The Business Case for Virtual Business, Part 2

Part 1 of this two-part feature explores the lessons learned in the early days of launching business ventures in virtual worlds.

There’s no doubt some companies have succeeded in using virtual worlds for branding and interaction with their customers, whether through in-world stores, billboards or other means.

Wells Fargo, for instance, has been operating its Stagecoach Island aimed at young customers for roughly four years and says it is pleased with the results.

Yet branding and advertising seem to be about as far as externally facing efforts tend to go in virtual worlds; attempts to take the next step into sales — for the most part — don’t seem to have met with much success.

All About the Experience

“What we’re seeing is a lot of hesitation because there have been such spectacular failures,” Forrester analyst TJ Keitt told LinuxInsider.

“People are in the virtual world for an experience,” explained Paul Messinger, a University of Alberta business professor who studies virtual worlds. “If they buy, it tends to be things relevant to enhancing the virtual world experience, like virtual clothes, hair or body enhancements.”

Real-world widgets? Not so much, at least so far.

Through the practice of “tunneling,” companies can link residents from an in-world store to a real-world e-commerce Web site — Sears, in fact, has experimented with something much along those lines, Messinger told LinuxInsider.

“It’s starting to happen, but a lot of people — at least in my experience — didn’t really go to Second Life to go shopping, so when they find themselves in the real-world Web site, they just go back to Second Life,” he explained.

Small Spenders

On the other hand, rapper Jay-Z has a clothing line called “Rocawear” that will also be made available virtually for avatars on WeeWorld, providing a way to enhance gamers’ experience while offering the company a marketing tie-in, Keitt said. [*Correction – July 2, 2009]

Virtual-world residents are not, however, generally willing to spend a great deal of money, Messinger stressed — and that, in turn, limits the types of sales that are likely to be made.

“They are willing to work for a very low wage,” Messinger explained — for many residents, “it’s like a leisure activity to work in club as a greeter, for instance, and then they use the money to buy something in-world.”

Residents who own in-world real estate tend to spend more by comparison, but it’s still just on the order of US$10 to $20 per month, he added — “it becomes like another cellphone cost, and that might be a nice benchmark for what people are willing to spend.”

IBM’s ‘Public Sandbox’

Like Wells Fargo, IBM is another of the widely publicized early players in using virtual worlds. Rather than just a single effort, however, IBM has pursued initiatives for both internal and external audiences — and even offers them to its own customers.

“IBM’s original foray into the public Second Life grid was primarily a research effort,” Craig Becker, an IBM Master Inventor who serves as tech lead for virtual space events, told LinuxInsider. “We knew that virtual worlds technology was a new and important field, and we wanted to learn more about it and find out how we could participate effectively. Naturally, when we appeared in a large public space, people noticed.”

For external audiences, IBM has gone beyond giving people a way to find out more about the company and its capabilities and begun hosting events open to the broader community. For instance, the IBM Public Sandbox is a destination in Second Life where the public can build, create and innovate. Second Life artists, including AM Radio, Tezcatlipoca Bisiani, Colin Fizgig, Bryn Oh and many others, have been known to hang out there.

‘A Very Moving Experience’

Jean Paul Jacob’s Almaden Research Center region, meanwhile, is used formany kinds of informal meetings, including a recent World Cultures Festival. Some of IBM’s high-profile researchers, including Grady Booch, meet and brainstorm with visitors in other areas as well.

The Second Life Ballet holds performances at its theatre on IBM 9/IBM 10, and IBM EAGLE is holding an in-world art show at its headquarters in the IBM region, Becker said.

“My friend Andrew Sempere curates the IBM Exhibition Space, which is home to large, high-quality virtual works,” he added. “IBM also hosted the kickoff session for the 2009 Relay For Life for the American Cancer Society. We had almost 200 people attending, and it was a very moving experience.”

‘We Saved Hundreds of Thousands of Dollars’

For internal purposes, IBM is at least as active — if not more so. Increasingly, the company is using virtual spaces to bring new employees together, for example,to get them up to speed on its culture, history and capabilities. During such virtual meetings, rookies tend to encounter employees from other parts of the company and other parts of the world — people, in other words, they never would have met during a typical orientation.

