Chapter #11Chapter #11Marketing Strategies for the New Marketing Strategies for the New

EconomyEconomy

SecondSecond LifeLife

•Three-dimensional virtual world owned and run by it’s “residents”•Developed by Linden Lab

•110 employees•Based out of San Francisco

•Opened to the public in 2003•Currently has 4,031,269 members •Stated as the "next phase of the Internet's evolution" •mixture of fantasy and reality

•Brand Marketing•Concerts, Meetings, etc.

What is it?What is it?

The WorldThe World – stores, beaches, golf courses, stores, beaches, golf courses,

bars, ski areas, high-rise office bars, ski areas, high-rise office buildings, fantastical anime cities, buildings, fantastical anime cities, medieval role-playing regionsmedieval role-playing regions

– Meet peopleMeet people– Own “land”Own “land”

The CreationsThe Creations– Personal Avatars made by fellow Personal Avatars made by fellow

“residents”“residents”– Can build literally anythingCan build literally anything– Able to trade, buy, sellAble to trade, buy, sell

The MarketplaceThe Marketplace– The Linden DollarThe Linden Dollar

247.5 247.5 LindenLinden Dollars per Dollars per US DollarUS Dollar

– LindenXLindenX

What is it?What is it?

Bad BeginningsBad Beginnings

Began June 2003Began June 2003 Started with nothing there, it was left to the Started with nothing there, it was left to the

users to create (however only 1000 users users to create (however only 1000 users returned every month)returned every month)

Linden Labs almost discontinued Second Life, Linden Labs almost discontinued Second Life, but the users that were on Secondlife were so but the users that were on Secondlife were so creative and passionate, Linden Labs Investors creative and passionate, Linden Labs Investors decided to keep financingdecided to keep financing

In 2004 they re-launched Second Life, where In 2004 they re-launched Second Life, where users could own their own content, which users could own their own content, which fostered creativitiy and encouraged users to fostered creativitiy and encouraged users to come backcome back

Growth GraphGrowth Graph

Growth since 2004Growth since 2004 Users who return regularlyUsers who return regularly

= .3 million or about = .3 million or about

300,000300,000 New Accounts as of New Accounts as of

Jan 16= 2.6 millionJan 16= 2.6 million

The Rise of PopularityThe Rise of Popularity

Has become a phenomenon Has become a phenomenon Free for casual useFree for casual use 334,000 regular visitors334,000 regular visitors 2.6 million have checked it out2.6 million have checked it out In mid January the number of people “checking In mid January the number of people “checking

it out” was increasing by 20,000 a day. it out” was increasing by 20,000 a day. Growth due to online ownership and ability to Growth due to online ownership and ability to

buy and sell goods and services online to other buy and sell goods and services online to other users. users.

In The Future…In The Future…

In two years experts expect Second Life to be huge- In two years experts expect Second Life to be huge- probably as large as the entire gaming community is probably as large as the entire gaming community is todaytoday

Check out the website: Check out the website: www.secondlife.comwww.secondlife.com

Business SupportersBusiness Supporters

Venue for which thousands Venue for which thousands of ancillary businesses can of ancillary businesses can sproutsprout

Backers of Second LifeBackers of Second Life– Mitch Kapor, Creator of Lotus 1-2-3 Mitch Kapor, Creator of Lotus 1-2-3

(spreadsheet)(spreadsheet)– eBay founder Pierre OmidyareBay founder Pierre Omidyar– Amazon CEO: Jeff BezosAmazon CEO: Jeff Bezos– Microsoft chief technology architect: Ray Microsoft chief technology architect: Ray

OzzieOzzie

Potential Business Potential Business ApplicationsApplications

““We all use teleconferences…but in We all use teleconferences…but in Second Life we gather and mingle Second Life we gather and mingle before the meeting, and when it before the meeting, and when it finishes, some people stop and talk finishes, some people stop and talk again. We start to form social again. We start to form social networks and the kinds of bonds you networks and the kinds of bonds you make in real life." - Hughesmake in real life." - Hughes

Examples Examples

Resident Anshe ChungResident Anshe Chung– Accumulated a real life net worth of more than $1 million Accumulated a real life net worth of more than $1 million – She Employs 30 people in China who build things and She Employs 30 people in China who build things and

otherwise improve the land she buys and develops for resaleotherwise improve the land she buys and develops for resale

Another developed Tringo (cross of tetris and Another developed Tringo (cross of tetris and Bingo)- became so popular now is licensed Bingo)- became so popular now is licensed for Nintendo’s Game Boy advancefor Nintendo’s Game Boy advance

All innovations in Second Life by its users All innovations in Second Life by its users give the users ALL intellectual Property rights give the users ALL intellectual Property rights of those inovationsof those inovations

Current Business UseCurrent Business Use

Daily spending (by users) is around $600,000 in Second Daily spending (by users) is around $600,000 in Second Life, making GDP about $220 millionLife, making GDP about $220 million

Where does the Money go?Where does the Money go?– Nike, Sony BMG, Toyota, Sun, Starwood and many other user Nike, Sony BMG, Toyota, Sun, Starwood and many other user

created and owned businesses in Second Lifecreated and owned businesses in Second Life IBM has:IBM has:

