed out, the issue of marketing to kids in virtual worlds will continue to be a tricky one, and both There and Second Life have said that the 50+ audience comprises their biggest users -- who'd have thought?

[Via Wonderland]

On the heels of the CSI:NY and Second Life episode tie-in -- which generated a lot of buzz, but not so much quantifiable gains for Second Life, Raph Koster wonders if virtual worlds are becoming "mainstream." He cites the folks from Metaversed, who like Alice, agree there really aren't that many "true" virtual worlds, though their definition is based in different factors: "A Social Virtual World has game-like immersion and social media functionality without narrative driven goals. At its core is a sense of presence with others at the same time and place." Metaversed's list includes Second Life, Kaneva, vSide, Entropia, Ogoglio City, There.com and MTV's worlds.(*)

Raph correctly observes that even though this list doesn't represent the largest segment of the virtual worlds space, it's the one driving the "mainstreaming" trend. Raph points also out that, as concerns the CSI example, most people were logging in "to play a game," and makes this salient conclusion:

The bottom line is something that has been known for a very long time. Chat is never enough. Try to find a real-world business built on social interaction without something to do, and what you will find is that successful social (or “third”) places generally rely on a shared activity: drinks at the bar serving as a lubricant, bingo at the church, bowling at the lanes, a movie to ignore, and so on.

So, is there hope for mainstreaming for non-entertainment apps? Absolutely. But in my opinion, it’s not going to come from pure social virtual worlds. Entertainment is going to continue being the key driver.

[*CORRECTION: The article originally attributed the list of "true" virtual worlds and their definitions to Raph Koster, when in fact they were Metaversed's.]

[Via Raph's Website]

Harvard Business School recently brought together six influential industry members in the field of massively multiplayer online virtual worlds to conduct a panel on the present and future of a burgeoning market space.

"I'm far from exhausted in the online opportunity," said Mark Kern, who left his tenure as team lead of Blizzard's World of Warcraft to found a new company, Red 5 Studios, dedicated to expanding the genre and market reach. He envisions a future of virtual worlds composed of 'synthesized content', produced by artificially intelligent game design systems which would take an hour of a player's free time and provide them "the ultimate experience catered toward that hour."

Who's Actually Playing?

In the meantime, numbers that he has seen indicate that only about 15 percent of core gamers engage in MMO games and worlds. Philip Rosedale -- founder of Linden Labs, the company behind Second Life -- added that his numbers indicate perhaps only a one percent market penetration in general. In a marketplace that could sustain hundreds of millions of players, current endeavors have only millions.

Philip went on to say that there is "a lot of growth yet to happen. Probably a lot of change, consolidation -- all the companies that you're seeing will probably go through a lot of evolution." Lacking clearly defined guides or genres, it is "not a mature market," and the space is like a vacuum.

The ROI Situation

Regarding the barriers of entry that new MMO developers face, Curt Schilling -- founder of the recently established 38 Studios -- said: "There are a few barriers here, and at the top of the list is going to be, and always will be, money." Few developers are internally funded, and, "when you're sitting in a meeting with venture capitalists, they are... Most of them are about ROI."

The focus on return on investment poses a challenge to new developers in the MMO space, because there is not yet a common-knowledge business model to calculate risk from.

Curt's company, fortunately, is similar to Blizzard in that it is entirely internally funded. "You have to meet deadlines, milestones, you have a budget -- all those things -- but when you can set those on your own, and you are creative, and you have responsibility to your team and to the product. It's different."

Mike Hirshland, of Polaris Venture Partners -- which works closely with Turbine Inc., producers of online renditions of Dungeons & Dragons and Lord of the Rings -- said that Curt's view of VCs is exactly right. "Three letters: R O I." He then shed light on the sort of capital needed for these projects: Large-scale MMO projects to date require three to five years of development time, at a cost of thirty to sixty million dollars to get the title launched, with substantial investments over time in order to regularly introduce fresh content.

To further complicate matters, the primary distribution channel is still in the form of boxed retail. "From a VC perspective," said Hirshland, "thinking about it is tough, challenging."

Where's It All Going?

Mark Kern, whose studios are supported by seventy million dollars in venture capital, noted that these projects are steering closer to Hollywood every day. "There is no possible way that we can do what it is that we want to do cheaper and quicker. VCs have asked us, 'Could you do something that costs a little less and comes out a little quicker?' Yeah we could, but it wouldn't be what we're going to make."

