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Real Opportunities in the Virtual World

Based on the technologies of online games, virtual worlds such as Linden Lab’s Second Life present a rich 3-D environment in which organizations can innovate, communicate and collaborate with consumers, partners, colleagues and other constituencies. Our very own Text 100 has taken the plunge, opening an “office” in Second Life to help clients and staff explore the communications and PR potential of virtual worlds. Brands including American Apparel and Starwood Hotels have also started to explore this new platform, setting up a virtual store and building a virtual hotel, respectively. But aside from the obvious cool factor of exploring and interacting in a new medium, why should PR and marketing professionals be taking note?

Second Life represents the next generation of peer-to-peer platforms (blogs, wikis and other online forums) that have already had such a drastic impact on the way public relations is practiced. Virtual worlds simply add another dimension to the digital communications fabric that is second nature to the “digital natives” who grew up socializing with mobile phones and over the Internet.

Why this fascination with Second Life?

Second Life (SL) is different from previous virtual realities because users are empowered to create their own content. There is no game script framing the actions of users. People can interact, create, educate, play and work in a 3-D environment as they like. This vast digital world is filled with people to meet, places to visit and businesses to create. It offers members a “blank canvas” on which to build a dream home, a water park, a small shop or a gigantic shopping center. San Francisco-based Linden Lab went beyond the limits of gaming when it launched SL in 2003. To date, with close to 850,000 “residents,” SL has attracted a solid user base and reports a growth rate of up to 22 percent per month.

SL has a fully contained economy based on rewarding risk, design, innovation and craftsmanship. Residents create their own virtual goods and services and because they retain the intellectual property rights of their creations, they are able to sell them at various in-world locations. Residents who have amassed Linden dollars, the SL currency, are matched with residents who want to buy Linden dollars at a currency exchange. The virtual entrepreneurial experience is not unlike that of the real world. Users aim to deliver a product or service that meets the demands of the community and–just as in the real world–their success rides on their ability to identify markets, create products, find (or build) distribution channels and price offerings to suit the needs of discerning customers. Linden dollars can even be converted to U.S. dollars at several real-world online currency exchanges.

To date, real world companies such as Starwood Hotels & Resorts Worldwide, American Cancer Society, American Apparel, Disney, Adidas-Reebok, Coca-Cola and music artists including Duran Duran and Suzanne Vega have established an SL presence.

Starwood Hotels & Resorts created its SL presence to showcase a new hotel, aloft, scheduled to open in the real-world in 2008. Starwood aims to prompt aloft SL guests for ideas and feedback to help ensure the success of the real-life opening. Hotel staff will observe how the guests move through the space, what locations they visit, even the type of furniture they gravitate towards and, especially important, what they ignore. Starwood sees this experience as a way to test-market the hotel's design and save money in the long run. If it finds significant numbers of people don't like a certain feature, they won’t build it, potentially cutting costs ranging from repainting walls to constructing indoor waterfalls. In the long term, SL aloft will remain online, even after the launch of the real-world hotel.

Nonprofit organizations are using SL as another medium for reaching real-world supporters. The American Cancer Society recently hosted a virtual “Relay for Life” in SL, where avatars walked through SL versions of Toronto, New York, London, Paris and other cities to raise money for the charity. The event reportedly raised more than $40,000.

In May 2006, American Apparel became one of the first real-world companies to open an SL store. Upon entering the store, users encounter a pristine environment that mimics the chain’s real-world stores, complete with dressing rooms and a checkout counter, where color-coordinated shirts and tank tops hang on racks. American Apparel reports it has sold more than 2,000 items to residents outfitting their in-world avatars, at a price of US$1 per item, but the company didn’t open this shop to turn a profit. They hope to utilize the online presence to increase real-world purchases through offering buyers a 15 percent discount off the same item in a real-world retail store. They even look to garner consumer feedback on a new denim line, launched in SL months before it appears in the real-world store. The company also reports having future plans to hire in-world salesclerks to work in the SL store.

For now, American Apparel recognizes the marketing potential of SL but doesn’t necessarily consider it an important revenue stream in its own right. But that may change in the near future as SL grows and demand heightens. While it represents only a small portion of the estimated US$1 billion a year spent by users buying and selling virtual goods online, SL entrepreneurs and customers already transact more than US$7 million per month. This only begins to scratch the surface of the massive opportunity, and you can bet commercial brands will seek a piece of this pie.

In addition to retailers and nonprofits, educational institutions like the University of Southern California (USC) are finding unique ways to engage their faculty and students. The USC Center on Public Diplomacy recently introduced its Public Diplomacy and Virtual Worlds project, a research project examining new technology and public diplomacy in relation to the role of video games, and specifically massively multiplayer online games (MMOGs). The project aims to identify the unique role that “localization” plays in the “public diplomacy” of gaming–in other words, where a game is framed for a community in another country, what is the local impact on that community? The project will also observe how people from different cultures come together through online gaming with MMOGs and how it shapes their ideas about each other and their respective cultures. The project will design contests to create “public policy” play tools that can be used to educate people about how different cultures work and function.

The Center recently hosted a contest for people to showcase their game-making talents. The challenge to the "game mod" community–members of the public who modify computer games–and current and aspiring game designers was to design a prototype or modify a game incorporating the fundamental characteristics of public diplomacy. Contest finalists demonstrated their games for panelists and the in-house audience at the awards ceremony. The event was simulcast in SL, where the virtual audience on Annenberg Island exceeded actual attendance at USC’s Davidson Conference Center in Los Angeles.

Virtual worlds provide companies with a fascinating way of building new bridges to their key audiences. Though still in the early stages, SL is growing fast and will experience some growing pains. Its user interface could be more convenient, and not every interested party will have computers that are powerful enough to support its graphics. The potential of virtual worlds, however, is immense. Imagine companies designing an electric car and getting instant user feedback without building a single model. Imagine residents designing simulations of their real-world home both inside and out to try out new bedroom sets and oriental rugs to help make real-world purchasing choices for their homes. The possibilities are virtually limitless.