The coming sim-com boom

We are going to have a metaverse of interconnected virtual worlds. Whether it evolves out from the current OpenSim and the hypergrid, or from the new crop of Web-based virtual platforms, or some combination, but we’re going to get there.

Folks who got their hopes up with the VRML standards, only to have them dashed, then raised again with Second Life, then dashed when Second Life failed to gain traction — well, some of those folks may be starting to lose hope.

But there will come a time in the not too distant future when we will look back and have a hard time imagining how we used to get along without the metaverse — just as our kids have a hard time imagining life without email, Google, Hulu, ¬†and whatever is the social network of the moment.

We know it’s coming for three big reasons:

  • Immersive worlds are more engaging than other types of online interactions. That’s why the big selling video games are all immersive and three dimensional. The PacMan-style, 2D games are being given away for free, or practically free, and are being played on cell phones. When kids put down $50 in a video game store, they expect realistic environments, engaging game play, great story lines, and, more and more often, a large community of players. It starts with games, it evolves in education, it moves into business, and it goes mainstream. It happened with windows-and-mice interfaces, it happened with email, it happened with the World Wide Web, and it will happen with immersive virtual environments.
  • Our computers are steadily becoming more powerful, the Internet is becoming faster, and we’re seeing new interfaces evolving — touch, Kinect — that all combine to make virtual worlds more powerful, more realistic, more engrossing, and easier to use.
  • We are hard-wired to think three-dimensionally. We find our way around by constructing mental maps. When we see our avatars doing something, a part of our brain thinks that we are actually doing those things. Immersive virtual environments fit the way our minds work, and can expand the reach of our minds beyond anything we can imagine today.

And there is one very good reason not to be getting too impatient about delays.

Every month that passes without some kid coming out of his basement bearing the new, 3D Netscape, is another month the rest of us have to get our business plans in order.

After all, if we knew, for certain, way back when, that the dot-com boom was coming, wouldn’t we have gone out and built Yahoo! or Amazon or eBay ourselves? Or, at least, invested in those companies when we had a chance?

But no, we thought the Internet was a fad. (Go and read “The Internet? Bah!” — Newsweek, 1995 by Clifford Stoll if you haven’t yet. So funny! And the naysayers are saying the same things now about the metaverse.)

We should have bought in early, before the market spiked. And we should have bought in again, after the dot-com bust. Instead, those of us who invested, probably invested at the peak — when everybody was doing it.

No, the time to invest — to invest money, to invest effort, to invest time and imagination — is before everybody is doing it.

Right now, Hypergrid Business gets 10,000 unique readers a month. I would say that’s probably about the number of people that see the potential of virtual environments, and who are thinking about it seriously. A few thousand more are playing immersive games like World of Warcraft, or hanging out in Second Life and Eve Online, and see the potential. The rest are casual users, enjoying the platforms, but not looking beyond at the big picture.

And that’s not a bad thing.

That’s a great opportunity for those of us who can see the future.

And an opportunity to change the future. Any one of us could become key players in this transformation.

Okay, not all of us are the kinds of geniuses who could come up with the Google search algorithm. (Though, now that Google has paved the way, setting up a system to rank grids by in-bound hyperlinks is a trivial task — once there are enough grids out there for the rankings to mean anything.)

But not every Internet startup required programming geniuses. Yahoo started out as a list of interesting websites. Matt Drudge worked as a telemarker and McDonalds manager before launching¬†the Drudge Report. Craigslist began as an email list featuring local events, sent out to Craig Newmark’s friends.

If any of us could go back in time, we could have started any of those companies. Or Amazon. Or eBay. Or we could have invested in them early, or offered our particular, individual skills in return for stock options. We could have been pioneers.

Or, I should say, I could have been a pioneer. Some of my readers actually were Internet pioneers. They did anticipate the future, and helped create it. I’m jealous of them — and don’t want to miss this new opportunity as well.

So this article isn’t for the folks who would see the Web coming and did something about it, and who can see the metaverse coming and are already working on their new startups.

This article is for the folks who can see it coming, but who haven’t decided what they’re going to do yet.

How the world will change

The metaverse isn’t going to replace the World Wide Web — just as driving randomly up and down the streets didn’t replace the telephone book. A two-dimensional representation of data is often the most useful way to convey information. Books, movies, directories, news articles, price lists — all work well when displayed on a screen.