– built stores for Circuit City and Searsbuilt stores for Circuit City and Sears – Allowing customers and Second Life users, for example, to Allowing customers and Second Life users, for example, to

design kitchens with all Sears appliancesdesign kitchens with all Sears appliances Linden Lab counts 65 companies that have sprung up inside Linden Lab counts 65 companies that have sprung up inside

Second Life serve real-world business customers.Second Life serve real-world business customers. CTO Cory Ondrejka says about 350 people work full-time for such CTO Cory Ondrejka says about 350 people work full-time for such

companies, and there are at least $10 million worth of such companies, and there are at least $10 million worth of such projects underway (currently)projects underway (currently)

Future GrowthFuture Growth

Linden intends to make the Programming code available to Linden intends to make the Programming code available to all users (HTML and HTTP)all users (HTML and HTTP)

““CEO Rosedale hopes that other companies' virtual worlds CEO Rosedale hopes that other companies' virtual worlds will interoperate with Second Life” will interoperate with Second Life”

Example quote:Example quote:– Say IBM uses our code to build its own intranet version Say IBM uses our code to build its own intranet version

that's somewhat different from Second Life," he says. "A that's somewhat different from Second Life," he says. "A user may say 'Wow, this virtual thing IBM has built is user may say 'Wow, this virtual thing IBM has built is pretty cool. Now I want to go to the mainland.' And we pretty cool. Now I want to go to the mainland.' And we have another customer."have another customer."

Long-term opportunities for LindenLong-term opportunities for Linden– lucrative services necessary to keep all these linked lucrative services necessary to keep all these linked

virtual worlds functioning smoothlyvirtual worlds functioning smoothly We can recreate Google's business in this environmentWe can recreate Google's business in this environment

High Speed InternetHigh Speed Internet

2006 40% of UK Households have 2006 40% of UK Households have broad brand connection by 2010 broad brand connection by 2010 70% of US house holds 70% of US house holds

Gain experience (5 years) spend Gain experience (5 years) spend less time reading newspapers less time reading newspapers (24%) and watching TV (23%)(24%) and watching TV (23%)

9% of UK retail spending on line. 9% of UK retail spending on line. In US 1/3 shop on-lineIn US 1/3 shop on-line

Top Online RetailersTop Online Retailers

1.1. Amazon.comAmazon.com

2.2. OfficeOffice DepotDepot

3.3. StaplesStaples

4.4. DellDell

5.5. HP Home/home HP Home/home officeoffice

Office maxOffice max Sears/Land’s Sears/Land’s

End/KmartEnd/Kmart CDWCDW Sony StyleSony Style Newegg.comNewegg.com

Threats or Opportunities Threats or Opportunities of the new economyof the new economy

Syndication of InformationSyndication of Information– Originator, Syndicator, DistributorOriginator, Syndicator, Distributor– RSSRSS

Increasing returns to scale of Increasing returns to scale of network productsnetwork products

CustomizationCustomization– Collaborative Collaborative filteringfiltering– Rules-based personalizationRules-based personalization– CustomizationCustomization

Disintermediation and Disintermediation and Restructuring of Distribution Restructuring of Distribution ChannelsChannels– www.SparkleCraft.comwww.SparkleCraft.com – Blue Blue NileNile – www.kayak.comwww.kayak.com– www.ebag.comwww.ebag.com

GlobalGlobal ReachReach

RadioheadRadiohead

Sustainable Sustainable advantage?advantage?

PrivacyPrivacy ClickstreamsClickstreams VersioningVersioning

– TimeTime– ConvenienceConvenience– ComprehensivenessComprehensiveness– ManipulationManipulation– CommunityCommunity– SupportSupport

Doing research Doing research on-lineon-line

Shorter (less is more)Shorter (less is more) Open ended questions at the endOpen ended questions at the end Do not ask questions of everyone that Do not ask questions of everyone that

only brand users can answeronly brand users can answer Keep respondents engagedKeep respondents engaged Indicate progress is made i.e. 70% Indicate progress is made i.e. 70%

completecomplete Hershey moved product development Hershey moved product development

research on-lineresearch on-line

Product Promotion & Product Promotion & Brand buildingBrand building

Internet searchInternet search– Paid Inclusion v search engine Paid Inclusion v search engine

optimizationoptimization E-mail E-mail MarketingMarketing Viral e-mailViral e-mail BlogsBlogs Promotional Promotional sitessites Banner AdvertisingBanner Advertising

– Click-stream Click-stream

Conducting transactionConducting transactionDelivering Digital productsDelivering Digital products

Dynamic pricingDynamic pricing Digital signaturesDigital signatures Digital deliveriesDigital deliveries

– Music, books, movies, educationMusic, books, movies, education

Customer Service and Customer Service and SupportSupport

Making transactions easierMaking transactions easier Retaining customersRetaining customers Co-production (not just self-help)Co-production (not just self-help) Product Return and Disposal (Dell Product Return and Disposal (Dell

secondary market)secondary market) Web 2.0Web 2.0

Dot.com Dot.com treatmenttreatment

JewelryJewelry ChecksChecks TelecomTelecom HotelsHotels Real estate Real estate

brokeragebrokerage Software (open Software (open

source)source)