Entrepreneurship In Virtual Worlds

The following article is provided as background for a theme that will be followed and expanded on in this blog; starting new businesses in virtual worlds such as Second Life.

Virtual worlds creating new sales opportunities

By Mark Boslet
Mercury News

Article Launched: 06/23/2007 01:49:11 AM PDT

Get ready for the next generation of Internet users - it’s here already.

For teenagers and twentysomethings, online virtual worlds are as much a part of daily life as black-and-white TV was for youngsters growing up in the late 1940s and early 1950s. Young people nowadays spend hours playing games and socializing on sites with names such as Neopets, Habbo Hotel, Gaia Online, Nexon and Tencent of China.

They pay to dress up avatars, or online figurines, buy virtual food for digital pets, dish out cash to make their cyber cars go faster - and create social relationships in a world they are drawn to in large part by peer pressure. All their friends are there.

“I don’t think it’s coincidental that what we are seeing is virtual worlds that attract teenage audiences,” said Amy Jo Kim, creative director of Shufflebrain, the Half Moon Bay creator of games and services. “They are playing around with identity.”

For companies around the globe, the emerging interest in online worlds is becoming a real business and a growing opportunity. By 2011, 80 percent of active Internet users will have some presence in a virtual community, according to researchers at Gartner. But taking the step to selling on the Internet isn’t simple.

At Habbo Hotel, for instance, 7.5 million monthly visitors decorate their online “rooms” with furniture they buy, and dive from 100-foot cliffs for fun.

“We sell more furniture worldwide than Ikea,” said

General Manager Paul Thind at the Virtual Goods Summit held Friday at Stanford University.Still, only 15 percent of members actually reach for their wallets - or, more precisely, their parents’ wallets, Thind said. The percentage is even lower for Nexon, a South Korean online game company with 18 million subscribers, where only 5 to 10 percent of players make purchases.

Subscriptions to the site are free, but gamers can buy personalized avatars and other items for use during play. “Every touch point where users try to show themselves off, we try to make money,” said Min Kim, director of game operations. “We’re selling a service, not a product.”

Neopets also is taking a big step into the for-cash online business. Up to now, transactions on the popular teenage site for virtual pets have been made using Neopoints, which users earn by playing games and entering contests.

The NC Mall will launch next week and Kyra Reppen, senior vice president, anticipates seeing packages of outfits selling for $10 or $15.

Price “is something we’re still experimenting with,” Reppen said. “We’re going to be listening and learning as we go.”