How is the global recession going to impact virtual worlds in the kids, tween and teen virtual world sectors? A question in the minds of dozens of management teams of these worlds.

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One early and obvious casualty from these economic times is a reduction in marketing budgets from advertisers. Marketers are being forced to re-examine their proposed expenditure and cut-back in areas typically classified as non-traditional or without demonstrable returns. Not good news for virtual worlds with business models relying on advertising and marketing from third-parties.

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This issue is unfortunately further compounded because these marketers are probably also fearing for their jobs at the same time and more likely to ‘keep their heads down‘ rather than ‘stick their necks out‘ and propose virtual world campaigns.

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On this basis, revenues from users (via premium subscriptions and micro-transactions) becomes paramount to the short and medium term success of these VW’s – and even more so due to the fact that this sector is already highly competitive and leaning towards over-supply. VW’s need to create strategies which improve on the conversion rates between active and paying users. The good news here is that small improvements on this conversion rate can lead to major revenue upsides.

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So really, the key here is to focus on the buying process psychology related to ‘upgrading’ member accounts. And it’s the parents/guardians of members who are the target here as these are the people with the power, or more accurately, the credit card.

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What’s needed here is the re-assurance from the VW’s directly to the parents that rewarding their children with premium services is a good thing – value for money essentially.

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I’ve spoken several times about the challenges facing what I call ‘Pure-Plays’ – virtual worlds created solely for online purposes without a real-world awareness or presence. These companies have several challenges – grow their user bases, grow their user bases and compete against well-known brands with their own worlds and the positioning/establishment of their own brands. It’s this third point which is sometimes overlooked.

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Of course, as the slide shown left identifies, there are several factors presented threats and issues for virtual worlds but in a recession I strongly believe the role of brand is the key to unlocking the value in active user bases.

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The brand needs to get into the real world in order to build awareness and to a high degree credibility with the parents. They’re not going to dish out their valuable disposable income without being convinced of the value and most importantly, trusting the company.

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What does getting into the real world actually mean?

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