The discussion on governmental regulation of virtual worlds was particularly interesting. In essence, the problem is this: virtual words are more centralised than the internet, and so it is possible (at least in theory) to regulate them to a much greater extent. Linden Labs, for example, has banned gambling in Second Life, in a way that it would be impossible for Google, for example, to ban gambling on the internet. However, when governments start to get involved in regulation, things become much more complicated. Which jurisdiction does a virtual world fall in? Do the fairly strong intellectual property rights of the west prevail, or the weaker IP rights of countries such as China? Is jurisdiction to be determined by the country in which the world is hosted, or the country in which the user resides?

A mire of difficult questions relating to public policy and law enforcement quickly emerges, and the only obvious thing is that there will be no quick solution. As virtual worlds reach the mainstream, and as their economies develop to an even greater extent, the tensions in the way in which they are regulated will likely become more and more apparent until a sensible method of regulation is found. 

VizWoz, a UK virtual world targeted at kids, has announced content deals with Twentieth Century Fox, Paramount Pictures, Walt Disney and Universal to display trailers and secondary content such as interviews at their virtual world cinema. Up to this point, the ‘cinema’ has been showing fairly minor cartoons, so a deal which brings in commercial content, even if not the films themselves, will be a big boost. The studios, of course, are keen to find as many ways as possible to advertise their films, and are likely to seek as many deals with sites targeting children as possible.

VizWoz may have a considerable educational element going forward; its CEO and another executive are former teachers (with the latter described as ‘taking a lead on educational projects’). CEO Daniel Laurence also has past form in this area as the founder of School Stickers and subsequently online reward system MyStickers, both providing a means for schools to reward their students. The potential educational use cases for virtual worlds have been well rehearsed, but a further aspect which may work well is the ability to offer in-world currency as an educational reward – perhaps a feature to look out for in the future from VizWoz.

The site, launched earlier this year, reportedly has over 60,000 users. That’s not very many, particularly when compared to behemoths such as Club Penguin which are aimed at roughly the same age group of 7-14. However, it is not insignificant and if VizWoz can continue to provide valuable content in its world it stands a good chance of success.

[via NMA]

They have confirmed that the avatars will be a persistent identity for players using the Xbox Live service, optionally replacing the gamercard which currently carries a player’s information, of which Egbert said: “it doesn’t say much about me”.  The avatars, by contrast, are highly customisable, and Microsoft is clearly hoping to tap into users’ enthusiasm for using avatars as a means of personal expression. The avatar is tied to the Xbox Live account rather than to the console hardware, so it will follow a user round whichever console they are using.  Players have the option to use a picture of their avatar as their gaming picture, as well.

Developers will be able to integrate the avatars into games that they build for the platform. The framework will allow for the generation of avatars using metadata, avoiding the need for developers to handle the 3D rendering aspect. Avatars also do not have to be tied to a human player – random avatars can be generated as well as avatars which stay the same – the example given is as a game show host.

The fact that by the end of this year (unless deadlines slip, which is not beyond the realms of possibility) all three of the main console gaming platforms will have 3D avatars or virtual world implementations is highly significant, not least because it goes some way towards pushing the concept of avatars and virtual worlds into the mainstream, perhaps paving the way for widespread adoption of more non-gaming virtual worlds in the future. 

Zynga, a games network which operates a series of social casual games, has raised $29m in a Series B round, led by Kleiner Perkins Caufield & Byers, bringing its total funding to $39m. It has also announced the acquisition of YoVille, a virtual world Facebook application. Zynga is already making its games available as applications on Facebook and other social networks, with 2.9 million daily active users across their different offerings, including Texas Hold’em and Scramble (a word game). It had been believed that Kleiner Perkins were no longer investing in Web 2.0, according to a recent Fortune article, but Partner John Doerr made an exception for Zynga saying that they have ‘cracked the code’ in developing viral games.

The reason that Zynga has attracted such enthusiasm from investors is the appeal of its model. It is able to create games on the cheap which nevertheless appeal to huge audiences. By creating a portfolio of games, and using social networking sites and cross-promotion to build up a user base, they start to be in a position to be very profitable. They are also freed from the tortuously long development cycles of large, traditional games companies such as EA (whose former Chief Creative Officer Bing Gordon is also joining Zynga’s board today).

However, this new model absolutely relies upon the social aspect to games, and it is likely that a desire to strengthen this is the motivation behind the purchase of YoVille. A virtual world built on top of Facebook is not a unique concept – Vivaty is another example – and there is a reason for that; the social network offers a boost to viral growth, and the combination of an appealing virtual world with the Facebook platform is a recipe for lots of users.

