Virtual Worlds (DOC download) by hedongchenchen


									Virtual worlds: is this where real life is
Article by Victor Keegan in The Observer, August 22, 2010

The registered population of online communities such as Second Life and Blue Mars is greater
than that of the US and Europe combined. Today's residents of the simulated universe aren't
just socializing but doing big business

Recently a man bought a space station for $330,000, while last month Small Planet Foods, a
subsidiary of General Foods, introduced a new brand of organic blueberries. What have these
two products got in common? Neither actually exist. Well, not except as pixels in the virtual
worlds where they are traded. Only the money is real.

The space station was sold in the virtual world Entropia Universe, which has its own economy
and currency. The buyer, who converted his $300,000 into 3.3m PED (Project Entropia dollars),
is convinced that virtual shops on his virtual space station will produce virtual profits that can
be converted back into real dollars. The blueberries represent a "brand extension" of a product
that exists in the real world as US company General Foods aims to establish a presence in
FarmVille, a game which exists as an application on Facebook and which at its peak has had
nearly 80 million players. It is a classic example of a new genre.

Farmers in FarmVille buy cartoon-like virtual farm animals, which have to be regularly fed, or
crops that require fertilizer (virtual, of course) to help them grow, in order to be more
successful than their friends. The real-time game has its own virtual currency that makes it
easier for members to trade and for the game's makers to profit. Parent company Zynga has
revenues of more than $600m a year which come mainly from FarmVille, despite competition

from half a dozen other farm games on Facebook. Zynga is reckoned to be worth between $4bn
and $5bn, based on the value of investment stakes that have been taken in it.

To many, this seems crazy: why spend real money to buy a virtual currency to purchase food in
order to stop a pig that doesn't exist from dying through lack of food? The easy answer is why
not – if that's what you want to do. It is arguably a lot more "real" – whatever that means these
days – than, say, sitting like a couch potato watching a soap on television.

This might still seem the stuff of fantasy but it's where real life seems to be heading: according
to some analysts, we are in the midst of a virtual revolution that might one day be considered
as important as the industrial revolution. Nic Mitham, founder of KZero, a Cambridge-based
consultancy, says that there are 175 virtual worlds that are live or in live beta and that the
number of registered users to them has risen from 880 million in the fourth quarter of 2009 to
1.1 billion today, a 25% increase within six months in the middle of a recession. The registered
population of virtual worlds (even if this is not the same as active users) is greater than the
populations of the US and Europe combined.

Children are already, and perhaps inevitably, very familiar with all this. Habbo Hotel, a virtual
world where teenagers trade goods and clothes, has increased the number of its registered
residents to 175 million from 160 million a year ago and the London-based Moshi Monsters, a
sub-teen world where kids meet and trade virtual goods with each other now has 20 million
members compared with 12 million at the end of last year.

Meanwhile, going in the opposite direction to General Foods, Moshi Monsters recently
announced that the branded goods it has developed within its virtual world are to be sold in the
real world, an example of something else we will have to get used to: a convergence of real and
virtual products.

Little wonder that Will Walsh, CEO of Sharpcards, which creates virtual cards for people to send
to each other from their mobiles, believes "there will be a time in the future when kids spend
more money in certain areas on virtual goods than they do in the real world."

Second Life, where you can choose your own avatar, build your own house and buy and sell
clothing, is still the best-known virtual world in this country. Launched in 2003, it claims up to
20 million registered users, although only about 1.4 million have been active in the past 60
days. For some it's been a rocky road: its San Diego-born creator Philip Rosedale stepped down
as CEO in 2008, but is now back in charge following recent redundancies at developers Linden

The latest published figures claim that virtual transactions (sales of land, clothes and artifacts)
in Second Life came to $500m last year and that the volume of user-to-user transactions (selling
each other clothes, furniture and land) rose between April and May this year from $49.9m to
$52.6m. However, it would be surprising if this growth were maintained in view of Second Life's
managerial problems and a sharp decline in the value of land within the virtual world. Casual

visitors are arriving in fewer numbers and long-term residents seem increasingly to keep
themselves to themselves – focusing on niche educational projects, virtual business meetings,
sex or art.

I joined Second Life five years ago and, with the help of a neighbor there, set up an art gallery.
To begin with, I displayed other people's artworks before – after I realized that the game's tools
enable anyone to transform creative ideas into (virtual) paintings or sculptures without formal
training – showing off works of my own.

My neighbor Juanita Deharo (her SL identity – in real life she is Judy Barrass and lives in
Australia) now produces artworks that bridge the real and virtual worlds. But citing falling sales
of her work because of problems there, she has thought about leaving Second Life. "There are
signs the community is on the move into other virtual worlds," she says.

Other virtual worlds? Competing with Second Life now are several similar online communities,
including OpenLife, Blue Mars and Inworldz. The former bills itself an an open-source
alternative grid for Second Life, set up in Australia in 2007, "to create a user content created
virtual world orientated towards users, affordable ownership and community".

