Virtual Worlds News has an interesting article about a drastic drop in investment in virtual worlds.
It went down to $14 million in this quarter -- from a high of $161 million:
The total dollars and number of companies funded indicates a steep decline in investment both sequentially and year-on-year. Last quarter, from January through March 2009, more than $68 million was invested in 13 virtual worlds-related companies. For the same quarter a year ago, investment in 16 companies totaled $161 million.
Of course, if you were surprised that VWs ever had $68 million, let alone $161 million, it's because you didn't realize that all sorts of casual games and browser worlds related to kids' games, etc. are called "Virtual Worlds". The list of the $161 million doesn't include Second Life or Metaplace or anything you've heard of as "virtual worlds".
That's not to somehow fanboy my way out of not admitting that virtual world investment declined marketly, if you go back to 2008 and the investment of $184 million where you will see things that you'd agree do fit under your understanding of VWs like Gaia or Metaversum.
It's interesting to note that Virtual Worlds Management changed its name to Engage Digital, and changed the name of its leading industry expo to Engage! as well -- because they realized probably a lot sooner than others did that another Virtual Worlds Winter of sorts was coming.
In San Jose in October 2007, we all watched as Anthony Zuiker, the director of the wildly popular and viewed TV series CSI (add your city's name -- it's everywhere) threw candy on us all and claimed that his servers were about to burn up from the million sign-ups that would come to SL as a result of cross-over from TV to virtual worlds. I winced as that candy falling hurt my head -- those kinds of dramatic gestures never actual work at the individual audience member level. I was among the big skeptics then, and watched curiously as the simulators just never filled up with that many people, and in the end there was something like 27,000 sign-ups, not 1 million (and that's ok -- that was big for SL then and now).
Still, that CIS:SL experience is likely what makes Forseti so grumpy even today about how avatars and TV just not mixing. (I think he's wrong, and that probably the right mixture, genre, characters, audience etc. just hasn't been found. You can't tell me that a Cartoon Network cartoon that had a virtual world in a browser on its website wouldn't have a lot of cross over. Or that even a boring C-SPAN type adult show discussing novels or politics might not have an SL crossover. Or whatever. We haven't plumbed the depths here).
Whether because of the constant recurring and reverberating story of a few PR agencies tanking out of SL because they didn't get some sort of ineluctive fix for their clients made investment tank, or because Mitch Kapor himself hurt his own liquidity moment opportunities by describing the people in SL as misfits, or whether all the sex and "ageplay" scandals and international divorce heartbreaks did it -- sign-ups lagged for SL since 2007 after their huge surge, but continued on an overall slope upward -- nobody, least of all Hamlet, has done the story of how the Gartner hype cycle just doesn't apply to Second Life, because it isn't just technology.
BTW, a source of occasional gleeful malice from Hamlet nee Linden Au, the Lindens' Victrola dog, is my prediction back in 2005 that SL would not get to a million that year from 40,000. And this has been endlessly parsed and referenced, but I can only point out again, what *I* consider "real" membership in SL: spending at least one Linden dollar. That number is still just under 450,000 or so -- it is not yet at a million. 60 day uniques fell and hovers around 1.4 million *now* -- it was not at this last year or the year before. So if the Lindens can show 10 million registrations or whatever, so what, that doesn't prove Hamlet right or me wrong. My conservative estimates based on what I saw as real world activity, like purchases and premium accounts, is still a very useful benchmark.
But...more importantly, the hype cycle doesn't apply because it's not about "a piece of technology". Somebody has to figure that out who is willing to sit with the charts and graphs and begin to understand the narrow social construct that "hype cycle" really is. It's more about the story of how big IT gets their early adapters and influencers to salivate on cue from their controlled tech blogs, and how they then de-salivate on cue from their controlled tech online news sites. Therefore... it isn't the story of "everything" any more than the story of social Darwinism is the story of "everything". It's just the story of that sector, and Gartner describes that social class as well as it can be described, in the way management jokes used to describe the stages of innovation in companies in general: "Fantasy. Ecstasy. Reality. Search for the Guilty Party. Reward the Uninvolved."
