WoW and Second Life Don't Tell the Whole MMO Story

WoW and SLInvestors poured $237 million into virtual world-related startups and payment systems last quarter alone, according to a report released today by industry trade show producer Engage Digital, signaling venture capitalists’ continued enthusiasm in the market. (Nearly $600 million in funding went into this sector for all of last year.) And ask the average tech-savvy person to name a major virtual world, chances are they’ll mention World of Warcraft or Second Life. Both MMOs certainly get the lion’s share of media attention; according to Nielsen Games, they often generate the most total monthly player minutes among all PC-installed worlds. However, as the recent investment news suggests, WoW and Second Life are only part of the story; neither world is truly representative of the MMO sector, nor reflective of where the larger virtual world industry is growing.

Why? In the case of Warcraft, its continued, unprecedented growth in subscribers suggests it’s a category killer in its particular sub-genre of virtual world, the subscription-driven, 3-D fantasy MMORPG. Subsequent rivals in that space have fallen far short of WoW’s 12 million subscriber base; most of the major game publishers are now focusing their energies on non-fantasy MMOs like Star Wars: The Old Republic, or experimenting with non-subscriber worlds, like Free Realms, largely leaving WoW alone in its own sub-genre. In the case of Second Life, while it’s earning tremendous revenue, its user base of some 750,000 monthly uniques makes it a midsized world at best, behind some dozen or so MMOs with regular users in the millions. Second Life’s particular sub-genre, a 3-D, dynamically user-created virtual world, has yet to attract any major competitor.

Meanwhile, numerous other virtual worlds are more popular than Second Life or even World of Warcraft, successfully operating on different platforms and revenue models, targeting various demographics. Consider, for example Zynga’s YoVille, an MMO that can be played only on MySpace or Facebook. Web-based and cartoonish, it’s not 3D and immersive like Second Life or WoW, but a virtual world all the same, offering users a simulated contiguous space with real-time interaction via avatars. It’s also tremendously popular: Just 14 months after its May 2008 launch, it now counts 8.5 million monthly active users on Facebook alone. But perhaps the most surprising thing isn’t its size; it’s that other MMOs, such as Maple Story and Habbo, are even larger. World of Warcraft and Second Life may be the most visible makes in the display window, but don’t forget the many other high-performance models on the show floor.

Wagner James Au is the author of The Making of Second Life (HarperCollins) and a member of the GigaOM Analyst Network. His complete discussion on trends and opportunities in the virtual world industry is now available on GigaOM Pro: “Virtual Worlds: Trends and Opportunities” (subscription required).

Trademarks courtesy Linden Lab and Blizzard Entertainment.

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