Virtual worlds now delivering genuine business opportunities

Every week Techvibes republished an article from Business in Vancouver newspaper.

This article was originally published in issue #1043 – Oct. 20-26, 2009.

As video games, social networks and virtual worlds increasingly star as stand-ins for reality, development shops are exploring new ways to monetize fantasy by creating virtual marketplaces replete with digitized goods and services.

Fuelled by micro-transactions in which users buy virtual goods and services for as little as pennies, virtual marketplaces are not only driving user engagement for technology companies, but also adding new revenue streams.

During a recent panel discussion at the Mobile Monday Vancouver event, where local Internet entrepreneurs gather monthly, roughly 90 attendees heard how B.C. companies are monetizing virtual goods.

“I can tell you that, from working with our clients, every single one of them is strongly considering micro-transactions, have micro-transactional products in development or already have micro-transactional products and virtual goods on the market,” said Jordan Willms, senior strategist with Vancouver’s Work at Play Ltd., which builds interactive social-networking applications for companies like Mattel Inc., Viacom Inc. and Rocky Mountain Bicycles.

Vancouver’s Utherverse Digital has designed five virtual worlds, including a virtual Vancouver and a number of adult-oriented sites.

More than four-million users have travelled Utherverse’s virtual worlds since the company was founded in 2003.

Last month, Utherverse launched a browser-based application that businesses can use to build their own virtual worlds.

The application is essentially a point-and-click virtual catalogue of rooms, landscapes and products that the companies can use to turn two-dimensional websites into three-dimensional interactive worlds.

Utherverse has also created an online virtual currency to facilitate micro-transactions – such as the buying and selling of virtual clothing that is worn by users’ characters, known as avatars.

Brian Shuster, Utherverse’s CEO, said the incentive for virtual travellers to buy virtual goods in the company’s worlds is largely to build their character’s status.

“Just like in any social environment, once people are represented and interacting with other people, they want to achieve, they want to be recognized, they want to gain status,” said Shuster, adding that people are increasingly associating with their online identities.

The company’s commitment to mimicking reality in its worlds has generated some controversy: it has introduced virtual sex and virtual drugs to one of its worlds.

Alex Mendelev, vice-president of business development at Victoria’s Backstage Technologies Inc., which creates casual games for social networks, said people are often driven to buy virtual goods for the same reason they buy real goods: want.

“What we found primarily is that people want to pay for things that they can’t have very readily,” said Mendelev.

For example, video-game users will buy virtual game points, tools or weapons that will help them to advance to new levels in a video game.

Mendelev said Backstage has also been successful at selling virtual goods that users then provide as gifts to their friends.

One of the company’s leading titles is a lottery-style scratch-ticket game for Facebook. Winning tickets reward the users with tokens that are redeemable for collectible images.

The company also monetizes gameplay for charities that it partners with.

By buying certain virtual products, the company’s game users have donated more than $200,000 this year to charities.

Backstage has partnered with Vancouver’s Super Rewards, which is the torchbearer among companies in B.C. that are feeling out the emerging virtual economy.

Super Rewards’ virtual- currency platforms provide incentives for Internet users to interact with ads on social- networking applications like Facebook and Twitter.

For example, video-game players can earn points for their favourite video games by filling out surveys, signing up for clubs and completing other small tasks from advertisers on Super Rewards’ network.

Super Rewards was acquired last July by a Kansas City-based advertising network.

The deal’s value was not disclosed, but has been reported to be anywhere between $25 million and $50 million – a handsome exit price for a company that’s less than two years old.

The one-year-old Reixl Inc. has put a different spin on the virtual-monetization model: it creates virtual environments and catalogues through which consumers can browse and shop for real goods and services offered by Reixl’s retail clients.

The Vancouver company’s catalogues and environments are built across mobile and other technology platforms, allowing consumers to access them anywhere and to direct friends to points of interest.

“People want to be able to carry their in-store experience portably and virtually,” said Roger Graham, Reixl’s founder.

Shuster added that people are spending more time immersed in virtual realities, and will continue to do so.

“To that extent, virtual goods are clearly just at the beginning of their life span.”