The story of investment that Virtual Worlds News is telling is not one that affects Second Life because...it didn't have any investment in several years since its last round, so it's not as if it shows
And that's just it. The way to understand this story of "investments in virtual worlds" right now is not "is there investment in companies that make virtual worlds?" but rather, at this stage, "is there investment by companies in the platform that virtual worlds make, that to some extent also accrue to the advantage of those companies".
It's not venture capital in the classic sense, but adventure capital, which is what I've been calling it for years -- it's what I call what WE spend as residents in SL, which take together, dwarfs the amount that the official VS put into this world. That means something, and no one has yet taken it seriously and analyzed it properly.
Adventure capital is everything ranging from IBM to the country of Portugal to NASA to the University of Michigan. Whoever spends money *on* a virtual world and *in* a virtual world for their own projects which they achieve *through* a virtual world. Oh, you say, isn't that just consumer spending? How can you book what a consumer pays for the cost of technology as "investment in that technology"?
Because what people pay is not merely a rate, or a price for a piece of hardware, or a software license. They put significant development costs into the place, buying space, artists and designers services, etc. They are prosumers, sub-developers also extending out and developing the platform. As I explained about social software,
This principle applies to social media, too, of course, which The amount of money I spent on Facebook birthday cakes isn't portrayed or reflected as a value for FB as a platform, but it should be. Unlike SL, it won't dwarf the official FB VCs -- but it will be significant. And studying those figures all over the place is the key to understanding the importance of VWs.
If SL will have transacted $450 million in business with only 1.5 million unique visitors in 60 days, that's the investment story to cover. It's a story that may also need some debunking if the figure turns out not to be so high (after the various openspaces price hike debacles or Zindra). But it's also a story that by and large will hold up. Money really does change hands in SL, unlike Twitter, where the devs have not announced a business plan, where the inside tech gurus sneer at people probing that issue by noting that Twitter is sitting on a goldmine (the ability to scrape millions of people's intentional searches and expressional content, as well as trends in news and so on).Still, the gold in them thar hills didn't pan out yet.
Meanwhile, it did in SL, and LL was even able to acquire some resident companies through the well- known GOMing process, and it did here and there in other spots in the Metaverse. i.e. for Forterra. If you were to get together the figures spent *on* There and Forterra in advertising or what content makers created, or its enterprise use, that would likely be a figure similar to the SL trend -- not some big impressive VC story, but a sort of post-VC investment story by "the rest of us" who aren't the VC angels but the unsung adventure capitalists. The adventure capitalists who are in the early ways of the virtual world boom, who stick with it even when it busts and cube3 tells us it's deja vu all over again, and who will see it through as it gradually transitions to the 3D web
Not to overstate the 3D web.
I'm a big believer in virtual worlds, of course, for all the reasons I've always cited:
o channels of dedicated communication -- a branded avatar or an avatar separate from or even sequestered from real life that enable concentration of communication or simply separation of communication, increasingly important in the deluge of media people experience these days
o serendipity -- in interactive, 3-D real-time settings you come across lots more people searching, exploring, crossing from different countries and or cultural groups that you are usually accessing or exposed to
o compelling search -- search that enables you to go and see something in 3D and talk to someone in real time is very attractive
o learning -- the immersiveness of the environment and the ability to channel communication and do a wide variety of things from creating objects to saving chat all lead to more lasting learning experiences
o socializing -- affording more widespread or more intensive socializing for all reasons
o business -- sale of virtual goods are increasingly recognized as the way to monetarize the Internet
However, I think it's reasonable to expect that companies that spent millions or hundreds of thousands will not be doing this rounding error again because it didn't work fast for them, and they became frustrated. A few will stick with it for the long haul but even those long-haulers wander away for various reasons, even when styling themselves as really immersed-and-not-augmenting virtual worlders who "get it".
And it's also reasonable to note that virtual worlds aren't the first thing people reach for in predicting money-making trends. Smart phones and mobile applications seem more reasonable to invest in because that's what people have their noses in now.
That's why, BTW, the Lindens would waste time on having the ability of people to call avatars in SL, not because they don't realize there's somethng fundamentally retarded about calling somebody you could call on their RL phone if you needed to -- but because the just want to "be in this space," to say that they, too are "in the space" of mobile.
