Will Second Life Continue to Get Second Chances?

Posted on August 1, 2007
Filed Under Web 2.0 Kool Aid |

One of my readers sent me a recent Wired article entitled “How Madison Avenue Is Wasting Millions on a Deserted Second Life.” It’s an interesting read because it parallels some of the things that I’ve discussed on this blog before related to Web 2.0 advertising and its failure to deliver for brand marketers.

The article is particularly interesting because the worldwide head of interactive marketing at Coca-Cola, Michael Donnelly, is interviewed, along with other entities involved with Second Life, and provides some perspective on what Second Life has done for these brands. Or, more accurately, what it hasn’t done for these brands.

Some of the more interesting excerpts:

So one day last fall, he downloaded the Second Life software, created an avatar, and set off in search of other brands like his own. American Apparel, Reebok, Scion — the big ones were easy to find, yet something felt wrong: “There was nobody else around.” He teleported over to the Aloft Hotel, a virtual prototype for a real-world chain being developed by the owners of the W. It was deserted, almost creepy. “I felt like I was in The Shining.”

Yet Donnelly decided to put money into Second Life anyway. He’s no digital naïf: When he joined Coke last summer, the company was being ridiculed for its huffy response to a spate of Web videos showing the soda geysers that erupt when you drop Mentos into Diet Coke. Within weeks, Donnelly had Coke and Mentos sponsoring a contest on Google Video that’s gotten more than 5.6 million views. But Second Life was different. “Many places you go, there’s still nobody there,” he concedes. That’s certainly the case with Coke’s Virtual Thirst pavilion, where you can long linger without encountering another avatar. “But my job is to invest in things that have never been done before. So Second Life was an obvious decision.”

But over at Second Life, where an elaborate NBA island went up in May, the action has been a bit slower. “I think we’ve had 1,200 visitors,” Stern reports. “People tell us that’s very, very good. But I can’t say we have very precise expectations. We just want to be there.”

Second Life partisans claim meteoric growth, with the number of “residents,” or avatars created, surpassing 7 million in June. There’s no question that more and more people are trying Second Life, but that figure turns out to be wildly misleading. For starters, many people make more than one avatar. According to Linden Lab, the company behind Second Life, the number of avatars created by distinct individuals was closer to 4 million. Of those, only about 1 million had logged on in the previous 30 days (the standard measure of Internet traffic), and barely a third of that total had bothered to drop by in the previous week. Most of those who did were from Europe or Asia, leaving a little more than 100,000 Americans per week to be targeted by US marketers.

And yet, so eager are corporate marketers to get in that a small industry has sprung up to help. Business appears to be good — very good. “We have basically not made any sales calls,” says Sibley Verbeck, founder and CEO of the Electric Sheep Company, which has built in-world presences for such clients as AOL, Major League Baseball, the NBA, Nissan, Pontiac, and Sony BMG Music. “We would like to. But we can hardly keep up with the Fortune 500 companies that are contacting us.”

What do marketers want when they call Electric Sheep? “They don’t know,” Verbeck says. “Mostly it’s ‘We’ve been reading about virtual worlds — is there anything there for us?’” Almost inevitably, the answer is yes. The cost varies greatly: A company can stage an in-world speaking event for as little as $10,000, but hiring Electric Sheep or one of its competitors to create a full-time presence, with a private island and a lot of virtual construction, could run several hundred thousand dollars a year. (Linden Lab leases virtual land to cover its server costs but doesn’t take a cut of what companies spend establishing their presence there.) Opt for a really elaborate build, hold frequent events to keep people coming back, and hire an employee or two to keep things running, and the budget could easily hit $500,000 a year.

You might wonder what Coke is doing in such a place. “It had a lot to do with hype,” admits Michael Donnelly.

Still, despite isolated reports of corporate dissatisfaction with Second Life, the influx continues.

What’s behind this stampede is not that hard to divine. “A terror has gripped corporate America,” says Joseph Plummer, chief research officer at the Advertising Research Foundation, an industry think tank. Plummer has been around Madison Avenue since the early ’60s, when modern advertising techniques materialized. “The simple model they all grew up with” — the 30-second spot, delivered through the mass reach of television — “is no longer working. And there are two types of people out there: a small group that’s experimenting thoughtfully, and a large group that’s trying the next thing to come through the door.” Second Life appeals to the latter — the ones who are afraid of missing out, who don’t consider half a million dollars to be a lot of money, and who haven’t figured out (or don’t want to admit) that Second Life is less than the bold new frontier it appears to be.

“Companies say, ‘It’s an experiment’ — but what are they learning?” Tobaccowala asks. “Basically, they’re learning how to create an avatar and walk around in Second Life.” Which is fine if that’s what you want to do. Just don’t expect to sell a lot of Coke.

The article seems to provide some confirmation that:

Incidentally, on a somewhat related side note, I spoke yesterday with an avid Facebook user and we discussed a number of things about Facebook. I was interested to hear that one of his favorite things about Facebook was the unobtrusive nature of the advertising which makes the advertising easy to ignore. While unlike Second Life, Facebook clearly has a large, engaged audience, companies like Facebook should also be concerned since anecdotal evidence seems to be indicating that they too are not delivering for marketers.

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