Virtual worlds: "2009 is going to be a trial by fire"

Carla Thornton — Sat, 24 Jan 2009 11:44:37 -0500

Virtual worlds, at least those looking for funding, are meeting the all-too-real world of the worsening economy, according to a new report.

Prepared by Virtual Worlds Management, a provider of market research and events related to the virtual worlds industry, the report says investments in 63 virtual-world related companies declined by 58 percent from 2007 to 2008, shrinking from $1.4 billion to $594 million. This year will see more contraction, Joey Seiler, editor of Virtual World News, told The Standard.

"2009 is going to be a trial by fire for the industry and entrepreneurs," he said. "We might see some big breakthroughs but also more layoffs and consolidations."

Among the bright spots predicted in the 2009 forecast is the youth market, which received a significant chunk of funding last year. Currently 193 of the approximately 350 virtual-world-related companies cater to teens or younger.

Another opportunity is the enterprise market, served by companies such as Rivers Run Red, which customizes "immersive workspaces" for companies interested in 3D collaboration tools.

"This is a perfect opportunity for our industry," wrote Rivers Run Red CEO Justin Bovington, one of the executives quoted in the forecast. "Enterprise virtual worlds have clear business advantages in this economic downturn" because businesses are not traveling as much as in years past.

Another area expected to enjoy more growth than others is virtual gifts, which have become popular on sites like Facebook and MySpace. "[That's] a pretty strong vote of confidence that the market is out there in North America, and not just with teens," wrote Michael J. Griffin, creative director at Leap In Entertainment.

However, rich, fully-functional online 3D worlds are still out of reach, said the forecast. "True Web-embedded 3D still looks like it is a ways away," wrote Metaplace CEO Raph Koster. "All the solutions today require plugin installs or downloads, which remains a significant barrier to mass market adoption."

The virtual world industry has been around since the 80s when LucasArts' Habitat introduced avatars. However, it's still struggling to find a popular foothold beyond Second Life. Most companies, which range from tween site FlowPlay to Simmersion Holdings, which makes 3D products for business users such as urban planners and architects, are relatively obscure.

Image: avatar couple (Leap In Entertainment)

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Virtual worlds: "2009 is going to be a trial by fire"