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The Evolution of Virtual Worlds, Part Four. Branded Virtual Reality

This is the fourth article in our series exploring the evolution of virtual worlds. The first post laid out the foundations of popular virtual worlds moving from 2.5D into 3D environments, what we call VW1.0 and 2.0. Part two explores a key growth area for the virtual worlds sector away from the gaming genre – Social Virtual Reality. Our previous post (part three) explained the power and popularity of ‘building stuff’ in virtual worlds, a concept called User Generated Spaces.

In this post, we move away from sandbox environments and socialising and focus on how companies will leverage virtual worlds to create Branded Virtual Reality experiences.

Brands in Second Life

The idea of brands using virtual worlds is not a new one. From an older demographic perspective many brands have dipped their toes into virtual worlds. This activity was activated primarily by the popularity of Second Life from 2007 – 2009 with over 100 brands launching campaigns. In many cases brands created islands in Second Life and in the vast majority of cases these destinations struggled to generate visitors. Why? Because the residents of Second Life tended to hang-out on the main islands and didn’t want to teleport away from ‘the masses’ and check-out an empty branded island.

l'oreal kitchen_001

We adopted a different approach with our campaign for L’Oreal Paris in Second Life. Instead of creating an island and dragging users from the mainland to an island, instead we partnered with existing retailers of virtual goods with shops on the mainland and asked them to stock the products we created.

These products were virtual goods in the form of ‘skins’ based on real-world cosmetics. We also utlised a popular location in Second Life called the Greenies Kitchen – a supersized room allowing visitors to explore a massively scaled kitchen. Inside the kitchen we placed an enlarged handbag containing photorealistic replicas of L’Oreal products. The virtual ‘skins’ were also distributed when users clicked on the products.

The key point to make here is that brands have to create experiences in virtual worlds that the users actually want to engage with. And, if a brand can provide a virtual world user with a product (i.e. a virtual good) that enhances their experience then all the better. The idea that ‘if you build it they will come’ is not necessarily true.

Existing Branded Virtual Worlds

Shifting to a younger demographic, the kids and tween sectors have adopted virtual worlds in their millions. As shown in the graphic below from the KZero Universe Chart, VWs such as Moshi Monsters, Monkey Quest, Moviestar Planet and Poptropica command significant online audiences.

This is turn has facilitated offline revenue streams in the form of merchandising, movies and other forms of branded entertainment.

kzero universe q2 2014 seg2

The way that branded virtual worlds resonate with this age range presents a interesting opportunity to brand owners when the virtual reality market penetrates this demographic.

Branded Virtual Reality

From an experience perspective, the current state of the virtual reality market is being driven by independent developers, enthusiasts and in a small number of cases, larger studios creating games in liaison with headset manufacturers.

Brands haven’t completely ignored the emerging popularity of virtual reality though. As this presentation shows, some companies and IP’s have already dabbled with VR demos. Expect to see more of these types of applications used for expos, product launches and the like.

But once the number of headset owners starts to ramp-up (from early 2015 onwards) with products such as the Oculus Rift (CV1), Sony Project Morpheus and others coming to market, this will be the catalyst for brands to enter the VR space. Here are some examples of how this will happen….

Gaming Brand Extension

3176836171_5aa0b21e9f_o For some brands, virtual reality fits very nicely into their existing brand values. A great example is Red Bull. Red Bull works hard to extend their brand into categories and experiences outside of their actual product, with Red Bull Racing being a perfect example.

This company already ‘has previous’ in the virtual space with a gaming experience inside Playstation Home and it’s easy to envisage this type of VR application being created. But this isn’t just a gaming opportunity for Red Bull – imagine experiencing a real-life real-time Red Bull race streamed from a stereoscopic 3D camera (from a company such as Jaunt ).

Music, Movies and TV

Wider product opportunities are also presented to brands over and above VR gaming. Take the music category for example. Music is already a powerful experience in virtual worlds and becomes even more compelling with virtual reality. Branded VR experiences from musicians and bands would allow fans to get even closer to their favourite artists with concepts such as virtual concerts. So, record labels should examine VR as closely as they currently user social media channels.

