Technology Intelligence Group

The current economy and Virtual Worlds

These are indeed interesting times for businesses, most particularly startups.  I always seem to be in a virtual world presentation or at a virtual world conference as the macro-economic situation worsens and worsens.  In stepping back, this downturn should have some surprising impacts on this stage of development of the virtual worlds industry.

By way of context, in my humble opinion, the virtual world industry is still relatively nascent. There have been companies doing virtual world platforms for fun and profit for decades, however as a technology sector overall, they are just now coming into mainstream adoption numbers.  There is the standard first/second/third technology generation tensions between early entrants (many of which are making money) and new market entrants (who are not) looking to disrupt and capitalize.

The virtual world companies that are in the middle of (or about to seek) fund raising will find their valuations pushed down as a best-case-scenario, with 'no capital availability' as a worst-case scenario.  Typical sources of capital like friends/family/angel investors are all feeling the pain of watching their personal portfolios shrinking on a daily basis, and are therefore less likely to invest in a speculative venture in an increasingly-crowded sector.  The venture community is suffering from a combination of gripping fear, lack of self confidence, and overall paralysis.....but only at a certain altitude.  Large VCs are most impacted, as they have so much more capital to put in to play that they need certain (absurdly large) valuations of the startups they are injecting capital into.  Smaller funds, which invest in smaller denominations/valuations, are going to clean up during this time. 

Bad news for VW startups wanting large valuations about now, good news for smaller VCs with capital on hand and VW startups looking for early smaller rounds.

What about the impact of the economy on the broader value proposition of the industry?  Lets break it down a step at a time....

Eduverse Follow Up- Symposium3 Video Now Online

Robert Shepherd, the coordinator behind the recent Symposium3 event in Amsterdam, was kind enough to post the video of the event on GoogleVideo this morning.  My video-conferenced keynote address, with the 1970s earmuff headphones and all, follows:

Virtual Worlds Forum 08- London wrapup

Many of the TIG contributors traveled to London this week for the Virtual Worlds Forum in London.

Unfortunately, due to an incident at the meeting venue, the event had to be canceled. Quite a few attendees switched location to the Hospital Club in Covent Garden for some networking and an Unconference on Tuesday.  A number of industry luminaries were there, including TIG contributor Dr. Richard Bartle, as well as Jessica Mulligan, Raph Koster, and Ian Hughes.

The kind folks at SXSW held a party at Digress City Monday night, which was a nice mixer of the VWF crowd, as well as attendees of a number of other conferences in London this week. 

Overall, it was an unfortunate circumstance for the attendees and organizers, but we were able to make a little lemonade from the lemons handed to us in the circumstances.

I now travel back to the US for a bit , and am speaking again at the ConEx Nature Conservancy panel on the 14th & 15th of the month.  If you are in Vancouver for ConEx, please drop by the 'Blogs, Wikis, and Virtual Realities, New Media Tools for Conservationists' panel in the 'Values and Society' track, and say hello to the virtual me!

Bandwidth Caps, Streaming Media and Virtual World Architectures

There has been abundant debate lately about Comcast's impending implementation of a 250GB/Month bandwidth cap on it's users in the United States.  Time Warner had started capping in June of 2008 by limiting subscribers to 40GB/Month, and many international ISPs regularly implement bandwidth limitations for their users. 

The reason behind this is simple, the majority of providers of Internet access come from a metered-service background, be they telephone calls or cable channels.  Now they want to apply the same model to Internet Access.  This is going to work out badly for many emerging Internet application classes.

Serious Virtual Worlds '08

In beautiful Coventry, England today and tomorrow is the Serious Virtual Worlds '08 conference, as part of the Serious Games Institute of Coventry University.  Hosted by Sara de Freitas and David Wortley, the conference has been at the forefront of mixed-reality events and location-integration between the real and virtual worlds.

I had the good fortune to keynote the conference last year and again this year.  Below is a link to a swf (flash) file of my slides, which I will annotate with audio (or link to the show video recorded) when I get back to my home base next week.

Download coventry_svw08.swf

Virtual Worlds Expo 2008 Round-up

Last week was a busy week in Los Angeles for the Virtual Worlds Expo 2008 at the Los Angeles Convention Center.  According to conference organizers I spoke with, nearly 1300 attendees participated in the event, which included multiple tracks covering consumer, media, children, enterprise, education and a 'future of virtual worlds' track.  I was fortunate enough to participate on a panel in this last track, alongside such industry luminaries as John Swords, Ian Hughes, Mark Wallace, and Ben Goetzel. 

