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Virtual Oscars

Posted by SIM on May 20, 2007

Virtual worlds to get Oscar-like awards
May 18, 2007

NEW YORK (AP) — Two of the best-known entrepreneurs in game-like online spaces known as “virtual worlds” plan to give out awards for the burgeoning industry.

Ailin Graef, a Chinese-born real-estate mogul in the “Second Life” world, and Miami-based Jon Jacobs, who owns an asteroid in “Entropia Universe,” announced this week that they’ve created a Virtual Worlds Academy.

The academy will accept nominations on its Web site for categories like “Best Virtual World,” “Best Virtual Fashion Designer” and “Most Dynamic Virtual Economy.”

The winners will be announced in February and will receive virtual statues at “live” ceremonies in “Second Life” and “Entropia Universe.”

The goal is to “recognize achievements in all areas of virtual artistry, technology, commerce and culture,” said the founders, who are better known under their online names: Graef is “Anshe Chung” and Jacobs is “Neverdie.”

“I guess all industries get to the point of having awards and I see no reason why the virtual worlds one should be any different,” said Ren Reynolds, a British consultant who follows the industry.

“It looks like a good move for Anshe as she is building a brand around a service organization that spans virtual worlds,” Reynolds added.

Beyond “Second Life,” Graef has business interests in “Entropia Universe,” “There” and “IMVU.” She has 60 full-time employees.

Copyright 2007 The Associated Press. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.



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Gaia Online

Posted by SIM on April 21, 2007

Move over MySpace, Gaia Online is here
Written by Wagner James Au
Sunday, April 22, 2007

By the middle of last year, it was attracting half a million unique visitors monthly; fast forward to last month, and that number is two million. It’s not a traditional MMO like World of Warcraft; it’s not a social game like There; it doesn’t originate from Europe like Habbo Hotel or from Asia like Cyworld. You haven’t heard of it partly because the San Jose company has kept a low profile.

Another reason you’re still likely in the dark: it’s primarily designed for teens. But with online worlds all sizes and styles poised for an explosion, you’ll almost certainly hear a lot more about it soon.

It’s called Gaia Online, and as a guy on a giant crane behind us tore down the giant Web 2.0 conference banner in Moscone West, I had a chance to sit down with CEO Craig Sherman— formerly COO with, and an Entrepreneur-in-Residence with Benchmark Capital, a main funder of Gaia— for a furious round of questioning. How did Gaia grow so large so quickly so stealthily?

“The world’s fastest growing online world hangout for teens.”

That’s the way Sherman and his team prefer to characterize Gaia, the brainchild of Studio XD, a comic art firm which gave the site its anime-influenced look. Gaia’s online world aspect (which launches in a separate Java-powered window) is a series of virtual towns where Gaian avatars can socialize (up to 100 in a single space), with apartments they can own, and treasures they can find. (No combat, however.) It’s just that 10% of total user activity takes place in the world itself.

Gaia’s Many Experience Channels

The world is just a conduit to the larger activity on Gaia, says Sherman: in addition, there are website arenas where users can upload and rate each other’s artwork and other content (7-10% total activity), or play multiplayer Flash mini-games with group chat (10-15% total activity.) The largest cohort of activity (wholly 30%) takes place in the Gaia forums, and here’s where the truly staggering numbers come in: Averaging a million posts a day and a billion posts so far, Gaia’s message boards (with topics running the gamut from pop culture to politics) is second only to Yahoo in popularity.

Gold for Activity

A unique innovation is the way the company distributes its virtual gold currency: instead of selling it for real money (as with There) or allowing its trade on the open market (as with Second Life), Gaians are automatically given gold for participation: You get gold for posting on the Forums, for riding events, for uploading content, for exploring the world. Subscribers are rewarded for engaging in Gaia, in other words— and the reward incents them to engage in Gaia even more.

Gold for Auction

With the gold, Gaia subscribers can buy items, clothing, and accessories for their avatars, some sold by the company, but most of it sold via Gaian-to-Gaian auction. (They estimate some 52,000 auctions are completed every day.)

What pays in Gaia, however, stays in Gaia: the company strongly discourages real money trading, and works with Ebay to curtail it. That’s not to say Gaian treasures haven’t been sold online. “One item sold for $6000,” says Sherman. “Wonderful to tell you, but bad for what we’re trying to accomplish.”

Gold— for Gaia Interactive, Inc.