IBM has also held large-scale, private meetings “behind the firewall,” providing a level of privacy not traditionally found in public virtual spaces like Second Life, where events are typically are open to anyone who wanders by. Last fall, for example, IBM held a virtual meeting instead of its annual “IBM Academy of Technology” conference of computer scientists.

“We saved hundreds of thousands of dollars in travel, food and accommodation expenses,” Ari Fishkind, a spokesperson for IBM Research, told LinuxInsider. “More importantly, we helped participants get a real sense of community, collaboration and camaraderie — and let them get back to their daily responsibilities that much faster.”

Virtual Conferencing

Indeed, it is in this realm that many of the current benefits of virtual worlds lie, Keitt said — whether for internal or external purposes. Virtual trade shows and conferences are also allowing customers and sponsors to interact virtually — a big benefit in these travel-restricted times.

Such virtual venues provide a way to chat in a more casual forum, as well as an opportunity to do prototyping and show customers early designs, Chris Collins, general manager for enterprise with Linden Lab, told LinuxInsider.

“Companies are reaching out to general customers, as well as high-level ones, and can easily set up very frequent, small sessions with them,” Collins explained.

Similarly, virtual worlds can also be used to conduct market research, Messinger added.

Security, meanwhile — which has been a point of concern for some companies using public virtual environments like Second Life — particularly for internal purposes — will soon be greatly increased there as well.

Linden Lab is currently working on deploying Second Life behind the firewall, Collins said, thereby delivering the same technology but in a more secure way for enterprises. Currently, the company is in the second round of private beta on the new technology, which will be opened up further over the next 12 months, Collins said.

‘Our Biggest Challenge Was Being Taken Seriously’

IBM has now branched out into creating products for its clients that help them host meetings and brainstorming sessions of their own, and facilitate social networking in a variety of virtual spaces such as OpenSim. Through a forthcoming product called “IBM Lotus Sametime 3D,” for example, customers will be able to conduct small, private brainstorming meetings in virtual spaces. That product is due to be available in a few weeks, Fishkind said.

Other services IBM now offers let clients visualize the performance of their networks and computer systems as they chug away in real life by rendering the systems’ operations in 3-D. “This gives people a better opportunity to troubleshoot any problems that crop up, and to optimize their system’s performance,” Fishkind explained.

There have certainly been challenges along the way, Becker admitted: “In the beginning, our biggest challenge was simply being taken seriously; too many people instantly equated ‘virtual spaces’ with ‘games’ and immediately shut down,” he explained. “But over time this has changed — and especially today, in these challenging economic times when travel is limited and everyone is trying to keep their costs down, a lot of people are beginning to see the value of holding meetings and conferences in virtual space.”

Meetings vs. Phone Calls

Virtual space technology will never replace good, old face-to-face meetings, Becker added — “but virtual spaces *are* a good deal more immersive, compelling, and engaging than a phone conference,” he said.

“One thing we’ve found is that if you and I talk on the phone, we’ll wake up the next morning, and if we think about it, we’ll remember it as ‘talking on the phone.’ But if we meet inside of a virtual space like Second Life … we’ll remember it as an actual *meeting*,” Becker explained. “This sense of ‘meeting’ with other people is a subtle but very powerful advantage that virtual spaces offer.”

For IBM, the benefits have been gratifying.

‘Identical Avatars in Blue Suits’

The company has encouraged its people to “get out there and explore, and to be creative, to talk to people and make friends and connections, and to show a side of IBM that, frankly, surprises a lot of people,” Becker explained. “I think that many people expected IBMers would all be identical avatars in corporate-approved blue suits and ties. This has most certainly *not* been the case.”

Two things IBM did right were assigning experienced staffers to the area and realizing “from the get-go the importance of becoming part of the community rather than behaving like a stereotypical corporation,” he said. “We encouraged people to go out into Second Life and get involved, and from the very beginning, we were open to working with a variety of groups on public projects.”

What lessons would Becker share with other companies considering entering virtual worlds?

‘Allow Your People to Explore’

“First off, make sure that you have a clear understanding of the benefits you hope to derive from the virtual space,” he said. “And secondly, allow your people to explore and get creative!

“I think that some business cultures find the creative freedom to be just a little bit scary,” he acknowledged, “but this freedom is exactly what people need to step forth and explore new, wonderful, innovative ideas.”

The Business Case for Virtual Business, Part 1