Real Opportunities within Virtual Worlds
By CSMG
Telephony Magazine, December 11, 2006

The second in our series on the social networking space, this article focuses on the latest Internet 2.0 trend likely to further converge the Internet, telecommunications and media industries-virtual worlds.

Many of us will shake our heads at the prospect of people spending their time socializing online within virtual world, but they are, and the telecom industry needs to take notice. CSMG believes the core capabilities of virtual worlds are powerful enough to attract large audiences now and in the future. Dozens of virtual world offerings exist, from Second Life to There.com-enough to suit any interest or demographic.

Virtual worlds combine social networking and 3-D gaming virtual reality. Online end-users sign on and design their own online persona, or avatar. The design includes choosing the sex, hair and skin color, body type, clothes, and other physical characteristics. Once designed, users enter an existing, pre-developed virtual world and begin interacting with other end-user avatars. Sound strange? It gets better. Avatars can have a conversation, through IM-like text that appears in speech bubbles; they can dance together, drive cars, listen to music on the beach, and even kiss. They can buy new clothes, property and other items with virtual world money, which is bought with real-world dollars.

For all the cynicism they may incite, the fact is that these virtual worlds are addictive. With each sign-on, end-users can interact with the virtual representation of people from around the globe. Singles can flirt safely and anonymously and, if they choose, form real world-relationships through these virtual interactions. For many this provides a unique level of escapism, of liberation and of risk-free socializing. The result is a new service that is extremely attractive, and CSMG research shows average time spent in these virtual worlds trending towards nine hours a week. Virtual world enthusiasm is viral, spreading rapidly by word-of-mouth.

The addictive nature of this new Internet medium, its broad 13- to 45-year-old appeal, and the rapidly increasing average hours spent 'in-world' make this a significant opportunity. Just as social networking sited have tremendous potential for telecommunications and cable companies, so do virtual worlds. Virtual world end-users are essentially leveraging on-net environments where communication and interaction are core features. Indeed, many aspects of this latest community application make it attractive as a core service for telecom and cable companies.

CSMG work in this space has answered some of the fundamental questions pertaining to strategic fit, service design and business model. That said, there are multiple potential avenues for carriers and MSOs to evaluate, including whether to extend existing virtual world sites to the mobile handset and television and/or to control their own through acquisition or fresh build-the only question is how deep to go and when. Based on foreign carrier assignments, we support the case for rapid movement while the phenomenon is still embryonic, and for the pursuit of both virtual world ownership and existing-site cooperation. While many customers will welcome a social network site or virtual world from a carrier, other customers will not; to drive maximum benefit, a dual strategy is often optimal. Though virtual worlds originated on the PC screen, carriers and MSOs can offer this application across three screens, enhancing the experience of the current fixed-PC-centric Internet.

Even for those carriers and MSOs without the appetite to move forward with an aggressive virtual world growth strategy, this new medium presents opportunities. Some of the largest 'oldco' companies such as GM are experimenting with virtual world advertising via billboards, events, and other means; carriers need to do the same. There is also the possibility of digital service distribution of music and video through these worlds-the possibilities are endless and real.

With increased scale and graphical capabilities, virtual worlds will quickly have a greater impact on the telecom and cable markets. I suggest you sign on and experience these new worlds to vanquish any doubts that you might have. Virtual worlds are here and they represent a large business opportunity for the telecom space-the benefits will be great. As to their benefits to society at large? Well, that is another matter entirely.