Financial Times on Virtual Clothing: It's a Big Business That Makes No Sense

"I think it's extraordinary spending real dollars in virtual worlds,' says Ann Mack, the director of trendspotting at New York advertiser JWT told the Financial Times."'But it's a 'psycho-graphic' rather than a demographic, a certain mindset - people who feel very comfortable playing with their identities both online and offline and people looking for an escape from their daily lives." The story begins with a focus on Stardoll--reporting just over 14 million members and 25,000 daily registrations--but also takes a look at Second Life and My Virtual Model. Just anecdotally judging from the announcements that come across the wire, celebrities, clothing companies, and the like are beginning to find it easier to launch virtual world campaigns with smaller, branded items instead of full-blown locales (e.g., K Zero's work with L'Oreal in Second Life).  With agencies like JWT, the world's fourth largest advertising firm, warming to the notion, it's worth the time to brush up on virtual goods, say, for example, at Virtual Worlds 2008's panel on "Virtual Goods and Branded Virtual Goods: The New Way to Revenue." [via Financial Times]

Comments

[csven]

Anyone else getting really tired of the "they pay real money for virtual stuff" comments (as if the value of the US dollar in their wallets isn't dropping as they speak)?

[len]

No. It means they may need to spend it on real stuff and the virtual stuff gets stuffed.

Time to wake America up.

[csven]

@len - you mean "real stuff" like commodity futures? or mortgage debts assembled into investment packages? or a $1Million baseball? Right.

[len]

Something like that, yes. Might as well at least have the paper after the servers shut down. Then you can play games on the coffee table with a big dice and some friends. ;-)

[csven]

Well, at least people buying the virtual clothing are aware of it's lack of intrinsic value. I'm not so sure most people are aware of the extent to which "virtual" stuff is responsible for whether or not the manufacturing plant which employs them is going to remain open or will be shipped overseas.

When they expect nothing tangible, that paper is at least something.

When they expect food on the table, clothes on their backs, and roofs over their heads, but get that same piece of paper, it's a slight let-down, wouldn't you say?

[len]

Most definitely. Millions to bail out banks but people go homeless? Not exactly nice in the real world. Perhaps the lack of scarcity in the virtual world except ideas and talent where scarcity is measured against links, is a way to stave off the cold with imaginary clothes and an imaginary house. It will make living in the library much more exciting.

[csven]

Seemed to work for the people living through the Great Depression. Difference is that instead of 60-70 million weekly viewers sitting passively in a darkened movie theater (taking away whatever message historians guess kept them coming back for more), they can now actively engage and use virtual worlds as learning, communication and prototyping tools.

When average people learn the business skills that, for whatever reason, they didn't learn in real life, there's an argument for supporting virtual economies. Because as we've both agreed, there's plenty of virtual in the "real".

"Teach a man to fish..."

[len]

It's just tough at this point to justify a broadband connection when the kids can't ride the bus to school because it is overcrowded and the SUV is now a yard queen. For home users, I don't think VWs have yet hit any kind of tipping point and won't for a few years.

I doubt the priorities for businesses to use virtual worlds is as high as the puff press wants others to believe. My focus would be less on the so-called 'unified communications' theory and more on infrastructure systems where real-time 3D mapping has a very high payoff for the customers. As for business meeting applications, Trevor's approach of leasing and indemnifying space JIT makes more sense. The problem for setting up shop is the traffic has to be of a demographic type that leads to sales or leads. The ROI for the Set It Up And See What Happens isn't very good.

That said, I agree with those who say too many of the businesses set up but don't know how to use the technology to meet their goals.

[RIP]

Aint it amazing how many people out there are goofy enough that you can sell them colored pixel dust and make them happier than a nasty hog in a mudhole? What a world!

[csven]

I marvel more at the people who pay top dollar for things like sports "collectibles" and other tangible items valued more for their *virtual* properties than their intrinsic ones.

And we should remember, "big business" does not mean high cost to the consumer; Wal*Mart's high-volume approach should have taught everyone this lesson.

So what if someone spends 25 cents on a virtual item in an online world; maybe while logged in at the library. It's no different than buying music on iTunes, renting DVD's online through Netflix, or using phone credits to get ringtones. Yet the business world somehow sees *those* as legitimate. Bullshit. Why is it somehow less understandable when there's a videogame-like visual component involved?

Here's why: people don't understand the real world, business dealings/contracts and the very monetary system on which their economy is based. They've grown up silo'd inside corporate or government jobs that required no knowledge of anything other than their little niche and how to operate a time card. That's a far greater shame than dropping a few dollars on a videogame unlock or virtual item.

When I visited Asia back in the 80's and saw street vendors in places like China and South Korea, I realized just how much Westerners had forgotten about capitalism. And if you're sitting around shaking your head at this particular activity and not actively doing the same thing on music and movie forums and everyplace else people engage in the acquiring of something for its virtual properties (like sports collectible shows), shame on you for being disingenuous. It's all the same and you know it.

