Real Companies in SL: Are they getting bilked?

I saw this news story in today's paper, and I was a bit suprised at the figures quoted:

http://www.mercurynews.com/mld/mercurynews/business/technology/16787504.htm

to summarize, It talks about a company called Millions of Us, which was founded by former Linden Lab Executive Reuben Steiger, and how they developed a sim for Scion. I"ve seen people post in the past about how cheap it is for a big business to to lay out a few thousand dollars and start a sim, however this quote from the article caught my eye:

"Steiger said an initial build might cost a client between $75,000 and $100,000. Another $50,000 might pay for six or so events at the site. Monthly support fees could add another $10,000 a month to the cost, Steiger said. The average cost of a project in "Second Life" for a major company runs in the low six-figure range, Steiger and other developers said."

So I wonder:

A) Do you think these prices are fair? Are these corporations getting what they paid for?
B) Are in game creators being sub-contracted by companies like this, and if so, are they being paid well, or are these companies just racking up huge profits, while paying people in game a pittance?
C) Should creators start thinking about charging more?

Food for thought...

Any RL company entering SL needs to seriously the cost of investing in a world with only 35000 concurrent users. If they consider paying $100,000 for a sim start up to reach a target audience of 2 million people (not avatars) a good investment, bully for them. But if I were a CEO of a company that pulled a stunt like that, heads would roll.

Kam

If you compare the cost of developing an SL sim with the cost of developing a corporate web site, where they are paying RL wages to the production company in charge of the project and the staff that provide daily customer support, then this is probably not out of line.

But as Kamael pointed out, the audience a company is reaching in SL is significantly smaller than the overall internet base. Spending that kind of money for a presence in SL -- as it stands today -- is a dubious venture.

Either these companies have succumbed to SL-overhype OR they are taking a long-term view that SL will eventually develop into the next internet, and they want to be an established part of SL when that time comes.

I don't think many care about concurrancy - it's the total number of people they can reach over a time period, not the total number they can reach at a given instant.

Darien, could you clarify this question:

C) Should creators start thinking about charging more?

Do you mean content creators in general, selling to the "general public"? Or those working on corporate developments?

Any company that goes into SL with their eyes open knows the current worth of it is only that it gives them Press Release fodder. It's a PR move only at this point and most get picked up by the media because it is still newsworthy. But that cache and novelty are fading fast.

When you consider the overall quality of the majority of corporate builds and the prices charged for RL graphic design work and custom 3D modelling, that's not a high price at all.

I dont consider second life a viable way to market most real world prodcuts things that might make it (in my mind anyhow are say downloable software or mp3's or something like that)

next for huge corporations like nissan and toyota this is not a large price its about right considering their size. Smaller businesses will not own 6 sims and whatnot

If you have been to any of these corporate places you will see just how much "virtual" land they have underneath them

Is it worth it? well its fun gives them a hobby

Does it make any real world sales? probably not but it is still fun and i have a pontiac and am going to get a scion and enter their decorating competition and i got a free nissan or 3

did that make me buy one in real world? well I already have a toyota corolla and when I go to buy another car I will shop as usual and their presence in second life will not have influenced which car I buy (that being said I am wanting another vw they were my favourite and they have like no presence in second life I Just ended up with a toyota this one time but I still prefer the look and feel of driving a vw so i will likely be going back to that...)

Real Companies in SL: Are they getting bilked?

Yes.

coco

hehe i ignored that and added the extra L bad coco hehe

(joking of course)

This is pretty much how the web was regarded when it was first lifting off the ground. And second life has great potential to become the web, on steroids.

Agreed.

Well I left it open ended on purpose. Should creators charge more for corporate, public, or both? If RL companies think building a sim is worth $100,000.00 and here I've been doing it for say 50,000L, which is the sucker? The corporation, or myself? Just interested in opinions.

Yourself. You could spend hours doing texture work on a build that gets you only a couple thousand L - a couple of bucks, rl. SL valuation is wonky, but that is because it's hard to make money in this game and the scale is adjusted accordingly.

I don't think it's a stunt at all. But it's not pure marketing (promotion) either. Any company coming into SL with their eyes fully open surely realizes the experimental nature of what they are doing. With companies like Ford and Toyota, $100,000 is nothing more than a rounding error in their promotional budgets. Building an experimental presence in virtual reality is a way to start thinking outside the traditional promotion box and test the waters - to find out how this new technology can best be used. These same companies did it with the web, and they will do it here. In many ways there is an advantage to experimenting when the user base is small - a blunder will not be very damaging.