A friend told me today about using Sprint and a webcam to talk via video phone with his elderly and sick mother -- he was worried about getting all the visa paperwork, funds for airfare, time away from family, etc. etc. involved in trying to travel a long distance to see her. And by using Spring with a video, he was able to reassure her, her caregivers, and himself that perhaps right at the moment, the arduous trip wouldn't be needed. Face-to-face meetings especially with sick relatives are always most important, but if there is technology that makes it possible to simulate them reasonable with far less cost, that's the sort of bettering of mankind or his conditions on this planet that matter. And that isn't happening in a virtual world, but on a real-life video screen.
Still, not everything has to happen on a tiny mobile screen. There is room for more. The Internet in one sense is disintegrating and slipping through the hands of all those Web 1.0 and Web 2.0 gurus who clung to it so fiercely as their exclusive domains, making everyone queue up to their webmaster-ness. It's flowing into the hands of ordinarily people holding phones in their hands who just want to use the Internet to go to someone else holding a phone in their hand, and not even to some big heavy website or even blog. The Internet is falling into its rightful place as kind of a big telephone hooked up to a truck, and not something fabulous.
And virtual worlds will then fill the spaces between those people accessing each other on phones and be the spaces in which they will interact even, for some purposes.
There's something about a world that just adds a certain indescribable kick. Even the 2.5D world of Raph Koster's, which some don't find "real enough" like SL, ads something very lively and radiating to a flat Internet page. It's a glorified chat room, and yet it's one where the ability to show people stuff, build stuff, link to stuf are all enhance. Or perhaps I should say "especially the world of Raph Koster" given that he adds capacity to it you can't get even through SL, like the ability to add to an inworld object the behaviour of going to a website or youtube more easily or embed the world in your website.
That kick isn't for everybody, but it will be for enough people that investment will continue to grow slowly, and eventually, even in the companies, not just in the platforms.
I think the credit squeeze is reducing investment in all areas. That is why systems like OpenSim are giving new life to projects involving VWorlds for education, and also for support and help groups. There is still much research being done, just a bit less money being thrown around.
Posted by: Micha Sass | July 10, 2009 at 08:26 AM
Sorry but nothing electronic will replace the feeling of a held hand of a loved one. Sprint video phone is fail when dearly beloveds are freakin dying. How stupid is anyone that buys that line of utter bullshit. Write that bastard out of the will.
Posted by: Ann Otoole | July 10, 2009 at 09:26 AM
I like that term, "Adventure Capital". It's both clever and accurate. For most it is a shot in the dark with no guarantee of any success. I think that is what makes so many balk at Virtual Worlds, there still hasn't been that big success that everyone can point to. One day, perhaps.
Posted by: Darien Caldwell | July 10, 2009 at 12:16 PM
I have never been compared to Yogi Berra before.;)
How about Einstein?;) LOL
Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results”.
Einstein or Berra, either way I'm in good company.;)
Posted by: cube3 | July 10, 2009 at 02:32 PM
"Money really does change hands in SL, unlike Twitter, where the devs have not announced a business plan, where the inside tech gurus sneer at people probing that issue by noting that Twitter is sitting on a goldmine (the ability to scrape millions of people's intentional searches and expressional content, as well as trends in news and so on).Still, the gold in them thar hills didn't pan out yet."
Prok, I'm surprised you haven't spotted this blatant tactic, with your cynicism of California Tech Strategy in general.
The fact of the matter is that Twitter is *MORE* valuable as an unknown entity, and if you consider the old maxims "follow the money" or "who profits" you'll see that quickly.
Consider the ridiculous valuations that AOL of old, Yahoo in its heyday, currently Google, and other seemingly magical tech companies have assigned to them.
It's a bubble, and it's baloney.
Sure, Twitter *could* be used to advertise, data scrape, all those things... but it would amount to some unknown but thoroughly reasonable and uninspiring X dollars of income a year provided some hard work was done first.
Perceptionswise, Twitter will be evaluated *much* higher as an unknown quantity. It's a gold claim, with a few nuggets lying openly exposed on the ground... *of course* those nuggets are not to be picked up!
The moment the nuggets on the surface are collected, people ask the hard questions about what's under the hill, and the real work of mining begins. Suddenly you are just another advertising/data/search company with a gimmick.
In the same way, lots of dumbass stuff that was appraised in the billions showed its true colors later.