[len]

The problem CS is the contracting model with a street vendor. It is the terms of service, obligatory terms etc., that distinguish the street vendor from Wal-Mart. I don't think the Asian street market is a good business model although it does come closer to matching what is going on in some virtual world markets. Oddly, this was predicted a decade ago with references to Blade Runner ("finest kind").

On the other hand, I don't disagree that selling someone a virtual shirt and selling them an mp3 differ much in type, just in kind. If I buy a shirt in SL, SL is the limit of its use. If I buy an mp3, Apple isn't limit of its use. Caveat vendor for the mp3. Caveat vendor for the SL shirt.

Mercantile value is simply what one will pay for something. Buyer decides.

[len]

Oops. It should be caveat emptor for the SL shirt. IOW, with an mp3, the vendor has to worry that it is an mp3 and understand its redistributability. With an SL shirt, the buyer has to worry about item decay (aka, versioning of object and system) and understand its lack of redistributability.

[csven]

"I don't think the Asian street market is a good business model"

len, I didn't say the Asian street market was a "good business model". You obviously miss my point, which should be clear in the remaining part of that sentence following the observation:

"...I realized just how much Westerners had forgotten about capitalism"

This was prefaced with,

"They've grown up silo'd inside corporate or government jobs that required no knowledge of anything other than their little niche and how to operate a time card."

This is the bigger issue, along with the mindless and senseless accumulation of things (much of which is increasingly stored out of sight in a landscape of "U-Stor-It"s). Personally, I'd rather people spend their money on virtual things than real things; there's less of an impact on our shared environment.

-

"If I buy a shirt in SL, SL is the limit of its use."

Not necessarily. As iTunes has it's DRM to limit content portability, so is SL limited. But in both cases, the content can be moved elsewhere; by force if necessary. So you're incorrect. SL is *not* the limit of its use. And increasingly, with examples such as DoubleHappinessJeans, the "type" of data moves from the virtual to the tangible.

I once said,

"I simply want physical objects that are truly important and worth the hassle of ownership. The rest can exist in a virtual space as far as I’m concerned. If I get really attached to it, I’ll have it fabbed."

I can't fab the experience for which people pay when they hand over hundreds or thousands of "real"dollars to sit in the front row of a concert. I can fab many of the "virtual" things in my SL inventory.

[csven]

(No, I didn't hit the "Post" button twice. Perhaps Admin would be so kind as to remove the duplicate comment.)

[len]

I understand DRM. That is why I am specific about MP3s. Jobs has been asking for relief from DRM because he understands it hobbles the market. The problem of the Asian model is quality. While you may not be uncomfortable buying a CD rip or even a designer dress rip, you might hesitate to buy your insulin or even Cialis from a street vendor. So in that sense, the value is not just in the willingness of the buyer to buy but also in the safety or quality and that varies by product.

I too wish we bought and threw away less stuff. Unfortunately, we are marketed that which is designed to be thrown away. Without coin of the realm standards for virtual world products, we're doing precisely that, C. Some markets for VR can operate like that bazaar model. Some can't.

Forterra and IBM are stepping up to sell into those markets. Given all the dolling of SL IBM was doing a year ago, I would think SL investors might really want to examine that 'throwaway' approach. I think it hurts SL but then, I don't use LL products so it doesn't affect me. Just observing...

[csven]

len, forget I even mentioned what I saw in Asia. It was only the trigger that woke me up to the bigger problem which I've now stated twice. That you keep discussing it (in another context, no less) seems to me to be an unwillingness to stick to the point centering around this first line:

"'I think it's extraordinary spending real dollars in virtual worlds,' says Ann Mack"

and your apparent endorsement of the sentiment:

"Time to wake America up" (aka: buying virtual goods is stupid).

Well, so is buying a whole lot of other stuff; intangible or otherwise.

Feel free to tell iTunes users and all the other millions upon millions of "virtual" buyers (including the ones on Wall Street) to "wake up".

Later.

[len]

I don't mind what they are buying. I do mind what they are stealing. I'm a musician with songs on the web. They are sold by one site (without permission), used for a YouTube video (without permission, but hey, it's a Samantha fan). On the other hand, UWA-Perth pays to have these created and added to their site. The Asian market is legendary for their piracy. Their governments are legendary for looking the other way until sanctions are applied.

Here's a fun thought: artists who work and sell create a consortium that sanctions server farm vendors for failing to protect the intellectual property of the artists. IBM stuffed SL because it could not provide security after using it to ramp up their own image as a 'benefactor of virtual worlds'. THAT's capitalism.

You have problems with knowing when someone is serious without a smiley. Of course sales of virtual goods works because digital media works.

There is nothing special about 3D files, Csven. What is a problem for the customer (and you have real problems in SL evidently), is when a product can't be removed from the store. Until you have real transportable assets, you are selling out of walled gardens. For some market, that is fine. For others, it simply screws the pooch.

BTW: the sale of what you call 'intangibles' such as baseball cars or comic books or autographs, etc., is valued by scarcity. That doesn't exist in virtual worlds. Of course, protect the IP and that situation improves. DRM may be bad for the vendor but only to a point. The same problems of scarcity affect the vendor.