The Journal’s Emily Steel led her interviewee quotes with an overview from our CEO Reuben Steiger: “This is now a category rather than a single phenomenon.”

Steel surveyed the ecosystem of virtual worlds and how early enthusiasm for Second Life has grown to encompass an ever-expanding set of platforms.

The article is subscriber-only at the Journal’s site, so read on for the full text…

Marketers Explore New Virtual Worlds
Some Create Own As Second Life Site Loses Some Luster
By EMILY STEEL
October 23, 2007

Marketers have figured out they need to get their own lives.

A year ago, online virtual world Second Life was being hailed as the
next big digital-marketing phenomenon. But it has begun to lose some
of its luster. Put off by high costs and uncertain returns, marketers
who had rushed to establish a presence in the three-dimensional online
computer game are beginning to look elsewhere. Some are trying other
virtual worlds with names like Gaia Online, Zwinktopia, Stardoll and
Habbo. Others, particularly in the entertainment industry, are
creating their own virtual worlds that fans visit via a brand’s Web
site.

“This is now a category rather than a single phenomenon…. We’ve
moved beyond just Second Life,” says Reuben Steiger, chief executive
of Millions of Us, a Sausalito, Calif., company that builds campaigns
for marketers in virtual worlds. Ad-holding giant Omnicom Group
recently took a significant minority stake in Millions of Us, citing
expectations that consumers increasingly will tap the Internet via
virtual worlds.

Take, for instance, television network CW’s new drama “Gossip Girl,”
about prep-school students living in Manhattan’s Upper East Side. To
promote the show, CW’s half-owner, Time Warner’s Warner Bros., worked
with Millions of Us to build a virtual Upper East Side neighborhood,
where users can shop on Madison Avenue or see the school that
characters from the show attend. The world, which just recently
opened, uses the same underlying technology as Second Life, but
visitors enter through the “Gossip Girl” Web site.

The shifting sands of virtual reality show how hard it is for
marketers to keep pace with fast-changing consumer habits on the
Internet. Second Life, where visitors use special software to create
digital alter egos, looked like an ideal world for marketers a year
ago. Consumers on the site were paying real dollars in exchange for
virtual goods and services. Advertisers had been caught by surprise by
the popularity of social-networking Web sites like MySpace and
Facebook, and didn’t want to miss out again.

“There is always this pressure of saying we weren’t early enough on
MySpace. We weren’t early enough on Facebook….Suddenly there is this
herd mentality and people are doing it because they feel like if they
are not there they are missing out,” says Marc Schiller, chief
executive of digital-marketing shop Electric Artists.

Companies ranging from Coca-Cola and Anheuser-Busch to Kraft Foods and
Nissan showed up on Second Life with virtual marketing campaigns.
Retailer American Apparel built an outlet selling virtual clothing
mimicking the apparel it sells in the real world.

But despite intense media attention, Second Life has failed to draw
significant amounts of traffic. The number of U.S. unique visitors to
the site who used the software application that’s necessary to
interact in the virtual world numbered 235,000 last month, according
to comScore Media Metrix, compared with 207,000 in March. In
comparison, IAC/InterActive’s Zwinktopia registered 4.4 million unique
U.S. visitors last month, while Ganz USA’s Webkinz registered six
million unique visitors.

Marketing executives who’ve spent time on Second Life say the need to
download special software, and difficulties in getting around in the
virtual world, were off-putting. (Some virtual worlds, such as Second
Life, require software downloads; others don’t.)

Furthermore, executives said that there wasn’t enough to do in Second
Life. “I’m like most people with Second Life. I became a member to
check it out and never went back,” says Eric Hirshberg, chief creative
officer of Interpublic Group’s Deutsch LA.

Digital-marketing executives say they had a hard time justifying the
tens of thousands, or sometimes hundreds of thousands, of dollars
needed to build and maintain a campaign in the virtual world when
there were few ways to measure return on investment. The result: Some
marketers are retreating. American Apparel closed its virtual shop.
Other marketers simply abandoned their promotions or stopped putting
money into their Second Life installations.

Chris Collins, chief aide to the CEO at Linden Lab, which owns Second
Life, says that marketers need to understand the Second Life community
in order to create successful campaigns. “A year ago the book on how
to market in a virtual world was completely blank,” Mr. Collins says.
“What is starting to happen now, is that the first couple chapters of
how to market in a virtual world are starting to be put into place.”

Indeed, marketers are continuing to experiment with virtual worlds –
but on a wider range of sites. To promote its Summer Slam pay-per-view
wrestling event, World Wrestling Entertainment launched its first
virtual-world promotion on Gaia Interactive’s Gaia Online, a community
site with anime and videogame discussions, among other features. Gaia
Online registered 1.3 million unique U.S. visitors last month,
according to comScore Media Metrix. Five days before the Summer Slam
event, “bad guys” from the WWE showed up and took over the site.
During the week, Gaia users “fought off” the bad guys. WWE says it was
pleased with the campaign and plans to continue marketing through
virtual worlds.

“People have been ignoring the fact that there are 12 other virtual
worlds out there that have hundreds of thousands of visitors,” says
Jonathan Nelson, special adviser to Omnicom CEO John Wren. “My bet is
this stuff is here to stay.”

This entry was posted on Wednesday, October 24th, 2007 at 1:44 am and is filed under Mat's Thoughts (twitter: matsmall), Press Coverage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.