Marketers Explore New Virtual Worlds: Some Create Own As Second Life Site Loses Some Luster

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.”

Source: Wall Street Journal