Instead, the metaverse will change the way we interact with things and people.

Outdoor kid games like cops-and-robbers have moved into massively multiplayer online games, for example. Okay, that’s not necessarily a good thing. Instead of healthy exercise, fresh air, and sunshine they’re sitting behind a computer screen. But it’s not all bad, either — kids who don’t have friends, have physical disabilities, or are otherwise isolated can still interact with peers and learn teamwork and leadership skills. Kids in foreign countries can practice English by playing with Americans. (And Americans, of course, can practice any foreign language they’d like by playing international editions of the games.)

As virtual environments get more realistic, and interfaces get more responsive, almost any physical activity will be duplicated. Dangerous activities, expensive activities, exclusive activities — and, of course, anything involving sex or violence. You might not be able to afford a million-dollar trip to a space station, but you do the same trip virtually.

And as facial expressions and gestures get more realistic, virtual socializing will become easier and more engaging. Many activities that we now do face-to-face will move online — clubs, live events, business conferences and meetings, expos, comic book conventions, speed dating, classes and training seminars, and counseling and coaching. As a result, these activities will become accessible to a much broader range of people than they are today — to people who may be geographically isolated, for example, or handicapped.

The average commute will shrink as more people telecommute or work from regional satellite offices — and people will be able to live closer to their relatives or friends.

Virtual goods already make up a large percentage of our purchases — music, movies, e-books — and there are virtual aspects to many physical goods, as well. For example, I can’t tell Diet Coke from a generic soda in a blind taste test — but I will only buy Diet Coke. If I can see the label, then nothing else tastes right. I’m paying extra for the brand name, for the idea of Diet Coke. Similarly, folks will pay thousands — even millions — for a real diamond that only professionals can tell from a man-made one. Much of the value of the iPod and iPad — and Amazon’s new Kindle tablet — is in access to Apple’s and Amazon’s online services.

As virtual environments become pervasive, virtual goods will become more important. Virtual clothing, accessories, homes and furniture and landscaping, vehicles, and things we can’t even imagine yet. And physical objects will have virtual components — though I can only think of industrial applications right now, such as virtual models of factories that demonstarte, in real time, what’s happening on all the assembly lines.

Business implications

If you can identify a trend — say, virtual worlds will transform dating as much, or more, as online dating did — the obvious business plan is to get ahead of the trend. We’ll eventually have a couple of big, general-purpose dating destinations, and a lot of smaller, niche sites. Then, there will be ancillary businesses that help people do virtual dating, and virtual personal matchmakers for folks who can’t get the hang of virtual dating, and have extra cash to spend.

Some of these businesses are scalable, meaning that as the number of customers increases, the company can add technology quickly, while adding staff slowly. For example, a virtual dating world in which customers interact just with one another can grow quickly. But a virtual dating work that requires staff — for example, club managers or speed-dating organizers, or counselors — will grow more slowly since employees are more expensive than computers.

Some companies may be able to use virtual staff, or bots, to make otherwise labor-intensive services more scalable. As a result, the use of these bots, especially for repetitive jobs, is likely to grow in the future.

The funding situation, however, is likely to be slightly different than it way during the dot-com boom. Early tech startups needed money for servers, as well as for technology, staff, and marketing. Today, companies can rent servers, adding more servers as they need them. And startups can look to the entire world for staff. These two factors can reduce startup costs.

Timing risks

The hardest part about launching a virtual environment startup is getting the timing right. Launch too early, and the customers won’t be there yet, and you might run out of money before the public is ready for your service.

Another risk of launching too early is that you might wind up using dead-end technology, and you’ll lose your entire investment as the world moves into a different direction.

The risks of launching late are even bigger. How many companies tried to sell books online after Amazon launched? After Netflix became successful at sending DVDs through the mail, Blockbuster and Walmart tried to do the same — and failed. Blockbuster eventually went bankrupt, and Walmart turned over their DVD rental business to Netflix in 2005.

Many Internet pioneers are still at the top of the game — eBay, Google, Amazon, PetMeds and GoDaddy were all among the companies founded in the mid-90s.

Of course, there are also cases like Friendster, MySpace and Facebook, where the earlier entrants were supplanted by later, better competitors. And new companies — like YouTube, Twitter and Hulu — continue to appear.

But with each new generation, the startups are increasingly complex, and the market more mature and demanding. It becomes harder and harder to break through.