Cyworld, a social networking site with a virtual world element, has announced that it is to partner with Mochi Media to create a new arcade of flash games, containing MochiAds. The idea is that the casual games arcade will be augmented by the ability for Cyworld users to play games with and compete against their friends on the service. For Cyworld, the deal provides greater engagement with the site and an additional revenue stream, and for Mochi Media it provides greater exposure for their games, and therefore their MochiAds.

Advertising in games is tricky, since when a user opens a casual game they typically want to play that game rather than follow an advert elsewhere. MochiAds approaches the problem by capitalising on the wait while the game loads, effectively showing a pre-roll ad. These adverts will be worth a tiny CPM, but the immense popularity of casual flash games means that the total might be worth something. Ultimately advertising in casual games is likely to take the form of branded minigames which a user can optionally play during a break in the main game, perhaps to earn bonus points. In the mean time, however, MochiAds' approach is the best on offer.

"Mochi Media provides a deep level of gaming integration, enabling our members to compete and engage with one another. We're constantly looking to increase the quality of our members' experience and providing a social way to interact with Web games is a perfect fit. Mochi Media helps solve a revenue problem that many social networks are facing. Since we don't allow banner advertising on the site and are the only major social network without it, we are very selective about our revenue generation partners", said Darian Patchin, Cyworld VP of product marketing.

Early virtual world Worlds.com has announced that it is to create a 3D environment to promote hip hop artist Darryl "DMC" McDaniels, in collaboration with PAID, a celebrity services company. Worlds.com will handle the technical creation of the world, and PAID will facilitate the sale of a series of virtual clothes and accessories which can be purchased using its ecommerce system. This will all be integrated into the rapper's existing website, Me-DMC.com.

It will be interesting to see what is developed; at present only the deal has been announced. However, at the moment the proposition doesn't sound very exciting. I am sceptical about the chance that an isolated virtual world, with its only brand-specific feature being the purchase of virtual goods, has for success. A higher profile brand with a wildly popular website might be able to make this work, but according to all the online traffic estimating tools, Me-DMC.com has very little traffic. This effort would appear to be yet another example of the 'build it, and they will come' approach to virtual worlds marketing which has been shown to fail so conclusively.

It's not as if a music brand is short of choices for innovative promotion online. How about a virtual world for rappers, with regular organised contests and free music to active users? Or thinking outside the virtual worlds space, how about an online tool to create a simple hip hop backing track? Or a Facebook application to have a rapping contest with your friends, or discover new hip hop music? None of these options need be particularly expensive, and are almost guaranteed to give a better return on investment than what I suspect is a doomed project. All of this with the caveat that the actual virtual world has yet to be released.

ABN Amro, the Dutch bank which has been pioneering in Second Life, has confirmed that it is still interested in the medium, despite significantly reducing its footprint in the virtual world this year. In an interview with e-consultancy, head of 3D experience at ABN Amro, Popke Rein Munniksma, stated that there was still 'a golden business case' for the use of 3D virtual worlds within customer service, and ABN Amro's intention to move towards selling products in virtual worlds.

For a bank, of course, that is a rather more complicated challenge than for most brands. The importance of complying with often convoluted regulations, at any rate not designed to work in the context of virtual worlds, is one factor. Once financial products start to be sold, a weight of additional regulation kicks in to protect consumers from, for example, misspelling. Another vital element of any technology used by banks to sell products has to be security. It is conceivable that ABN Amro could look to create sufficient security in Second Life, perhaps by using a private island which they themselves host. However, it remains to be seen whether most customers would, at least in the short term, feel secure enough to give personal information to a bank in a virtual world. One could imagine a whole new breed of phishing attacks, with scammers building whole 3D models of a bank in a virtual world. Despite all these difficulties, Popke Rein Munniksma hopes to be selling products by 2009, although he is at pains to point out that 2009 is an aspiration rather than a deadline.

An area in which ABN Amro is, perhaps understandably, more bullish about the promises of virtual worlds is their internal use: "At this time, we are mostly looking into virtual meetings - how you can use virtual worlds as a substitute for conference calls and business meetings. The business case is obvious - the travel costs and the time you spend in traffic jams." Interestingly, Munniksma reveals that they are looking at using Active Worlds internally, rather than something like Second Life or OpenSim, because of the lighter performance burden it places on corporate computers clearly not procured with 3D in mind.

Virtual Worlds Forum is delighted to be welcoming Popke Rein Munniksma as a speaker to the conference on 6-8^th October, 2008.

The entire business model rests on a long tail of sites aimed at the 6-17 demographic emerging. GoFish refers to this trend with the rather less impressive buzzword 'deportalization': "Deportalization is a term that describes the phenomenon where Internet traffic is moving from large portals to smaller, disparate sites. From February 2000 to October 2006, the number of websites grew from 10 million to 100 million. During the following 12 months, the number of websites grew to 143 million. The drivers of this trend are search and increased user confidence with regard to the medium. We expect that, in the next several years, the large sites will continue to lose traffic to smaller sites. We also believe that vertical advertising networks, such as the GoFish Network, will receive an increasing share of advertising dollars spent online."

