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Dearest Readers,

If you enjoy reading my blog or liked any of the panels and conferences I put together this past year, I would greatly appreciate your vote for my proposed SXSW panels:

Virtual Goods: The Next Big Business Model! 
What’s Wrong With Today’s Major Social Networks?
Human and Property Rights in Virtual Worlds

I haven’t put together who the rest of the panelists are yet - I’m waiting to see if any of these panels get selected, but I guarantee any panels I put together will be interesting, fresh, and relevant.  Why? Because I really hate wasting peoples’ time. And I really enjoy being a catalyst of enlightenment, in whatever small way I can.

SXSW is my favorite conference of the year.  It’s just a really cool mix of product oriented people: creative people who build stuff.  These are the kinds of people I love to spend time with.  Plus, it’s in Austin and Austin is a super fun town. 

Greatest thanks,

s

update:

p.s. To all of you lazy folks who are reading this post but not voting (e.g. most of you), because SXSW uses awesome Ajaxy Web 2.0 technology, it only takes you 1 second to vote.  So you have no excuse.  :P

Leigh Alexander, who is one of my favorite writers on the subject of virtual worlds, interviewed me about the future of online gaming.

The whole thing is worth a read - it turns out it’s a lot easier to speak casually with someone than to blog (surprise!).  In it, I talk about one of the holy grails of online gaming:

“One of the hallmarks of a successful Web company is — if you look at the track record of the most successful companies that have stayed independent and sustainable, like eBay, Google or Amazon — they have built platforms [which can] foster entrepreneurs. There are ecosystems that spawn innovation from the community members themselves, and Facebook is falling in with that too, with the new platform launch. Few gaming people understand this intuitively — though, Xbox Live Arcade really fosters an entrepreneurial ecosystem, too. That’s something Areae is trying to focus on – how to build an actual ecosystem and a real, [open] web platform for people to [work, build, and extend upon].” 

We just announced our recent Series A investment in Conduit Labs, a Boston based company that’s focused on building a social networking / casual MMO hybrid.  Well, what does that exactly mean? And aren’t there a hundred companies now doing this exact same thing? 

This new space - the intersection of Web 2.0 and online gaming - is a very difficult one to define.  This categorization encompasses companies like Kongregate to Areae to Three Rings - each of whom is vastly different from the others.  To make it even more confusing, Conduit Labs is not really like any of the three companies I just mentioned.  They’re inventing an entirely different interpretation of what it means to sit at this intersection. 

Conduit Labs is building a gaming environment.  That is to say, the primary driver of user interaction is game mechanics.  This gaming environment lives in an immersive, graphically rich world.  But the gameplay Conduit Labs is building isn’t exactly like other online games we’ve all now become familiar with: there’s probably not going to be much kart racing or princess saving or dragon slaying.  We aren’t yet disclosing what the gameplay or graphical metaphor will consist of, because that’s part of the secret sauce. 

Leigh Alexander from Worlds In Motion wrote up a great interview with Nabeel that provides more insight into what Conduit Labs is up to.

Nabeel: “I think probably every other day now over the last couple months, I see a new casual MMO or virtual world startup; it’s been constant…and what I saw was the same kind of dichotomy — two types of startups. There’re hardcore MMO gaming guys trying to make that experience more accessible, sort of like World of Warcraft meets the web. And the other side of the coin is a bunch of web guys who want to build a web site with virtual gifting and more gaming.”

While Hyatt recognizes the value in both of those approaches, he adds, “I think they’re missing the larger point – which is that there is no interaction on the web that is like a social game. I don’t mean a single-player game, which is based on a legacy of, really, only video games; it doesn’t last hundreds of years. There’re actually thousands of years of games that are primarily social activities like dancing, or bowling. And those are about you bonding with your friends, and there’s nothing like that online right now. And I think the web and social networks provide a whole new medium to create something that’s never been seen before.”

