Next Wednesday kicks off the Virtual Worlds Conference in Los Angeles, and we hope to see you there.  We’ll have a booth and will be speaking throughout the schedule, as laid out below.  Please drop us a line if you want to meet, or swing by the booth and say hello.

WEDNESDAY, SEPT 3, 2008

11am, Hollywood Track, Chris Carella, CCO
Virtual Worlds Primer for Entertainment Industry: How do you take an existing entertainment franchise to the virtual world?

11am, Future of Virtual Worlds Track, moderated by John Swords, Dir of Business Development
Technical Visionaries Discuss and Debate The Future of Virtual World Technologies

THURSDAY, SEPT 4, 2008

11am, Hollywood Track, Valerie Williamson, VP of Marketing
How TV Networks Are Effectively Using Virtual Worlds

1pm, Future of Virtual Worlds Track, Sibley Verbeck, CEO
Virtual Worlds Roadmap

2:30pm, Future of Virtual Worlds Track, moderated by Giff Constable, VP of Products
Virtual Worlds Meet the Web: The Present & Future

- - - - -

As for my own panel, Virtual Worlds Meet the Web, I am very pleased to be joined by an excellent set of industry leaders:

Daniel James, CEO, Three Rings
Keith McCurdy, CEO, Vivaty
Mitch Olson, Co-Founder, SmallWorlds
Sean Ryan, CEO, Meez

The overview of the panel is as follows:

The discussion of Web-based worlds versus download worlds has changed significantly over the last year with the advent of interesting new Flash-based efforts and effective 3D plug-ins. In this panel, a group of virtual world executives discuss the business and technology decisions behind their diverse product initiatives, analyze trends in Web usage that are driving the rising importance multi-user virtual experiences, and tackle the bigger discussion of how the Web and virtual worlds should interoperate. 

Virtual Worlds News today updated their Youth Worlds Analysis.  You can see Joey’s analysis here and the list here.  The space is super active, but I would not call it crowded. Not even close.

Why? Because it is like saying that the kids Web space is getting crowded because every toy company and kids brand has a website.

To kids, virtual spaces are the Web, with popular sites like Stardoll, Club Penguin, WebKinz, Gaia, and the Nickelodeon, Disney and MTV brands leading the way.  This is what they know and enjoy.

Virtual spaces and multi-user environments are converging with traditional website design and functions into a fun and effective combination of asynchronous and synchronous interactions.  It is still early days and design best practices still have to be proven out, but the train is moving.

However, what remains to be seen is how much room there is for pure play virtual world growth, as opposed to virtual environments tied to media, toy, apparel, or other real-world properties.

Greg Verdino put up a post the other day titled “Hate to tell you, but Web 1.0 was social too.”

And of course it is true. Putting aside the difference between the Internet and the Web (or even dial-up bulletin boards) for a second, from the very beginning these technologies have been about communication, which means that they were social.

What has changed?  The technologies became easier to use (and create), access became faster and more painless with better connection speeds and hardware, and mainstream culture changed and started treating the Web like an every-day tool.

Who and what was first is irrelevant to everything but a history book.  What matters is when technology and culture converge and mainstream adoption becomes a possibility.  That is the question at hand with avatar-based communications.

Note: just saw that Gartner has placed public virtual worlds in the trough of disillusionment, with 2-5 yrs to mainstream adoption. I think that the time to adoption will differ based on market audience (age) and entertainment vs serious usage, but if you average it out that this isn’t unreasonable — we are still in the innovation / innovator stage.  There will be some great successes in the near term, however.

VentureBeat has a story on virtual goods business models being used to good effect by casual gaming companies.  Given the uncertainty swirling around social network advertising, I have to imagine that almost every casual game developer is thinking along these lines. Even for brands who are looking to use casual games and virtual spaces to bolster marketing and real-world sales, virtual goods can be an effective way to turn a marketing cost center into a profitable effort.
Of course, for both virtual goods and advertising models, you have to invest in building the traffic before you can really start to monetize.

Still, the casual game space has been doing well enough that Zynga “has yet to tap into any of its venture money even though it has a staff of 80 people and other operating costs; it has been profitable through its previous $10 million round as well as this latest one, he [Mark Pincus] says.”

Ravi Mehta of Viximo has some more interesting thoughts on the topic at Virtual Goods Insider.

We were thrilled to finally announce WebFlock last Thursday.  We had some nice coverage alongside the release and I thought I would highlight a few with side commentary:

TechCrunch and Hollywood Reporter broke the news followed up by an in-depth piece from Virtual Worlds News and coverage at Worlds in Motion. Joey Seiler, with Virtual Worlds News, picked up on an important point when he wrote, “WebFlock is not–not–a virtual world. It’s a tool for developing virtual environments. While other worlds develop content relationships with brands, The Sheep are only interested in taking WebFlock to the brands themselves.” Raph Koster also, not surprisingly, got this distinction.

WebFlock is not a consumer virtual world.  Each implementation is entirely private-labeled, thus registration, art and user experience is controlled by the owner, not ESC.  I’ll write a little bit more about that tomorrow.  A key thing to note is that each space is separate, just like Amazon.com and NBA.com, and you navigate from one WebFlock-powered implementation to another just like you do from one website to another — by going to a new URL.

Right now, I personally don’t think of the Metaverse as a separate layer on top of the Internet that is navigated entirely in 3D; rather virtual spaces will be integrated and embedded right into the Web.  Virtual experiences don’t have to be part of large, sprawling worlds, but rather like websites, can be small, targeted, purposeful, and engaging. They enrich a webpage rather than replacing it.

