A winning business plan for 'Second Life'

In a virtual world known for unusual demographics, contest winner Market Truths will look into how users react to brands, products and services.
Written by Daniel Terdiman, Contributor
The winner of a business plan contest in Second Life is a company that's likely to help others come up with business plans for Second Life.

The honors, announced Monday, went to Minnesota-based Market Truths, which devised a market research and analysis system to help real-world companies figure out what works and what doesn't in the burgeoning virtual world.

The contest's judges rewarded the Market Truths submission because the team has conducted similar market research in the real world for years, and because it appeared to have the best profit potential of the four finalists.

"I was really impressed by the quality of (all) the ideas we received," said Susan Wu, a contest judge and a venture capitalist from Charles River Ventures. "Each one of these businesses could turn into a viable ongoing enterprise, not only in terms of Second Life, but as a service that stands across multiple virtual worlds."

The other finalists in the first-ever business plan contest in Second Life submitted proposals--in order of finish in the contest--for a suite of in-world communications and collaborations tools, an in-world music distribution system and a reputation-based search engine.

Wu said she voted for the Market Truths team--led by its managing director, Mary Ellen Gordon--because of its real-life market research experience and the likelihood that the team would be able to extend that experience into the virtual arena.

"I personally favored Market Truths because they had the best execution," said Wu. "It seemed most likely that they would be able to execute on their idea (and) the fact that (Gordon) already has experience doing this."

The contest, which launched in November, sought creative business plans with real profit potential. It was sponsored by The Electric Sheep Company, the largest third-party creator of projects and services in Second Life, and global public relations firm Edelman.

The Market Truths team will receive free access to a private Second Life island for six months, as well as a prize of 350,000 Linden dollars, the in-world currency--about $1,308 in U.S. dollars.

The proposal was for a system in which Market Truths would conduct regular focus groups, as well as surveys and other market research to determine the kinds of things that members of the Second Life community like and don't like about brands, products and services from third-party companies.

The research and surveys will provide analysis based on Second Life users' real-life gender, in-world gender, real-world age, time in Second Life, and other factors. That will give Market Truths' clients the opportunity to gauge users' attitudes based on a number of demographic factors, including the unusual ones that come up in a virtual world where a participant can take on any personality, gender, race, age or size they wish.

Gordon said her team will conduct focus groups inside Second Life and has already been doing so. Market Truths, she said, has been signing up Second Life users to participate in the studies who are being paid a nominal fee--in Linden dollars--and are required to have been in Second Life for at least 30 days in order to ensure that they have some investment in it.

For Market Truths' customers--potentially large corporations considering whether to set up shop in-world, following in the footsteps of companies including Toyota, General Motors, American Apparel and Starwood Hotels--Gordon said the idea is to provide information about how Second Life users will react to their brands, products and services.

Further, Market Truths' services will allow companies to market-test prototype products and to assess how Second Life users will react to them.

To the judges, the fact that Market Truths can help its clients evaluate how the Second Life community will respond to products, brands and services is an invaluable and potentially lucrative business.

"People will pay them a lot of money, so...it's a really good business," said Jon Goldstein, a contest judge and partner at Catamount Ventures, an early investor in Second Life publisher Linden Lab. "Another thing we considered in this contest is the effect on Second Life and its community...What (Market Truths is) going to be doing is working with big companies and helping immerse them in Second Life, and that's a great for getting more people involved and educated about Second Life."

The second-place finisher, a team of three from the Seattle area called Metaverse Technology, has created a suite of communications and collaboration tools intended to give enterprise users a way to use Second Life for business meetings and other important gatherings.

Jacob Sullivan, a Metaverse co-founder and an electrical engineer, said that his team would provide clients with tools along the lines of PowerPoint, interactive whiteboards and other presentation tools that could be used in Second Life.

The team imagines that businesses as well as educators would find the most use from the tools, but individual users might also want to buy pieces of the suite.

The third-place finalist was a team of three from Turkey that created a system for distributing music throughout Second Life in something of an iTunes model.

The idea, said team member Ozgur Alaz, a trend scouter and ad planner from Istanbul, is to provide owners of Second Life venues--clubs, stores, theaters and the like--with jukeboxes through which visitors could play digital music that anyone listening could then buy.

The business model for the idea, said Alaz, is to share revenue with the venue hosts as an incentive to place the jukeboxes in their locations. The team said it would try to find partners among the major recording labels to gain access to their catalogs of music. Songs would cost roughly the same as a song from the iTunes Music Store.

The fourth-place finalist was the Italian team of architect Laura Cassara and journalist Mario Gerosa.

The two have created a concept for a search engine to allow the virtual world's users to more easily locate the kinds of places, stores, clubs and other things that interest them.

The idea is based on the reality that the built-in Second Life search functionality is fairly rudimentary and has little or no contextual utility. Instead, it searches purely on keywords.

But Gerosa and Cassara have come up with a system that would allow users to find things based on their preferences and on quality.

That means that as users discover new objects and places in Second Life, they would be able to rate them and in the process create a "quality atlas."

The result would be something akin to Amazon.com's recommendation engine: as users find things, the engine would suggest other places or objects in Second Life or even, potentially, outside the virtual world.

Wu said she thinks the system would make a potentially profitable business but is not as well-developed or unique as that of Market Truths.

"Unless you're Linden Lab or you have experience doing search," Wu said, "you probably don't have a very defensible strategy if others enter the market."

Wu added that significant competition will inevitably emerge in the Second Life search market in the near future.

For Goldstein, the four teams represented the idea that Second Life can and will be a useful medium for those looking for new ways to build businesses and make money. And as a result, he said, the future of Second Life as an entrepreneurial environment is rosy.

"I think the competition is a great idea," said Goldstein, "and I think it's further validation for what's going on in Second Life, which is a platform to enable creativity and entrepreneurship."

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