Just like the Wii and Guitar Hero reinvented the social gaming metaphor for a broader audience, Conduit Labs is trying to do the same for your web gaming experience.  I’ve also seen innumerable business plans in the last year for startups in the online gaming and virtual world space.  But most of them have been rehashes of things we’ve already seen, building things like “making the MMO even more casual” or “putting casual games into Facebook” or “Club Penguin but with chimpanzees.”  (disclaimer: I actually like chimpanzees quite a bit, probably more than I like penguins.) 

We invested in Conduit Labs because I believe the team there really gets it: there’s an entirely new type of immersive experience waiting to be built.  It has less to do with technology (although we are building on the basic assumptions/principles of the zero-barrier MMO and all that entails), and more to do with social engineering.  This is a great team that has the right blend of experience that includes Web 2.0, hardcore MMOs and the scalability expertise that comes from supporting tens of thousands of concurrent users, and understanding how to design “fun” for a mass market audience that comes from building groundbreaking social games like Guitar Hero. 

We’ve made a couple of interesting investments recently in the social media space - Twitter and well, the aptly named Social Media.  Social Media, the company, is building a highly viral network of micro-applications that live across multiple social networks.  The announcement regarding the Social Media funding is here.  Social Media is a 1st cousin to companies like Slide and RockYou - both of which are essentially virtualized social operating systems, coordinating massive networks of widget-based microtransactions.

What I find compelling about Twitter and Social Media is that they are both creating standards around specific user behaviors and then syndicating this standard across multiple social operating systems.  This server side synchronization of user relationships and user behavior is the key asset to own.  We’re now moving into a client agnostic era, where clients - whether they be Flash, Ajax, Facebook-centric, or MySpace-centric - are marketing channels whose function it is to drive efficiency into the process of targeting and segmenting your users. 

A client should be an interpretation of a user group’s needs within a specific context (by ’context’, I mean the 14-18 year old females on Facebook have a different community ethos than the 14-18 year old females on MySpace and thus could be segmented into two different user groups).  Done well, this can lead to lower user acquisition costs and a broader distribution engine.    All in the pursuit of creating the zero barrier platform.

Seth Goldstein, Social Media’s CEO, put together a cool summit last week called AppDevCon.  It was a get together of 60-70 of the leading Facebook application developers.  I spoke on a panel about investing in Facebook apps.  Justin Smith, from the Inside Facebook blog, wrote up a good summary of the event’s sessions here.  My comments were truncated because Justin was liveblogging the event, but to sum up what I said:

  • We are actively investing in Facebook apps.  However, I feel there are very few, if any, standalone apps today that would make outstanding venture investments.  There are interesting threads and patterns that are emerging that could become great venture investments. For example, MySpace and Facebook are the two most well known asynchronous social platforms. There is great market opportunity for an emergent synchronous social platform or application.  I’m also very interested in virtual gifting and virtual currency platforms that operate across myriad environments.
  • I am most interested in investing in smart, creative folks who have an interesting hypothesis, a good process for experimenting in rapid iterations, and a methodology for collecting data that gives them insight into when and where to place the big product bet.  The pace of innovation on the Facebook platform is insane right now.  It’s enormously difficult to predict what the killer app might be. 
  • Should app developers be building on other platforms other than Facebook? It depends on the ROI - Facebook is but one user acquisition vehicle with its own Customer Lifetime Value datapoint.  If you build a framework that lets you test aggressively and measure results quickly, there’s no reason you shouldn’t be deploying across multiple environments.

Eesh.  I’m really playing catchup on this post.  My apologies.  If you want to be immersed in my life’s trivialities on a somewhat regular basis, you can follow my Twitter stream.  

For the 2 people that read my blog that don’t read Techcrunch (hi Mom, hi Grandma!), here’s a link to the Techcrunch article that I wrote awhile back on Virtual Goods: the Next Big Business Model

Also, the videos from the Virtual Goods Summit can be found here.   These are all worth watching, but if you have only 1 hr, I highly recommend that you watch the first one, Virtual Goods Success Stories.  Kira from Neopets, Paul from Habbo Hotel, David from Tencent, and Min from Nexon all disclose fascinating and very proprietary statistics about their businesses. 

