Second Life of Shadow Consumers

KEY SLIDES

Slide 1: Virtual World Opportunities: Second Life and Beyond Siemens Global Web Conference Kloster Seeon, June 1, 2007

Slide 2: Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 3: The future is here. It‘s just not widely distributed yet. William Gibson Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 4: Since 1997 CScout reports directly from the global Hot-Spots keeping your fingers on the pulse. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 5: CScout is translating new market developments into new profit opportunities. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 6: We are Screening & Monitoring Trends from early signals to radical innovations. High Climax: Mass Market Early Adoptors: Impact Trend-Setters Followers: Fast & Late Followers Innovators: Lead Users Retro Trends Low Low High Duration Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 7: What we also do… Trend Management System Executive Trend Tours TrendPool - Database Trend Reports Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 8: Executive TrendTour New York City, 18. - 20. July 2007 3 days of Trends & Innovation: - „The Future of Media“ - „The Future of Marketing“ - „Consumer Generated Media“ Request your TrendTour today. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 10: The new Web 2.0 is a social-amplifier. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 12: „Everybody is an artist“ Joseph Beuys Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 13: Today software enables anybody to become an author, journalist or film maker. Attention Economy - Self-representation ‣through avatars (online gaming), ‣voice (podcast) and ‣as actor (video) or ‣author (weblogs). Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 14: Participatory culture - sharing and participating is spreading in the digital world. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 19: The average Gamer is 32 years old. The average age of the most frequent game buyer is 40 years old. 69% of American heads of households play computer and video games. Thirty-eight percent of all game players are women. * From the Entertainment Software Association. The stats are a combination of both computer and console gaming. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 20: There are over 400 million active gamers worldwide. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 21: A virtual world is a computer-based simulated environment intended for its users to inhabit and interact via avatars. Definition - Virtual World Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 22: 6,5 Mio People create their virtual Second Life. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 23: Second Life (www.secondlife.com) was created in 1999 by Linden Labs, a privately held company. The founder is Philip Rosedale, the former CTO of RealNetworks. The creator, Rosedale, says he got the idea back in 1992 when his wife handed him a copy of the book Snow Crash by Neal Stephenson. Snow Crash is basically a sci-fi story about a hero in the future who unravels a mystery that transverses both the real world and the “Metaverse.” “Metaverse” is a 3-D virtual universe online. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 24: Second Life’s First Millionaire At the end of November of 2006, Second Life spit out its first millionaire. The millionaire is Anshe Chung, whose fortune in Second Life includes virtual real estate, cash holdings in Linden dollars, and several brands in Second Life. She also has significant virtual stock market investments in Second Life. Born in China, she is currently a citizen of Germany. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 25: Why is Second Life so successful? ‣ User Generated: SL is a completely personalized environment. Residents can view and modify the world, create, buy and sell property, houses, services and other virtual items (from clothing to technology) ‣ Own Currency: Second Life has its own economy and a currency referred to as Linden Dollars (L$). Though the exchange rate fluctuates, as of February 2007 it is reasonably stable at around L$ 270 to one US dollar. Residents trade real currency via credit card or paypal into L$ The Second Life Currency Exchange acts as a real financial market ‣ Explorative Interaction & Communication: Users are called residents and appear as avatars. Second Life provide an advanced level of a social network service combined with general aspects of a metaverse (3D virtual world). Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 26: Real Life Companies in Second Life. Several real world brands are starting to set up a presence in SL and translate real-life products and services into the virtual domain of Second Life. 20th Century Fox, Adidas Reebok, American Apparel, American Cancer Society, Axel Springer AG- Bild.T- Online, BBC Radio, Centric, Creative Commons, Dell, Disney, Endemol - Big Brother, Eudoxa, Gabetti Property Solutions, Harvard Law School, IBM, Leo Burnett, Lichtenstein Creative Media, Max March Industries, Mazda, MLB.com, MTV, Intel, The New Media Consortium, PA Consulting Group, Reuters, Starwood Hotels, Sun Microsystems, TELUS Mobility, Text 100, Toyota, Universal Motown Records Group, Mercedes Benz, BMW, Deutsche Post, T-Online, Pontiac, Wired Magazine, Sony BMG, Calvin Klein, Loreal… ABN Amro, BCV, BNP Paribas, ING Bank, Saxo Bank, Wells Fargo. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 27: Strategies in Second Life. Advertising & Promotion: Most of the companies are currently investing in SL as an alternative advertising and promotional platform (for example Sony BMG Artists Promotion). Generating a buzz worldwide Virtual Business: The virtual shops are mainly used to display and sell virtual items (for example Adidas Store).Virtual spaces are usually connected to an external online website. Education & Future Market: Stage events, speeches and seminars (Intel in Second Life New York Live Window)Experiment a new type of interaction with the users Use Second Life as a test laboratory for the future of the internet (IBM) E-Learning, Recruitment, Internal Workshop and conferences. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 28: Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 29: CScout initiated a Innovation Project for Bild.T-Online AG (Axel-Springer Verlag). CScout developed the concept for „The Avastar“ and realized the concept within Second Life. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 30: The Avastar is the most efficient marketing activity for Bild.T-Online ever. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 31: A real newspaper for a virtual world. 23rd Issue L$150,- Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 32: Regis Braathens, alias Rowan Barnett, is Chief Editor of the Avastar. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 35: Avastar Areas: Main Sphere Newbie Lounge Star Lounge Style Lounge Style Lounge Travel Lounge Beach Club Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 44: Future Virtual Worlds - Playstation „Home“. Home is a real-time online 3D, networked community available on the Playstation 3. It allows users to interact, communicate, join online games, shop, share private content and even build and show off their own personal spaces to others in real time. With an avatar uniquely customized according to each user’s preference, users can explore the 3D community that is Home – a sleek, modern environment featuring spacious common areas; custom spaces dedicated to specific games; and personal apartments. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 45: Future Virtual Worlds - Playstation „Home“. Official Trailer (Quicktime Video) Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 47: 8,5 Mio People. World of Warcraft is a massive multiplayer online role-playing game (MMORPG). Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 48: eSports is becoming a serious sport-business. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 51: Shopping is different in Virtual Worlds. Different… … Payment Methods … Consumer Behavior … Needs & Wishes Same… … Identity … Products … Brands? Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 52: vBusiness Strategy has three main characteristics. ‣ Innovative ‣ Global ‣ Sustainable Siemens Global Web Conference, Jun 2007 © 2007 CScout Trendberatung