I can't speak on behalf of A - the determination of value would rest solely on the judgement of the corporation paying for the project - I would like to point out that as with almost any business that employs administrative support and management, there is a cost overhead besides what is being paid to the actual builders on a project. Paying support staff, managers, accountants, building rent, etc. are all costs of conducting business and making sure things go smoothly, and those costs are put back into a project's overall budget.

B) In-game creators are being commissioned for projects, by and large. In some cases they wish to remain as independent contractors (as opposed to full-time employees), sometimes they're working on a trial basis before a full time offer is made. In every case that I'm aware of in the dev. company I work for, contractors first approach us for consideration for a working relationship.

In regards to payment, again I can only speak for my experiences. I'm proud of the fact that ESC has always maintained a philosophy that the best quality artists deserve a paycheck commiserate with their skills and dedication. Personally speaking, the RL job market in the area I'm in cannot compete with the benefits of my job with ESC.

C) If you're talking about creators charging more for inworld products in their SL businesses, I think you're comparing apples and oranges. The traditional SL business model is one of microsales, which is made possible by the fact there is no natural scarcity of materials nor a cost-per-product-unit base that needs to be met in order to pay for labor, materials, packaging, etc. Once an item is made for your SL business, you can sell an infinite number of them with no further cost to yourself.

A custom build - and this goes for both custom building for SL residents and RL corporations alike - introduces a level of scarcity. Usually people that want a custom build want it to be a one-off project, and will expect you not to resell it to the general populace. In some cases, specific scripts and textures cannot be reused in other projects without a previous discussion of IP rights (who owns the finished project and its components). This being the case, the builder has to not only recoup the costs for their time and effort, but also factor in the fact that they will not be able to make a continued income off the project.

That being said, I've always been a supporter of SL artisans charging what they feel they're worth. Talent, skill, work ethic, education, etc. are all real life attributes that make you a valuable commodity in the workforce. If your skill set is such that you're in the top percentage of artisans, the marketplace should be able to support hiring you for a fee equal to your abilities, regardless of platform.

It's more than just having a "presence" with the other "cool corporate kids" here.

My RL career is in the field of what you could call non-traditional marketing, specifically customized and experiential (event-based) marketing. In certain cases, we're hired to do a "test market effort" for a new client to see what the results will be on a small-scale venture, in order for them to expand these efforts on a larger scale down the road.

In this case, Second Life provides an opportunity to do exactly this. SL is a perfect market medium for a small-scale test.

I would assume that most, if not all, of the companies doing marketing efforts in SL are aware of the minimal target markets they're reaching, the limited numbers of consumers which could theoretically be reached, and the specific reasons for those numbers.

If they're thinking anything else, the CEOs of any of the companies currently creating or maintaining a presence in SL need to rethink their marketing management personnel choices for not doing their jobs. Any marketing exec with half a clue knows they're not reaching 2-3 million users, rather a small percentage of the 35,000 or so concurrent users.

For example, consider a direct mail program in which you might send out a million offers to a specific market. On average, you expect a 3-5% response, out of which maybe half become customers who will make an actual purchase. If you reach these numbers, it's considered a fairly successful program. Out of a million, you get maybe 15,000 interested customers. In the 35,000 concurrent of SL, if you get 1000 visitors to your sim in a month, and maybe half or more of that buying whatever you're selling there, it's considered a successful small market test program.

Simply put, SL is a test market effort for advertisers to learn what might and might not work in this relatively new marketing medium and how to improve upon future efforts with this data. Compared to the time and monetary investments they usually make in other marketing efforts, spending $100k in SL (including creative work, program management and promotion) isn't a bad deal considering what they could be doing with the gained knowledge and experience years from now if/when other metaverse-type competitors pop up with the ability to offer their services to a much larger market. Or, how to be ahead of their competitors who are desperately trying to get up to speed at a much later date.

If anything, they should probably be paying more for the resulting data alone.

As it's already been said here, a marketing expenditure (test or otherwise) of $100k for any of the RL companies I'm aware of in SL isn't even a drop in a bucket for them to spend. They'll spend a LOT more than that on a single regional campaign to get a simple card in your mailbox that will probably end up in your garbage can before you even get past the first three words of the headline copy on it.

Don't angst for the "poor" RL companies in SL having to spend more cash than some of us won't make in 5 years of working our RL jobs. They know what they're doing. If they don't, it's their money to waste. Either way, nobody's getting bilked here.