I’m just getting back from a brief vacation.  I thought about going somewhere exotic, but I ended up being very, very lazy. I went to San Diego, hung out with old friends at ComicCon, and emptied my brain at the beach.  I read about a dozen books and watched Season 1 and 2 of Battlestar Galactica.  I know that sounds horribly dorky, but alas.  What can one do? 

When I started writing this blog, very few people were talking about the melding of MMOs and Web 2.0.  My goal for the last year was to proliferate this concept widely and to help bring together what I observed to be two very segregated, but highly complementary communities.  This was my motivation behind putting together a Virtual Worlds/Casual MMO panel at the Web 2.0 Expo and for including the panel on “Virtual Items: Mainstream or Not” at the Virtual Goods Summit. 

 Yesterday, BusinessWeek published a special report called “Getting Serious about Gaming.”  Two of my investments are mentioned in this article, one of which is Areae:

“One of the most high-profile efforts in this area is the L.A.-based Areae, founded by industry veteran Raph Koster (former chief creative officer at Sony Online Entertainment (SNE)) in December, 2006. Still in stealth mode, the company is talking very broadly about its plan to reinvent virtual worlds. But the basic idea is to bring down the astronomical development costs of the popular MMOGs by borrowing from the equally popular and vastly more economical Web 2.0 technologies supporting sites such as MySpace and YouTube.”

Hrm, they don’t exactly get it right.  What they do get right is that Areae is still very stealthy. In all seriousness, I don’t like invoking a Web 2.0 metaphor where the sole conclusion is ”cost reduction.”  Web 2.0, while an accelerant of more cost efficient development models, is in my mind, primarily characterized by a collaborative and community-driven relationship with your users where “A+B” does not merely equal “A+B.”  This is the kind of alchemy all of us technologists strive for - how do we transform mundane, commodity database driven web pages into something that supports life?  ;>

And since when was MySpace Web 2.0?  

In any case, all my good natured snark aside, I’m very happy to see the transformation in the market that has taken place over the last year.  The conversation around next generation social media has moved far beyond Second Life and WoW.  Every day, I see new business plans and prototypes of entrepreneurs constantly innovating in this space. 

I am producing this awesome conference, the Virtual Goods Summit, with my friend Charles Hudson.   We wanted to put together a conference that moved the dialogue beyond “Virtual Worlds: Hype or Not” to discussions that can inform meaningful industry evolution and actual implementation.  With companies like Tencent ($500M+ yearly revenue) and Habbo Hotel ($65M yearly revenue) generating a significant portion of their revenue from virtual goods, it’s clear that virtual goods represent a real, viable business model and will likely have a huge impact across all of the consumer Internet.  [update: Note that this isn't just for people interested in gaming.  There's a reason we only have one session related explicitly to virtual goods in gaming & entertainment!]

What: Virtual Goods Summit 2007
When: June 22, 2007 from 10 AM - 5 PM
Where: Annenberg Auditorium Stanford University

Virtual goods and virtual currencies are growing beyond their traditional
roots in online gaming and beginning to exert growing influence on the
development of social networks, community sites, and casual games. This
growing influence is due in large part to the fact that consumers have shown
a willingness to embrace virtual goods as a way to express themselves
online. From pets to coins to avatars, virtual goods are becoming a real
opportunity for companies who are looking to build more engaging online
experiences:

  • Neopets users have created over 206 million virtual pets
  • Tencent has over 250 million active users in China and generated $100+ million in Q1 2007, 65% of their revenue comes from virtual goods and services
  • Nexon generated $230 million in 2005, 85% of which came from virtual item sales
  • Habbo Hotel has over 75 million registered avatars in 29 countries, 90% of their $60 million+ yearly revenue comes from virtual goods
  • Gaia Online does over 50,000 person to person auctions a day - making them the 3rd largest auction site on the Internet.  Their average user consumes 1200 page views a month.        

