Just over a week ago, Sibley posted his take on the economy and its impact on virtual worlds.  That day, I also spoke to Joey Seiler at Virtual Worlds News, and for those who didn’t see the piece, this was my primary message:

“We suspect that the best virtual worlds will remain relatively counter-cyclical, as they provide a cheap form of entertainment. However, business models that relied on advertising and sponsorships will be under pressure, while those who chose subscription models or micro-transaction models will stand stronger.  Advertising spend is going to shrink and concentrate, and it is going to focus on highly measurable areas.  We also expect enterprise experimentation budgets to shrink, as businesses cut back on non-core IT projects.  We still see solid interest in building large-scale youth worlds. This will not be start-ups, but rather companies that have a strong real-world property that they can leverage and who know that virtual worlds are a necessary competitive, and potentially very profitable investment in their future.”

I was interested to see Geoff Ramsey, CEO of eMarketer, come out yesterday with an article on ad spend projections.  While eMarketer has inevitably cut their projections, Ramsey believes that growth will remain strong:

“[T]here is still a consensus among many analysts that spending growth for online advertising will continue to show double-digit gains in both 2008 and 2009. eMarketer agrees.”

Ramsey also refers to several surveys, including a McKinsey study of marketing execs which said that 55% are “cutting expenditures on traditional media, precisely in order to increase funding for online efforts.”  Key drivers behind this will not surprise readers of this blog: the Internet provides greater levels of targeting, measurement, engagement, greater insights from conversations and participatory marketing, etc.

You can read the full article here.

This is not to say that online advertising can completely resist a recession, but that folks like Ramsey are bullish that the floor will not drop out.  Ad Age has an article today on the softening in the ad sales hiring market. Still, there is a recurring tone of cautious confidence, as the author wrote:

Aside from the burst of another asset bubble, there are few similarities between the internet bust of 2000 and the slowdown occurring today. First, most believe we’re looking at a few years of single-digit growth, not negative growth, as occurred between 2000 and 2002. In 2000, online advertising was still experimental for most marketers; today it’s part of the mainstream. Indeed, unlike in 2000, agencies are unlikely to cut any online staff and likely will use the downturn to fill or upgrade positions.

My personal belief remains that virtual worlds, as a relatively new and thus still experimental form of online advertising, will struggle to gain share of interactive ad spend.

For those attending the upcoming Virtual Worlds London conference, put on by Chris Sherman and the team at Virtual Worlds News, I wanted to note that ESC CEO Sibley Verbeck will be presenting on Monday afternoon, October 20th, with folks from Intel, Samsung, ngi, and Digital Space.  While in LA, the group presented the concept of the new roadmap effort, this time they will be presenting some great content from the work done over the last several months.

October 20th, 1600 / 4pm GMT

Afternoon Keynote - Virtual Worlds Roadmap Keynote
A cross industry team will present a framework and effort to publish virtual world case studies and descriptions of the technical and business barriers to future mass market adoption of specific virtual world applications. The session will invite the audience to contribute to virtual world industry predictions, analysis, and ideas for lowering barriers to innovation.

- Victoria Coleman, Vice President, Samsung Electronics
- Bruce Damer, Digital Space and Executive Director, Contact Consortium - Virtual Worlds Roadmap SIG
- John Hengeveld, Senior Business Strategist, Intel
- Jeffrey Pope, Executive Vice President, ngi Group Ventures / 3Di
- Sibley Verbeck, CEO, The Electric Sheep Company

If you haven’t registered yet, and would like to do so, you can use the code GIFFVIP for a 20% discount on the full show pass.  If you want an expo-only pass, you can register online for a free one using the code gif66, but there is only a limited number of those free passes.

I miss working with the Ill Clan gang of Frank, Paul, Kerria and Tom, and was thrilled to see their release of the short film Tiny Nation, a concept I enjoyed hearing about long ago and which I wondered would come to fruition.  It is funny and wonderfully produced.  Go check it out!

And if you are in the market for machinima services, I cannot think of a more talented team.

Next Tuesday at 14:45 UK time, I will be giving a short but meaty presentation at the Virtual Worlds Forum in London.  Topic: building financial models for your virtual world effort, and examining things like economic levers, and the many implementation and production costs that are often overlooked.  I am going to be mostly focused on larger virtual world efforts, rather than marketing campaigns inside an existing one.

I will be in London on Monday and Tuesday bouncing between meetings, and so drop me a line at giff - at - electricsheepcompany - dot - com if you are also attending or would like to meet up.

Today I am pleased to introduce a guest poster, our talented product manager Mike DeBenedittis, to share some architectural background around WebFlock.

Title: “WebFlock: Under the Hood”
By: Mike DeBenedittis
Date: 9/22/2008

People often ask what’s under the hood of WebFlock. If you’re curious grab a crescent wrench and I’ll take you through the nuts and bolts.

