UNIVERSITY OF NOTTINGHAM

NOTTINGHAM UNIVERSITY BUSINESS SCHOOL

An exploratory Investigation of Virtual Worlds: Proposed Business Models in Second Life

Chiu, Kung-chak

MSc in International Business

An exploratory Investigation of Virtual Worlds: Proposed Business Models in Second Life

by

Chiu, Kung-chak 2008

A Management project presented in part consideration for the degree of MSc in International Business

Acknowledgement
Without the guidance and assistance offered by various parties, this research would not be completed with quality. First, I am grateful to have my supervisor, George Kuk for assisting me throughout the dissertation. And offering advices on the improving the structure of the work. Second, I would like to thank for the opinion made by Nick Mitham, Jason Mirvis and Andrew Mallon. They are the professional researcher on virtual worlds, and they have given me various insights into investigating the Second Life. Lastly, I have to acknowledge the support from my family and Amy Sun who have unconditionally encouraged me during the process of dissertation.

Abstract
With the growing awareness on the research of virtual worlds, it is claimed the development of virtual world is not merely the gaming purpose but which is rife with moneymaking opportunities. To further interpret the feasibilities of the models, scholar and practitioners have investigated and analyzed the literature of business model from various perspectives and theories. In this dissertation, Second Life (SL) is selected as the most appropriate platform for demonstrating the proper adoption of business model and application in virtual worlds. Based on the research on virtual worlds and relevant literature, the business models and applications in SL can be classified as Virtualization of Real Products; New Virtual Products or Services and Physicalization of Virtual Products or Services. In the light of research on virtual worlds, the major characteristics of VW embrace Interactivity, Immersion and Network Effects. After investigating the Media Richness Theory and Task Closure Theory, some elements generalized from these theories form some theoretical-based indicators to evaluate the 99 selected companies in Second Life. These theories suggest several significant factors which include Feedback Capability, Intuitive Cues, Avoid Overburdened Non-intuitive Cues, Personal Focus, Task Closure, Virtual Availability and Social Presence.

Table of Contents
Chapter1: Introduction Chapter 2: Background and Overview of Virtual World 2.1 Evolutions of the video gaming industry and social networking sites 2.2 Comprehensive Definition of Virtual Worlds 2.3 Typology of Virtual Worlds 2.4 Justification of the selection of virtual world 2.5 Second Life (SL) Chapter 3: Literature Review 3.1 The Concept of the Business Model 3.1.1 Definitions 3.1.2 Components 3.1.3 Taxonomies 3.1.4 Representations 3.1.5 Change Methodologies 3.1.6 Evaluation models 3.2 Business Models in Virtual world and Proposed Models in Second Life 3.3 Proposed Business Models and applications for SL 3.3.1 Virtualization of Real Products (Physical to Virtual, P2V) 3.3.2 New Virtual Products or Services (NVP/S) 3.3.3 Physicalization of Virtual Products or Services (Virtual to Physical, V2P) 3.4 Relevant VW Features and Theories to the Proposed Business Models 3.4.1 Interactivity: 3.4.2 Immersion: 3.4.3 Network Effects (Network externalities) 3.5 Media Richness Theory (MRT) 3.6 Task Closure Theory (TCT) Chapter 4: Methodology 4.1 Research Hypotheses 4.2 Initial Preparations 4.3 Selection of Sample 4.4 Selection of Firms/ Organizations in SL 4.5 Evaluation of Business Models and Applications in SL 4.6 Assessment on each Firm/ Organization 5 8 8 13 17 19 23 27 29 30 31 32 33 34 34 37 41 42 42 43 44 45 45 46 49 50 53 53 56 56 57 58 59
3

4.6.1 4.7 4.8

Measures Inter-Rater Reliability Data analysis

Chapter 5: Results and Discussions 5.1 Inductive Analysis 5.1.1 Virtualization of Real Products (Physical to Virtual, P2V) 5.1.2 New Virtual Products or Services (NVP/S) 5.1.3 Physicalization of Virtual Products or Services (Virtual to Physical, V2P) 5.2 Statistical Results 5.2.1 Analysis of the Statistical Results 5.2.2 Trends of adopting a business model in SL Chapter 6: Conclusion 6.1 Limitations and Future Research 6.2 Future Research Bibliography Appendix 1: Selection of SL companies Appendix 2: Activities, Technical Aspects and Social Aspects of SL companies