The Virtual Goods Summit will bring together leading entrepreneurs, venture capitalists, and technologists to discuss the present and future of this rapidly growing market. We encourage you to join us at this year’s event and participate in what promises to be an exciting and lively conversation around some of the key questions facing the virtual goods market today:

  • How will virtual goods and virtual currencies impact social networking?
  • Are virtual goods the next big business model?
  • What does it take to successfully launch a virtual goods offering?
  • Are virtual goods poised to go mainstream?
  • What does it take to nurture and develop a successful virtual economy?
  • Why are users embracing virtual goods?   

We’ve assembled a strong team of industry experts to join us for the day and share their views and experiences:

  • David Wallerstein, Tencent/QQ
  • Paul Thind, Habbo Hotel
  • Kyra Reppen, MTV Networks (Neopets)
  • Craig Sherman, Gaia Online
  • John Chi, Nexon USA
  • Amy Jo Kim, ShuffleBrain
  • John Vars, Dogster
  • James Hong, HotOrNot
  • Jia Shen, RockYou
  • Erik Bethke, Go Pets
  • Tim Stevens, Doppelganger
  • Raph Koster, Areae
  • Mark Wallace, 3PointD
  • Dan Kelly, Sparter
  • Daniel James, 3 Rings
  • Sean Ryan, Meez
  • Jim Greer, Kongregate
  • Joshua Hong, K2 Networks
  • Robert Scoble 
  • Susan Wu, Charles River Ventures 
  • Kevin Efrusy, Accel Partners
  • Nabeel Hyatt, Conduit Labs

I highly encourage you to register. I think it will be a fabulous event full of lively discussions and great people.  We’re in the process of setting up an IRC backchannel, a Twitter stream, and other communications channels, so keep posted.

Sincerely, your friendly conference hosts and organizers,

Charles Hudson and Susan Wu

If you’re at Web 2.0 Expo, come to my talk tomorrow, Wednesday from 3:20 - 4:10 pm in room 2009, about “the Future of Online Gaming & Virtual Worlds.”   I’ve put together a wonderful group of panelists that includes:

I’m psyched because Gaia Online and Club Penguin are both talking publicly for the first time ever about their businesses.  These are two of the most exciting web companies you’ve probably never heard of, unless you have kids between the ages of 6-15.  

I’m taking question suggestions!  Post your comments.

We’ll be talking about why “online gaming and virtual worlds” is incredibly important to the future of the Web as a whole.  And maybe delving into SecondLife’s furry monetization strategy.

Umair Haque writes a blog called BubbleGeneration that I like a lot.  His writing has consistently helped me expand my thinking in many ways.  He recently commented on my post about why avatars are the web’s most undervalued asset today:

“Controlling the emotional intensity of an industry is an incredibly powerful source of advantage in the post-network economy.

But that’s a small part of the reason avatars are valuable.

The truth is that the post-network economy is an interaction economy. The avatar is a focal point for interaction - a sticky, context independent, information-rich focial point…which should be enough to explain why they can also be explosive focal points for value creation.”

I think we are actually making the same point, we’re just using different words to describe it. 

Whenever I evaluate a new consumer startup, what I am constantly ruminating is “What is the relationship between this service and the user who uses it? Is it a weak emotional relationship or a strong emotional relationship?  What is the nature of this relationship - is borne of need or desire?” and so on. 

I care about this because emotional intensity has a direct correlation with 1) how much attention a user is willing to spend on any given product/topic (Quantity) and 2) the Quality of the interaction the user is likely to have with this service.  Emotional intensity creates option value for the service provider. 

Think about your most recent romantic relationship.  The stronger you feel about someone, the more likely it is that you are going to 1) spend more time with that person and 2) explore the depths of the relationship’s possibilities.

As we are moving into an era where attention is the most valuable currency and the user is pummelled with more content they could possibly consume in a lifetime, the strength of one’s emotional connection with a service, a brand, or a product is of utmost importance.  The dominant strategy for creating defensible unfair advantage around your product in Web 2.0 was community and the associated network effects.  But in a world where every single service has deployed a community platform with identical feature sets, how do you differentiate? It’s not enough to deploy communication platforms, user profiles, and voting tools.  Social game mechanics help, because they lay the foundation for a number of different emotion states: tension, exhilaration, accomplishment, delight, etc.  