We first started down this path in Fall 2007, when we went out to the market analyzing existing technologies for a number of clients, and found that nothing really fit the business requirements on our list. Consequently, we decided to build our own, levering existing components wherever possible. We started building a new kind of user interface as well as a robust virtual world server, the latter which we internally call the Aspen platform.  We consider WebFlock a customizable application that sits on top of Aspen, and it is worth noting that we are building other worlds on top of Aspen that have a different set of functionality from WebFlock.

The technology underlying WebFlock has some core characteristics, among them:

1.    Easily extensible - We wanted to develop a solution that could be applied to a number of different projects. The flexibility in the Aspen platform can accommodate customized user interfaces, entirely different rendering layers (for example: Flash, Unity3D, Java3D, etc), or custom simulators (for example: physics modeling, game dynamics).

2.    High performance – We had two considerations. First the server must be high performance, allowing for a large number of users to be economically hosted. Second the client software must provide an excellent user experience to as many of our target users as possible.

3.    Get in fast - For WebFlock our focus was on getting users into the experience fast. This means no downloads, no installs, and no restarts.  It also meant a simplified set of functionality to make movement and interactivity very straightforward (that is a never-ending process of improvement). An example here is limiting user camera controls.

4.    Accessible on most users machines - As I mentioned above, WebFlock is designed with the wider Internet audience in mind. We considered what processor and graphics capabilities end-users would have, ranging from the 4 year old “hand me down” PC to a current mainstream PC. Importantly, we went out and got that older hardware to test on!

5.    A set of core Virtual World features - This includes things like registration, sharding, chat filtering, user muting, and metrics collection.

So the WebFlock application is designed to be very easily accessible, easy to use and require no download and installation. We accomplished this by building an Adobe Flash application for the UI. In order to render the 3D scenes we employ Papervision 3D to display textured 3D models. Combined with our custom avatar system we refer to this as “Perspective 3D”. Finally, the user interface employs some javascript features provided by Scriptaculous, this allows us to leverage the flexibility and performance of the web browser combined with the rich Flash-based environment. We’ve found this technology stack permits WebFlock to run on most computers, even older machines, without encountering the operating system or video card issues that surface on many VW platforms.

On the server side, WebFlock runs on ESC’s proprietary Aspen virtual world server. We developed this server using several open source components. Core to Aspen is Apache’s MINA, a message passing framework. We use MINA to manage connections and pass message between the server and connected clients and we have found that MINA meets our high performance goals. While MINA handles message passing, the greater portion of Aspen is made up of virtual world management features. When we began development we took a look at Ogoglio, an open source Virtual World server using the Apache 2 license. The concepts from Trevor Smith and the Ogoglio team — concepts like web accessible protocols and easy platform extensibility — really inspired us. We contributed some code back to the Ogoglio pool, but then realized that our direction would depart significantly. So we rolled up our sleeves and began a significant custom coding and revision effort which has become the bulk of Aspen.

For those that like visuals when it comes to architecture descriptions, I have created the below image. We use Apache http Server for asset serving and MySQL for persistence of data.

WebFlock has been successfully deployed for Showtime’s hit series The L Word (see here for the virtual chat environment), but its early days for both WebFlock and web-based virtual worlds. There are many features, as well as ongoing usability improvements, that ESC will add to WebFlock in the coming months. I expect the WebFlock technology stack to performance admirably, and remain flexible, as we deploy more WebFlock implementations and build out custom Aspen-based virtual worlds on the web.

Mike DeBenedittis is Director of Product Management for Electric Sheep Company overseeing development of ESC’s products including WebFlock.

Next Wednesday kicks off the Virtual Worlds Conference in Los Angeles, and we hope to see you there.  We’ll have a booth and will be speaking throughout the schedule, as laid out below.  Please drop us a line if you want to meet, or swing by the booth and say hello.

WEDNESDAY, SEPT 3, 2008

11am, Hollywood Track, Chris Carella, CCO
Virtual Worlds Primer for Entertainment Industry: How do you take an existing entertainment franchise to the virtual world?

11am, Future of Virtual Worlds Track, moderated by John Swords, Dir of Business Development
Technical Visionaries Discuss and Debate The Future of Virtual World Technologies

THURSDAY, SEPT 4, 2008

11am, Hollywood Track, Valerie Williamson, VP of Marketing
How TV Networks Are Effectively Using Virtual Worlds

1pm, Future of Virtual Worlds Track, Sibley Verbeck, CEO
Virtual Worlds Roadmap

2:30pm, Future of Virtual Worlds Track, moderated by Giff Constable, VP of Products
Virtual Worlds Meet the Web: The Present & Future

- - - - -

As for my own panel, Virtual Worlds Meet the Web, I am very pleased to be joined by an excellent set of industry leaders:

Daniel James, CEO, Three Rings
Keith McCurdy, CEO, Vivaty
Mitch Olson, Co-Founder, SmallWorlds
Sean Ryan, CEO, Meez

The overview of the panel is as follows:

The discussion of Web-based worlds versus download worlds has changed significantly over the last year with the advent of interesting new Flash-based efforts and effective 3D plug-ins. In this panel, a group of virtual world executives discuss the business and technology decisions behind their diverse product initiatives, analyze trends in Web usage that are driving the rising importance multi-user virtual experiences, and tackle the bigger discussion of how the Web and virtual worlds should interoperate. 