59 64 65 68 68 68 72 74 76 80 84 87 89 90 92 107 113

Chapter 1: Introduction

Even though the notion of virtual worlds (VWs) or metaverse remains novel and in its nascent stage, we cannot deny virtual worlds are playing an important role in the community of kids, teenagers and adults. Based on a report of Balkin and Noveck (2006), approximately 30 million people regularly engaged in various platforms of virtual worlds in 2006, spending about 22 hours each week on average. Tech consultancy Gartner estimates, By the end of 2011, 80 percent of active Internet users (and Fortune 500 enterprises) will have a second life, but not necessarily in Second Life (Reuters/Second Life, 2007). Nielsen//NetRatings (2008) reports there were about 367 million active Internet home users in May, 2008. Mitchell Kapor, President of Kapor Enterprises (World Economic Forum, 2007) claims, virtual worlds will eventually become the common interface for all Internet communications. The virtual world will grow up to be a low-res version of reality (p.26). Needless to say, this phenomenon will become increasingly prominent.

For business potentialities and opportunities, companies urge to work out how to assess the value created in virtual worlds and to convert values into tangible assess and benefits in the real world. Fortune 500 companies start to create various forms of presence in virtual worlds such as Second Life (Mennecke et al., 2007). These companies desire to understand the possible and hidden needs of existing or prospective customers. Not surprisingly, adoption of innovative forms of new e-Business could help improve companys performance (Zhuang, 2005). Therefore, many organizations are eager to acquire a criterion for establishing the business in virtual worlds. This is a new but fascinating research topic in order to investigate the
5

business models and applications adopted by companies in virtual worlds. However, there is no profound theoretical framework or empirical to ground research in this field as it is rather a novel subject, and the current research lacks appropriate metrics to assess the value of v-Business ventures (Barnes, 2007).

Based on the perspectives of general literature reviews, it is recommended to assess the performance and effectiveness of business models and applications in virtual worlds. However, the general focus of literature is not the main theme of this dissertation. In this research, conversely, a reverse analytical method is adopted to identify the most adopted business models and to examine which business models entail certain elements and characteristics in line with the literature and virtual world researches. It is worth investigating into the relationship of the VW features with the proposed virtual business models.

In this dissertation, Second Life (SL) is selected as the most appropriate platform for demonstrating the proper adoption of business model and application in virtual worlds. Based on review of literature about concepts of business models and features of virtual worlds, this research aims to generalize the characteristics of business models and applications in SL and to propose the appropriate business models for SL. In addition, it is focused to analyze the relationship between the proposed business models and elements extracted from Media Richness Theory (MRT) and Task Closure Theory (TCT) together with the features of virtual worlds.

A thorough investigation will be conducted and discussed to illustrate the methodology of the research, which entails inductive analysis and statistical analysis. This approach explains the firm behaviours in SL and adoption choices of proposed
6

business models and applications, also the statistical analysis helps to explain and analyze the relationship between the proposed business models and the characteristics of virtual worlds, elements of MRT and TCT. In the conclusion part, it is

contributive to evaluate the limitations of the research and to suggest a direction for further research in the future.

Chapter 2: Background and Overview of Virtual World

it is logical to understand its history, characteristics, typology and developments before projecting an insight into business models of virtual world. To begin with, a section attempts to examine the evolutions of the video gaming industry and social networking sites, these developments lead to the emergence of modern virtual worlds (Paul et al., 2008). Later, Virtual Reality and Gaming Worlds together with social

networking sites are the origins of virtual world. Next, comprehensive definition of Virtual Worlds (VWs) and typology of VWs are introduced followed by a justification of selection of a VW, Second Life. Lastly, an introduction of Second Life shows its appropriateness to be the best representatives of VWs for business opportunities.

2.1

Evolutions of the video gaming industry and social networking sites

It is sensible to introduce that virtual world is developed from video gaming industry and social networking sites. Virtual worlds would have the features of video gaming and applications of social networking. Thus, the following section demonstrates the evolutions of the video gaming industry and social networking sites.

