The WIRED Article...

Wednesday, August 1, 2007 Wednesday, August 01, 2007

I read the now-infamous article in Wired this month that suggested RL companies have given up because they cannot seem to make any money in SL. The article cited a series of what I would consider bogus reasons for this, such as “empty sims”. Here are my thoughts on the situation.

First, the article applies RL standards to a virtual world. It suggests that business success in SL is limited because of the apparent low population, and there is some truth to that, but not in the way the article implies. I don't think SL is a way to generate zillions, at least not yet. I believe this is because SL's current population (8M registered, 45K online) represents a market space and economy equivalent to a medium-sized city, not a national-sized audience.

The SL market is essentially a small market, unlike Myspace or Facebook who have many millions of participants and is essentially an extension of the RL universe. SL operates more or less in a secondary virtual universe, whose connection to RL is very different from traditional websites who can easily address the needs of millions.

SL Users are typically not in SL for RL purposes. They are in SL to create a NEW environment for themselves and their comrades. They make, use, wear and do things they cannot do in RL. Yes, there are some who do RL-related activities, but they are by far the minority. Most SL residents are there to create fantasies for themselves. This is why RL companies are having so much trouble – they are addressing the wrong universe!

In such a small market, you must expect small returns until the economy grows. You cannot expect big things to happen. Consider an analogous situation: a big-city manufacturer shows up in 45,000 resident Smallville and spends $1M on a spanky new store. By the way, the big city manufacturer produces items that are not usable in Smallville. What do you think is going to happen?

At this point in SL's history the successful commercial SL operations are those that directly address the residents' needs. These operations intimately understand the culture, habits and activities that take place in SL. They don't assume that success in some other universe will translate into SL success. They create new successes based on the characteristics of the secondary universe of SL. They fully engage SL and determine what the market needs – Like Any Successful Business Should Do!


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