Honestly... a billion and a half for moneylosing YouTube? Bought by Google, the one company that is just dripping with servers... they sure didn't need YouTube's. So all they bought was YouTube's fame with that 1.5 billion. WtF!? Dumb, dumb, dumb. And proof of that 'dumb' is Hulu actually being profitable and coming up out of nowhere behind YouTube... honestly, the brilliance of the YouTube people was NOT monetising YouTube first, thus not showing how ridiculously unworthwhile it is.
Twitter is in the same category as Lycos, Altavista, or Excite... just watch and see. Meaning that it has a chance of survival, but it will be as 'cool' and 'valuable' as CB radio's currently are, in short order.
10-4?
Posted by: Desmond Shang | July 10, 2009 at 03:03 PM
Desmond, I don't know why you're telling me I haven't "gotten it". Can you read? I said Twiter is only a promise of gold, not gold, and it didn't pan out yet.
I fail to see why somebody with 10 million people on their servers with no income and only a faint gleam of prospecting through ads or selling access to high-paying data scrapers versus somebody with only 1.5 million people on their servers who still make $450 million for themselves as well as X million for their host (LL claims to be profitable) is somehow "worse" or "less cool" or whatever the California Insanity says it is.
One has money in hand, and can keep making it if it just doesn't screw up. The other has no money, and a big chance of screwing up, and frankly, even if it makes money with the recipes it will use, won't likely see that $450 million or X million any time soon.
At some point Hulu might get subscriptions. YouTube will never get subscriptions and will rely on ad revenue trickles and/or die.
Eventually someone will figure out that scraping data from people to try to get them to click on ads isn't the same as getting them to buy stuff, and that making real stuff, or even virtual stuff, is better than making free, consumable "media" that goes nowhere.
These are basics.
Posted by: Prokofy Neva | July 10, 2009 at 03:26 PM
Prokofy, you seem to have made yourself a bit more obvious with this post. I know you have reasons to make these FIC lists and complain about open source as the shadow government of SL, but you realize there is another reality to this. The mere fact of how you tout one and not the other makes your political agenda obvious, especially with this article on capitalists and the tone taken. Open source devs know that there are some LL devs that are totally against open source, and you seem to side with those LL devs. Of course those LL devs that are against open source want to earn their cash by reinventing the wheel on ad-hoc solutions that they justify to the angel investors/adventure capitalists. With open source out in the open, that makes it harder for the for those LL devs to justify why they reinvented the wheel when a well known solution already exists... and usually for free! Maybe somehow you get money from such justifing to reinvent the wheel to get the cash from angel investors... it's quite an adventure in deed.
Posted by: Dzonatas | July 10, 2009 at 05:50 PM
Um, opensource is the shadow government not only of SL, but of the world. It's evil, and must be stopped.
I'm happy to openly promote capitalism, which I definitely view as a lesser evil than technocommunism, although I'm not uncritical of capitalism, I believe in civil society and corporate responsibility and such.
Are their LL devs who oppose opensource? Good! I never heard of them. I know there are managers up farther in the chain who are reluctant to let even their own opensource predilections be indulged too far because they instinctively know opensource=death.
I'm not aware of any wheel-recreation but I don't get into that granular level of technical detail. Why don't you put your opensourceness where your sniping mouth is and cite some examples of where you see LL devs are "reinventing the wheel just to make it not-free". If they are doing that, I'm not sure it's a bad thing anyway.
Gosh, somehow I get money for justifying such reinvention of the wheel?! Where? How?! I want to sign up for this. Every body should.
The only thing I've ever gotten from the Lindens is about US $32.17 once or twice from their old dwell program, and occasionally I've gotten an abandoned 16 m2 for L$16.
I deserve more, surely!
I'm dying to see the list of Lindens divided up into who is for opensource and who isn't. I just never came across a single one who is even critical of opensource. They all act like suffering political prisoners in a corporation only temporarily devoted to opensource.
Posted by: Prokofy Neva | July 10, 2009 at 06:03 PM
"Why don't you... cite some examples of [reinventing the wheel to justify business as usual]"
Let's start with one called the UI. There are already several open source and closed source solution on the market, so you can't just say avoid open source. They didn't go with any of them... they reinvented one.