Movies and TV is another branded virtual reality opportunity. Re-creating sets and places from iconic movie-sets and TV shows has already proven to be popular in VR. Unofficial (i.e. not endorsed or created by the IP owner) examples of this concept include Jerry’s Place, the bridge from the Starship Enterprise , the ‘Trench Run‘ from Star Wars and the Bat Cave. On an official basis, a Game of Thrones VR experience was also created recently.

Screen Shot 2014-06-14 at 14.44.00

Proving this genre is coming our way, recent reports indicate movie companies are already exploring the use of virtual reality in movies. Maybe soon you will be able to be Iron Man.

Character-Driven VR

Younger users of VR headsets (expected to be a part of the market from mid 2015 onwards) are a valuable piece of the future marketplace. Just as we’ve seen branded virtual worlds already prove popular and more recent developments linking on and off line product (Skylanders and Disney Infinity), we should expect VR environments driven by stories and characters.

These types of experiences will allow the players to be part of a narrative-led VR world, immersed alongside their favourite characters and stories. This could be part exploratory, allowing the players to roam around their favourite worlds as well as have RPG-elements enabling them to quest and play as these characters.

In Summary

Being placed inside a virtual reality environment on your own is compelling but when you’re sharing this ‘virtual space’ with others it becomes a completely different experience.

As the virtual reality market gathers pace, the essence and attributes associated with virtual worlds will be a key driver for adoption and this take-up will take place in several different areas.

Social Virtual Reality – interacting with your friends in a social setting is an area Facebook will be looking to exploit. User Generated Spaces – being able to build your own worlds and explore them with friends is another sweetspot. And not to left behind, as we’ve indicated in this article, Brands and IP owners will also want to leverage the presence of virtual reality. Exciting times!

Further information:

Legends of Oz Branded Virtual Goods in Blocksworld

Branded virtual goods (BVG’s) are a great way for brands and IPs to connect with target audiences playing games. Typically, virtual goods inside games and virtual worlds based on real-world brands are at least 5x more popular than non-branded equivalents.

We’re one of the pioneers in the BVG arena, having developed campaigns for brands such as L’Oreal Paris inside Second Life and Dancing with the Stars/ Strictly Come Dancing inside Stardoll.

Screen Shot 2014-02-07 at 09.44.23The latest campaign we’ve forged is between upcoming Legends of Oz movie and popular 3D building game , from Linden Lab (creators of Second Life). Blocksworld has over 1m downloads from the App Store and over 400,000 user-generated worlds have been created.

With the new branded virtual goods set, players will be able to create and play with content and characters from the upcoming animated feature film, slated for release on May 9, 2014.

Screen Shot 2014-02-07 at 09.37.26

The Legends of Oz set will include: Continue reading →

Branded Virtual Goods, Q3 2012 update

Branded Virtual Goods is a category we love at KZero and also one we helped create back in 2007. Here’s the Q3 2012 update of the much-viewed Slideshare presentation containing the virtually definitive A to Z.

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Golden Triangle Slideshare presentation

Our latest report, The Golden Triangle is now available on Slideshare.

This report explains and positions the opportunities available to IP owners in the toys/games and tv/movie sectors with respect to virtual world integration. The full high-res report can be ordered here

The Golden Triangle

View more presentations from KZero Worldswide


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New KZero report: Toys, Media and Virtual Worlds – Creating the Golden Triangle

We’ve just released our latest report called ‘Toys, Media and Virtual Worlds – Creating the Golden Triangle’.

The report, in presentation format, aims to provide professionals in the toys, games, TV and movie sectors with guidance and insight into the key opportunities and strategies available in the virtual worlds sector.

Importantly, it also recommends how to align all three elements into a cohesive community building and revenue generating platform.

Areas covered include branded virtual goods inclusion, community and awareness building, research and development, character development and many others.

