They hang out for hours on end, actively seeking out new people and things to experience. These “residents” of online worlds – who also aren’t afraid to buy online – match the definition of a desirable audience. With millions of registered users and thousands of dollars changing hands every minute these virtual worlds provide ample opportunity to enhance e-commerce and bolster your brand.
However, marketing to virtual-world participants is very different than in the real world. It requires carefully assimilating into the community of pixelated people and tactics that are more about nuance than numbers. Those who buy not-so-real estate before understanding the culture could cause damage to their brands that carries over into the real world.
Virtual worlds enable people to escape the doldrums of school, work and home life by using altered egos (avatars) to navigate terrain where almost anything goes. Virtual worlds such as Second Life, World of Warcraft, There.com and Kaneva are among the fastest-growing (and most-hyped) destinations for online entertainment, and marketers have been quick to stake their claim.
Second Life has grown from 100,000 to more than 4.4 million registered users within a year, and often has more than 40,000 people online simultaneously. World of Warcraft, a massive multiplayer game, has more than 8 million subscribers.
Console makers are getting into the act as well, creating virtual- world extensions of their gaming platforms to retain their customers when they take a break from killing or competing with each other. The Sony Playstation Home world will launch later this year, while Nintendo has developed a virtual world for owners of the Wii console.
Today most of the money to be made from virtual worlds comes from subscriptions and selling virtual real estate. According to analyst firm Screen Digest, online virtual worlds surpassed $1billion in revenue in 2006, but most of it (87 percent) stems from subscriptions paid to the worlds’ creators.
Marketers are spending on in-world events to increase their reach, and most importantly, to get access to a desirable demographic. If you imagine that these worlds are primarily a respite for socially awkward teens, think again. Because the sites require a faster-than-average computer and broadband Internet access, users tend to be somewhat computer-savvy and more educated, according to marketing consultant Sam Harrelson.
“They are not your typical audience,” says Harrelson, who counsels clients on marketing strategies for Second Life. Participants tend to also use many social networking sites such as Flickr and del.icio.us, and because they buy virtual goods such as clothing for their avatars, they are comfortable with spending online. Screen Digest projects that commerce (both business to consumer and consumer to consumer) transacted through these sites will top $1.5 billion annually by 2011.
There.com, a virtual world created by Makena Technologies, has more than 600,000 registered avatars, with participation equally split between males and females, according to Betsy Book, director of product management. The median age is 22, and 70 percent of members are between 13 and 26, she says. Shopping for items for avatars is one of the most popular activities, according to Book.
Learning the audience
Before deciding whether to establish a corporate presence, companies should create avatars and join the virtual world as individuals to learn how people communicate and what their tolerance is for marketing. Virtual-world residents have developed their own culture that must be understood before marketers establish a presence, according to Harrelson. Residents would prefer to learn about companies from their peers rather than be approached by advertisers or overwhelmed with graphic ads. “If you buy a building without a marketing plan you can be wasting a lot of money,” Harrelson says.
Opening a storefront and expecting avatars to cruise by and start shopping is an unreal expectation. Sporting goods and apparel company Reebok did just that and had their store defaced by Second Life activists who are rebelling against the commercialization of their escapist distraction, according to Harrelson. (Buildings can be reset in Second Life, so the damage was only temporary.) The company erred in not doing any community outreach before setting up shop, he says.
Companies must be sensitive to what are considered acceptable levels and aggressiveness of advertising in virtual worlds. “If brands go in and assume that you can have ‘in your face’ advertising, it could potentially be very damaging,” says Greg Verdino, who blogs about online marketing. Companies must “join the community and add value” or risk anti-brand backlash, he say. “A bad brand impression in Second Life can follow you into real life.”
A virtual presence must be interactive and offer some entertainment or incentive to be accepted by the community and to garner traffic, Harrelson says. Just as in the real world, free music, sporting events and item giveaways are the best methods for attracting a crowd.
“If you are not authentic and do not offer anything to the community, you are likely to be ignored, at best,” according to Catherine Smith, director of marketing for Linden Lab, which operates Second Life. “However, those firms who commit to a long-term, creative presence in Second Life have an opportunity to interact with their community in new and innovative ways.”
American Apparel, a Los Angeles-based casual clothing company, was the first retailer to establish a Second Life store, in June of 2006. The younger audience of people who “are into leading-edge stuff” was a good match for American Apparel’s customer base, according to Web director Raz Schionning.
American Apparel held several events to generate attention on Second Life, including a launch party that surpassed expectations. Avatars were lined up outside their store in a four-hour queue, according to Schionning.
He says the company thought a Second Life storefront would be a better investment than advertising in an online game. “I’m not sure that a billboard in a racing game would get us much notice” because of the speed of video games, he says. The virtual storefront is modeled after a Tokyo store and costs a few hundred dollars per month to maintain, Schionning says.
Revenue Slow to Grow
Virtual worlds sell real estate in the form of buildings and islands, which can cost tens of thousands of dollars to set up and maintain. IBM purchased 24 islands on Second Life and has committed to spending $10 million on virtual-world marketing.
MTV set up a virtual Laguna Beach island on There.com to promote its TV show of the same name. Reuters, Cisco, Dell, Wired Magazine and General Motors established virtual-world stores or offices, and Calvin Klein launched CK IN2U, a virtual perfume.
Land speculation is becoming big business in virtual worlds. Companies that don’t want to buy an island or take the time and resources to develop an attractive property themselves can buy or rent a building or office space from a virtual landowner. Second Life real estate developer Ailin Graef of Germany claims to have made $1 million developing and selling virtual properties.