Arcade Games: The first entrant into this emerging market, it was Atari Interactives Pong released in 1972 (Wiki/Pong, 2008), besides that game the other successful coin-inserting arcade video game including Tank, Indy 500, Space Invaders, and Pac-Man (Herman et al., 2008; Winter, 2008). Unlike the tactical problem-solving and objective role-playing characteristics of previous games (such as Chess, Monopoly, D-Day etc.), all of those games used new elements of real-time operations, which promoted interactivity and enriched reflexes (Castronova, 2002).
8

Console Systems: The Nintendo gaming company announced to release an entertainment system (formerly named as Famicom in Japan) in 1986, introducing famous original characters such as Mario, Donkey Kong and Popeye (Herman et al, 2008). In the beginning, these games were designed for single players, but the next generations of them changed users to play against each other. Followed by two famous fighting games as Mortal Kombat and Street Fighter 2, the home console gaming experience had been elevated into a new level and the development has given rise to emergence of various physical games such as sports games and dynamic user interfaces of Nintendo Wii console system.

Local Area Network (LAN) Games: LAN games provide a platform of computer-based rather than console-based, in which players experience various social interactions in-game. All participant players had to be connected as well as to load the same programmes simultaneously, most of the games were likely to be real-time strategic simulations or first-person shooting (FPS) games (Jansz & Martens, 2005).

Internet Connectivity: Nintendo and Sony invented new consoles with 32- and 64-bit systems that used CDs in the 1990s (Herman et al. 2008). As the Internet technology developed at a high rate, more powerful consoles such as PlayStation 2 and Xbox were released to promote the capabilities of video game consoles. The new systems allowed players to play against and communicate with other users through Internet connectivity, this entirely expanded the scope of video games in terms of geographical aspects and social interactions.
9

Unstructured Games: Despite proceeding along fixed paths only, roaming and wandering freely in a huge computerised world were the main features in this type. The terms, sandbox, open and unstructured, represented freedom of gaming experience that were not previously introduced, the Grand Theft Auto series could be the best example of showing expansive design and freedom of movement featuring with realistic elements in the surrounding environments (Murray, 2005).

Games with Player Generation of Content: The further development of gaming would present players with almost 100% of freedom within the surroundings, an example of this type was the Sims series gained a huge success in the field (Au, 2001). Since the design seized the taste of players about demands on highly controlling of their gaming environment and generating their own content, embracing appearance of the characters, new furniture and design for the homes (Kelly, 1994). In fact, the gaming software producer, Electronic Arts, reports that approximately 80% of the Sims in-game contents is created by players (Ondrejka, 2006). However, players still select to play a game with online components only regardless of user-generated content, this is yet to exist in a virtual world.

Worlds with Designer-Provided Objectives: Wish game designer spotted the potentialities of the Internet application and framework, they introduced in-worlds including World of Warcraft (WOW), Everquest, City of Heroes and Age of Conan which were beyond previous gaming experiences. Players are able to immerse and wander almost everywhere they want, still require to obtain various skills, tools and levels by increasing experience points and completing special tasks (Lastowka & Hunter, 2006). These massively
10

multiplayer online role-playing games (MMORPGs) aim to provide players with designer-oriented objectives or missions (Song & Lee, 2007), several worlds have become very successful such as WOW has attracted over 10 million subscribers (Blizzard, 2008). However, these MMORPGs still focus on designer-generated gaming convention which is only advanced versions of earlier electronic games.

Social Networking Sites: Intrinsically, social networking sites are not designed for gaming purpose, nevertheless they significantly affected the development of virtual worlds. A typical social networking platform enables members to socialize and share various contents in terms of texts, pictures, audios and videos. Other common uniqueness comprises communication tool such as blogging, instant messaging and chat, prompts of friends profile updates, introduction to friends of friends, commenting and tagging of contents, software and applications exclusive to that platform. Three types of the sites are geographically-based (eg. Cyworld was launched in South Korea in 1999), demographically-based (eg. Facebook was originally released for Harvard students; nexopia.com is for teenagers) and activity-based (eg. YouTube is for video sharing, LinkedIn is for professional networks), all of these elements can be considered under the realm of Web 2.0 technologies which is user-friendly without requiring substantial technical knowledge (Boyd & Ellison, 2007).

To sum up, these evolutionary processes of video gaming industry and social networking sites serve as a mother side of the virtual worlds. If there is a mother of VWs, it is essential to investigate the father side of VWs. Dr. Yesha Sivan (2008a) suggests virtual reality is the other parent of VWs.
11

Virtual Reality: Virtual Reality is defined as a simulation in which computer graphics is used to create a realistic-looking world. Moreover, the synthetic world is not static, but responds to the users inputs, [such as] gestures, verbal commands, etc.). (Burdea and Coiffet, 2003) In particular, virtual reality involves real-time simulation and interactions via different sensorial channels such as visual, auditory, tactile, smell and taste (p. 36). To consolidate the notions, three Is are regarded as central points of Virtual Reality in terms of the capability to experience the reality (Immersion), the ability to modify and create it (Interaction) and Imagination to create solutions to issues of applications. Figure 1.1 illustrates a triangular relation of the 3-Is that exists to construct a cutting-edge technology and immersive environment for a wide range of possible applications of VWs.