Blue Mars is more restrictive than Second Life in terms of allowing its users to make their own
content, but this 3D virtual world platform (developed in Hawaii by a company called Avatar
Reality) has let more than 200 developers – mostly individuals or indie game designers – loose
on creating cities, games and 3D environments on a terraformed version of Mars. Opened to
the public in September 2009, and still in beta testing, it promises users better graphics and a
more streamlined experience as a result. Blue Mars further differs from Second Life in that
avatars cannot be fully customized and the emphasis is on shopping and gaming rather than
social interaction.

Nonetheless, successful (virtual) fashion designer Estelle Parnall is taking her business away
from Second Life into Blue Mars. "Everything will be better, once the content gets created," she
says. "The graphics, and in particular avatar appearance and clothing, are of a much higher
standard than could be reproduced in SL and in virtual platforms relying on social engagement,
this is of paramount importance."

For Juanita Deharo, "what keeps me in Second Life is the international community of artists,
audience and curators, and these new grids can't match the diversity, stability, performance
and security of SL at this stage." She acknowledges none the less that "the scene is changing

The growth in virtual worlds for children is also continuing. Last month, for instance, saw the
launch of Innerstar University, created by a US toy company, in which pre-teens can create doll
avatars to navigate the campus of a virtual university, earning stars by competing cheerleading
or horse riding games that can then be redeemed for pets or a haircut.

Closed virtual worlds dedicated to business or education are also flourishing. Based in Florida
and Boston, ReactionGrid was founded by three Second Life programmers in January 2009.
They build bespoke virtual worlds for business clients (including Microsoft and a number of
universities) – usually as a "fun" way of facilitating business tutorials, such as an interactive
arcade version of a PowerPoint-like presentation. Worlds created include classrooms,
campuses, and bar lounges.

Side by side with the trend to build escapist worlds such as these is a dash to construct 3D
reproductions of actual places in the real world in the hope of attracting people to buy goods
and entertain themselves without an irksome journey to town. There is a virtual London in
Second Life, with a 40,000-strong community, which according to its founder Debs Regent (or
Debs Butler, as she is known offline) made a small profit last month, mainly from renting out
shops and clubs. But at least five virtual versions of the capital have been built or are in the
throes of construction by companies such as Twinity, NearGlobal and Microsoft, as well as by
University College, London.

Vistors to Twinity can also enjoy virtual replicas of Berlin, Singapore and Miami. Earlier this
month, the company hosted a virtual barbecue in (its recreation of) South Beach, Miami, while
in a game of one-upmanship with the mayor of London, the company's vehicle engineers have
just built a (virtual) motorcycle that lets visitors tour the cities (without ever being required to
wear a helmet).

For sheer ambition all these projects are dwarfed by Project X, the brainchild of Mike Fotoohi
from Egham, Surrey, who intends to reproduce the entire planet as a virtual world in which
members will be able to build replicas of their homes on the same street as in real life. Project X
is still in closed beta and at the moment Fotoohi and his team have only finished building
central New York and a few other places, but after merging the open source Openstreetmap – a
free and open source editable map of the world – with publicly available satellite image
mapping from the US government to produce a 3D skeleton of practically every road on the
planet, users will be invited to take over the planet.

Fotoohi and his colleagues believe that virtual worlds – in which social media will integrate with
a three dimensional web – have a great future. "We have only scratched the surface," he says.
"As bandwidth increases and technologies like ray tracing [simulating 3D effects] and video
delivery become more realistic thanks to increasing processing power and faster connections
then we will have worlds that will look very real in the future.

"Project X is the initial phase of what I believe will be the next generation of how people will
use the internet."

One feature being developed using mobile technology aims to synch the virtual and the real
worlds – so that your avatar in a virtual world will follow you in real life wherever you go.
"Shopkeepers who advertise their products in our virtual world can actually see customers
attracted to their store as a result of that advert," says Fotoohi. "This is something that has

never been done before and for the first time you can measure accurately the pounds and
dollars that you spend. The person who uses this system will also get a revenue share, which is
great for the consumer and advertiser."

The early virtual worlds, most of which have been grossly underperforming for their investors,
according to Nic Mitham at KZero, found it difficult to establish their virtual brands in real life.
Mitham now sees two trends. First, virtual worlds are changing from levying monthly
subscriptions to charging small amounts for virtual goods, a practice made popular by
FarmVille. The second driver, he says, is brands creating their own virtual worlds to sell their
products. Virtual goods that carry real-life brands, Mitham says, have 10 times the buying
power of virtual brands.

How big is the virtual revolution? Factor in games like FarmVille, massively multiplayer online
games such as Entropia Universe and World of Warcraft and other virtual services and it is a
case of pick your own number. Some unofficial estimates claim that virtual products are worth
$1bn in the US and $5bn in Asia. This is a woeful underestimate since one part of Facebook,
FarmVille, may soon be worth a billion and it is already capitalized at more than $4bn. In the
future, too, the mobile phone, is likely to be a major incubator of virtual products.

FarmVille may one day be seen as a milestone in accustomising non-geeks to the idea of online
currencies and virtual products. Virtual products have a particular attraction to businesses
because beyond the cost infrastructure already in place, overheads are few and manufacturing
costs zero. Carbon footprints become less of a concern, too. And in a recession, virtual worlds
offer their colonists the chance of a cheap escape from everyday reality.

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