So far the majority of the commerce transacted within virtual worlds is consumer to consumer. People are happy to spend a few dollars to buy a skateboard or outfit designed by a fellow resident. More than $1.6 million changed hands in a single day on Second Life in March, according to the company. Companies such as American Apparel are testing the waters of selling virtual goods to generate revenue, but more importantly, to get more exposure for their brands.
American Apparel sells items (virtual jeans or T-shirts) to avatars to wear while cruising Second Life. The clothes are all modeled on real items, and American Apparel offers coupons for 15 percent off real world items when someone purchases the virtual equivalent, Schionning says. The virtual coupons link to its online store, but the transition between the websites could be smoother. “The technology is a bit too clunky,” he says.
While the 12,000 purchases of American Apparel garb in Second Life currency (Linden dollars, which are purchased with real money) aren’t enough to boost the company’s bottom line, the attention from the media and access to Second Lifers has made it a worthwhile investment. “The value is in the exposure,” notes Schionning.
People tap into their inner consumer through their avatars without the restrictions of the real world. While you might not be able to own a tricked-out sports car or diamond necklace for financial or practical reasons, your avatar can, and marketers can use the boundless possibilities to broaden their branding opportunities.
Residents of There.com can buy or rent apartments and adorn their online homes with furniture or art designed by residents or sold by retailers that represents the life they would like to have, according to Makena Technologies’ Book. Shopping is the most popular activity on There.com, she says. “Your online self represents what you are, and where you live says who you aspire to be,” Book says.
The growth of virtual money-changing got the attention of a congressional committee, which is studying the possibility of taxing virtual purchases. Profits made from selling virtual goods are required to be reported as taxable income when converted into currency, and Congress could tax individual virtual transactions in the future.
While companies should not expect a virtual store to convert its visitors into millions of dollars in online commerce, participating in virtual worlds generates buzz and creates brand awareness that can justify the investment.
“Real-life businesses are generally not looking at Second Life as a revenue opportunity, but rather as a way of extending their brands,” Linden Lab’s Smith says.
Brands that create a positive impression in the virtual realm can transfer that interest to their real-world products, according to Book. For example, Nike sold virtual sneakers that enable avatars to run faster, she says, which reinforces the company’s message of its products’ enhancing performance.
Determining an accurate way to measure the value derived from a virtual store or event is a work in progress, according to Book. “We’re still trying to figure out what works in metrics,” she says. The company is developing methods for tracking avatars’ presence in commercial areas of the virtual world to provide demographic data to marketers.
While a company might be happy that the avatar of a young woman is flirting with others at their virtual party, they can’t be sure that it is not an older married man behind the avatar, making it difficult to be certain who is being exposed to your brand. “There is no way to be sure if the registration [information] is actually who they are,” says Book.
Virtual Cottage Industry
While anyone can join and do business in an online world, creating an experience and brand identity that is worthy of residents’ attention requires an insider’s insight. Hot on the heels of the virtual worlds craze are marketing consultants, ad agencies and graphic designers specializing in building and monetizing in the faux environments.
Companies such as Electric Sheep, Millions of Us and The SL Agency provide consulting services that enable companies to create a virtual presence that is consistent with the rules and culture of virtual worlds. Hiring a graphic artist who has experience building offices or islands in a virtual world will expedite the process for companies looking to build a virtual presence.
Joe Mastrocovi and his partners at Long Island- based Moderne Promotions thought their 25 years of event marketing experience would translate well to the virtual realm. After spending time learning the ins and outs of Second Life as residents, the company launched The SL Agency, a marketing company focused on developing events such as volleyball tournaments, concerts and parties in Second Life.
The same tricks of the trade to entice young audiences that work in malls and clubs (free music, free clothes) also work on Second Life, according to Mastrocovi. The SL Agency purchased an island named Activ8, which provides avatars with a place to ski, wager, dance or cruise the boardwalk.
The company sells virtual outdoor advertising such as billboards on Activ8, as well as sponsorships of events. Mastrocovi says virtual and real-world events can be held simultaneously to maximize the press potential and viral buzz.
Similarly, There.com holds events that match what is going on in the sports world, such as skiing events during the winter, and a virtual grand prix in March, according to Makena Technologies’ Book. Companies can purchase sponsorships to expose their brand to virtual world participants without having to commit the resources needed to establish a permanent presence, she says.
But companies expecting to host a DJ-ed virtual party for a song are mistaken. “The costs aren’t much cheaper than a real-world event if you want to hire talent,” Mastrocovi says. By combining in-world and real-world events, companies can create millions of impressions to websites as well as drive customers to brick-and-mortar stores, according to Mastrocovi.
Just as event companies hire beautiful 20- somethings to hand out merchandise in the real world, Mastrocovi recommends that marketers pay well-known avatars to walk around Second Life and promote a company’s brand. These “brand ambassadors” are people trusted in the virtual environment, and an endorsement for them holds weight with other residents, he says.
Participating in online worlds today provides access to an influential younger audience, but it is a challenge to quantify the return on the investment. In the future the companies that administer these sites will develop better ways of tracking the time that residents are exposed to a brand as well as offer more in-depth demographic data. Makena Technologies’ Book says the company would likely develop methods for sharing details about the people behind the avatars that are attending events and making purchases.
The popularity of virtual worlds is encouraging more companies to create alternatives, including kid-themed universes and even a world based on Shakespearean characters. However, blogger Verdino says consumers will have a limited appetite for virtual participation. “No one is going to join 57 different virtual worlds.”
The technology to make virtual worlds interesting and interactive places to while away the hours has arrived. By getting in early, companies can help to set the course for marketing in these burgeoning worlds.
John Gartner is a Portland, Ore.-based freelance writer who contributes to Wired News, Inc., MarketingShift, and is the Editor of Matter-mag.com.