Thursday, June 5, 2008

Waiting for the Crash

The analysts are doing what they do best: analyzing stuff. This morning, the news was about a study predicting that use of virtual worlds will explode over the next ten years:

22 percent of global broadband users will register for one or more virtual
worlds over the next 10 years. This will expand the virtual world market to one
billion registrants, with roughly an eight billion dollar services opportunity.

"Despite a multitude of challenges, virtual worlds present a unique marketing opportunity to target a highly sought demographic, and virtual worlds should be part of a company's marketing portfolio," according to Harvey Cohen, President of Strategy Analytics.

Wow! Who wouldn't want a piece of that? Of course, as always with things of this nature, it's easier to predict the trend than it is to make it real.

The first question to ask, naturally, is whether the study has any validity. My suspicion, where all such future-trend-predicting are concerned, is a familiar misuse of statistics in which short-term developments are extended without any adjustment into the future. This is the fallacy that led one sports television commentator, back when I was but a lad, to predict that women would soon be running marathons faster than men because their times had been improving so rapidly. Lost on this commentator was the fact that, at the time, women had been competing in the marathon for only a few years, and their records were relatively soft. Women today are running the marathon faster than ever, but men are still a little faster. That's what happens with long-term trends; rarely do they indefinitely follow a straight line.

So is the virtual worlds prediction founded on a similar fallacy? A handy chart gives us some indication:

There's good news and bad news in that chart. The prediction concerning registrants as a percental of overall broadband users shows the percentage leveling off at around 22% of all users. However, the orange bars hold the bad news: "active users" will allegedly increase arithmetically, without a break, for the next ten years and beyond. Five years from now, this is likely to seem naive.

It's a very seductive idea, though. Who doesn't enjoy the prospect of a future that comes with a fully-realized virtual world? I think we're all still waiting for Snow Crash, the seminal sci fi from Neal Stephenson that portrayed an online world so compelling that the book's protagonists clearly prefer virtuality to the real thing.

Invent a virtual world like the one in Snow Crash, and you should be able to print money. It would be the ultimate online community. But let's assume that you managed to do such a thing; would anyone want to use it?

Think about it: Snow Crash shows a world in which people go online to hang out. It's pretty much the same for Second Life or even World of Warcraft: that's where online friends go to congregate. And who has the time for that sort of thing? Between work, the daily commute, eating, and sleeping, it's a challenge for me to find quality time to spend with my wife. I can barely imagine the changes that would have to go down in my life before I started hanging out in virtual worlds.

I used to have the time for that sort of thing when I was a graduate student. I would certainly have done such things when I was a teenager, except such things didn't exist when I was a teenager. And that's the key: virtual worlds appeal exclusively to those who have time for them. That means kids, teenagers, and kids right out of college. The rest of us are too busy leading our lives to get involved.

So before the your eyes fill up with dollar signs in contemplation of virtual worlds, consider the challenges. Your market will be functionally limited to people between the ages of 6 and 24. Those customers will certainly subscribe to more than one virtual world, since if there's any one characteristic that most young people share, it's a fickle temperament. They will not be there to shop, they'll be there to meet with friends, and they'll see your advertisements and merchandising as an unwanted intrusion. And when the winds shift--as they certainly will--and something new comes down the pike, they'll be gone. Remember Friendster? No one remembers Friendster. Some day it's likely that no one will remember MySpace, Facebook, or Second Life. This is what happens to companies that cater to a fickle, trend-driven user base.

Virtual worlds can and probably will get bigger and more prominent. But we'll still be waiting for Snow Crash for a long, long time.