Whilst the statistics they use are largely irrelevant - the number of websites is of little consequence, if no traffic is going to the new websites – other advertising networks have enjoyed the fruits of a new long tail. It matters, because if a single site receives enough share of the audience, it can sell its own ads, without the need to give a cut to the network. Niche ad networks like FM Media are seeing real success, particularly with blogs. However, it is by no means certain that GoFish can capitalise on that. In the virtual worlds space, there isn't a long tail at the moment, with a few big players dominating. Data from K Zero also showed that most advertising campaigns were still happening on a small number of virtual worlds. Virtual worlds also arguably favour an oligopoly because of the social 'chicken and egg' problem inherent to the social web. Given the importance of virtual worlds to kids' activity online, these are significant hurdles for GoFish.

Lively's launch has been the subject of much discussion and analysis, not least as to what their strategic aim is with the service. Indeed, some have argued that Google doesn't really appear to have thought through what it wants to achieve with Lively. I have argued that Lively is ultimately about getting Google into 3D advertising. Yet another possible use case has now popped up, though: enterprise.

Terra Nova has an interview with Lively user experience designer Mark Young, in which he is surprisingly open about future plans for a Googler. He talks about a couple of specific changes which would be particularly important for businesses (my emphasis):

It's a challenge to create a simple GUI for large group discussions but we are hearing some demand for it from organizations and businesses. It will take a significant amount of R&D to make it easy to participate in a seminar with 100 people chatting...

Many people are asking for the ability to limit who can visit or decorate a room... There are a variety of use cases where groups, organizations and businesses need to limit access to members, customers or employees. We considered a sharing framework like the one for Google Docs where you choose to have a document be public or private - if its private then you grant access by sending email invites to the people that you want to share with or collaborate with. Now that we have a lot of users, we can test alternative ideas to find patterns that better match what people want to do.

There is a tension with Lively at the moment. On the one hand, if you visit Lively.com you will be faced with numerous, and apparently popular, rooms for cybersex –a potential problem previously discussed. On the other, however, Google is a serious company with a strong track record in providing services to businesses, particularly in the form of Google Apps. Trust and security are key concerns for enterprise users of virtual worlds, and Google could be in a strong position to address them, particularly when compared to smaller start-ups without their record. The fundamental question is: is Google a consumer or an enterprise product? The answer may be either one, or even both, but in any case changes need to be made to stop the very promising Lively descending into further strategic muddle.

Of course, if you come to the Virtual Worlds Forum in London you may hear more of Google's strategy, as the head of Lively, Mel Guymon, gives a keynote.

Stardoll, which last week reached the milestone of 20 million users, is the most popular website with under-12s, with 32% of the audience. For the 12-17 market, mobile social networking tool Frengo was the most popular with 26%, although MMO Runescape came in at a close second with 25%. The numbers:

Under-12s

Stardoll.com: 32%

Club Penguin: 29%

Nick: 25%

12-17s

Frengo: 26%

Runescape: 25%

Bebo: 19%

The reason for the incredible and disproportionate popularity of virtual worlds among younger users remains unclear. One theory is that kids have greater imagination; the same reason that under-12s love cartoons which often bear little resemblance to the real world is why they love inhabiting a world as a penguin. Another is that the younger the person, the more innovative they are prepared to be with their communications. A look at modern communications show that most Brits below 60 (and many over) are happy with email, most below 30 (and many over) are happy with Facebook, more still below 20 are happy with the edgier MySpace and those below 12 are clearly very content with virtual worlds. It is arguable that the older the user, the more conservative they are with their communications, which may mean that virtual worlds may have to wait some time yet before they reach popularity with adults.

Clearly this is a puzzle that developers would like to solve. In a cruel irony, the demographic most enthusiastic about virtual worlds is the hardest to monetise. If the reasons behind VWs' success with younger users can be identified, greater rewards could lie in store. In the meantime, the social web has never had it so good.

One of the frankly bizarre-looking toys (that's Anakin below, apparently) will be given away with each happy meal, along with codes to unlock 'top-secret Jedi quests' in the McDonalds virtual world. And that's very clever; Club Penguin have shown that kids are able to either pay for or persuade their parents to pay for subscriptions to unlock extra content in virtual worlds, suggesting that the 'secret codes' will be just as appealing to many children as the head attached to a spaceship. McDonalds have got themselves a good deal here, with access to a great brand with which to create content for their new virtual world. Somehow jedi quests sound more fun than cooking burgers as virtual world activity. Star Wars have also done well though, with their virtual world marketing campaign for the new film likely to be far more successful than many other efforts. It seems very likely that this sort of tie-up between physical and virtual will continue.

It appears that speculation earlier this week was correct: Linden Lab's VP Platform Joe Miller has confirmed that a thin client for Second Life, to be called SLim, will be launched in beta 'in a couple of weeks'. The client will be a light weight way to access Second Life, providing text and voice chat without the immersive 3D experience.

