Tuesday, August 15, 2006

A second look

About a month ago, I posted about Second Life. For the most part, it was not well-received by the SL fanbase. To summarize, I basically said SL was the equivalent of the latest concept car at a car show; it gets a lot of PR and eyeballs but will never hit the mainstream. My overall opinion hasn't changed but you could say I've been watching closely.

Today on Clickz, an article about SL and the potential for marketers. There are good points in the article, some that made me question my opinion of SL and some that strengthened it. Let's start with the latter:

"The opportunity is real and the audience is growing both, in Second Life and the World of Warcraft, the two largest metaverses. Om Malik, of GigaOm, presented growth figures on his blog for these mediums: "Former Second Life staffer Rueben Steiger crunches the numbers on Second Life's growth, and figures if the current rate of 22 percent monthly growth continues, there will be 3.6 million Second Lifers by July 2007. Slower growth, say 10 percent every month, stills bring the total number to Second Life to about 936,000 residents."
First, Second Life is nowhere in the league of World of Warcraft. According to MMOGChart.com, in May 2006, Second Life had 65,000 paid users. Warcraft had 6.5 million. That is a thousand fold difference. In between those numbers are about a dozen other metaverses with higher subscriber numbers than SL. In terms of buzz, however, I would agree that SL is a peer of WoW.
But let's look at the quoted growth figures. Hitting the link takes you to the original forecast post. What is tough to swallow about the methodology is the linear compound growth rate. Take a look at this chart from MMOGChart.com. Most MMOs experience tremendous growth at launch. I don't think SL falls into this category given that it's not a retail product. Its growth is different, predicated by a large network effect and increased value of the product from activities of current residents. The more people that play, the more valuable the SL world becomes. I don't disagree that SL is hitting its stride, boosted by the free access and recent change of not requiring a CC for registration. SL will definitely grow in the next year, however, are we going to see 3.6 million SL residents next year? I don't think so.

My main argument for this is a lack of a market. In order for SL to hit that figure, one of two things has to happen. SL has to eat into the market share of current MMO players or SL has to grow the market and pull in entirely new MMO players. Though SL will probably accomplish both of these things, it won't do it at the level forecasted. I can't believe there's any current MMO player that hasn't heard of SL. This audience has already made their decision and I'm not sure anything SL does in the next year will significantly change this. In regards to SL pulling in entirely new MMO players, this is significant challenge as well. SL is not a plug and play product. It is a product for first adopters and actualizers that love surfing on high learning curves. This market too, has already been tapped by SL. It's really difficult for me to believe there are 3 million people in either of these categories that would jump on board.

But does it really need people to be successful?
"there are about $5.3 million in user transactions over the course of a month in Second Life."
$5.3 million. Nice. SL residents are nothing if not hardcore. That comes out to about $81 in transactions per user (Based on 65k users. And I know I'm using data points from two separate sources and probably too different time periods). Even though this is a transaction number (meaning it's duplicated by nature), it got me thinking. Unlike other MMOs, there are no levels or quests in SL. Status in SL (other than social charisma) is achieved through creativity and currency (one leading to the other). All this adds up to making SL an entrepreneurial paradise.

Though I'm still not sure how applicable marketing insights gained from SL can be outside of SL, I'm starting to believe that it may be a legitimate testing ground for virtual marketplaces. I think companies would have to commit to more than one-off PR-generating campaigns (the majority of what I've seen so far) to learn anything but learn something they might. While other MMOs are struggling with the RMT issue, SL laughs and says, "Issue, what issue?" I confess, I'm supportive of RMT and here was this RMT experiment staring me right in my face. So from now on, I'm going to temper my skepticism a little and see if anything interesting pops out of SL.

If you're keeping score, that's minus one and plus one. Par. To be continued...

[By the way, Clickable Culture has an interesting post on SL population stats. Good first comment too]

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