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Summary:

A total of $594 million was invested in 63 Virtual Worlds in 2008, according to Austin-based trade show company Virtual Worlds Management. That may seem like a lot, but that’s down from the more than $1.4 billion in 2007 (their estimate), a figure that was hugely […]

vwmA total of $594 million was invested in 63 Virtual Worlds in 2008, according to Austin-based trade show company Virtual Worlds Management. That may seem like a lot, but that’s down from the more than $1.4 billion in 2007 (their estimate), a figure that was hugely skewed by Disney’s purchase of kid’s world Club Penguin for nearly $700 million. While there weren’t any acquisitions of that size in 2008, much of last year’s investment also went into worlds aimed at kids and teens, which continue to enjoy enormous audience growth. (The largest, Habbo, is almost as popular as World of Warcraft, and profitable with far less development costs.) By VWM’s tabulations, 19 kid-oriented companies saw ’08 investment, compared with 11 virtual worlds for adults — though in my observation, the latter category actually includes several worlds such as YoVille and Metaplace that also strive for teen appeal.

Most youth-oriented virtual worlds are free to play, depending on such methods as “freemium” upgrade subscription, microtransactions, and gift card purchases for revenue. Which explains why so much 2008 money went into companies that monetize virtual worlds in these ways and others — $64.7 million for five companies, according to VWM.

By contrast, on this list I see only three major investments in the development of adult-oriented, 3D graphics heavy, massively multiplayer online games: $70 million for Trion World Network to make a fantasy MMOG and a MMOG for the Sci-Fi Channel, $50 million for Realtime Worlds, which is creating a Grand Theft Auto-style MMOG, and $40 million for Turbine, creator of Lord of the Rings Online. WoW continues to dominate this category so thoroughly, however, most of the industry finally seems ready to concede defeat, and look for opportunities elsewhere.

Disclosure: My Second Life blog is a “media partner” for Virtual World Management’s Engage Expo.

By Wagner James Au

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  1. Has there been any increase of investment into companies that are trying to make a virtual world platform, as opposed to just one-off “Virtual World With Cat Avatars” and “Virtual World With Dog Avatars”? It seems to me that whatever company can create a easy to develop for virtual world platform, could make serious money. So much of the development costs for creating a MMORPG seem to be in re-inventing the wheel over and over, chat system, network code etc.

    Is there any work going on in the FOSS world with regards to a virtual world platform?

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  2. World of Warcraft still raises the bar when it comes to ‘mainstream’ virtual worlds. It can be hard for newer and smaller companies to take a piece of the pie when the big 800lb gorilla is evolving with you.

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  3. I doubt that there’s all that much money to be made in a platform. Platforms tend to perform pretty averagely – look at Ning, for example. I think this occurs for a number of reasons:

    – There’s no distinction between platform-based systems – either it’s so variable that there’s no point in a platform at all, or else it’s so straightforward that all systems based on it are essentially the same
    – It requires constant maintenance – often systems reinvent the wheel because the wheel needs reinventing, current technology will only be current for a few years, then the system will need to be rebuilt, along with all apps based on it

    Not to mention, in essence a platform for a virtual world is a combination physics and graphics engine, which people do license. Anything more limits the freedom of world design.

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  4. I don’t think they will be able to defeat World of Warcraft, maybe not for the next 5 to 10 years. They’re making a lot of money out of those kids (with parents spending money for them) and adults that may sustain to maintain the game.

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  5. I agree that a platform would be successful, yet at the same time I agree that its not going to make anyone fabulously wealthy. I would love to see something on the order of Joomla or Drupal for virtual worlds.

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    1. @Moose, we recently launched Digital Dollhouse for a client in California and just published an article and case study about how we did it. Digital Dollhouse uses Drupal as a front- and back-end engine and Flash for the primary front-end game play.

      http://knurl.us/url/obko9s4

      I’d love to know what you think!

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  6. [...] Virtual World Money in ‘08 Targeted Kids, Kids’ Wallets GigaOm ,January 22, 2009 A total of $594 million was invested in 63 Virtual Worlds in 2008, according to Austin-based trade show company Virtual Worlds Management. … [...]

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