Virtual worlds a risky bet for big business?

The thriving community of Internet users that are opting for a 'Second Life' in virtual worlds are a tempting market for advertising. But is a virtual presence a viable option for big business?

The thriving community of Internet users that are opting for a 'Second Life' in virtual worlds are a tempting market for advertising. But is a virtual presence a viable option for big business?

Linden Lab's Second Life, a site where Web surfers can interact with other users in a 3D realm, is one of the more popular virtual world on the Internet. It boasts 8.9 million registered online identities and has its own currency.

It's also become a space where some corporations are buying up virtual space to promote their brand 'in-world'. Multinationals IBM and Coca-Cola, The Australian Broadcasting Commission (ABC), Telstra and the Australian Information Industry Association (AIIA) are among those that have created their own virtual presence in Second Life.

Telstra has purchased a virtual area which it calls 'The Pond' -- featuring 11 islands, each dedicated to different activities. The carrier has issued its own residential tenancy agreements for portions of "virtual land" within a greater tract Telstra has purchased off Linden Lab, which it rents to customers on a monthly basis.

According to New World Notes, a blog which tracks the success of corporates in the virtual world, The Pond gets over 11,000 visits a week and is the fourth most popular site on Second Life. ABC Island also ranks highly -- boasting around 1,980 visits per week.

Jason Romney, general manager of innovation at Telstra and the man behind the telco's new world presence, says the company is "delighted" with its success on Second Life.

"It has been an audacious initiative," he said. "We have a thriving community".

But Gartner analyst Andrew Walls warns that these companies are exposing their brands to considerable risks.

Any upside an organisation might see in marketing terms, he said, could easily be negated by the substantial risks such a presence might pose to their brand identity.

Walls likens the virtual world of Second Life to the "Wild West" of the early Internet -- before there were rules or any thought put into online security," he said.

New world marketing
The arguments for building a virtual presence, Walls said, are mostly based around a perceived sense of economic opportunity from a brand-building perspective.

Second Life does have plenty of successful solo entrepreneurs offering their design services or buying and selling off chunks of virtual real estate and there is real money changing hands to pay for these services. But most corporations in the virtual world are only establishing a presence for marketing purposes.

"It's essentially advertising," Walls said. "To my knowledge there isn't a single Australian corporation of any size that has established a presence where they are actively transacting business."

Even among those companies that are transacting, "they tend to have to jump back into the real world and use traditional channels" to finish a given deal, he said.

Sheryle Moon, chief executive officer of the AIIA disagrees. She said that using the online world as a method of evaluating goods and services before buying them in the physical world is nothing new.

"It's not dissimilar to how most people use the Web already," she said.

Walls said that the jury is out as to whether Second Life is an effective avenue for marketing. "For a start, it's passive -- no-one is forced to go to a corporate site. As a user you have a choice as to whether to go to that site."

The virtual world also has little opportunities for targeted campaigns, he said.

"If you randomly chat to an avatar on Second Life, you'll find that they might be from New York or London or anywhere," he said. "When Telstra BigPond creates a presence, they have no way of knowing whether avatars are from within their coverage area. Their presentation can fall onto deaf ears. It's not very targeted marketing."

Romney asserts that while many of the Island's visitors may be from outside the reach of Telstra's "real world" services (such as telephony and data connectivity), they aren't out of reach as potential consumers of BigPond's exclusive sports coverage, movie and music content.

"The revenue we generate for many of these services is through advertising," Romney said. "The value of advertising is proportional to the number of eyeballs you attract. In that sense it's preferable for Telstra to gain a global audience."

In an "Internet Protocol-assisted level playing field," he said, "Telstra is battling it out for global eyeball attention."

New security threats
Walls said that establishing a virtual presence opens the doors to a host of new security threats.

Everything in Second Life is shaped from primitive graphic objects, each of which is built with scripts attached to describe how that object behaves.

An organisation can construct a building or other object that represents its brand, but there is no law as such to prevent a more experienced Second Life coder warping it to represent something entirely different.

The ABC learnt this the hard way in May, when its island was all but destroyed by a hacker.

Moon said that an organisation's virtual presence can be secured, you "just need the right level of skills" to do it. "The ABC simply hadn't put in the right level of security," she said.

"Like all software, Linden's is far from being perfect," explained Romney. "The resourceful genius of Second Life users is superbly equipped to be mischievous. Malicious code is essentially a part of user generated content."

In that sense, Walls said, securing your presence on Second Life is an "application security problem".

"You need to anticipate what kind of interaction will occur with that asset," he said. "You need to get the basic coding right to ensure that no knowledgeable coder can come along and mess with your corporate image."

At least, Moon jokes, it's easy to repair a damaged building in the virtual world. "You just revert to your backup," she said.

There is also little guarantee that your virtual presence will remain available at all times, Walls said. Linden Lab is a small company that offers no guarantees around availability other than a "best effort" approach.

"The reality of this environment is that there are real business continuity issues," Walls said. "Linden Labs are pressed to keep these servers up and running. The more people that go to a specific location, the more you find jerky movement or drop-outs."

Avatar cops and virtual AVO's
Corporations, whether they are within the real world or a virtual world, have responsibilities that extend beyond the level of the anonymous individual.

The corporation has a responsibility, for example, to ensure that its staff are not exposed to inappropriate speech, harassment or intimidation.

Again, there are no laws to prevent this occurring on Second Life.

Walls said that when asked who is responsible for online security, generally organisations look to the IT department.

"But what does IT know about crowd control? Or fixing physical graffiti on a virtual asset? These are not things that IT thinks about."

Telstra employs its own support staff (at least two full-timers) to log-in to the virtual world and "look after the visitors".

At any one time, Romney said, there are several Telstra employees on the virtual island "at a minimum".

These staff do end up having to act as security guards at times. Romney said Telstra tries to be "even-handed" about security on its islands, but "where we are alerted to offensive behaviour or harassment, we intervene to prevent it. The buck ultimately stops with us".

Equally, an organisation has very few ways of being able to control who enters its virtual presence -- and may find it difficult to stop some other avatar distracting potential customers that are interacting within it.

Moon said the AIIA, which plans on having board meetings within its virtual presence, has never experienced such a problem during the informal meetings it has held to date.

"But could it happen? Yes. Most people who come to our space do so by invitation, but other people can wonder in."

"In the case of a board meeting, we would have to ask them to leave," she said. "It's an interesting thought -- we might need avatar police or virtual AVO's!"

Other virtual options
Walls said there are more targeted versions of virtual worlds (alternatives to Second Life) which may prove more beneficial to corporations in terms of managing risk.

Some offer private virtual worlds, where the corporation merely buys the utilities and software necessary to build its own virtual world to use for communicating internally or with approved participants.

"It's very early days, similar to the early days of the Web," Walls said. "Organisations are testing out new business models. Like the Web, the good models will survive, the bad ones won't."

"If organisations think they can just use it as an advertising space, they need to look closely at what Second Life is all about. You have to understand why people are going into virtual worlds and what they are doing in that world."