As product designer, your role is similar to that of a conductor of a large symphony.  Only, your instruments are peoples’ emotion states.  Each user experience is the orchestration of numerous emotion states.  The value of a customer to you is completely correlated with his/her set of emotional reactions.  To add complexity, the timber of each note varies by instrument and by person.  For example, the emotional footprint of surprise is different than that of longing.  Surprise has a big high and tapers off, leaving it with a short tail.  Some people may be frustrated by a feeling of longing, whereas some people may find it stimulating.  Ad infinium.

In short, this matters because emotional intensity is the most important filter by which people determine how to spend their time and energy.  If you understand what the emotional relationship with your user feels like, you can then figure out what the possible range of monetization opportunities might be. 

Folks like Wagner James Au and Mitch Wagner of InformationWeek have already blogged about the panel, but I wanted to share my presentation with the folks that couldn’t make it.  This is my take only.  The other panelists - Wagner James Au, Robert Scoble, and Robin Hunicke all had great things to say.  By the way, Robin is brilliant.  She’s the lead designer for the forthcoming MySims on the Nintendo Wii and a PhD candidate in CS/AI at Northwestern.  As she spoke, I thought ”Sheesh, it’s going to be hard to follow her.”

The question I was trying to answer was, “Is the next generation of the consumer web 3D?”  I think the answer is not necessarily.  

1. The reason why we’re asking this question is because there’s a bubble forming in the virtual world space right now.  

That’s a pretty incendiary statement. What do I mean by it?  What I see on the horizon are dozens and dozens of new virtual world platforms and titles hitting the market - far more than the public will want to consume.   By ‘title,’ I mean a self contained, branded version of a virtual world much like “Virtual Laguna Beach.”  All the big media and consumer goods companies are looking at what’s happening with online community sites like MySpace and Facebook and want in on this action desperately.  

However, I think that all of the media hype around Second Life is misleading the public about what the next generation consumer Internet might look like.   That isn’t to say that Second Life doesn’t have tremendous merit in moving the dialogue forward about what collaborative work and play spaces feel like.  What I mean is that there are now quite a few companies who equate “future of online communities” with “3D graphical world.”  The mad rush by these big brands to create empty showrooms in SecondLife is proof of this.   Just like in the dot-Bust days, there will be lots of shoddy substandard products brought to market in the mad frenzy to create a ‘presence.’ 

But the good news is that in this crazy landgrab, there will be a couple of winners that shine through.   There is considerable appetite for online play spaces right now - you can see the proof of this in the many bootstrapped and under the radar services that are getting a lot of traction. 

2.  What does the next generation consumer Internet look like?

What I’m interested in above all else is the nature and evolution of people and our constructs [culture, economic and belief systems.]  As I’ve said before, I think the real story behind the consumer web today is what’s going on cognitively - how our relationship with the Internet is changing. 

Here’s how I see the evolutionary arc of the online user experience:

Web 1.0: Information Sharing
Web 2.0: Interaction
Web 3.0: Immersion

By immersion, I mean that people will demand experiences that are more emotional, engaging and genuine.  3D graphics are one way to create immersiveness, but not the only tool we have in our toolkit.

Let’s look at how the ways people have expressed themselves online have changed over time:

Pre-Web: Text based worlds
(I am looking at a character named Ulion and the text he has used to describe himself)

text mud

Web 1.0: Geocities

Geocities Page

Web 2.0: MySpace, currently the world’s largest massively multiplayer online game

myspace2-small.jpg

Then, there are a few sites that reveal glimpses of what the future might look like.

Web 2.1: Gaia Online
(Gaia started as a bulletin board system that has slowly layered in a 2D virtual world graphical metaphor over time. What you’re looking at is one user’s profile.)