The overall show was well populated compared to previous shows, if not a bit drowning in the spacious LACC.  It was evident that the industry is evolving, both in the international flavor of the participants attending, as well as the distribution of industry vs. customers, and (within industry) the number of consumer virtual world companies vs. the number of technology providers to same.  The latter quantity was present in abundance, with every company vying to be the platform-of-choice for developers to create consumer and business worlds upon.

This is the current-indicator-incarnation of a leading-indicator that I wrote about in late 2007, in that VC investment in the virtual worlds market was leaning heavily towards technology and component startups versus retail virtual world plays themselves.  It took eight to ten months for these second round investments to bear fruit, and they were in full bloom at the show.

One side note- many vendors I spoke with bemoaned the mix of industry/customers at the show, as there was an overpopulation of industry represented this time around.  It may be the first-time-location or a statistical blip in attendee mix.  Time will give us more samples to trend from.

Next, I head off to Coventry England to the Serious Virtual Worlds 2008 conference.  I had the opportunity to keynote the conference last year just as the integration of virtual worlds and the real world was still a black art.  This year should provide much more meat for conversation (or presentation) given the considerable activity that has taken place in the intervening twelve months.  I'll be posting the presentation shortly after my keynote, although in my usual fashion, it will be of the 'pretty pictures to accompany the speaker's points' school and not a longhand document with lots of text. When I get back to the states next week I will do a voiceover to accompany the slides and post them to slideshare.

Nortel: Part II- 'All your positional voice belong to us'

Nortel dropped the other shoe this morning, in addition to their formal announcement of Project Chainsaw, by announcing their acquisiton of Diamondware (Mesa, AZ) for $10M.  Diamondware is a company that provides 3D positional audio for virtual worlds and games.

This is a case of $10M providing considerable leverage.  When I was at Cisco, we used to search long and hard for key technology players that had disruptive potential for the industry if acquired.  A protocol stack here, a key-technology player there, and pretty soon you have a corner on the key resources needed to make a market work.

Diamondware is a key technology provider to MANY companies in the virtual world and gaming markets.  For example, one of their licensees is Vivox, the people who get all the credit for providing spatial audio for SecondLife.

On a related note, Nortel announced intent to acquire PingTel about a week ago as well.  PingTel makes a slick opensource, SIP-based, IP PBX for Linux.  If the Nortel voice team were to combine some cool SIP-based IP Telephony kit with spatial/positional audio.........

Now that Nortel has announced intent to acquire Diamondware, expect a number of shakeups around industry as (generally) virtual world startups will be averse to using spatial-audio technology owned by a company who sells virtual world technology.  If you are the CEO of some other spatial-audio vendor today, I'd go get a haircut and whiten my teeth if I were you, because you're about to get a bunch of invitations to the dance.

Breaking: Nortel entering Enterprise Virtual World market

Nortel has been stealthy about their virtual collaboration efforts to date, sharing a little bit at the recent vPolicy event in London, however it appears that they have been developing a virtual space as a collaboration tool for onboarding, events, and training.  The project, known both as web.alive and "Project Chainsaw" (I prefer the second name, much more evocative) is starting to trickle out of Nortel as of tonight.  The screenshots I saw in London were very high quality graphics with hundreds of concurrent participants, which bodes well for the burgeoning 'enterprise events' application (think 'employee all-hands meetings')

Before any of the gaming people say 'Nortel WHO?', remember the fact that these guys have an enormous enterprise voice and video footprint that they can incrementally upgrade to include this function.  This is going to be a game-changer in the enterprise collaboration market for Virtual Worlds.

Video on YouTube of the Project Lead talking about Chainsaw with some screenshots.

Take a look at the breaking news on their website for more details.  I am hoping to get some time with their CTO of this effort over the next two days for inclusion into the TIG Industry Outlook for the VW space, so stay tuned.

Catch me if you can- August and September edition

Over the next two months, I will be doing a fair bit of  speaking regarding the future of the virtual workforce and workspaces, which will coincide with the release of Technology Intelligence Group's Industry Outlook 2008-2009.