Figure 1.1: The 3-Is of Virtual Reality: Immersion, Interaction and Imagination

INTERACTION

I3
IMMERSION IMAGINATION

Thanks to Morton Heilig invented an immersive virtual reality technology in the 1950s namely Sensorama simulator, virtual environments could be conceptualized, created and used for various purposes, especially for online learning in the 1960s and 1970s (Kock, 2008). Virtual reality technology redefined virtual environments can
12

incorporate a great proportion of elements of the real world, even if those elements are delivered in a stylized and unrealistic fashion (P. 2).

In short, the parents of the virtual worlds are Virtual Reality and Gaming Worlds together with social networking sites. By understanding the origin of virtual worlds, a further investigation into the uniqueness of VWs is necessary to constitute a formal and comprehensive definition of Virtual Worlds. Implied by the historical progressions of related technologies and applications, it is more explicit to identify main characteristics of VWs.

2.2

Comprehensive Definition of Virtual Worlds

In general, the unique feature of virtual worlds is the social interactions among subscribers and their avatars that engage in three-dimensional immersive common platform with the highest degree of user-generated contents, autonomous objectives and social networking application tools. With a number of academics and scholars concerning on defining virtual worlds, some influential perspectives have stood out. The creator of text-based virtual worlds in the 1970s and 1980s, Richard Bartle defines, a world is an environment that its inhabitants regard as being self-contained. It doesn't have to mean an entire planet: It's used in the same sense as the Roman world or the world of high finance (Bartle, 2003). However, this only explains the world side of virtual worlds only, and this does not elaborate the virtual side. Therefore, an experienced designer of virtual worlds in the 1990s, Raph Koster points out, a virtual world is a spatially based depiction of a persistent virtual environment, which can be experienced by numerous participants at once, who are represented within the space by avatars (Koster, 2004). Koster addresses to spot several central features of a virtual world (a great number of participants with persistence), however,
13

there is lack of explicit explanation of corresponding technology to make the environments feasible. Subsequently, a virtual worlds researcher, Edward Castronova adds that, crafted places inside computers that are designed to accommodate large numbers of people (Castronova, 2004). Although Castronovas definition complements what Koster missed to include, it does not recap the notions of persistence or synchronous interactions. To summarise, despite these definitions shape some important characteristics of VWs, they fail to explicitly recognise the people and their social network as crucial to the definition. Without participants or players, a virtual world is meaningful but an empty database (Bell, 2008).

In these virtual communities, in-world users are able to build relationships as friends, lovers, virtual family members, business partners, team fellows and online community members. In addition, users are allowed to create objects, save, donate, trade among others or even edit some of the virtual objects. In terms of creations of virtual objects, these items might raise other players interests, this probably in turn creates value to the real life economy (Lastowka & Hunter, 2006; Lederman, 2007). Based on Bartle (2006), From their humble beginnings, virtual worlds have evolved to become major hubs of entertainment, education, and community (p.31). Later, Balkin and Noveck (2006) further explained, Although the development of these virtual worlds has been driven by the game industry, by now these worlds are used for far more than play, and soon they will be widely adopted as spaces for research, education, politics, and work. In short, these various characteristics constitute VWs as excellent virtual environment for collaborative play, learning, socializing and work.

Associating with these elements, components and essential factors of people, a more extensive definition emerges (Bell, 2008):
14

Synchronicity: Synchronous communication and interaction depends on share activities, a turn-based or non-real time virtual environment seems to be a delayed online reply or thread rather than a world. Real virtual worlds ought to provide an awareness of space, distance and co-existence of various users discovered in the real world offering a sense of environment, in which a common timeframe enables for numerous group activities and organized social events. For example, BBC.com can never offer a sense of navigable landscape which is intrinsically the pages of a website. Nevertheless, virtual worlds provide users a sense of geography and sphere, irrespective of scale.

Persistence: A real virtual world is supposed to operate without any pause, which continues to function even users have logged out. The notion of persistence distinguishes VWs from video games such as Pac-Man or Street Fighters, it changes the way users interact with other players and the virtual space itself. Hence, the leading character would be no longer going to one single user but a member of a dynamic community and developing economy. It is not difficult for participants to realise the virtual environment exists and evolves even without their presence.

