The battle for the future virtual world environment is on!

  • Virtual worlds are actually a tiny niche market. A very profitable one, but it’s not a mainstream product, and will never be. That’s the tough reality.
  • It’s not a question of more or less gadgets, or more or less sophisticated interfaces. Because it’s a niche market, the amount of people who will be drawn to product X or Y is small. Not tiny — enough to sustain a company with profits over several years — but small. People will eagerly switch over to a more shiny and bright solution, but they won’t be many. We have seen this happening over and over again.
  • HiFi and Linden Lab’s next platform will be competing for exactly the same people in 2016, with similar products, and with similar handicaps: no users, no content, tiny market. Who will survive? We know about HiFi’s business model and it makes sense for a slice of the market (the people willing to pay for online services). We have no clue about Linden Lab’s business model for its next platform, and not enough data to speculate about it, since, unlike HiFi, they have provided us with nothing we can evaluate.
  • Facebook will also launch their own virtual world, along the same lines, and probably also in time for the Oculus Rift to be on the shelves. However, Facebook is also in decline (and thus Zuckerberg has been very clever in expanding and diversifying its operations). Will something tagged with the Facebook brand make a difference by 2016? Remember that we’re really talking of just a few million people here. By 2016, they might already be happy in either HiFi or Linden Lab’s next platform and unwilling to move.

In spite of everything I’ve written, I’m not a pessimist. I’m a strong believer in niche markets. They have faithful users, and often are quite willing to spend money. Almost all luxury brands are niche markets and all companies operating in them are very successful and quite profitable. For the niche market of virtual worlds, the future seems quite bright indeed, as never before in the past 15 years, and I’m obviously as excited as everybody else, and quite intrigued about the possibilities. But I’m also a realist and understand the limitations of a niche market: at some point, it won’t grow, but just deliver a steady stream of income. And having three competitors for the same consumers — HiFi, Linden Lab’s next product, possibly Facebook — means that the current revenues enjoyed by Second Life, which has 98% of the overall market, will be split among the three players. Facebook has unlimited funds and can hold on while the competition dies out, and it can also engage in a dumping strategy until HiFi and Linden Lab are ruined. Linden Lab can still fall back to Second Life, if their new platform is a flop. What can HiFi do? On other technology related news, take a look at themarketingheaven.com for your digital marketing service needs.

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