The fluid nature of these games and worlds provides developers -- and investors -- new opportunities to monetize user experiences: Cable internet and television provider, Comcast, likens the amount of time and money players spend in MMO virtual worlds to the amount of time and money spent on premium television channels, or Video On Demand services. In the Asian market, developers of MMO projects in South Korea have honed a system similar to America's highly lucrative ringtone market.

Philip Rosedale expounded on the Korean system: "Anybody know Kart Rider? Kart Rider was really an interesting thing. Korean game, very successful, about 100,000 online at a time. Lightweight -- very lightweight. The company made money by selling stuff that you would attach to your car; what's fascinating is that a lot of the stuff they sold was just cosmetic."

"They actually found that they could drive a hundred million dollar a year business," he noted.

Making Players Count

On the topic of monetizing Second Life, Philip explained that Linden Labs sells virtual land to its users for a standard monthly rate. The cost varies only by virtual acreage, and what players do with the land has no effect on the rate that Linden Labs will charge them. "You've got to use flat fees, you've got to use simple treatments on things."

Second Life's greatest draw for users, however, is the ability to produce and even sell their own content: "The interesting thing about user-generated content is that if there is any impediment to people creating it, they won't." Philip related the unsolved challenges of interface and infrastructure of MMO virtual worlds today to that of web browsers and the state of the internet in years past.

Chris Carella -- CCO of Electric Sheep Company, an advertising firm which focuses on virtual worlds, and has worked with clients ranging from the NBA to MTV -- agreed with this view. Employees of Electric Sheep Company have even gone to the lengths of developing a more browser-like prototype interface for Second Life, to ease ergonomics.

Corey Bridges -- co-founder of Multiverse, with a background in marketing for corporations such as Netscape and NetFlix -- agrees with these sentiments as well, and thinks that "the notion is enabling this entire medium to be opened up. Not by 'somebody made a werewolf suit', but by somebody saying 'oh, here's a new use for virtual worlds', along the lines of wikis, as-such, didn't exist ten years ago."

"The technology could've supported wikis ten years ago," he continued, "but it took some evolution of somebody saying, 'Hey, let's try this.' And then blogs, and podcasting -- these sort of things have come up organically."

A number of of panelists hope to blur the lines between virtual worlds like Multiverse, and the web browser as we know it. Corey's view is that once a platform can be developed which makes experimentation attractive and economically feasible, people will experiment. "And that's where you get real innovation."

Less a matter of 'if', and more a matter of 'when', MMO virtual worlds, the panel concluded, will become the context and interface for hundreds of millions of users, facilitating billions of dollars in transactions.

[The preceding article by Patrick Murphy originally ran at Worlds in Motion sister site Gamasutra. Thanks to Dan Weis for organizing this panel, Harvard Business School for hosting it, and Dr. Joshua Green for serving as moderator.]

Worlds in Motion's big sister, Gamasutra, has been covering the interesting lectures out of the Montreal Games Summit, and this session saw veteran developer David Perry describing how what was supposed to be a year off turned into a 12-month crash course in the merits of the free-to-play business model in online spaces. In this excerpt from the full lecture coverage, Perry discusses what he learned.

Entering The World Of Free-To-Play

Perry recalled getting in touch in touch with a man named Howard Marks. He explains, "He bought Activision with Bobby Kotick, and this was when Activision was totally destroyed. They bet the farm on CD-ROM, and this was at a time when cartridges were the main way to sell games- but it paid off. He’s just bought Acclaim and is betting the farm on free-to-play games. Now, people who bet the farm are impressive to me.”

Perry said that free-to-play games are a concept they decided to look at because they were a major way to play games in China and the rest of Asia, and China's game industry is growing faster and faster and catching up on the US. So he decided to go to China to check out the game development community and visit the China Joy Expo.

“It’s an anything goes-atmosphere," he said, showing images of people selling luggage on the show floor to demonstrate. Next, he showed a picture of Chinese clowns at the Expo. "When then I saw those clowns, I felt real sorry for them, because I remembered those days."

He went to see a company and give a talk, and he showed an image of him with the entire staff, all of them staring at the camera rather intensely. "See how all of these people are looking at you?" Perry pointed out. "They really are looking at you. They’re watching everything you do, and playing every game you make, and they’re analyzing it and learning from it. It’s actually a little spooky.”

He then went on to describe his work with Nexon's Korea-based dancing MMO Audition, and how he became interested in it and interested in localizing it for the US. After speaking with the developers and giving them some hints and tips, he suddenly ended up with them asking him to take control of 3 MMO teams in China.