Network of people: Without people or participants, virtual worlds will be nothing but a ghost town. People subscribe and join to interact, immerse and communicate among others and with the virtual space. VWs can be viewed as an ecosystem in which the movements and behaviours of one member spill over the whole system influencing every other part of the virtual world. Indeed, users can build short term and long term relationships in-world, however it is not necessary to still be an active agent of the
15

ecosystem (Williams et al., 2006). One player can join the WOW with communicating with others but still interact with the in-game environment, even these individual behaviours may affect every other user in-world.

Represented as avatars: An avatar is an incarnation of a live player, can be digitally represented (in terms of text or (3D) graphics) beyond a simple title or name, that has an ability to create actions and is manipulated by a human user. Therefore, a textual representation of a character in MUD (Multi-user Dungeon released in 1978) could be an avatar; a fully graphical character created in Ages of Conan would be an avatar. Oppositely, a Facebook profile has no agency beyond its creator, it cannot be counted as an avatars mode. For instance, a user can say his avatar kills the monster and rescue the princess, as these actions are controlled by player through an avatar. In contrast, no one can say his Facebook profile is emailing someone. Users control all the actions of the avatars, meanwhile the avatar itself performs those actions.

Facilitated by networked computers: A video game of Dungeons and Dragons could be regarded as a synchronous, persistent network of users represented by numerous avatars. However, this game differs from virtual worlds by the methods of facilitating data and communications via networked computers. Networked computers are responsible for data management of all the objects, textures, interactions, transactions, environmental programmes and saving them indefinitely that is all processed through networked computers. In addition, computers are capable of tracing all conversations, connections and networks of users in order to allow instant messaging functions across national and geographical boundaries. The capabilities and potentialities of networked computers
16

promote the scope of the VWs to expand across imaginations.

2.3

Typology of Virtual Worlds

Provided with history and comprehensive definitions of virtual worlds, it is at the right moment to consider a typology of virtual worlds in order to facilitate further study and applications of them. A growing number of individuals and organizations perceive virtual worlds as an opportunity for business and economic activities, many retail and service companies and some governments have created a presence in virtual worlds. However, it is argued that what virtual worlds outweigh traditional e-commerce and e-government in terms of value creation and capture, how individuals and companies can harness this value. To further interpret the application, one question involves identifying the most appropriate virtual world for certain activities and justifying the selection (Paul et al., 2008).

To help dispel such doubts, Porter suggested a five-factor typology of virtual communities including Purpose, Place, Platform, Population and Profit Model(2004) which can be extended to the fields of electronic games, social networking sites and virtual worlds. Some explanations are necessary to add to make the typology applicable for the new extents. 1. Purpose (Content of Interaction) Unlike Porters focus on specific type of information or content in the virtual community, purpose also focuses on a game with strategies, tactical and theme-based design; the network with theme-based objective or open design and virtual worlds with age, content and open setting. 2. Place (Location of Interaction) Porters focus on the notion of place is fully or partially virtual, place additionally
17

considers whether users are co-existed or geographically situated. 3. Platform (Design of Interaction) It is focused to consider synchronous interactions and asynchronous interactions as well as to reckon the computer platforms connected by the Internet and different gaming platforms. 4. Population (Pattern of Interaction) Size of the group, categories of social ties and features of the target user market are all the areas needed to be considered. 5. Profit Model (Return on Interaction) The model is adopted to assess the virtual worlds based on a single purchase fee (fixed fee); subscription-based; advertising-based; virtual assets sold to members and real world ancillaries.

The typology is constructive for analyzing the evolutionary development of innovations in video gaming, online social networking and virtual worlds, the typology can help identify future applications for business, e-commerce and education; new technological applications; and research scope in social, business and computer sciences (Bell, 2008). However, this typology can only generalize the concurrent phenomenon, as the area and focus changes, it is necessary to embody other emergent elements. For instance, other taxonomy alternatively categorizes virtual worlds in terms of types of engagement that user join the virtual world (http://www.kzero.co.uk). This leads to redefining or introducing certain platform factor to the above typology.

