Tuesday, October 25, 2005

Early for digital world business opportunities

There are three different levels of business opportunities in digital worlds:

1. In-world economies
Digital world residents are providing products and services to each other. It might seem that there is a lot of opportunity given the substantial economic activity but the range of possibilities is limited. The magnitude of economic activity can be seen in the daily conversions from Linden Dollars or Simoleans to US dollars and the trading volume on eBay and digital currency exchanges.

However the scope of this activity is limited to a set of in-world products and services such as real estate, escort/sexual services and product sales (clothing, hairdos, home furnishings, other objects). The market size will grow as more people subscribe to digital worlds. The market scope will grow if functionality is added to the worlds, also if new user groups come online.

2. Physical world businesses marketing to digital world customers
Physical world companies are starting to go online to market themselves and their services to digital customers. A recent example is Wells Fargo marketing financial services to Gen Y through its entertainment portal Stagecoach Island in Second Life. The digital world customer market is still small, in October 2005, Second Life had 60,000 total worldwide subscribers and presumably fewer who are active on a regular basis.

The cost for physical world companies to establish a digital world presence is minimal in the scope of their overall marketing budget and the brand cachet of being online would likely drive physical world sales. There is also a bit of the land grab idea, companies sensing a great potential future payback for being an early mover in establishing a digital world presence.

Customer avatars could interact with store avatars for pre-shopping and/or discounted sales and companies could assess mini-launches of new products in a low cost way in digital environments.

It is actually surprising that Gen Y commercial brands such as Abercrombie and Fitch, MTV, car companies, etc. do not have digital world presences yet. Part of this can be explained by the still poor visual rendering quality for direct product viewing and buying decisions, but the abstract aspects and customer research in the sales process can occur online now. Another corporate consideration would be the cost and effort required to keep online content fresh.

As every company now has a website, maybe they too will have a digital world presence in the next several years where customers can come to find out about the company and interact with virtual sales staff or other corporate information representatives, for example for a job interview screening or business development partnership meeting. With a corporate presence, companies could have internal meetings in-world as well, an interesting alternative to video conferencing and conference calls.

Further, digital worlds could be an interesting exploration for physical world companies in service delivery. In the financial services example, would clients be more willing/comfortable to discuss the intimate details of their financial situations through their avatars than in person? Would an investment advisor be able to pick up unspoken clues from an avatar meeting? Avatar meetings preserve intimacy and depersonalize interaction in a positive way, maybe making advice more objective.

3. Physical world businesses bring physical world customers in-world
Given the current technical, economic and behavioral inaccessibility of digital worlds (see "Hurdles to faster metaverse deployment") to mainstream consumers, it is too early and too limited for physical world entities to bring their physical world audience online for their products and services. One obvious future application is learning, there are tremendous benefits of using a digital environment as a learning destination, including the ability to collaborate in a non-interruptive multi-channel way. Distance learning platforms such as those designed by market leader eCollege may merge with digital environments.

In-world economies are limited in their current mode but expandable as additional functionality and user groups area added. It is early for physical world brands to move online, but those with the Gen Y focus or aspiration should be establishing presence in the digital world. These are the halcyon digital days where Coke, Lexus and Cingular are not yet plastered around the digital environment, but online merchants have plastered their own advertising around.

It is sad though expected that the current digital worlds have such a heavy component of commercialization. As other entities provide online worlds, perhaps different worlds will become known for different attributes; e.g.; CollabWorld, LearningWorld, PhysicsWorlds to test different laws of physics, etc. It is entirely possible that Second Life and Sims Online will not be around in the next several years, having been superseded by the next metaverse platform(s).