The State Of The Metaverse Development Industry, 2 Years Later: The Big 3 Go Broad, The Boutiques Stay Strong

Are metaverse development agencies leaving SL en masse?  You may think that were you to glance at the headline of a recent Reuters story, "Frustrated virtual agencies look beyond Second Life". It's been roughly two years since a May 2006 cover story on BusinessWeek attracted a swarm of interest in Second Life by real world companies, and studios specializing in SL content creation to service them.

Over the last several months, it is true that the "Big Three" of metaverse development companies-- The Electric Sheep Company, NWN partner Millions of Us, and the UK studio Rivers Run Red-- are moving their primary focus away from Second Life for marketing projects in other virtual worlds.  However, I think a fuller summary of the current situation is this:

The largest metaverse companies are expanding their portfolio of virtual worlds, while an explosion of smaller boutique agencies remain focused on Second Life.

By smaller, I mean studios with a handful of employees; sometimes just one and two full-timers.  In the last six months alone, I've written about the SL-based marketing/publicity campaigns and projects of at least twelve: Rezzable (last seen here hosting a L'Oreal marketing campaign), Aimee Weber (producer of the Scott Adams/Dilbert in SL event), Dancing Ink (producer of a US-Muslim relations metaverse project for The Brookings Institute), AI Design Studio (creator of this Autocad import/exporter), Brazil's Agência Click (last seen here with their SL site for Fiat), Involve 3D (creator of the Tech Museum site), Clever Zebra (recently blogged here), South Africa NGO Uthango (briefly blogged here), Second Marketing (whose SL campaing for Nestle was featured here), Daden Limited (last seen making a Google Maps-in-SL mash-up), Green Grotto (with a Playboy campaign that was blogged last month), and Japan's Metabirds (island resort project noted here).  There's many more I didn't get a chance to mention, of course.  Off the top of my head:  Avatrian, Portugal's Beta Technologies, The Metaverse Modsquad , The Illusion Factory, The Magicians, Japan's Melting Dots, France's Extralab, and Clear Ink.  I'm certain I've missed many other metaverse companies in this list; I hadn't even heard of a company called Advanced Virtual Inc., for example, until Dizzy Banjo told me the Mexican government was one of their clients.

So what does this mean?  Several things, I think:

Overall, it's an inevitable market adjustment.  At the moment, Second Life has a monthly active user base of 550,000.  The larger companies (say more than a dozen employees) need to focus on virtual worlds with a greater number of potential eyeballs and return on investment.  At the same time, with less mouths to feed, smaller studios can do lower budget campaigns and show decent ROI.

That aside, it's also true that the Big Three still maintain a presence in Second Life, albeit a reduced or re-positioned one: Rivers Run Red recently launched an enterprise-class solution platform based in SL; in the last couple months, Millions of Us unveiled an ambitious showcase for Cisco and continued another with Electrolux.  As Giff Constable/Forseti Svarog mentions in a clarification blog post to his Reuter's interview, they're still working at least one more SL-based campaign this year.

What happens next depends on Second Life's progress as a platform; with greater stability, more firewall/open source server options, and more usability, the user base will grow, as will interest from companies and organizations who want to connect with them.  If that happens, I suspect these smaller studios will grow more ambitious, and take on larger projects, and more staff. 

Of course we know what happens if the opposite outcome obtains.

Image credit: BusinessWeek.com.

Comments

[Marianne McCann]

I also started working for one of the "unnamed" on the list. There is definitely work to be had out there, even if the sheep, rivers, and millions are playing on different pastures.

[Eggy Lippmann]

*cough*
Hamlet, depending on how you count, at Beta Technologies we have 20-30 people in total, thank you very much ;)

Beta Technologies is a joint venture between a 10 year old web development company in Lisbon and a 25 year old video studio in New York.