And kudos for Millions of Us for seeing the business opportunity when it first arose. Almost makes me want to send a résumé to them.

However, my question to the average person in SL: What is the potential that corporate presences will ultimately help nurture creativity (either commercially or with the independent guy who just creates for the sake of creativity) or will it just eventually turn SL into one big marketing platform with no concern for the little guy other than to get his money?

Toyota blowing $100k on a marketing campaign here doesn't bother me at all. However, sometimes the possible outcome answers to the question above make me wince a little bit.

But that's probably another topic for another forum string, eh?

No, I don't think RL Companies in Second Life are being bilked. They seem happy with the costs as far as that article states.

"The average cost of a project in "Second Life" for a major company runs in the low six-figure range, Steiger and other developers said.

At this stage, that's still a relatively modest investment for major corporations, Kingdon said.

"A lot of these companies are treating it as marketing research and development," he said. "It's a small, growing audience now. It doesn't offer the reach of say, MySpace, by any stretch of the imagination." "

And I get from the article that Second Life just might in for a surprise in the not too far future. Read the last paragraph of the quoted part of the article. Looks to me like the companies making a presence in SL are merely testing the waters and using SL as a research and developement platform.

Could "Millions of Us" be SL's competition in the near future? I as yes.

Keyword being "Marketing". It isn't Miillions of Us or Electric Sheep doing the R&D. They've already done theirs and have become highly successful content development businesses. It's their corporate clients such as Toyota, Ford, Cisco, Dell, etc who are spending the R&D dollars, and it is with an eye toward new media (Second Life).

I don't think the companies that buy these sims are getting their money's worth, because they never seem to use them for anything. I've explored around several of them. They're beautiful builds but there's almost never anyone there. Why don't they experiment with having meetings there instead of spending a fortune on phone calls or batting emails back and forth? Why not develop a whiteboard ap for SL? They're paying for it, they'd might as well use it.

Katie

Them not using it is their problem. That doesn't mean they aren't getting their money's worth. It means they are probably squandering the opportunity.

I know it's the corporate clients spending the money for R&D. That's mostly the reason I don't think they are being bilked by SL. They are looking for a new virtual media to market their products or services.........that is pretty much stated throughout the article. Millions of Us are the ones reaping the benefits. They are content creators (or the hirers of content creators). They obviously have quite an understanding of Linden Labs' endeavors............btw, I believe the CEO of Millions of Us is a former Linden Labs guy. All the problems LL is experiencing at the present time (and for the forseeable future) is being observed, studied, and analized. That is what R&D is all about. Toyota, Ford, Cisco, Dell, etc are not going to create a virtual world............but they will finance someone else to do it for them. It seem they are choosing LL to observe, study and analize..........and they are using Millions of Us to do that. It's future competition for SL. Linden Labs is locked into a direction that would cost them a fortune to change...........Millions of Us is not. And it's pretty obvious that Second Life's platform is problematic and without a clean start next to impossible to correct. The mistakes LL has made will not be made by the next guy...........and sounds to me like Millions of Us just might be part of that "next guy".

One really has to stretch the limits of creative interpretation to read that from this article. And in your case, I dare add, hope

They are not locked into any particular direction. That's the basis of Second Life as a "platform".

And you base this on what? Sorry, that's just a ridiculous statement.

What is LL's major problem? Scalability? It can't scale with growth? It's requires a never ending upgrade for their software, hardware and network? It requires a never ending upgrade of the client viewer? Can it ever get ahead of the "behind the 8 ball" curve? Can that be fixed going in the current direction? Is that the advantage Linden Labs "platform" has over any other platform?

And I made a ridiculous statement?

Nobody has yet stated that Second Life is a mature product. In fact quite the opposite. Much of the scalability improvement is happening this year, and if you listened carefully to Cory Ondrejka's statements in his last two townhalls, you'd remember that he said they will be deploying these improvements "cautiously" and slowly. They understand that there is too much at stake already to just tear it down and rebuild it. Somebody suggested the analogy of rebuilding your car's engine, while you're driving it. Spot on. You'll be eating your words by Q1 '08, if not sooner.

Also, please name a single software product that even comes close to approaching the scale and complexity of Second Life that ISN'T in a perpetual state of development, and does NOT require a never ending upgrade schedule for "software, hardware and network".

There is no such thing as being ahead of the curve when it comes to cutting edge software development. The two ideas are quite at odds with one another.