Putting More On The Plate

Perry continued, "So suddenly, remembering this is my year off, I suddenly have 3 fully-funded MMO teams in China. And I don’t speak any Chinese, so thank God for their producers!”

He described some of the interesting things they do in the game to build community, such as “punishments” for losing. Losers, for example, might have to wear panda suits. “Now, you’d think what the hell is that, we have to get that out of the game for America," says Perry. "But the thing is that it works as an ice breaker – it makes people start conversations and laugh about it together.”

He described how in the game, people can become couples, enter couples competitions and even have virtual marriages which could lead to virtual divorce.“We have teenagers getting 'divorced!'" Exclaimed Perry. "It’s crazy! The big question is, will it work in the U.S., though? I have no idea.”

He discussed some complicated licensing issues. "In China they don’t care about copyright," he explained. And the team ended up doing a deal with Warner music group. “It’s an example of the new relationships that we are forming now that are trying to push free-to-play forward," Perry noted.

Perry moved on to discuss Seoul and the Gstar expo. “compared to China Joy it’s a little more sedated, but it’s pretty similar.” He showed an image of a girl in a padlocked cage, with attendees doing push-ups to win the girl, and “Korean developer speed dating” where one can meet developers and be shown their game in a kind of speed-dating setting -- lots of small, two-person tables with laptops, he explained.

He talked about going to visit GameHi because he liked the look of an FPS they had, Sudden Attack -- "and they had this MMORPG that I liked the look of, and so suddenly, boom! I had another MMO! it was called Dekaron, and it had this Korean story which we rewrote entirely – a 4000 page story - and called it 2Moons, and released it in the USA for free. And most importantly, it had no development cost. The game immediately charted and it’s only in beta! It charted higher than Lord of the Rings Online.”

Monetizing Free Games

“In-game advertising is something that they don’t find very interesting over there, but here it’s different,” Perry continued. He discussed how he went to a Raiders game at McAfee Coliseum and how the stadium was covered in billboards and other advertising around the field.

“Players will have no problem with advertising if you don’t charge full price for your game and then include a little bit of paper that tells people that you’re sending their IP address to agencies and cover the game in adverts," Perry joked, referring to player backlash over Battlefield 2142.

Another condition required for players to accept in-game ads is that you: "Don’t delay or interrupt the gamer at any time with advertising, or require them to click anything to get rid of it," cautioned Perry. And finally, he advised, "Give them something valuable in return - obviously a free game is great. Make advertising an exchange."

He concluded, "If you compare this to TV, TV fails on every point. That’s why TV is dying and we’re going to kick TV’s butt."

The Evolution Of In-Game Ads And Item Sales

He then discussed how in-game advertising has evolved from banners and static billboards into advertisements interwoven with the story, and noted that they take great pains to offer optional advertising that the player can turn off. “We want to say that our game is totally free, so players can turn it off - but gamers who turn it on receive an XP boost," explained Perry. "96 percent of gamers want the experience boost.”

Perry also highlighted four key points regarding item sales. Firstly, don't charge too much. Secondly, don't upset the game balance -- in other words, don't make winning something that can be bought. Third, don't take what Perry calls "the velvet rope" approach, by disabling the fun parts and making players pay to unlock them. And finally, don't allow hackers, bots or fraud to devalue everything.

"In 2Moons we actually have a jail, so you can walk by and actually see the bots in jail,” Perry said.

He then discussed ideas for selling items, and noted, “The point is that you might not like any of these, and think they suck, but these are all ideas that are being experimented with. It really it is the Wild West.”

Going Down The Wrong Road?

Perry expressed that the rising cost of games is a move in the wrong direction. “There is a growing wall in front of poor gamers, and every year we place another line of bricks on the top of the wall to make it harder for them,” he said. But wealthy gamers want the full experience and money, so how about flexible pricing?

According to Perry, the only truly honest model for games is "crappy games = zero sales." He added that: “As long as the free games from China stay bad, then there’s no problem, but if they start to get it right -- create an Assassin’s Creed, a Mass Effect, a Super Mario Galaxy -- and for free, then we’re going to be in real trouble.”

Perry said he has no idea why he hasn't self-destructed after his busy year, but offers a few suggestions: "Every day make sure you’re doing something to grow your career. And if you have time -- you won’t think you have time, but you can make time -- try to pay something back into the industry.”

In answering questions, he noted that Chinese companies were worth billions of dollars, and could lead to a lot of disruption: "You should not be surprised if Epic or someone gets bought by a Chinese company," he cautioned. "And how would you feel if that would happen? I’m not trying to be all doom and gloom, but there is a lot of disruption is possible.”