Slide 53: Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

Slide 54: The Power of Virtual Worlds … changes the way we think about the World Wide Web. Siemens Global Web Conference, Jun 2007 © 2007 CScout Trendberatung

Slide 55: Virtual Worlds CScout is helping will be relevant you to keep for your business. ahead of time. You can profit from There are new virtual business to gain emerging real business. Virtual Worlds. Siemens Global Web Conference, Juni 2007 © 2007 CScout Trendberatung

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Who Active: Aarhus Business College: Aarhus, Denmark Oklahoma City University: Oklahoma City, OK Arcada University of Technology: Helsingfors, Finland The Open University: Milton Keynes, UK The Art Institute of California-San Diego San Diego, CA Oregon State University: Corvallis, OR The Art Institute of Pittsburgh Pittsburgh, PA Otis College of Art and Design Los Angeles, CA Audiocourses Music Production School: London, United Kingdom Pellissippi State Technical Community College: Knoxville, TN Australian Film TV and Radio School: Sydney, Australia Pennsylvania State University: (Various towns), PA Ball State University: Muncie, IN Pepperdine Universtiy: Malibu, CA The Bay School of San Francisco: San Francisco, CA Platt (Media Arts) College San Diego: San Diego, CA Beach College: Santa Barbara, CA San Diego State University: San Diego, Calif. Bentley College - Department of Natural and Applied Sciences: Waltham, MA San Francisco State University: San Francisco, CA Bradley University, Peoria, IL Savannah College of Art & Design: Savannah, GA; Atlanta, GA; Lacoste, France Bromley College of Further and Higher Education Seton Hall University: South Orange, NJ California State University - Pomona: Pomona, CA Sheffield Hallam University: Sheffield, UK/ Central Missouri State University: Warrensburg, Missouri Sogang University: Seoul, Korea Central Piedmont Community College - Futures Institute: Charlotte, NC Stanford University: Palo Alto, CA Colorado Mountain College: Glendwood Springs, CO SUNY Empire State College: Saratoga Springs, NY Columbia University: New York, NY Temple University: Philadelphia, PA Dyersburg State Community College: Dyersburg, TN Texas State University: San Marcos, Texas Elon University: Elon, NC The Bay School of San Francisco: San Francisco, CA Finger Lakes Community College: Canandaigua, NY Thomas Jefferson University: Philadelphia, PA Fullerton College: Fullerton, CA Trinity University: San Antonio, Texas Gerald D. Hines College of Architecture University of Houston: Houston, TX Center for Distance Education, UAF Fairbanks, Alaska Harvard University: Cambridge, Mass. University of Bedfordshire Luton & Bedford, UK Idaho State University: Pocatello, Idaho. University of California Berkeley Illinois State University: Normal, IL University of Cincinnati: Cincinnati, OH Indiana University: Bloomington, IN University of Colorado at Denver Medical Center: Denver, CO Insead University of Connecticut: Hartford, CT Institut Ingemedia: Toulon, France University of Derby: Derby, UK Johnson & Wales University: Providence, RI & 5 Western States University of Edinburgh: Edinburgh, Scotland, UK Kalamazoo Valley Community College: Kalamazoo, MI University of Florida: Gainesville, FL Leeds College of Art and Design: West Yorkshire, United Kingdom University of Massachusetts: North Dartmouth, MA Leeds Metropolitan University: West Yorkshire, United Kingdom University of Minnesota, School of Physics and Astronomy: Minneapolis, MN Lehigh Carbon Community College: Schnecksville, PA University of Missouri - Kansas City: Kansas City, Missouri Loyalist College: Belleville, ON, Canada University of Nevada, Reno: Reno, NV Mayville State University: Mayville, ND University of Paisley: Paisley, Scotland, UK Minneapolis College of Art and Design: Minneapolis, MN University of Southern California: Los Angeles, CA Minnesota State Colleges and Universities University of Southern Denmark (Syddansk Universitet) Montana State University: Bozeman, Montana University of Surrey: Guildford, UK Nanyang Polytechnic: Singapore University of Sydney: Sydney, Australia Nelson Marlborough Institute of Technology: Nelson, New Zealand http://www.utk.edu New York University - McGhee Division: New York, NY University of Texas at Dallas: Richardson, Texas Newcastle University Newcastle upon Tyne, UK University of Texas Medical Branch: Galveston, Texas Northern Illinois University: DeKalb, IL University of Wales, Newport: Newport, Wales, UK Ohio State University: Columbus, OH

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In economics, scarcity is defined as a condition of limited resources, where society or a system lacks sufficient resources to produce enough to fulfill subjective wants.

Alternatively, scarcity implies that not all of society’s goals can be attained at the same time, so that trade-offs are made of one good against others. Neoclassical economics, a school of thought that refers to a general approach in economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, defines its field as involving scarcity: following Lionel Robbins’ (late British economist) definition, “Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.”

Traditionally goods and services are scarce because of the limited availability of resources along with the limits on our technology and skillful people relative to the total amount desired.

- If people desired nothing, there would be no scarcity.

- If resources were great enough to produce more than anyone desired, there would also be no scarcity.

Inefficiencies in the use of resources may also limit the production so that goods are scarce. It is hard to eliminate all inefficiencies, and some characterize institutional inefficiency as artificial scarcity.

Goods, which include services, that are scarce are called economic goods (or simply ‘goods’ if their scarcity is presumed). Other goods are called free goods if they are desired but in such abundance that they are not scarce, e.g. air and seawater. A vrtual equivlent might be common starter “textures” or devices common to all players.

Where and when goods are scarce it is necessary for society or people to make choices as to how they are allocated and used.

In virtual worlds, as an example, avatars may desire to own a private virtual island. The amount of virtual land, however, may be limited by design, or by game play, market structure, or individuals with market control so it is necessary to make choices as to how avatars allocate their resources.