Virtual Worlds News today updated their Youth Worlds Analysis.  You can see Joey’s analysis here and the list here.  The space is super active, but I would not call it crowded. Not even close.

Why? Because it is like saying that the kids Web space is getting crowded because every toy company and kids brand has a website.

To kids, virtual spaces are the Web, with popular sites like Stardoll, Club Penguin, WebKinz, Gaia, and the Nickelodeon, Disney and MTV brands leading the way.  This is what they know and enjoy.

Virtual spaces and multi-user environments are converging with traditional website design and functions into a fun and effective combination of asynchronous and synchronous interactions.  It is still early days and design best practices still have to be proven out, but the train is moving.

However, what remains to be seen is how much room there is for pure play virtual world growth, as opposed to virtual environments tied to media, toy, apparel, or other real-world properties.

Greg Verdino put up a post the other day titled “Hate to tell you, but Web 1.0 was social too.”

And of course it is true. Putting aside the difference between the Internet and the Web (or even dial-up bulletin boards) for a second, from the very beginning these technologies have been about communication, which means that they were social.

What has changed?  The technologies became easier to use (and create), access became faster and more painless with better connection speeds and hardware, and mainstream culture changed and started treating the Web like an every-day tool.

Who and what was first is irrelevant to everything but a history book.  What matters is when technology and culture converge and mainstream adoption becomes a possibility.  That is the question at hand with avatar-based communications.

Note: just saw that Gartner has placed public virtual worlds in the trough of disillusionment, with 2-5 yrs to mainstream adoption. I think that the time to adoption will differ based on market audience (age) and entertainment vs serious usage, but if you average it out that this isn’t unreasonable — we are still in the innovation / innovator stage.  There will be some great successes in the near term, however.

VentureBeat has a story on virtual goods business models being used to good effect by casual gaming companies.  Given the uncertainty swirling around social network advertising, I have to imagine that almost every casual game developer is thinking along these lines. Even for brands who are looking to use casual games and virtual spaces to bolster marketing and real-world sales, virtual goods can be an effective way to turn a marketing cost center into a profitable effort.
Of course, for both virtual goods and advertising models, you have to invest in building the traffic before you can really start to monetize.

Still, the casual game space has been doing well enough that Zynga “has yet to tap into any of its venture money even though it has a staff of 80 people and other operating costs; it has been profitable through its previous $10 million round as well as this latest one, he [Mark Pincus] says.”

Ravi Mehta of Viximo has some more interesting thoughts on the topic at Virtual Goods Insider.

We were thrilled to finally announce WebFlock last Thursday.  We had some nice coverage alongside the release and I thought I would highlight a few with side commentary:

TechCrunch and Hollywood Reporter broke the news followed up by an in-depth piece from Virtual Worlds News and coverage at Worlds in Motion. Joey Seiler, with Virtual Worlds News, picked up on an important point when he wrote, “WebFlock is not–not–a virtual world. It’s a tool for developing virtual environments. While other worlds develop content relationships with brands, The Sheep are only interested in taking WebFlock to the brands themselves.” Raph Koster also, not surprisingly, got this distinction.

WebFlock is not a consumer virtual world.  Each implementation is entirely private-labeled, thus registration, art and user experience is controlled by the owner, not ESC.  I’ll write a little bit more about that tomorrow.  A key thing to note is that each space is separate, just like Amazon.com and NBA.com, and you navigate from one WebFlock-powered implementation to another just like you do from one website to another — by going to a new URL.

Right now, I personally don’t think of the Metaverse as a separate layer on top of the Internet that is navigated entirely in 3D; rather virtual spaces will be integrated and embedded right into the Web.  Virtual experiences don’t have to be part of large, sprawling worlds, but rather like websites, can be small, targeted, purposeful, and engaging. They enrich a webpage rather than replacing it.

Tony Walsh also picked up the story over at Clickable Culture and I added a comment there about some of the 3D tools: avatars and environments are built using standard 3D tools like Maya and 3DStudioMax. I also noted the lack of a fully user-controllable camera, which I think is a good thing for mainstream usage right now.  We call the environment “Perspective 3D”, since it has many of the immersive qualities of 3D without the usability complexities or hardware/software requirements.

ESC is not exclusively doing WebFlock work by any means, but the application provides an important option for the market that was missing, and we are excited about where this technology will go.

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The Electric Sheep Company creates Web-enabled social and virtual world experiences. This blog is written by many members of our team, and contains a mixture of corporate messages and individual opinion pieces. To learn more about ESC, please visit our website.