Why RL Businesses Fail in Second Life, Part 3

Wednesday, October 17, 2007 Wednesday, October 17, 2007

This is part three of my analysis of the ongoing failure of RL businesses in Second Life. Part one was in response to the infamous WIRED article, and part two expanded on my thoughts. In part three, we'll discuss ideas for how RL businesses may actually succeed in Second Life. So, what could a RL company do?

There are only three basic approaches to using Virtual Reality by a large RL business:

Indirect or subtle marketing. We have all seen how the hard sell has not worked. Dell, Coke and other major RL corporations set up large Second Life operations, sometimes covering multiple islands. The islands are usually covered with logos, branding, analog virtual products, etc. Few come to see these. Why would you want to visit a billboard? What kind of immersive experience is that? We immerse to engage our own fantasies, not a corporation's! Some have gone further by arranging events or activities at these sites in attempts to attract visitors. But it's all "pull", and little genuine interest.

The only successful approach I've seen is by General Motors on Motorati Island. They've created a sandbox for virtual automotive businesses within the sandbox of Second Life itself. They've out-web2.0'd Second Life! Why does this work? Simply because it promotes the cult of the car, and it does it well. A visit to Motorati Island reveals many interesting automotive businesses, including GM itself. It works because it addresses our immersive fantasies, not GM's. GM approach is very subtle, and it's a shining example of how to leverage Second Life for business purposes.

Collaboration. We all know how much different a 3D meeting is from a typical conference call or chat session. There just seems to be something extra in the experience that makes it a little bit closer to reality. No, it's by no means perfect, but it is definitely better than audio or chat alone. Businesses can certainly use Second Life as a platform for collaboration, as long as they take appropriate precautions against griefers.

Go Native! This is perhaps the most interesting approach, where a RL business simply attempts to compete as an in-world company. They produce products and sell them.

But what should a RL company sell? I suspect they should simply do what any sensible business does: find out what people want, and then make it! Most RL businesses seem to believe that a virtual presence will lead to RL sales, but I don't see why that would be so, considering that most people use the virtual world for immersive reasons. A RL business should carefully consider their strengths and then see how they could apply in a virtual world.

Here's some obvious suggestions:

  • Retailers like Wal-Mart or Best-Buy are good at determining buying patterns and arranging easy ways for consumers to buy products from multiple manufacturers. Well, Just Do That In Second Life! A well-organized virtual Wal-Mart that is properly advertised and promoted would be an incredibly busy place. And I suspect it would be desired by many scattered builders desperately trying to attract shoppers to their small plots – and who really have little idea of how to do so effectively, as compared to the skills of a big retail chain. Builders should build; Wal-Marts should sell.
  • After the many recent virtual bank failures, isn't it clear that a RL financial institution could quickly set up a similar service – this time backed by their solid RL reputation? Who would use a fly-by-night bank then? That segment of virtual business is theirs for the taking.
And there are many other similar ideas if one puts your mind to it. But there's a problem.

The problem is that even if these RL mega-corps were to set up such virtual operations they'd be profitable, but probably only make a few thousand dollars. Maybe more, but certainly not millions. Not worth their time, perhaps. Revenue would eventually top out, not because they are doing something wrong, but because there just aren't that many customers. Second Life is still just too small, at least at this point. You can make only so much money in a small city.

But wouldn't it be a good position to be the premier virtual bank as Second Life's population grew? Double the population, double the revenue. Think long-term. Where will virtual reality be in five years? Ten? Start now and gain experience and reputation for the future.


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