Originally posted at blog.techintelgroup.com
These are indeed interesting times for businesses, most particularly startups. I always seem to be in a virtual world presentation or at a virtual world conference as the macro-economic situation worsens and worsens. In stepping back, this downturn should have some surprising impacts on this stage of development of the virtual worlds industry.
By way of context, in my humble opinion, the virtual world industry is still relatively nascent. There have been companies doing virtual world platforms for fun and profit for decades, however as a technology sector overall, they are just now coming into mainstream adoption numbers. There is the standard first/second/third technology generation tensions between early entrants (many of which are making money) and new market entrants (who are not) looking to disrupt and capitalize.
The virtual world companies that are in the middle of (or about to seek) fund raising will find their valuations pushed down as a best-case-scenario, with 'no capital availability' as a worst-case scenario. Typical sources of capital like friends/family/angel investors are all feeling the pain of watching their personal portfolios shrinking on a daily basis, and are therefore less likely to invest in a speculative venture in an increasingly-crowded sector. The venture community is suffering from a combination of gripping fear, lack of self confidence, and overall paralysis.....but only at a certain altitude. Large VCs are most impacted, as they have so much more capital to put in to play that they need certain (absurdly large) valuations of the startups they are injecting capital into. Smaller funds, which invest in smaller denominations/valuations, are going to clean up during this time.
Bad news for VW startups wanting large valuations about now, good news for smaller VCs with capital on hand and VW startups looking for early smaller rounds.
What about the impact of the economy on the broader value proposition of the industry? Lets break it down a step at a time....
Continue reading "Crosspost from TIG Blog- Current Economy and Virtual Worlds" »
A little over a year ago, I wrote a number of industry and technology forecasts within a blog post entitled Look into the ball and tell me what you see. In the post, I predicted changes and announcements in the Virtual Worlds industry, and I'd be a poor futurist and technologist if I didn't revisit that blogpost and see how my predictions fared. Most futurists are loathe to do this sort of thing, as rear-view mirrors are usually not very flattering. There was a humorous anecdote I once read in one futurist tome about a professional forecasting study done in England where the most accurate forecasters of future events were actually plumbers.
So, with the prescient-plumbers in mind, lets revisit my prediction of June of 2007 for June of 2008 and see how I fared:
Prediction: "T= This time next year. Three or Four major 'verses competing for customers with status/infrastructure innovation ("Transfer your avatar and property to our world for free from Second Life when you join, no charge!" (American and United regularly do this with frequent travelers)). Voice is common, and the 'verse developers have finally figured out that the utility of their 'verse is directly effected by the amount of other data sources they can integrate into their environment (Note: RSS is a fine start, but it's a .0001 on a 10 scale). Worldwide adoption of virtual environments as a dominant Internet tool is still <1%."
Verdict: Fast forward to June 2008. Google Lively launched in July, IBM was demo-ing multiple internal virtual world efforts and announcing interoperability but did not officially ship any product as part of their collaboration suites, Microsoft was mum, and Sony Home slipped not once but twice from their Beta in 2007. So, from the enumerated vendors in the blogpost, I missed launch by a few months, batting a big zero for timing. On the other hand, each platform prides itself on data integration, specifically video or slides, from the outside world. No one is really interested in 'transfer your property' yet.
Revisionist history verdict: Sun (a major player) shipped Wonderland code for public download. Lively shipped one month later than I predicted. IBM is working on private label products using multiple virtual worlds for hand-picked customers. A slew of startups have shipped, like Rivers Run Red and Electric Sheep, in addition to the major technology players.
Final verdict: I under-estimated the timing of the launches. They are all walled gardens as predicted (no interoperability other than the proof-of-concept demonstration by IBM with SecondLife and OpenSim). Feature functionality for the most part is better than SL (or is SL++ like RRR's offerings) with the notable exception of Lively.
The predictions and prognostications regarding virtual world interoperability are proving less and less relevant as we see disruptive players enter the market with web-based solutions (Electric Sheep, 3DExplorer, etc.) that do not require a fat download or special browser software. As these environments begin to leverage the vast array of social networking APIs, other micro-blogging technologies such as Twitter and Pownce, and communications technologies such as AIM or Skype for VoIP, the relevance of walled-garden-interoperability seems rather outdated. It never has made sense to walk your avatar between World of Warcraft and Second Life, and it seems even less relevant to do so now between Lively and Second Life other than to make it simpler to have your avatar look consistent between tools. However, this is putting lipstick on the pig if we don't address the broader concern of compartmentalization of these environments, essentially replicating the Instant Messaging market instead of the Email market, where we can use interoperable systems and different clients for the same end result.
There have also been a number of platforms launched in the intervening year for virtual environments (Electric Sheep, Multiverse retreaded, VastPark, others) that will be interesting experiments in toolkit vs. finished product.
A sad casualty of the last year was Transmutable/Ogoglio, Trevor Smith's efforts towards building 3D spaces as a web service that could be leveraged. I hope someone is able to take the gauntlet from Trevor's efforts and carry them forward, because I predict that this approach has the most promise of any of the models currently deployed. Make it a feature, not a product, or (heaven forbid) industry. That's when you'll see real market penetration numbers and ROI.
In my (new) formal day job, I'm putting the finishing touches on the Technology Intelligence Group's Virtual World Industry Outlook for 2008-2009, with some specific focus on not only activity in the last year but also leading indicators like VC money-flow, new major market entrants and potential standards emerging from surprising places. This will dive into much greater detail about predictions for the coming year beyond this post or last year's crystal ball. Stay tuned, it'll be one of our first publications as soon as the main site goes live.
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