Instead of monthly subscriptions, Gaia Online sells “rare items”— treasures, fantastically cool fashion accessories for player avatars, and so on— two offered a month for $2.50 each. Subscribers buy them via credit card, Pay Pay, cellphone—or cash on the barrel. (“We employ someone full time whose job is getting dollars and quarters” out of envelopes kids send them, Sherman notes.)

… but first, a world for our sponsors

The company’s other revenue source are ad campaigns created to run within the world of Gaia. Before launching these, Sherman says, they solicited subscriber feedback, to find out which potential advertisers they wanted to see in the world— and which they didn’t. (Cool fashion brands got the majority nod; big American auto companies, however, didn’t.)

Staffers work with advertisers to create, not passive billboards, but an extended immersive experience. Gaia’s campaign for New Line Cinema’s fantasy adventure The Last Mimzy, for example, challenged their users to accomplish a series of tasks in order to get their own special Gaian-only Mimzy (a super-intelligent bunny). Hundreds of thousands of these Mimzyies were given out—meaning some 10-20% of their total user base jumped through the hoops to win the advertiser’s prize. (By contrast, when Nissan began giving away virtual versions of their cars in Second Life, far less than 1% of Residents took them up on the offer.)

The Secret to Gaia’s Success

Craig Sherman has been thinking what the value-proposition of his site in the era of MySpace or Facebook. “In a world where teens are constantly branding and packaging themselves” on sites like those, he points out, “Gaia is where you get away from it all.”

Whether that remains the case when the competition reaches full roil remains to be seen, but for now, the Gaia seems destined to keep growing.

The Gaia Numbers: Demographics and Usage Patterns as of April 2007

300,000 log in daily, according to the company; average unique visit is two hours a day.

Average concurrency: 64,000 users. Maximum: 86,738.

85% of users are based in the US

10% are English-speaking but non-US (with 5% a nebulous Other)

Breakdown by gender: 55% Girls – 45% Boys

About 20% of subscribers put up their real life photo in their avatar profile.

Number of Gaia gold “millionaires”, as of last week: 1385


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Virtual Kids

Posted by SIM on March 23, 2007

Time to play, money to spend
Webkinz and Club Penguin struck gold by attracting millions of kids to their online worlds and keeping them there. What makes their sites so sticky?
By Carleen Hawn, Business 2.0 Magazine
March 23, 2007

(Business 2.0 Magazine) — Eleven-year-old Liana Crandall, a fifth-grader in St. Louis, is a typical overscheduled kid. When she isn’t playing soccer or basketball after school, she’s swimming or singing in the choir. But she always makes time for one special thing.

“I get all my homework done during recess because then I can go home and play Webkinz,” she says. “I play at least an hour a day, two hours tops.”

Never heard of Webkinz? You will.

The site is the brainchild of Ganz, a Canadian toymaker with a popular line of plush pets. Two years ago Ganz created an online environment to entertain the owners of its stuffed animals and was quickly swept into the exploding world of virtual-reality gaming aimed at tweens, children between the ages of 8 and 12.

The value of this exact market hasn’t yet been tallied, but a 2005 report by Packaged Facts counted 29 million U.S. kids ages 8 to 14, with a combined annual purchasing power of $40 billion. Nearly 90 percent of these children are now online, which means there’s a lot of money to be made by websites that can capture the kids’ attention and their impressionable eyeballs.

Ganz’s and a site called Club Penguin were early entries into this market, but they’ve been joined this year by the giants of tween marketing: Disney (Charts) and Nickelodeon (Charts). What started as an Internet sideline for a plush-toy company is shaping up as a battle for the hearts and minds of a generation.

It’s a battle that bears watching by anybody interested in making money on the Web, because once children aim their browsers at one of these virtual worlds, they tend to stay there, not just for a few minutes but for hours at a time. The sites are, in the jargon of the webmaster, extraordinarily sticky.

This is how they do it.

Imagine Beanie Babies in cyberspace and you have a pretty good picture of what Ganz is up to. The company sells its Webkinz–special-edition plush toys with names like Googles, Cheeky Monkey, and Love Puppy–for $10 to $12.50 apiece.

Each comes with a tag featuring a “secret code” that gets its owner into the Webkinz World website. There the toys come to life on the screen, ready to be adopted. The kids give each toy a gender and a name and can spend “kinz cash” to buy food, clothes, and furniture. They’re also invited to play games, enter trivia contests, chat with other pet owners, and even take jobs–such as flipping virtual burgers–to earn more spending money.