Gaia Screenshot

Web 2.1: Yelp

yelp-sm.jpg

Web 2.1: Flixster

flixster-sm.jpg

3. What are the implications?

We are moving from web pages to web places.  More and more game-like features will find their way into everyday web design - you see this already being implemented successfully on sites like Yelp and Flixster.  People will seek out experiences, rather than just content.  3D is just one tool out of the many we have available to create immersive, engaging experiences.  3D should be used tactically - it makes sense for some audiences and for some applications.  There are many ways to think about presence and dimensionality online.  3D graphics facilitate spatial/physical awareness. But we should also be thinking about 3 dimensional social presence and shared/collaborative presence.  Luckily, there are a couple of good examples in this space already.

This post will be continued…

I think the future of online gaming eventually converges with the future of Web 2.0.  This session will explore what we think the future of online games looks like. On the panel with me are Raph, Craig Sherman - CEO of Gaia Interactive, Gene Yoon - VP International of Linden Lab, and Joi Ito - my guild leader and Creative Commons guru!

 Early bird registration ends today, so if you want to go, sign up and receive a discount.

  • save $300 by using the discount code below to register (by today)
  • earlybird = $200 off, + $100 off with discount code webex07mk35
  • register at www.web2expo.com/pub/w/53/register.html
  • Also if you have any thoughts or ideas about the type of content we should cover, I welcome your suggestions. 

    Raph Koster announces his new company, Areae - and we at Charles River Ventures are very excited to be part of this journey.   I’ve known Raph since 1994 or so - back when we were MUD developers, and I’m excited to support him in finally realizing the dream he’s had since starting Legend MUD

    Though Areae is still very stealthy, Areae sits at the intersection between Web 2.0 and MMOGs.  If you think about it, the Web 2.0 and the Massively Multiplayer Online Gaming communities have largely been pretty siloed - gamer developers go to game industry conferences and Web 2.0 folks go to Web 2.0 conferences, and there has not been enough intermingling between the two communities. 

    But both industries have been inching closer and closer together.  I predict that the successful online communities in the future will continue to more strongly resemble MMOGs.  And MMOGs will continue to extend their reach and exposing their data to other Web applications - either formally, by the developers/publishers themselves, or informally by folks like Rupture

    Here’s what the 2 communities can learn from each other: Game designers have been creating rich, fully immersive environments for years.   All of the design principles that I thought about when I was designing MUDs are identical to the issues facing Web designers today - how do I create more immersive environments? How do I give participants -equity- in this virtual world? How do I make users feel like real citizens in my social ecosystem? How do I create better scale around world and object creation? How can I expose building tools that were previously available only to Admins and Devs to the end users - and make them dead simple to use?   How much content should I pre-seed and what content containers do I think users are going to be more likely to want to customize and make their own? 

    For Web 2.0 designers, there is a brilliant, must-read presentation that Amy Jo Kim put together about how to intelligently apply game design principles to Web 2.0 services to make them richer, more compelling, and more immersive (read: “sticky.”)

    Yet, the Web 2.0 crowd knows a lot that the game devs don’t: how to create massively scalable, low barrier to entry, micro-chunked experiences.  How to create appealing, mass market products that are appealing to a diverse demographic.  How to iterate quickly and create production processes that give you tremendous economies of scale around innovation. 

    I’m excited by the possibilities - Raph has brought on an excellent team and advisory board.  It’s time the Web 2.0 and Gaming communities begin collaborating for the betterment of all users, everywhere. 

    Here’s some of the coverage on Areae thus far:

    GameBiz Daily:

    “I would describe what we’re trying to do as marrying together a lot of the philosophy of the web and web 2.0 with virtual worlds,” Koster told GameDaily BIZ. “We’ve been paying a lot of attention to how the Internet is going. If you remember my speech at the Austin Game Conference last year about whether or not the games business is full of giant dinosaurs… a lot of that ties into this.”

    CNet:

    Koster is not divulging much about Areae, but the company’s site alludes to its pure, massively-multiplayer online game DNA: “We’re working on some new tech that will literally change how virtual worlds are made. We’ve got a cool world or two incubating on the back burner.”