Also included in the report are examples of projects deployed to date. The free report can be requested here.


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KZero Reports

Branded Virtual Goods – The (Virtually) Definitive List

We’ve updated our popular presentation, Branded Virtual Goods – The (Virtually) Definitive List. This presentation shows screen-shots of branded virtual goods and branded virtual experiences taken from MMOs, social games and virtual worlds. A high-res version is available by requesting it here.

Just in case you were wondering, there’s now over 150 brands!



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KZero in The Guardian: Virtual worlds: is this where real life is heading?

The registered population of online communities such as Second Life and Blue Mars is greater than that of the US and Europe combined. Today’s residents of the simulated universe aren’t just socialising but doing big business.

Link to story.

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China Bans Online Virtual Money Dealing for Minors

June 22 (Bloomberg)

China, the world’s biggest Internet market, said it will prohibit companies that operate platforms for online virtual-currency transactions from providing services to minors in an effort to prevent abuses.

The ban will be implemented Aug. 1, according to a Ministry of Culture statement on its website today. Online game operators that issue virtual currencies for use in their titles won’t be affected by the ban.

The Chinese government has tightened control of the Internet as the number of web users rose 29 percent last year to more than 384 million, the most of any nation. China, which prohibits pornography, gambling and content critical of the government, has blocked access to foreign websites such as that of Facebook Inc. and closed local sites. Google Inc. cited increased censorship as one reason for closing its China search site in March.

More on Business Week.

Virtual Goods: Good for Business?

An extract from a recent KZero report on B2B virtual goods (also published by the Journal of Virtual Worlds Research):

Whilst 2008 saw the emergence of the virtual worlds sector, 2009 has to be called the year of the virtual good with 2010 seeing even broader usage. With online destinations such as social networks seeing the creation of brand-new revenue steams and virtual worlds ‘giving the users want they want’, the virtual goods sector is one of the fastest growing areas of the Internet.

In its most popular form, virtual goods relate to accessories for avatars – clothing, hair and other person-related apparel. These are purchased by users to customise their appearance and are popular across all types of virtual worlds, from kids and tweens right through grown up worlds and also apply across all genres. There is an incumbent demand for users to want to  change and control how they are seen in virtual worlds.

But virtual goods don’t just include avatar appearance customisation. Online communities are learning how to monetise all aspects of the user experience, including the ability for example to buy a bespoke user name or access specific areas inside a virtual world. On the SocNet side, virtual goods are being used to great effect with social/mini-games, providing ‘tools’ to complete the game faster / level-up.

Interestingly, average revenues per paying user (ARPPU) increases in line with age, highlighting the value in older demographics. Typically ARPPUs from SocNets peak at around $5 per month, rising slightly to around $6 for virtual worlds. In terms of the overall market in total revenue terms, we estimate it to currently be worth $5bn globally (as of June 2010), rising to $14bn in 2012.

virtual goods revenues kzero

This growth rate is potentially under-estimating the future market-value when you factor in the impact of augmented reality revenues and other sources of virtual goods platforms, such as the AppStore. Continue reading →

Building the (virtual) Yellow Brick Road

KZero client Summertime Entertainment is enjoying our full range of services in support of their upcoming animated movie Dorothy of Oz. We were appointed earlier this year to provide strategic services relating to the development of the virtual world, virtual goods and social gaming elements.

With the movie coming out early 2012, our focus has been on developing the virtual platforms to build pre-launch awareness of the movie as well as provide online destinations for fans (and monetisation of course). All online efforts are designed to bridge the Wonderful Wizard of Oz franchise to a new generation.

We’ve created the end-to-end business plan and model for the virtual world, leveraging both the Dorothy brand and the movie. This effort includes the in-world feature sets and user journey as well as game/questing mechanics, socialisation mechanics and the supporting virtual goods strategies. Now we’re working alongside Dubit to build-out the world and bring it to market Q1 of next year.

Here’s some concept artwork for the movie. Continue reading →

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