Virtual Worlds Forum

2008 feels like an exciting year for the virtual worlds market. Startups are springing up everywhere you look, established worlds have a good idea of how they need to evolve, big media and entertainment brands are interested in the space, and corporate use of virtual worlds is becoming more common. Yet there are still plenty of challenges facing this industry. With the aim of provoking some discussion, here’s ten of them.

As the drive towards more microtransactions and other new business models for MMOs and virtual worlds gathers pace, so the payment companies who enable it are gearing up to capitalise. PlaySpan has just announced its acquisition of PayByCash, and says the merged company will be one of the "fastest growing commerce and payment services companies" supporting the online games industry.

We've got opinions on Google's new Lively virtual world service, and doubtless you have too. But so do some of the key players in the virtual worlds industry, two of whom have just strung their thoughts together on their personal blogs. Ex Linden Labber Cory Ondrejka (now at EMI) and Electric Sheep Company CEO Sibley Verbeck have both broadly welcomed Google's full-scale entry into the market, but with reservations / qualifications showing they're not jumping onto the hype bandwagon surrounding Lively.

It's easy to look forward, particularly when analysts are predicting mushrooming growth and revenues for virtual worlds in the next five years. But sometimes it pays to look back too, either to learn lessons from the past, or simply to remember where this industry started from. The Virtual Worlds Timeline should certainly help with that. It's just been launched by artist Annie Ok, who describes it as similar to a Wikipedia entry, with users able to register as editors and add events they feel were important. So far, according to Reuters it's got 14 editors and dozens of entries - mainly focusing on launches of key worlds, and relevant films/literature. It's not the first project of this nature, mind - check out the, ahem, Virtual Worlds Timeline too.

So, it seems the rumours of Second Life expanding to PS3 and Xbox 360 weren't true - at least not yet. They'd been flagged as a potential announcement during Linden Lab board member Mitch Kapor's keynote speech yesterday during Second Life's fifth birthday celebrations. Instead, he talked about how Linden Lab's virtual world may change and develop in the next five years, opening up to a wider audience. His speech is well worth watching (above) - he talks about the shift from the 'pioneer era' (i.e. early adopters) to more pragmatic use, and also announces plans for a Linden Prize of 10,000 Linden Dollars for "superlative achievements in elevating the human condition through Second Life".

Social network Hi5 has acquired PixVerse, one of the application developers creating apps for Hi5 and its rivals. The company was responsible for the popular Pix Chat and Pix Wall applications, which let users communicate with each other.

It's time to get the cake'n'candles out for Second Life, which celebrates its fifth birthday today. Linden Lab's virtual world came out of beta on 23rd June 2003, and the company is celebrating the anniversary with a two-week Virtual World Fair, which includes parties, exhibits and discussions. It kicks off today, and lasts until 7th July.

Linden Lab has confirmed that non-paying Second Life users were briefly shut out of the virtual world earlier this month, but that it doesn't intend to make a regular habit of this in the future. The news ties into the ongoing debate over free versus paying users, and how (if at all) virtual worlds should differentiate between them.

Nickelodeon has signified its intentions in the virtual worlds market by forming a dedicated Virtual Worlds group, which will sit within its Kids and Family Group division. Neopets general manager Kyra Reppen will head up the new group as SVP, reporting to Steve Youngwood, Nickelodeon's EVP of digital media.

Disney is launching a localised version of its Club Penguin virtual world in Australia, on the back of strong growth for its wider Disney web portal, which has seen visitor numbers double to 800,000 since the end of last year. Club Penguin isn't part of that site yet, but Disney plans to hire a team by August to manage the localised virtual world in Sydney, according to the company's Duncan Orrell-Jones.

News is all over the wires that Linden Lab co-founder Cory Ondrejka, who left the company earlier this year, has joined major record label EMI as senior vice president of digital strategy. He'll be working with digital president Douglas Merrill, who joined from Google in April. The moves are clear signs that EMI is looking outside the music industry for executives to try and restore its waning fortunes, but is there a knock-on effect for the virtual worlds industry in Ondrejka's appointment?

As more teen and tween-focused virtual worlds launch, their business models will inevitably come under scrutiny. Advertising is a touchy subject for many parents and campaign groups, yet premium subscriptions or micropayments could also strike the wrong note. On the plus side, parents may be willing to pay a monthly subscription for a world that they feel their child is safe using. All of this is being explored, not least by Mattel, which has just launched a subscription offering for its Barbie Girls world.

There are plenty of reasons for optimism and excitement about the growth of the virtual worlds market, but it's good every once in a while to listen to someone playing devil's advocate, or simply pointing out some of the potential pitfalls. An article by Bruce Damer over on Terra Nova falls into the latter category: he poses the question of whether the virtual worlds industry is heading for a downturn "as severe as the one in the period 2000-2003".

Disney has announced plans to create a new division called Disney Interactive Media Group, merging the activities of its Walt Disney Internet Group and Walt Disney Interactive Studios divisions. It means that virtual worlds and MMOs will be sitting under the same roof as the company's console and handheld game publishing business.

Following layoffs last December, now virtual worlds agency Electric Sheep Company has restructured, with its machinima animation division ILL Clan splitting off as a separate business entity. The two companies originally merged last January.