Also in response to a question from the audience, he made a response to Jonathan Blow’s ethical questions about MMOs. "It’s hard to argue with free," Perry said, "People saying, 'I’m not paying for this unless I love it.'”

Concluded Perry, “After 25 years in the business, I’m stunned as to how wide-open this business still is. There are so many creative ways to still make a difference.”

[The preceding exerpt, with contribution by Mathew Kumar, originally ran at Worlds in Motion sister site Gamasutra.]

In a fledgling industry based on information sharing and the germination of new ideas, whether we're virtual world users, media or creators, we're all careful to embrace, study and tolerate all new ideas. After all, we're on equal footing at the threshold of a nascent industry, and while some important lessons are already beginning to solidify -- virtual goods are here to stay, self-expression is a key component in avatar-based interaction, social networking is part of play -- a "right," absolutely fact-based methodology has yet to surface, and it's doubtful that it will for some time yet.

Looking back ten, even twenty years from now, it's hard to predict which of the new products and trends we currently see will have left a lasting impression on the industry of online spaces, but it's a safe bet that some who are emerging as leaders now may fall along the wayside (remember the search engine wars?) However, a rather incisive new piece by Malcolm King of Australian debate journal On Line Opinion is unafraid to admit to the overhype of virtual worlds, lambasting Linden's "PR spin" around Second Life and calling it "intellectual trash."

He attacks the industry from an academic's perspective, and while comments like "[Kids are] going to be better off learning to play guitar, lacrosse, karate, cricket, soccer or chess than sitting alone in a darkened bedroom battling god-knows-what coming at them in 3D through their computer screen," are vaguely myopic, the resentment for what might be called an over-proliferation of virtual worlds hype and unsubstantiated PR fumes drives his exacting dismissal of the industry altogether.

It's interesting to read, because academia is one of the primary fronts in the evolution of virtual worlds, as many learning groups for both young kids and university students are looking at the possibilities of online worlds for the classroom, for simulation and education.

Terra Nova's Lisa Galarneau takes King on -- "I quite enjoy it when people get sick of hype and decide to rain all over the parade. The problem is that too often people do it when their annoyance causes any degree of balance and levity to flee," she begins, and while she also admits that King is "certainly right" about the overhype issue, she deconstructs his arguments handily.

And voila, an interesting and pull-no-punches discussion on the real potential and concrete, measurable value of virtual worlds appears at Terra Nova, making it clear we've perhaps begun to move into an era of honest criticism. Now, if only such grounded scrutiny could put an end to people using names like "Mistwalker" and "Dazzlestar" in their professional email signatures.

[Via Kotaku]

Edward Castronova, Associate Professor in the Department of Telecommunications at Indiana University and developer of the Arden Shakespeare-themed world, apparently has some concerns about the impact of virtual life on the real world.

"My guess is that the impact on the real world really is going to involve folks disappearing from reality in a lot of places where we see them," Castronova told the BBC, discussing his recent book, Exodus To The Virtual World, on the same topic. He predicts that over the next decade, everyone will be involved in virtual worlds to some degree -- but that a group of individuals may "go and disappear," spending all of their lives there.

Castronova visualizes that virtual worlds may become a sort of "refuge" for those whose real lives are less appealing, but he still sees them as a step forward based on their ability to connect people globally for communication.

[Via BBC News]

This afternoon at the Worlds in Motion Summit at GDC, GoPets.com CEO Erik Bethke gave a talk concerning the cross-over of traditional MMORPGs and Virtual Worlds.

An area focused on by many in the industry is the constant struggle of the User Interface. Bethke thinks of this as misplaced focus in that “You need to think about the core of the virtual world, [that] trumps any UI problem you can think of. UI is never the problem.”

Using World Of Warcraft as the basis of his comparisons, he mentioned than many in the virtual worlds industry look down on WOW because it all comes down to “killing monsters and taking their shit.” Showing a screenshot of the game overflowing with windows, hotbars, and myriads of other UI covering almost every corner, he made the point that “You can have a super complicated UI and still make over a billion dollars a year.” To give further context to the importance of this, WOW’s 10 million subscribers is equal to around 5% of total television viewer ship and equal to the entire Xbox 360 user base.

In trying to determine what the appeal is, Bethke showed another screenshot from WOW, with a goblin with a yellow exclamation mark over his head (this indicates an available quest). “That’s what’s missing from so many virtual worlds. No guys with yellow exclamation marks over their heads.”