(click through for full sized graph)

The most immediately obvious feature of the graph is that the age axis does not go above 40. Virtual worlds are a new technical phenomenon, and it should be no surprise that their initial adoption will be by younger people. This is surely the biggest gap in the virtual world market, but the important question is whether there is a market in that gap. 2D web social networks for older people have started to emerge, such as Saga Zone which is aimed at over 50s, but it is too early to tell whether people of that age group will adopt new methods of communication en masse. On the face of it, virtual worlds for old people could be a big hit, enabling often lonely elderly people to have more social contact, and the 3D paradigm may even make more sense than the world of websites. I suspect that this is a very long term growth area, although the industry has to hope that the market emerges before current users of Club Penguin reach pension age!

I was joined on a podcast by Sibley Verbeck, CEO of Electric Sheep, to talk about the announcement as well as get his insight into the latest developments in the virtual worlds industry – particularly the impact which Google Lively will have.

Listen to the podcast to get the full story, but the big point that I took away from my discussion with Sibley was the importance of going mainstream. I think he’s right to see that as the absolutely key thing that the industry has to work towards. Part of the solution will be technology – which is where WebFlock comes in – but it is also going to require clear strategic thinking to find ways to make virtual worlds more valuable to mainstream users. Mainstream adoption for Verbeck is what will enable business models to start to work more effectively.

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Charities rely upon people rallying around a cause to raise money, and virtual worlds have shown themselves to be an ideal way to do that. It is likely the hyper-connected environment of virtual worlds, in which communication is incredibly easy, which allows people to work together so effectively. The trend is a wider consequence of the internet – websites such as JustGiving, where users publicly donate money to a particular cause, having been invited by a friend, are evidence of that.

David Miliband (UK Foreign Secretary) has spoken about the power of communication driving support for a cause in the context of its ability to rebalance the relationship between the state and the individual. He calls it the ‘civilian surge’: “There are 200 million Chinese learning English; there are more bloggers in Iran than any other country in the world per capita; Buddhist monks march for democracy in Burma. I got the idea of a civilian surge when I was talking to David Petraeus [the US military commander] in Iraq because, he says, ‘You can’t kill your way out of this problem - you need politics as well as security.”

There is, of course, a commercial lesson in this. Virtual worlds offer brands the potential to mobilise support in their favour. If a brand can find a way to be the ‘in thing’ in a virtual world such as Second Life, with users really engaging with the message behind that brand, that could be incredibly valuable. That potential is arguably at the route of advertising interest in virtual worlds, and is perhaps the holy grail. 

That’s the message from Kaz Hirai, president and group CEO of Sony Computer Entertainment, in an interview with GamesIndustry.biz. Home, a virtual world for PlayStation users, has been in development since 2005 and has been dogged with a series of delays. Initially intended to launch in late 2007, it was then postponed until spring 2008. The latest timescale is an open beta to be launched in the autumn of this year.

According to Hirai, the reason for the delay is the desire to get Home right first time: “had we launched it before we thought it was the right time and the right features and functionality to launch it - with the high anticipation, people would go there in droves the first time around, they would check it out and say, “This isn’t fun at all, so I’m not coming back again.” With virtual worlds so dependent on user numbers –an empty virtual world which is supposed to be all about socialising isn’t much use- this may well be a sensible position to take.

The promise of Home is certainly great. Xbox 360 has enjoyed phenomenal success, and has turned into a real revenue generator for Microsoft. Home could potentially go beyond that, with advertising revenue on top of sales of commercial content and microtransactions between users. The graphics capabilities of PlayStation 3 may also enable the development of by far the most graphically impressive 3D world to date- developers will be able to rely upon content being processed the same way given the identical consoles.

Before that promise can be fulfilled, though, Home has to launch. Whilst it is still benefitting from good hype at the moment, too much delay could easily lead to a loss of interest, and the delay exacerbates any possible initial disappointment with the product. It’s a high stakes game; Sony could still get it right, and win big, or things could go very wrong.

MTV, the Viacom-owned music channel, has launched a virtual world: MTV House. It is a 2.5D world built in Flash, similar in that respect to Habbo Hotel. There are several different rooms: MTV One, MTV Two, MTV Hits, MTV Base, MTV Dance as well as MTV Bathroom and MTV Kitchen, all of which are accessed from a central lobby.

The main purpose at this stage seems to be to create another way for users to access MTV’s content. Heavy prominence is given to online videos, for example, which are discoverable in the different rooms. Each room also has a ‘character’ in it, an automatic avatar which, when clicked, gives a list of relevant content. In time, MTV is presumably hoping that a powerful social aspect to the world develops as well. Right clicking on the world reveals that it was built by Yomego, a virtual world development agency which offers a white label solution – it looks like this is what MTV has deployed.

The business model is to be based around advertising, in a potentially win-win situation for MTV; if House is successful, they increase user engagement with their own brand and content, as well as creating more inventory to sell.

This light weight approach to virtual worlds, with barriers to adoption as low as possible, may well be the most successful way for traditional media brands to take advantage of virtual worlds, at least initially. It stands a good chance of mainstream adoption, and is a low cost way for brands to ‘dip the toe in the water’ of virtual worlds.

House has initially been launched in the UK, and MTV intends to role the product out worldwide in the coming months.