Perhaps we now generally overlook the historical progressions, developments, characteristics and typology of virtual worlds, we can begin to think and ask, how many virtual worlds out there? Which one to choose for a deeper investigation? Dr.
18

Yesha Sivan in his personal blog points out currently there are more than 100 various virtual worlds in which multi-millions of money are involved and he claims this is only the start. The future development of a mature virtual world would is rife with new functions, features and capabilities in order to alter the forms of many businesses. Correspondently, Amazon, eBay and Google developed while Rand McNally, Tower Records, HMV might suffer, virtual worlds would give rise to new companies with new business models and knockout old companies with traditional model. Hence, it is time for individuals and organizations to learn about virtual worlds from both technological and business applicable perspectives (Yesha, 2008b).

2.4

Justification of the selection of virtual world

For business potential and opportunity, companies urge to work out how to assess the value created in virtual worlds and to convert values into tangible assess and benefits in the real world. In this dissertation, Second Life is selected as the most appropriate platform for demonstrating the proper adoption of business model and application in virtual worlds. Second Life is an online 3D virtual world which combines features of online video game technology and social networking tools, such as Facebook and MySpace with potentialities of e-business. It is not merely an entertaining environment in which it is not designed for children (Johnson & Middleton, 2008).

There is a variety of virtual worlds available (Table 1) on hand which are designed and they vary in terms of purposes, demographics, culture, structure and economic integration (book, 2006). Simply, demographic and cultural aspects are relatively not significant in consideration of choosing the worlds, but structure and economic integration are pivotal elements in manifesting the business potentialities of virtual worlds.
19

Table 1. Available virtual worlds in the market, as of August 2008 1. 2. 3. 4. 5. 6. 7. 8. 9. A Tale in the Desert Activeworlds Amazing Worlds Arabus Barbiegirls City of Heroes Club Penguin Cyworld Entropia 20. Kaneva 21. Lively (Google) 22. Metaplace 23. Meez 24. Mokitown 25. Moove 26. Multiverse 27. Open Croquet 28. Openlifegrid.com 29. Ogoglo 30. Prototerra 31. Qwaq 32. Rocketon 33. Second Life 34. Seacrets 35. Spine World 36. Spore 37. Stardoll 38. Star Wars Galaxies 39. The Manor 40. The Palace 41. The Traveller 42. There.com 43. Time Warp 44. Tower Chat 45. Twinity 46. Vastpark 47. Vivaty 48. Virtual Ibiza 49. vMTV 50. vSide 51. WebFlock 52. Webkinz 53. Weblin 54. Whyville 55. Worlds.com 56. World of Warcraft 57. YoVille

10. ExitReality 11. Eve Online 12. Football Superstars 13. Forterra OLIVE 14. Gaia 15. GoSupermodel 16. Habbo 17. HiPiHi 18. Home 19. IMVU

Source: http://www.kzero.co.uk/blog/index.php?m=200808&paged=4

World of Warcraft (WOW) is one of structured virtual worlds with most crucial features for virtual realities, but its content and design are created by developers.
20

Since WOWs economy is intrinsically closed, that lacks a real money trading system (Atlas, 2008). Users cannot control, edit and create content at a higher degree of freedom in-world. This results in WOW is not an appropriate platform to accommodate business applications.

Alternatively, Linden Labs Second Life basically is unstructured in nature which is characterized by the user-generated content. This enables users to create all subject-facing content showing in-world without involving the platform developers (Ondrejka, 2005). In addition, products and services in Second Life can be traded in both a virtual currency system, Linder dollars (L$) and in a real world currency (as of September 2008 the exchange rate is about L$266 to 1 US$). Based on the Second Life Blogs statistics, it is reported that the total number of regions owned by residents grew 44.2% in Q2 from Q1 (SL Blog, 2008), this implies companies can seize more business opportunities while SL virtual world expanding.

In addition, a number of reasons can justify the selection of Second Life is the most suitable and applicable platform for illustrating organizations adopted business model and applications in virtual world. For providing organizations with a new business platform, Second Life offers Second Life Grid (SLG) to resolve various business applications in terms of increased productivity, effective collaboration, improved communication, enhanced Engagement with your customers or audience and Reduced Business Costs (Second Life Grid, 2008).

Increased Productivity: Organizations can use SLG to improve their productivity by concentrating on internal management such as meeting, training and simulation. Apart from this, they can
21

involve their clients with meeting, interviews, recruiting and product research. For example, real life events, meetings and prototype are easily created in a cost-effective fashion.

Effective Collaboration: Users or avatars from various locations in the real world who can collaborate in a 3D immersive environment in real time. Participants can wander around new virtual facilities, join a scripted training event or design a new workplace with others.