There is much time already spent put into available UIs like Gtk, SWING, FLTK, etc etc. It costs lots of money to develop them and test them. The reason why people choose well know solutions is because they've already overcome well-known problems and, further, they implement features that a greater population want, besides just LL users.
"Gosh, somehow I get money for justifying such reinvention of the wheel?! Where? How?! I want to sign up for this. Every body should."
Gosh, so you think it is good that someone comes along and tells you it is good to install a new bathroom because they reinvented it. You don't need those tubes anymore, because someone reinvented new ones even though tubes already exist to do all your plumbing needs. Yes, everybody should sign up and install new toilets and tubes because it makes capitalistic sense.
The only "shadow" being made is by closed source. You can't see in the shadows like you can't see closed source. How would anybody know that something, like the UI, was reinvented when they can't see it? The only death they are afraid of is when anything that does get open source is audited against what was reinvented. If they truly worked with the open source communities, that kind of copy-cat death would never happen.
Luckily, there are mainly open source devs that do proper accreditation on sources as much as possible, which help in turn to keep everybody involved, directly or indirectly, in business.
It would be the communist that would want to copy-cat anything they need and centralized it to their "ruling" power.
It seems LL is the the only open source knowledge you have (if you can call it that, even Stallman wouldn't), which is a pity since there are far better examples and more honest adventures.
Let me know how you like your tubes... cause, you know, this so called Internet was originally designed and built on Open Source. How would your blog exist without Open Source in the first place?
Posted by: Dzonatas | July 10, 2009 at 06:53 PM
The problem with most open source is A) it barely works. B) it's too generic or too specific for the given purpose. The only way to get software that is tailored specifically to the task at hand, is to write it specifically for the task at hand.
By your reasoning, then there should only be 1 open source solution for any given task. The fact that there are 10s or even 100s of competing open source solutions to the very same tasks shows the folly of that thinking. No one solution can possibly hope to fit every possible need.
LL doesn't write software to justify a salary, they write it because they want somthing that works, and works well.
Posted by: Darien Caldwell | July 10, 2009 at 07:11 PM
reality.. virtually
http://www.worldsinmotion.biz/2009/07/doppelganger_closing_vside_due.php
"but keep the love going"..even if all the user gen content you gave us is now gone and inaccessable." to paraphrase and recontextualize.....
i dont think there was any "direct user gen content" in vside, except the love....lol
anyhow... on to the next "conference circuit/vc shindig" for these metagame gods."_:)
and remember its all about dancing, and thanks for all the fish.:)
Posted by: cube inada | July 10, 2009 at 07:41 PM
@Darien, the fallacy of your argument that exists where you have tried to make a racist difference between open-source devs and closed-source devs. You say "it barely works," so somehow you tried to qualify every open-source dev as incapable of being able to generate good code. Then you say "it's too generic or too specific," so if something isn't too generic or too specific, then what is it? List examples of such closed-source that is neither too generic nor too specific and has no other competitive match in open-source.
You attempt to put words in my mouth and accuse me of a communist when you said there should only be one. I never said there should only be one. What I do say is there should be proper accreditation for any given amount of source (which includes ideas) being used. In the patent system, there are reasons why there are laws on patents. If people could reinvent patented ideas, many business would cease. Somehow you think it that is a good thing that they cease because you think there shouldn't be "10s or even 100s" of competing solutions. There is quite a different between competing solutions and reinventing the wheel with the same solution over and over.
"LL doesn't write software to justify a salary, they write it because they want somthing that works, and works well."
Are you telling me A) capitalist don't want to compete, B) that it is ok to be racist, and C) that, further, you can automatically and magically qualify a development team of 100-or-so to put in the same amount of time into development, testing, deploying, and working with others (in many different languages) to get feedback, and find out what works best in the same amount of time that a few million open source devs can? My guess is you never tried Linux and therefore have no real experience about an open source environment like Debian.
At least the Internet works for you to write your entry on this blog -- it's open source, gosh forbid!
Posted by: Dzonatas | July 10, 2009 at 07:49 PM
You know, I didn't think I would see the day on Prokofy's blog where something like Copybot is being justified as a 'good thing' becuase it can copy your idea and your work; then, somehow magically make the copy 'work well' because most likely what it copies 'barely works' in the first place, and so that is justification why the copier should get all the credit and not the original creator (by what was said above).