Tomorrow, I am virtually participating on the "Future of Virtual Worlds" panel as part of the vBusinessExpo in Forterra OLIVE, organized by Clever Zebra.  I will be joining Bruce Joy of VastPark, Nicole Yankelovich of Sun's Project Wonderland, Darius Lahoutifard of 3DXplorer, Corey Bridges of Multiverse, and John Swords of the Electric Sheep Company.  I guess I am the only non-platform person there.  :-)

Next week, I am traveling to Los Angeles (and bringing my children to the House of Mouse) to speak on Rita Turkowski's panel at the Web3D conference attached to SIGGRAPH.  The panel, on Sunday August 10th, is entitled "I see Web3D's Future in..." and will have panelists from diverse parts of industry so it should be an interesting cocktail.

Shortly thereafter, I return to the City of Angels (fulfilling the curse laid upon me when I moved from there in 1996 warning that people can never actually escape) to speak at the Virtual Worlds Expo 2008, where I will be participating on the September 3rd "Technical Visionaries Discuss and Debate The Future of Virtual World Technologies" panel with an august group of visionaries including John Swords, Ian Hughes (epredator), and Mark Wallace.  This one should be fun to watch, and if it wasn't so early in the morning, I'd bring a bottle of Tequila to get things rolling properly.

To round out September, I will be returning to beautiful Coventry England to keynote the Serious Virtual Worlds conference held by David Wortley of the Coventry University Serious Games Institute.  If  you haven't followed the work they are doing there, and those that are working closely with SGI, you should take the time to do so.

The good news is that all of my other engagements during August and September are virtual in nature and will not be emitting the carbon of actual air travel.  Now, I'm off to go plant a forest in my backyard to offset these trips.

Virtual Policy '08 Recap

As I type this, I am just flying back from Leigh Jackson (BERR) and Ren Reynolds' (tVPN) excellent Virtual Policy 2008 event where I had the honor of being the closing keynote presenter.  The event, hosted by the British Ministry of Business and Enterprise Regulatory Reform in London, was positioned as an educational venue for industry and academics to engage with government officials considering the best regulatory posture for social virtual spaces.

There were a number of highlights of the event, which Ren had broken into main-room events and panels, and separate 'deep-dive' breakouts to discuss specific issues in greater detail.  Each of the panels I attended were populated by industry and academic experts with well-thought-out presentations and positions, which were elaborated on in even greater depth in the breakout sessions.  All in all, the government (and industry) attendees to the event could not help but learn much more than they had anticipated.

My slides from the event (which are blissfully devoid of text except in sparse places, by deliberate consideration of the fatigued ocular capacities of the attendees at the end of the two full days of conference) I have uploaded to slideshare, or can be downloaded here.

Download vpolicy_closing_keynote_renaud.pdf

The overall theme to my closing keynote was one of keeping a high-altitude perspective when considering regulation of virtual worlds, given the rapid pace of technology development as well as the inherently porous nature of technologies and their natural tendency to absorb the best aspects of other technologies as well as be absorbed themselves by peer or succeeding technologies.  As such, my slides have simple graphics representing my major categories of focus, including:

• Children's issues in virtual worlds

• The opportunities to revisit the traditional workspace arrangements in place in enterprise in favor of virtual spaces with telecommuters, and the resultant environmental impacts of such policies

• Intellectual property creation and protection in virtual spaces

• Identity, necessary anonymity, presence and building trust electronically

• Leveraging virtual spaces as a platform to incorporate more serious-games techniques into the general workplace

• And finally, the near-term opportunity represented by being able to maintain a flexible work-arrangement with the oldest 5% of the population to take advantage of their considerable experience and potentially capture their learnings in this electronically-mediated mechanism for archival and data-mining purposes.

Visiting Professor Dr. Richard Bartle had lucidly reminded the attendees the preceding day that any movement towards taxation of virtual economies must be weighed against the collateral impact to virtual currency exchange and commerce in gaming worlds.  I would strongly suggest finding an archive of the 'Conversation with Richard Bartle' section of Tuesday's agenda for a concise and to-the-point summary of why a light-touch is the best course of regulatory action.  If I find one I will append it to this post.

Should you have the opportunity to catch a replay of the event, which Ren and Leigh thoughtfully streamed into Second Life, I would suggest doing so.  I hope that their future collaborations together on the subject bear as much fruit.