Friday, June 15, 2007

Virtual Worlds Online

We've all heard about the media success of Second Life; the addictiveness of MySpace; and the large valuations of Club Penguin. Just launched is the Virtual Lower East Side which is an avatar based approach to location based social networking. So take the best of all of the aforementioned products: the avatar based Second Life, with the social networking aspects of MySpace, together with web based aspect of Club Penguin. Just like MySpace, VLES is starting as a tool to bring bands together with their fans. Interesting play, and I think that we could be seeing more of these web based virtual worlds, especially as bandwidth becomes less of an issue and Flash continues to pack in the power in small sized bytes.

Virtual Web based worlds are very interesting to the marketer since we have clearly seen the power in social network marketing and the power of word of mouth. However, what the virual world allows is also a chance to build a strong robust application with little capital outlay. What does that mean????? MySpace really didn't have a strong business model until it reached a critical mass of users and even then CPMs are reaching $30 or so. YouTube didn't have any business model at all (and still might not). These virtual worlds do. Club Penguin charges $6 a month to customize your penguin and users gladly pay. Second Life items cost real money and users gladly pay. Not all users but some and I think that will be sustainable enough for social network and virtual world builders to build a robust application and will allow for more entrants into this brave new world.

Will MySpace become virtual? They have the easiest userbase to do so with. But will it happen? I doubt it. The code that MySpace is written on is so unstable that if we were to have some virtual users and some static users we'd crash the system. So there's an opportunity here! Could VLES be the next virtual MySpace in the 3D Web 3.0? I don't know. But I do know that there's an opening here for someone to create a rich application with decent cash flows that if successful will probably rival a valuation like YouTube's. (Since MySpace was bought for $580 million and Club Penguin was flirting with $450 million at a fraction of the users of MySpace).

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