Thursday, 2 August 2007

Capgemini CTO on Virtual Worlds

You might find the following article of interest. It is from the August Technical Briefings by Andy Mulholland, Global CTO for leading IT company, Capgemini. I have already mentioned Andy and his co-CTOs in an earlier post, and would commend you to their blog. I do not necessarily subscribe to all the views here, but I thought you would be interested. For Capgemini legal folk, Andy has cleared this for posting!

IBM and MIT recently co-hosted “Virtual Worlds: Where business, society,technology and policy converge,” which witnessed a strong presence from global corporations spanning diverse industry sectors, from Bank of America to BMW,and General Motors to Target. Toyota stated they were investing six figure sums to reach—what they perceived to be—the next generation of consumers in their own environment.

Virtual worlds are creating massive—or as some would say, disproportionate—interest, with the most popular name in the business today, Second Life, home to nearly one hundred globally or nationally recognizable leading enterprises in addition to its 4.5 million registered citizens. (There is even a Swedish Government embassy for Swedish nationals.) CyWorld is used by 80% of South Koreans under the age of 20, and now the Chinese have announced that they are establishing a virtual world for up to 150 million Chinese nationals to use. For those who wish to keep up with the news in virtual worlds, Reuters has its own bureau in Second Life, and its business reporting service can be found at:

“What is a 'virtual world?'” is the usual question from those who are not naturally familiar with the Internet. It is formally defined as, “A computer-based simulated environment intended for its users to inhabit, and interact via avatars (computer generated replicas of people)” (source: Wikipedia). This habitation takes the form of a three-dimensional graphical representation of the various aspects of a “normal,” real, physical world with rules such as gravity, topography, locomotion, real-time actions, and communication—until recently only in the form of text, but now real-time voice communication using VOIP is also becoming available. A virtual world is a persistent environment that continues to exist even after you leave, unlike a user-defined application.

This type of virtual world developed through massive online multi-player gaming,where role playing through the creation of personal avatars was a major part of the attraction; particular examples being World of Warcraft, EverQuest, Ultima Online and Lineage. The attraction started by Second Life was that it does not involve gaming but rather the creation of a world that develops in response to the wishes of its “citizens’’ to provide the kind of environment that they want to “live” in. This has led to the advent of a new term, “Networked Virtual Environments” or NVEs, which are being used to describe online platforms where participants are immersed in a three-dimensional representation. NVEs are potentially the next stage of development of collaboration tools and particularly add extra value when objects are involved, as they can be “seen” more clearly as 3D representations.

Second Life is the easiest to understand commercially, as its proprietors Linden Lab have released historical data showing it to have nearly 2.0 million active users, known as residents (who have been there in the last 60 days). Sales between residents are transacted using Second Life’s own unique currency, the “Linden dollar,” (L$), which had a fluctuating conversion rate of 260–320 to a US dollar in 2005 to 2006.

The Linden can be converted into US dollars by several well-known banks, and some—ING Group as an example—even allow purchases to be made in Second Life on their standard credit cards for recharge to the cardholder in their national currency. Linden Labs makes its money from the sale of “land” to residents, who after purchase have to pay a subscription to continue to own the land. It’s the owners’ challenge to decide how to use the land, which runs all the way from individuals creating their own buildings as “homes” to which they invite their friends for socializing (creating a consequential market for furnishings, etc.), through to businessuse (IBM has over 5,000 employees working in Second Life). The Second Life economy in 2006 was estimated at more than $600 million by an analyst tracking virtual worlds and their growth.

A quick round up of activities in various sectors shows a variety of reasons for their growing presence in the virtual world. Automotive represents a good example to analyze, with most global brands present. General Motors, Nissan and Toyota were early adopters of the ability to offer test drives, which in reality were more like driving games, but this has now broadened into making Second Life a part of the overall marketing mix complete with links into first-world activities. The use of Second Life has now become an industry-wide shift, driven by experimenting with new ways to use 3D experiences to interact with their existing or potential customers.

For the automotive industry with tangible physical products, it is the addition of 3D to represent their products on the Internet that provides critical new capabilities. Launches of new models are made at manufacturers’ sites in Second Life in the same manner as at their own physical premises, including “free gifts” to encourage visitors to attend the launches. The recent launch of the Mercedes C Class saw visitors who registered and visited being offered a free set of Mercedes Racing overalls complete with a helmet for their avatar to wear! Marketers say that the issue is how to market to, and engage with, a generation that has grown up with gaming and being online as a major source of their entertainment and information. On Second Life they can now buy the car of their choice as a 3D model that they can use to drive around and visit different locations in the virtual world.

Johnson Controls see a different approach, with a representation of your house created in a virtual world that you can access from anywhere in the world via an Internet device in order to check if everything is okay, adjust the heating, reset the alarms, etc. In the meanwhile, consumer companies are experimenting with how to extend the rapid growth in “social networking” (Web 2.0 sites such as Facebook, MySpace, etc.) into something that connects to their “brand,” and its use in a virtual world. To summarize, there is a strong belief that virtual worlds will develop as the medium in which the current “Internet Generation” will increasingly combine various aspects of their lives as they link social networks to gaming, to making choices on what and how to buy. Come to think of it, the title of the MIT and IBM event was well chosen indeed.

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