Improved Communication: The SLG offers multiple channels of communication which embraces graphic, video, audio, text and voice. The system supports multi-language and real-time text or voice chat, participants can present their work in aid of a wide range of communication tools, and in-world audience can easily identify the speaker or communicator in the 3D-voice space.

Enhanced Engagement with your Customers or Audience: Apart from conventional e-commerce websites, the SLG offers a special management for promoting higher involvement with customers or audience. For example, organizations can use the platform to organize focus groups, customer research and feedback, recruitment and interviews, or parties and events in this 3D interactive and immersive environment.

Reduced Business Costs: In this 3D immersive platform, organizations can create a private or public meeting venue where users can join to interact and communicate using text and voice in real
22

time. To link up users from different locations of the world, the SLG provides a cheaper solution against the cost of setting up of video conferencing system or flight tickets.

2.5

Second Life (SL):

If you could try to have a quick search of Second Life on any online search engine, you would find SL was inspired by a science fiction novel, Snow Crash by Neal Stephenson. He coined the term metaverse which cannot be found in one paper dictionary. In some researchers such as Johnson and Middleson (2008) generalize it as a user-defined world of general use in which people can interact, play, do business, and otherwise communicate. (p.55)

In 2003, Second Life was launched by Linden Research Inc. (or Linden Lab), a private corporation situated in San Francisco. Linden Labs (LL) was established by Philip Rosedale in 1999, LL has a vision to connect all people to an online world that improves the human condition. (Lindenlab.com, 2008) As of September 2008, the population of Second Life has climbed up to 15 millions of subscribers (Second Lifes Economic Statistics, 2008). However, the number could be misleading as some of the users are inactive and may have more than one account or avatar.

Generally, it is free of charge to join S but paid memberships are allowed to own virtual lands and other items in-world. Participants are represented by avatars that can move, run, fly and even teleport (quickest transportation means from one location to another in SL) through a virtual geographical world with traits that parallel the real world. Users can find distinctive places either by searching feature in a map or by entering specific location coordinates. Basic characters of avatars and names can be
23

selected during the first register and login process, but users are allowed to customize their appearance of avatars in various ways over time. The main communication takes place through text, instant messaging, voice or acts with various gestures (Nuttal, 2007). In addition, a wide variety of presentation tools are introduced which includes slide shows, streaming video, new type of TV broadcasting in-words (Secondlife.com, 2008).

Figure 2. Second Life Website (www.secondlife.com)

Second Life has obtained numerous attentions from both the news media and real life businesses. Most of the media focuses on Second Life are its adoption of open source software (releasing source code of Second Life viewer is the example), which enables users to design and create their own space and virtual products in order to preserve intellectual property rights for the creations. In turn, users can trade their created products or services among others in a specific virtual currency, Linder dollars (L$) which is exchangeable to US dollars at the rate of 0.004. Some SL inhabitants have
24

made a serious fortune by selling virtual items and services such as clothing, furniture, scripted robots as pets, and sex service (Harkin, 2007). A total of US$ 7.3 million was exchanged for L$ in the month of August 2008 (Second Lifes Economic Statistics, 2008).

In essence, Second Life is a Multi-user Virtual Environment (MUVE), which is not strictly speaking a game as there are no pre-defined objectives or tasks. It is a common place for socializing, build local and regional environments, and engaging in virtual economic activities (Mennecke et al., 2007). All the content is user-generated in this world, in which demonstrates its open-ended architecture and collaborative character. These characteristics of Second Life are in common with technological development such as Facebook, YouTube, Wikipedia and Flickr, with their focus on collaboration and community. Similarly, SL is widely regarded as an extended application of Web 2.0 phenomenon (Helmer, 2007). Second Life is said to be a pioneer of next stage of the Internets evolution. To begin with, it is suggested to capture the impression of Second Life by watching some introductory videos and YouTube.com is good way to see the overview of Second Life.

In fact, Second Life is rife with moneymaking opportunity. Current business uses of SL such as IBM, they recruited about 3000 employees in-world (Kirkpatrick, 2007); a career fair was organized for real-life job employers from Accenture, EMC Corporate, GE Money and US Cellular (Schalch, 2007); BP has held an event for job ethics and compliance in Second Life (Monahan, Harvey, & Ullberg, 2007); the medical organizations use SL platform to help discuss and improve the people suffering from autism and Aspergers syndrome (Phillips, 2008); and a virtual experiment called Zora was launched to facilitate civic involvement in participants aged 11- 17 (Bers &
25

Chau, 2006). There are a variety of businesses and institutions that have joined Second Life including retailers, news agent, hotels, computer system developers and educational institutions (Carnevale, 2007; Foster, 2007; Hemp, 2006a; LaPlante, 2007; Stein 2007). Even politicians have engaged in SL such as Hillary Clinton has an avatar and a democratic headquarter has been created in-world (Elliott & Kruck, 2008). Therefore, Second Life is the most appropriate virtual world to investigate and interpret with business models and applications.