It’s a model that can be enormously seductive. Ganz reports that toy buyers have snapped up more than 2 million Webkinz pets since April 2005 and better than 1 million users have registered online. More than $20 million in retail sales in less than 24 months is considered pretty good money in the plush-toy business. Ganz is privately held and won’t disclose its profit, but to put that growth rate in perspective, it took Second Life three years to attract the first 1 million “residents” to its virtual universe.

Club Penguin uses a different approach but gets similar results. There are no plush toys to buy or entrance fees to pay. New members are offered small virtual penguins that they can adopt, name, feed, and clothe. They can also chat, play games, and even help publish the Club Penguin newspaper.

Where creator New Horizon Interactive makes its money is in what it calls premium play. Any kid can have a penguin for free, but if he or she wants to decorate the penguin’s igloo, Mom or Dad will have to subscribe–for $6 a month, or $58 a year. Traffic has mushroomed. Club Penguin saw 2.9 million unique visitors in January, according to Nielsen/NetRatings, up from just 705,000 in March 2006.

So what keeps Crandall and millions of other kids playing for more than an hour each day?

One thing that attracts them, experts say, is the sense of power that children get in a virtual world but rarely experience in real life. “This isn’t rocket science,” says Club Penguin founder and CEO Lane Merrifield. “A lot of virtual-reality companies look at these games like television–‘We are going to entertain you, and you are going to enjoy it.’ Ours is a two-way stream.”

One way Club Penguin gives kids control over their environment is by letting them “bank” points they win in games and convert those points to “money” that can be used to customize their igloos. “Club Penguin Time,” a standardized clock (actually based on Pacific time), lets kids from all over the world meet up online without having to worry about coordinating time zones.

Another trick used by Club Penguin to keep kids hanging around is throwing themed “parties.” During the holidays, for example, Club Penguin’s writers built a plot around a huge winter storm. News of the storm began leaking onto the site’s weather reports in November to create a buzz of anticipation. When the storm finally hit in December, it dumped snow in every room on the site.

The penguins had to dig tunnels to get around. Captain Rock Hopper, the site’s pirate, was delayed by the gale. When his ship finally landed, it was in shambles and the penguins had to repair it. The winter party was a big success: In December the number of unique visitors to Club Penguin jumped by more than 20 percent.

But kids are fickle. Bennett Morris, 7, and his brother Lawson, 5, used to live for Club Penguin but are now enthusiastic Webkinz players. The boys, who live outside Boston, like the variety of the Webkinz animals and the “houses” they live in. “I like the private rooms. I like to get furniture and decorate King Kong’s house,” Bennett says. King Kong is his Webkinz gorilla. He also has Coco (a monkey) and Gumdrop (a chihuahua). “I like Webkinz better because there are more games,” Lawson pipes in. “My favorite is Wheel of Wow, but you can only play it one time a day.”

This is an important feature: Webkinz puts strict limits on how much time kids can spend on any activity–a “leave ’em wanting more” strategy that is one of the secrets of the site’s success. Webkinz’s traffic ballooned from 1.1 million unique visitors in November to 1.9 million in December. Moreover, kids spent an average of two hours and eight minutes per visit on Webkinz between April 2006 and January 2007. (YouTube, by contrast, averaged 32 minutes per visit during the same period, while Club Penguin averaged 54.)

What will happen once Disney and Nickelodeon get their sites rolling is anyone’s guess. Disney just relaunched an existing virtual-reality site under a new name: Disney Xtreme Digital (DXD). Users get to choose from among more than 500 Disney-branded character-and film-themed sites (Hannah Montana or Buzz Lightyear for tweens, Pirates of the Caribbean for teens, etc.).

Nickelodeon launched its entry,, at the end of January. Kids are invited to create virtual identities and spend virtual currency in Nickelodeon stores or visit online versions of top-rated Nickelodeon shows like SpongeBob SquarePants.

Club Penguin and Webkinz trumpet their sites as safe, ad-free environments. Disney and Nickelodeon are more frankly commercial and–in a big shift–ad-supported. Marketing to kids is always tricky; no one wants to be seen shilling to children. And whether the kids will buy the branded content, or the products advertised, remains to be seen.

But the biggest question hovering over this whole market is what the kids will want in the future–like next week. The most carefully crafted strategies can be blown up by an overnight shift in whatever adolescents deem cool.

Just ask Crandall. She can reel off a dozen reasons she now prefers Webkinz to Club Penguin but doesn’t hesitate when asked how she finds the hottest new games. It’s easy, she says. She asks her friend Danielle.


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