Virtual worlds, real business opportunities

Call it late-90s-style virtual reality, redux. The Internet is rapidly morphing into a 3D medium, and virtual worlds such as Second Life are no longer seen as glorified games but as online spaces with populations, geographies and economies. There are real commercial opportunities in virtual worlds, and many companies are working to develop them.One major player is IBM Corp., which has thrown its considerable weight into the evolution of a commercially viable 3D Internet. Last year, the company announced it was making a strategic investment of $100 million to develop cutting-edge 3D technologies."IBM is first and foremost a consumer in this space," says Chuck Hamilton, a Vancouver-based director in IBM's 3D Internet division. The company used the technology to create an online community for more than 300,000 IBM employees scattered globally. "We're also interested in the economies in worlds and how to leverage that in our business. About 400 companies have already approached us to work with them on 3D projects."A key issue industry players are tackling is the lack of common standards that will allow worlds to interoperate. Most 3D software is proprietary and primarily geared towards gaming, explains Peter Finn, a Vancouver-based project manager in IBM's 3D Internet division. "Virtual world A can't communicate with virtual world B. You can't pull inventory out of one world and put it into another, or use the same business processes and currency." Although companies are exploring business possibilities in Second Life, Finn points out that at present it's pure fantasy. "It's a virtual world, but not a virtual reality." Overlaying virtual worlds on the real world to model and customize products en masse is where 3D e-commerce has immense potential.Many companies are already operating in this space. One example is My Virtual Model, a Montréal-based provider of online shopping tools. Started up in 2000, the company provides customizable 3D models to Sears, Land's End, Reebok and other retailers. Customers can create online avatars with similar body types, hair styles and other features to help them visualize how fashions will look on them in real life. Business is booming for My Virtual Model, says its founder and president, Louise Guay. About 12 million models have been created to date by customers, and the company is growing by about 500 new models per month. "All the big brands are coming on board now," she says. "People haven't looked to virtual worlds for e-commerce until recently, just entertainment and marketing." But retailers are definitely noticing the conversion rate for online shopping is boosted dramatically when customers are able to see their wares top to bottom in a personalized context, and mix and match them as they please. Guay points out the conversion rate for soft goods such as clothing is 35% compared to an industry average of about 4%, and can be as high as 300% for the company's recently-launched home décor tools that allow shoppers to visualize new kitchens, due to the higher prices of appliances.Guay sees some emerging trends today that will take off once common 3D standards are in place. One is the creation of personal avatars, or virtual identities, that are truly mobile. "When you create an online model, you won't have to recreate it when you go to another site. You could do it once to transport into many places," she says. And the whole concept of identity is morphing among young people. "Kids love sending their avatars to their cell phones, and asking friends to rate it."IBM's Hamilton agrees, pointing out the creation of social shopping with personal avatars is a logical next step. When people shop online, they feel like they're alone but there are likely many others shopping at the same site. "When you go to the mall, you do it in the context of other people. You may talk to other people buying the same thing, ask them about their experience, and so on." The explosion of user-generated 3D content is another important trend, says Guay. "People are already populating the 3D Web," she says. "Right now, there's a democratization of innovation underway. People love to participate with open APIs - they see they can be part of a larger commercial adventure." Pressure from retailers and other customer organizations who want to capitalize on these trends is speeding the development of open standards, says Marc Stevens, general manager at Montréal-based Softimage, a provider of 3D software tools and subsidiary of Avid Technology Inc. "Customers definitely want it," he says. Organizations want consistency in the way 3D images are viewed and manipulated from one site to another, and the ability to integrate components created with different tools.Stevens says he's seeing a significant shift of advertising dollars into the 3D Internet, and a convergence of gaming with advertising. "This is just starting - people have to figure out if they'll get a return from ads placed in games. But they're realizing if you put a Coke can in a game, it's a more targeted way of reaching that age group than a broad-based television ad."And he says another channel to reach young people will be opening very soon - next generation cell phones and handhelds will have 3D-ready chips, and Softimage has developed lightweight 3D software for devices. The 3D Internet will change the way people look at advertising and the way content is produced, he says. People want to interact with products: flip them around, change the colors and play with them in different ways."More and more media and gaming companies that specialize in doing one thing are starting to combine into content companies that just look at what medium it'll be pumped out to in the end. If you look at movies like Pirates of the Caribbean, the ads for the movie and the game are the same. The whole experience is starting to be looked at holistically: you create the content once, and use it and monetize it in different ways."

Virtual worlds, real business opportunities

Broadcast | July 25, 2007

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