Tony Walsh also picked up the story over at Clickable Culture and I added a comment there about some of the 3D tools: avatars and environments are built using standard 3D tools like Maya and 3DStudioMax. I also noted the lack of a fully user-controllable camera, which I think is a good thing for mainstream usage right now.  We call the environment “Perspective 3D”, since it has many of the immersive qualities of 3D without the usability complexities or hardware/software requirements.

ESC is not exclusively doing WebFlock work by any means, but the application provides an important option for the market that was missing, and we are excited about where this technology will go.

The Academy of Television Arts & Sciences put out their press release and 2008 Primetime Emmy award nominations, and included in the release was a list of finalists (finalists are not considered “nominees”) for the Interactive Media Programming Juried Area, Fiction:

We’re proud of our partners at Showtime and thrilled to have been involved.  It makes today, with our announcement of The L Word implementation of our new WebFlock product, even better.

The NYTimes [link] had an article today, echoing similar recent reports, that Microsoft is embracing virtual world elements for the Xbox.  It is another example of gaming and social activity meeting in the middle to appeal to the mainstream.

Here is an excerpt from the article and a quote from David Hufford, Microsoft’s director for Xbox product management:

“And what really is appealing to that mainstream consumer is that social experience, in the living room or online,” he said. “Whether it’s the older consumer or the Facebook generation, they see games not as a solitary experience but as something you do with friends and family, and that’s what we want to deliver this fall.”

At the core of Microsoft’s initiative is a new interface for the Xbox 360 that incorporates humanlike “avatars” representing players. Users will be able to customize their avatars and socialize with other players, even outside a particular game. Nintendo has successfully used a similar approach with its Wii, in which each person creates a more cartoony figure called a Mii. Sony is also working on such a system with a new service for its PlayStation 3 called Home.

In Microsoft’s system, users will be able to share photographs with one another across the Xbox Live network and also watch movies together in real time, even if they are thousands of miles apart.

During my lunch blog-browse, I ran across two posts that hit on different sides of the same issue: are social media marketing projects falling short because they take a build-and-ship approach?  Today projects need to focus on near-term ROI, which ostensibly is a good thing, but this is leading to risk averse behavior from CMOs. One point of consensus at the Advertising 2.0 conference was that the short average tenure for CMO’s is leading to short term thinking, not unlike public companies hamstrung by the pressures of quarterly numbers.

Over at Hyperempowered, Marc Schiller asks whether brand “build and ship it” thinking can ever compete with startup “alway in beta” thinking, where services and experiences are constantly updated and improved in an iterative fashion.

At Experience Matters, David Armano writes, “one of the biggest challenges agencies face is that marketing initiatives are often focused on short term gain vs. fostering long term relationships. This results in a churn and burn which can become difficult for us to sustain.” This points to the reality that a relationship and “conversation” is not built overnight, but also highlights the need for longer-term, iterative thinking.

The software industry learned the hard way that “build it, ship it” was a pretty awful approach, and thus agile development was born.  A key step was the ability to move away from shipping physical media.  The Web makes it easy to update software whether desktop apps or, even easier, purely online applications.

When one is creating a TV spot or a radio ad, one faces the same issue: one must create and ship because once it is out there, it is out there and cannot be changed — you have to start again with a new campaign piece.  Now that agencies and their clients are moving online, they need to learn the same lesson that the software industry learned: iterative is the way to be.

Don’t spend all your budget guessing user behavior, but rather put your best foot forward with a first release, monitor closely, and save some budget for constant improvement.

There have been a number of articles recently about the challenges big social networking sites have faced in monetizing their audiences. I think that there are two issues going on here:

1. the type of ad interaction needs to improve, and

2. advertisers and their agencies need to come up to speed and get comfortable with these new mediums.

The latter is requiring some real change to businesses as organizational structures and titles that fit the processes of old school media buying struggle with the dynamics and complexities of online.

The New York Times has an extensive article today on this topic [link here]. As the author writes, “In the last few months, the bloom has come off social networking’s rose” and “the balloon of unrealistic prospects is losing air.”

I happen to believe that the social networking sites will figure this out, but they will have to evolve just as the advertisers. The article states, “there are concerns that social network users do not view ads, no matter how carefully the ads are placed.” So much of advertising success depends on the method. Simple case in point: in virtual worlds, we have seen very effective engagement levels (see Pepsi and vMTV’s example), but not by sticking the 3D equivalent of a billboard on the wall.

I very much agree with this statement from eMarketer, quoted in the NYT article: “‘The challenge is that all these new forms of advertising are more difficult to plan, measure and quantify than advertisers are used to, and that has impacted spending growth,’ Debra Aho Williamson, an eMarketer analyst, wrote in April.”

I have not yet had time to write up my notes from the Advertising 2.0 conference the other week, but it was clear that agencies are struggling with the variety, complexity, and newness of social media advertising. It is considerably easier to stick to traditional media buying. We are in a transitional period where advertisers are not happy with the cost/benefit equation from traditional media buying, but still need to get comfortable with these new methods and metrics.

Neither business nor culture changes overnight, and Chris DeWolfe is right to ask everyone (including the media) to take a deep breath.

Sadly, I was too busy to attend the Social Gaming Summit, but hope to make it through some of the blog coverage.  I’m storing up my links to browse through below:

• Jeremy Liew, one of the key organizers, has a good roundup here
• Joey Seiler of Virtual Worlds News, and a moderator on one of the panels, blogged
• Monetization and Business Models
• User Generated Games in Social Networks
• Worlds in Motion’s Simon Carliss covered Joey’s panel on Casual MMOs and Immersive Worlds
• Inside Social Games covers Asynchronous Games on Social Networks
• Mashable’s coverage
• Andrew Chen’s thoughts