    Gamasutra:

    With what sounds like a firm emphasis on user participation, as well as user customization and content, all central tenants of the Web 2.0 ethos, we make an obvious leap toward the current open virtual world leader, Second Life, which Koster laughingly dismisses. “See, you’re already jumping to conclusions about what we’re making! Honestly, there are as many differences from Second Life as there are from Everquest.” He pauses, but concludes, “I’ll just have to leave you tantalized.”

    Shawn Fanning’s new social networking service, Rupture, was announced with great fanfare yesterday.  Since he’s kept it remarkably stealthy, it’s impossible to discern what he’s really building.  However, there was some concern in the blogosphere yesterday that Rupture may violate World of Warcraft’s terms of service agreement.  Given that Shawn has demonstrated an acute ability to learn from his Napster experience by delivering the successful Snocap service, I would be really surprised if Rupture did not play well within the ecosystem that has already created around WoW. 

     Yes, there’s already a thriving ecosystem of developers building atop the WoW platform.  Think of as a Salesforce.com-style AppExchange for the World of Warcraft environment.  There are already hundreds of individuals and small dev groups out there building very cool UI, management, and communications modification for your World of Warcraft experience.  WoW has done a good job of creating the hooks to allow people to extend the WoW gaming experience.  Many games have done this in the past and I’d be surprised if all future online multiplayer games didn’t support something similar.   APIs, like open source, facilitate economies of scale around the development process and create network effects for the core product. 

     I spoke with Matt Marshall over at Venturebeat earlier today about why I think there’s a need for Shawn’s new service - Matt’s article is here.  I haven’t seen Rupture so I’m only speaking from the perspective of being an average player who sees an opportunity in the market.  Matt’s article links to a number of different services that I pointed him to, that provide some subset of the functionality that Rupture seems to be aiming towards.  But there’s still market opportunity for someone to provide a cohesive and comprehensive toolset that sits atop the core WoW experience - wrapped up in a UI targeted towards the average user.  Right now, I suspect that most WoW mods are downloaded primarily by the hardcore raiders and PvPers. 

    Also, most services right now are geared towards making your core gaming experience more efficient or helping you locate game-related information - there’s definitely opportunity in providing tools that help people discover, communicate, and build relationships with other folks.  After all, your average MMO player spends 20+ hours a week in game.  That’s a lot of people with some strong similar interests. 

    Paul Kedrosky and Jason Calacanis have both written posts today about how the real story behind Web 2.0 is the spectacular growth in online advertising revenue.

    If you look at the stats that Paul’s linked to, it’s clear that online advertising is still a baby, nascent market.  Despite its torrid growth, the money spent on online advertising is only a fraction (about 11%) of the money spent on advertising in newspapers.  And I’ve had numerous discussions with one of our EIRs who was the former president of Knight Ridder Digital, Tom Mohr, about the state of the newspaper industry.   It’s clear to me that the newspaper industry is going the way of the dinosaur unless newspaper companies can figure out how to regain their relevance to end customers and reinterpret their role in providing the glue tying together regional communities.  So I firmly believe that online advertising is still in infant stages.  If online advertising were an infant, I’d say it’s crawling and can sit unsupported, but it’s not yet opening doors on its own or coloring in a coloring book.

    While the online advertising story is an exciting one, it’s not the real, real story behind Web 2.0.  Online advertising is the derivative story.  The first and foremost function we should be paying attention to? The increasingly blurry line between our online, virtual selves and our real world, physical selves.  In the Web 1.0 era, folks used the Internet as an adjunct to their normal routines.  Now, in the Web 2.0 era, the line between their offline and online lives are blurring such that the Web, the communities we participate in, and the tools we use to communicate are an integral part of our quotidian existence.  There’s so much to monetize on the advertising side because as Jason rightly points out with video and audio ad stats, folks are moving their lives online. 

    This is interesting to me, because it puts evolutionary pressure on our assumptions about identity, relationships, commerce, and culture.

    The Web 3.0 story is NOT about AI, as John Markoff would have you believe.  It’s about continuing down this path of improving the user experience of living and socializing online.  This story is about human context, social proximity, and a sense of place. 

    Susan Wu

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