As much as people don't like Copybot, open-source devs don't like it when their ideas are merely copied, made closed-source, and someone else makes money off it. Open source makes it so things like Copybot aren't a problem and the original ideas and creator are well known.
Copy, close-source, sell, profit... that is Copybot for you.
Prokofy, maybe you will wonder who really "invented" Copybot. Is it a capitalistic adventure? Lemme recite you one last bit and I'll move on for now, "o business -- sale of virtual goods are increasingly recognized as the way to monetarize the Internet"... and the Internet is open source: http://www.ietf.org/iesg/1rfc_index.txt
Posted by: Dzonatas | July 10, 2009 at 08:31 PM
Racist?? Hmm...I must have missed something...it's hell to get old .
Posted by: brinda allen | July 10, 2009 at 09:13 PM
You and me both Brinda. I don't see anything about being a Communist, or copybot either. :)
I suspect mind altering drugs are at play here. LOL
Posted by: Darien Caldwell | July 11, 2009 at 12:05 PM
I think Dzonatas meant prejudiced rather than racist. This site and its fans are often pretty hard on opensource devs/users, maybe he gets a bit angry about this. Darien did say 'most', thus implying some opensource tools are useful e.g. Apache or typepad for example. Dzonatas does seem a bit confused, but he is in good company in these type of threads.
Posted by: Micha Sass | July 11, 2009 at 01:26 PM
Um, the Internet is not "opensource". That's one of those fantasies and fallacies of open-source extremists that are repudiated easily by grown-up coders who acknowledge the importance of open source but don't become fanatical about it.
The Internet would have remained a goofy geek ham radio club if the Internet had not become OPEN to commerce and OPEN TO proprietary code, such as we saw in amazon.com, ebay.com and all the other COMMERCIAL sites with PROPRIETARY code that made it possible to PAY FOR the Internet -- which made it possible to grow.
This blog for example isn't entirely based on "open source code" but has its own proprietary code as well.
I have no idea why I'm being charged with celebrating copybot, something I have never done, so I don't know what he's smoking.
The idea that "open source made it possible for something like copybot not to be a problem" is one of those goofy fanatical ideas that only this sort of extremist opensource Nazi could come up with. Copybot is a result of, and a direct function of, the opensource "ethos" i.e. lack of ethics, and its culture and cynical nihilism. Copybot is not defeated by "more opensource" but by punishment of hackers, law, and proprietary code. I don't *care* if copybot "will always manage to break through". So will typhoid. That isn't any reason not to provide clean drinking water.
IETF citations, filled with copyleftists who have welcomed the copyleftists in the interop group, is hardly a source on anything. It's filled with the same kind of zealots.
Copybot was created by John Hurliman, and sold by him at a profit. It was a direct function of his cynical participation in opensource, and his cynical sale of something supposedly supposed to be kept open. Today, John works at Intel, i.e. big IT, which is a big booster of opensource as it provides them with free dev labour like it did from John Hurliman. The entire incestuous mix of opensource communists and big IT oligarchis is somthing never examined, but the career of John Hurliman is a good place to start to begin to understand how all this works.
Posted by: Prokofy Neva | July 11, 2009 at 02:53 PM
Sure the internet is not 100% opensource. The IETF is mainly concerned with communications protocols (TCP/IP,UDP,SMTP etc.). These protocols are 100% open. They have to be. The source code implementations of these open protocols can often be closed. Open protocols are essential for interoperability. So the internet is a very open place really, people can obtain details of the protocols being used by grabbing the RFC's, and implement as they see fit and open or close their source how they like.
Posted by: Micha Sass | July 11, 2009 at 08:04 PM
Sure there is plenty of good Open source software. I use it all the time. So do many. But Again, back to the subject at hand, Linden Lab, A lot of what they do is very proprietary, and there's just no open source package that is going to fit all of their necessary critera, and that is true for many things.
The problem with open source comes when people insist *all* code should be open source, and try to push that on people. You have the right to raise your brain-child as you see fit. :) You can whore it out on the street corner, or you can cherish it and keep it safe. ;P
I write a LOT of proprietary code in my Real Life Job. I have written a good deal of Open Source and even Public Doman Freeware. I ride the fence like a Rodeo Star. :)
Posted by: Darien Caldwell | July 12, 2009 at 01:23 AM