We do *lots* of projects, man, up to 5 a month sometimes, we have business all over europe, england, denmark, slovenia, lithuania. I guess we're not on the international media a lot, but in Portugal I have been interviewed over 50 times, newspapers, magazines, TV, I got a book in the works, i've had speaking engagements in just about every university and lots of other events.
The "problem" is that we're not marketing people, our projects aren't all glamorous and hype-y, so they're not in the media a lot.

We do business-logic projects, movies, recreation of monuments, mixed-reality conferences, physical simulation, scientific visualisation, everything. Marketing is but the tip of the iceberg when it comes to what can be done with Second Life!

Some of our largest projects (over 20 sims!) are confidential, or at least for internal use only.
Our beautiful office is located in the building that used to house IBM, dude :)
Come visit!

[Hamlet Au]

Cool background, Eggy, thanks. How many full-timers? I had the impression of under a half dozen, but it's been awhile since I checked.

[Giff Constable]

I think Eggy has a great line: "We do business-logic projects, movies, recreation of monuments, mixed-reality conferences, physical simulation, scientific visualisation, everything. Marketing is but the tip of the iceberg when it comes to what can be done with Second Life!"

Projects that require large numbers of people or scale, or that need to bring in outside communities from the Web, or that want to run more-than-simple games, are probably not best suited for SL right now.

However, projects that need an inexpensive prototyping platform, or flexible scripting capability, or a world that offers a first level of integration to systems outside of the virtual world, or want to experiment with how avatar communication can improve human learning or interaction -- all this SL can be very good for. Even marketing projects can be effective if design and budget is managed appropriately to the size of the existing community.

Still, outside of kids worlds, I think in general our whole industry is trying to emerge out of the learning/pilot stage, and that means ROI is still being discovered. We know that the user behavior and engagement fundamentals are good and important. Those fundamentals tell us that this isn't a fad but an important movement for online behavior.

While ESC is largely shifting away from SL for our particular client needs and goals, we by no means consider it unviable for all virtual world initiatives. I think it is fantastic that there is a thriving ecosystem around Second Life -- if SL stands a chance at breaking into the mainstream, this ecosystem will be an essential part of that success.

[RightAsRain Rimbaud]

Hamlet hit the key point-- SL is not delivering the number of eyeballs needed to sustain large-scale development costs. It's that simple.

Our sims have growing traffic each month, but our marketing and promotions efforts are very high as we are in effect fighting a lot of noise to reach a fairly small active audience.

SL shows 350,000 or so people each month spending inworld. This is flatish for last 8-9 months already. Active users still 500,000 by Linden definition. So, this is not the big uplift at all that we had hoped to see after the rush in 2007.

What happened...? Couple of observations from our little mousehole in the metaverse:

* Early adopters arrived in early 2007 (many still inworld btw) but SL NEVER hit meaningful maintstream adoption. Why? Could be that mainstream users don't want a "Second Life" they want an virtual world experience, but not the alternative RP. Linden has no marketing effort to reach this group.

* Corporate sponsors got burned. They spent the money on builds, but never got the good PR or monetization. We hear lot of stories from unhappy corporate buyers, many of whom will not come back to SL. Lot of 2006/2007 corporate builds are empty or gone. So little positive referenceability for new entrants.

* Linden has a broken registration and welcome process. Maybe that is ok, because in fact it seems the platform cannot handle more than current loading. But nonetheless, newbies are not being converted to engage users at all. Worse even, LL cannot even give companies like Rezzable a stable Registration API so we can do it ourselves.

Our feeling now is that SL is still best virtual world online now. Tech stack is great and many fixes seem possible to get SL out of the self-inflicted rut it is in now. But communication is weak/non-existent and even now early adopters are losing patience. Yet, worst problem for SL is that LL is not marketing the positive, exciting story about the virtual world. They seem to be fixated with real estate specualtion and alternative lifestyle, neither of which is bad btw!

Seems LL is too techy to get into marketing. Our feeling is that another virtual world will get the marketing right this year, even if the tech is weaker or earlier stage and that will be the platform that grabs mainstream users. We can just wait for ESC to tell us which one it is gonna be!