In a “real-world” market economy, this is often achieved by trade. Other ways to make this decision involve tradition, community democracy, and government top-down or centralized command. In the market, individuals and organizations, such as corporations, trade resources amongst themselves, reallocating resources to where they are most wanted by those with purchasing power. In a smoothly operating market system, the rate of exchange between different resources, or price should adjust so that demand is equal to supply.

Certain goods are likely to remain inherently scarce by definition or by design and this is the most common type of goods in virtual worlds/games (e.g. World of WarCraft, Ultima Online) examples include land and/or positional goods such as awards generated by honor systems, fame, achievements, experience and levels. These things are said to derive all or most of their value from their scarcity. But these may be seen as examples of artificial scarcity, a reflection of game or in-world design.

Since virtual goods can be produced and copied at almost negligible cost, they do not need to be scarce. This is why copies of of common digital goods are free or can be had at very little cost- depending on intent. However, virtual currency and many other virtual products are kept artificially scarce through intellectual property protection, as in Second Life, by the IP holder. The same for game levels, awards, special items, etc. where the trade-off is time.

Players or in-world participants (avatars) who desire these goods will often use “real-world” currency or barter to acquire these economic goods. Brokers may purchase accounts in whole and “strip” them and sell them piece-by-piece to maximize their return on investment.

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H&R Block embraces the shadow consumer with avatar to avatar tax interaction. Notable the use of a “tango” dance script, a common activity in SL, tied to the product line, a product bundle that costs $100 Lindens that can be redeemed for a A special code that provides access to the new Tango product, Real World retail value of $70. US, virtual scooters to tour H&R Block Island (entertainment & interaction), Tango avatar apparel (fashion), a program that will enable Second Life residents to earn Linden Dollars by helping to market H&R Block’s Tango product bundle on their own virtual property (affiliation, business).

From the press release:

Visitors to H&R Block Island will experience a new virtual tax world as they arrive at a landing point dotted with welcome signs, maps and other navigational tools, including:

– A virtual H&R Block tax experience where real life tax professionals will be available in avatar form to answer tax-related questions free of charge. H&R Block’s virtual tax advisor avatars are named Hope Bechir and Rex Philbin. Hope and Rex will hold office hours in Second Life from 6-7 p.m. PDT on Tuesdays and Thursdays starting March 13 through April 17, 2007.

– A main auditorium where visitors can watch a video describing the development of H&R Block’s revolutionary innovative new tax preparation product, Tango ( www.hrblock.com/tango), as well as attend other in-world activities.

– An exclusive H&R Block Tango product bundle that costs 100 Linden Dollars and includes:

– A special code that provides access to the new Tango product, which retails in the real world for $70.

– A variety of virtual scooters to tour H&R Block Island, virtual dancing shoes that allow users to do a tango-style dance when worn, and other Tango avatar apparel.

– A program that will enable Second Life residents to earn Linden Dollars by helping to market H&R Block’s Tango product bundle on their own virtual property.

H&R Block will plan events and new activities in Second Life on a regular basis throughout tax season and during the off-season as well. The company will continue to expand and refine its Second Life presence through active engagement with the community.

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Avatars (a.k.a. “av”) is coined the ”Shadow Consumer”, in a Harvard Business Review article about avatar-based marketing in virtual worlds. The piece argues that, while the real-world subscribers to online virtual worlds are an obvious target for marketers, the online avatar, essentially alternate identities, “arguably represents a distinctly different ’shadow’ consumer, one able to influence its creator’s purchase of real-world products and conceivably make its own real-world purchases in the virtual world.”

Virtual Economy and Avatar Marketing“ is an excellent starting point. ”Marketing to Avatars. Companies spend vast sums of money trying to segment, reach, and influence potential customers. On this cast the discussion ask that perhaps they should think about targeting those customers online alter egos as well. This conversation is with Harvard Business Review senior editor Paul Hemp as he talks about the potentially lucrative domain of online games. At least one hundred million dollars transacted in the side market alone (online auctions) for skills and accessories just for avatars…

EPISODE 3: Marketing to Avatars:
Date: May 25, 2006. <Click To Listen or Download to “Marketing to Avatars” MP3 Format> 

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