2010+ VW growth areas Part One: Branded Worlds

Our latest report, Virtual Worlds 2010+ explains the key growth areas emerging in the sector over the next three years. This is a series of posts taking each area in turn and breaking out the analysis.

We think one of the major contributors to growth in the KT&T category will be branded worlds – virtual worlds created by real world companies in the toys, games and media spaces.

We’ve already seen some indication of the power of branded worlds, namely with Barbie Girls, Webkinz and Buildabearville (shown right in a segment from the Radar).

The MTV suite of worlds are also worthy of note, albeit slightly less successful (in terms of comparative registered accounts), perhaps due to targeting a slightly older age group.

All three of these branded worlds amassed multi-million registered account user bases in a relatively short period of time – something pure-play virtual woods typically struggle with.

Here are the reasons why branded worlds are set to be major growth areas in 2010+:

1. Brand awareness

The importance of The Brand is often over-looked by new VW companies. Sure, having a technically sound platform and product is one thing and of course, viral marketing is great (as a theory) but potential users need to know about the world. Branded worlds have a huge advantage over pure-plays because they have incumbent levels of real-world brand awareness – they have customers that already have a relationship with the brand.

We’ve recently completed a consulting project for a global games publisher on one of their tween brands, providing guidance and strategy on the in-world user experience/journey, financial model, marketing/acquisition and monetisation strategies. What blew us away right at the start was the incredibly high level of brand awareness in several key territories – an ideal start for a virtual world.

Furthermore, creating the virtual world was almost a ‘no-brainer’ strategy as it’s simply an evolution and extension of their existing brand.

2. Distribution channels

A large real-world base of potential users who know the brand – check. Next thing, tell them about it. Another key advantage branded worlds have over pure-plays are distribution channels.

These are existing communication tools and platforms already in place, typically supporting marketing activities for the real-world brand. Integrating supporting messages to propel potential users to registration can often be done effectively creating economies of scale from marketing and acquisition perspectives.

3. Ability to monetise

This is key. A challenge facing pure-plays is convincing parents (if the VW is targeting younger ages) that the new VW brand is ‘worthy’ of their disposable income. Factors such as credibility and value come in to play here. Clearly, real-world brands have already crossed that bridge and (being overtly commercial and direct) taken their money. Therefore, converting active to paying users is in a way marginal income for the brand and not an entirely new process.

Digging a little into optimal VW business models for branded worlds, our view here is that virtual goods is the way to go, even if it’s tempting for the brand to think they can leverage users sufficiently towards premium subscriptions. Whilst in theory premium subscriptions might make a lot of sense for real-world brands creating VWs, the vast majority of these companies have products, not subscriptions for their real world offerings. Don’t introduce a new mechanic here. Stick to what you know (and your real-world customers know) – virtual goods is the way to go (no intention for rhyming there BTW).

4. Multi-genre

There’s an awful lot of real-world brands in the KT&T space (particularly kids and tweens) that are ripe for virtual world entrance. And, they cross many different genres – girls/boys, sports, music, fashion, real-world games/activities,…the list goes on. One branded world to definitely watch is Lego Universe. It’s been over two years in the making – so it had better be good! Another couple coming down the track are World of Cars from Disney and Kung Fu Panda World.

And they’ll be a lot more to come and many a deal struck this February, seeing as Engage Expo is co-locating with the Toy Fair 2010 for their NYC show. See you there .

The full KZero report, Virtual Worlds 2010+ can be ordered here.

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