Lowering the barriers to using Second Life appear to be part of this. Users already understand IM and VoIP relatively well, and so less explanation of the concept of Second Life might be needed if the 3D aspect is viewed as an extension of that core functionality, rather than IM and VoIP being viewed as features of a 3D world. The difference is subtle but I believe that it is significant. It also has enterprise consequences. Miller cites an example of a business meeting where participants don't have to have the full 3D client to be in the meeting- it would certainly be easier to persuade a business colleague or IT department not familiar with SL to use an IM/VoIP client than to use a 3D client. It will also run on much lower spec hardware, still a key barrier to adoption in much of enterprise.

Miller also announced that avatars and groups will be able to have a phone number. In one use case, an avatar could have a phone number which could be used to reach them in-world by someone using PSTN (conventional telephone network). There will also be optional voicemail, so that the caller is not reliant upon the avatar being in-world at the time of the call. This is connected to the shift in emphasis I discussed earlier: by providing core communication features to Second Life, it becomes a much simpler proposition to market to potential users. In a second example, a meeting could be assigned a number, allowing a participant to join without having to even download SLim, let alone the full client. This goes a long way to solving the enterprise chicken-and-egg problem, of it not making much sense to ask your client to a meeting in Second Life if they are not already members.

Disney has announced several additions to its Disney.com property, including a new portal for virtual worlds (as well as its other games) and mobile widgets. Both are significant because they point towards interesting strategic decisions which Disney will have to take.

Disney's business is based on creating brands that kids love, and its virtual worlds activities are part of that. The consequence of that is that it has ended up with a collection of very different virtual worlds, in exactly the same way in which it has created films which stand alone. However, with virtual worlds the possibility to join them up in some way exists in a way that it doesn't with other media, such as films. It is clear that the games portal is the start of Disney's work towards this. The key advantage of such an approach is cross-promotion. If they can build 'Disney' up as a virtual worlds brand, instead of just 'Club Penguin' or 'ToonTown', etc, then when and if a user becomes bored of one virtual world the natural decision is to play a different Disney world rather than jump ship entirely. The challenge is to achieve that without weakening the individual virtual worlds, however. It clearly doesn't make much sense for users to have a single avatar, for example; a fairy in Club Penguin or a penguin in Pixie Hollow would make little sense. Disney is, though, working on a single sign on, with multiple avatars in different games tied to one account.

The other interesting new feature is the creation of 'virtual worlds widgets'. These are widgets in the mobile content sense of the word, which will allow users to access and interact with virtual worlds from their mobile. The widgets aren't, at this stage, about full access to the whole virtual world; instead users will be able to interact with a little piece of the virtual world. An example is that players of Pixie Hollow will be able to look after a fairy on their mobile phone, which will presumably also exist in the full virtual world. Nevertheless, as data prices plummet and phones become more sophisticated, Disney could be one of the first to bring VWs to mobile devices in a big way, given that games such as Club Penguin and ToonTown only require flash, rather than a hefty 3D client.

It is the conventional wisdom of the virtual worlds industry that interoperability is a Good Thing. Indeed, its promise of a single, persistent avatar which works the same in all worlds and the ability to move between worlds offers a real way to achieve a true, universal metaverse. Linden Lab's work on interoperability continues apace, with teleport between Second Life and OpenSim now possible, and the recent launch of the Second Life Open Grid beta.

Not everyone is quite so excited, however. Prominent Second Life user Prokofy has written a post in which she argues that moves to interoperability are happening too fast and risk creating not the utopian metaverse but a world in which intellectual property is not respected and there can be no enforcement of laws.

Well, that's one of the reasons you don't rush to interoperability! That's why most people aren't asking for this; not even most games and worlds are asking for this! Hello! Under the guise of making "universal standards" (called in this scenario "open standards") which enable "everybody to connect all different ways," they are creating openness without any kind responsibility....

There's another way, and that is *not have the roads*. Until you need them. Until FIRST you work out the agreement, THEN you connect. This creation of a web of connectivity pressuring each "service provider" to Balkanize their choices strikes me as destructive. I don't think it really follows the model of the web. The web had hyperlinks that took you to other pages to read stuff or look at pictures. It didn't take you there to chat, interact, communicate, feel, have sex on poseballs and furniture that people wish to sell, to put it bluntly. Different!

Clearly this is a difficult area. I'm not sure that the 'agreement, then technology' framework which Prokofy suggests is scalable- it wouldn't lead to universal interoperability, with competitive business concerns inevitably becoming a factor in VWs' decisions as to whether to connect to each other. I would point out, though, that infringement of IP on the web, irritating as it is, is endemic and it has yet to break the web. Put simply, this post will no doubt appear on a number of splogs, but that doesn't materially reduce the business case for this blog to exist. People make money from content on the web despite IP infringement, and I suspect that something similar will happen in virtual worlds.