26

Chapter 3: Literature Review

With regard to the emergence of a very popular virtual world, Second Life, it is designed as an advanced in-world economics by providing users with opportunities to organize a wide range of virtual business activities referring to as virtual business or commerce (v-Business or v-Commerce) (Castronova, 2008). Not only academics and scholars are enthusiastic about virtual business and its possible spillovers to the economies in the real world, incumbent organizations are also researching the methods of harnessing the nascent virtual marketplace to their competitive advantage (Hemp, 2006b). Prior to proposing a unique theoretical framework to conceptualize the business models and application in Second Life, it is rational to review some related literature of business models and applications in traditional business.

In this section, it concentrates on examining and defining the concept of business model through a review of the literature, highlighting limits and insights. Although there is no precise theories or framework to describe a model of virtual business, but it is worth investigating the traditional literature in search of an appropriate or new perspective. Speaking of business model, it mentions the logic of value creation that is incorporated into organizations processes, planning and strategies (Coda, 1988; Normann, 1977). The concept of business model has been popularly used since the mid 90s, however it could not contribute to a common acknowledgment. A number of various possible definitions hinder to identify the feature and nature of a model and method of determining a good model. Too many similar term including business strategy, business concept, revenue model and economic model would confuse and dilute the principal notion of it.
27

Based on expressions of Osterwalder, Pigneur and Tucci (2005), a business model provides several cross-sectional factors, as follows: The value that a firm addresses one or more segments of the market The network of shareholders and the construct of the firm that are able to create value in an appropriate market The connection with capital leads to create profits and sustainable revenue sources

These factors contribute to consider that components and dynamic relations can generate both value for the customer and benefits for the organization (Afuah & Tucci, 2001 ). In the later development, the Internet acted as a central connector to combine offline and online marketing policies, which brought about a new type of business models (Afuah & Tucci, 2001; Mahadevan 2000; Timmers, 1998; Osterwalder & Pigneur, 2002; Pateli & Giaglis, 2003) that is originally from breaking and redefining firms value chains (Evans & Wurster, 1997; Prandelli & Verona, 2006). For example, these changes induced the separation between physical and information flows of goods as well as led to the separation of physical and recognised networks in economic agents, in order to create new roles of intermediation in terms of meta-mediaries and info-mediaries.

As mentioned above, the Internet offers more options for firms to enter the market. This in turn resulted in reformulating the traditional business model with considering the characteristics of the Internet. The business models that are strictly operated with Internet, regarded as e-business models in terms of clicks-and-mortar and pure play (Pottruck & Pierce, 2000; Afuah & Tucci, 2001). E-business model is a new concept, based on an distinctive online presence showing with the dot.com; clicks-and-mortar
28

illustrates a mixture form, in which pre-existing traditional business model extends its application to integrate with the Internet-based field as firms that perform both online and offline. Therefore, many researchers attempt to investigate to redefine the taxonomy of the major e-business models (Rappa, 2004; Linder & Cantrell, 2000; Pateli & Giaglis, 2003; Timmers, 1998). Until very recently, the model classified as virtual reality or community appears to develop in a prospective way, as it would gain from the expanding application of the Web 2.0 tools (OReilly, Musser, 2006). These tools offer to improve the degree of interactivity and collaboration of community participants, as the virtual community is a spontaneous social phenomenon that would lead to development of business in the community. For instance, Hagel claimed that a new form of business model in a virtual community would be the future development of the Web in 1999. Indeed, the progressing development of virtual worlds and the Web 2.0 imply that there is still potential to construct new forms of business. Thus, the existing business models would associate with various forms and link to the exclusive features of virtual worlds (Nissim, 2007).

3.1

The Concept of the Business Model

In recent years, it is agreed that business models have been one of central issues in business and computer science research (Evans & Wurster, 2000; Pateli & Giaglis, 2003). To further interpret the feasibilities of the models, scholar and practitioners have investigated and analyzed the literature of business model from various perspectives and theories.

According to the approach of Gordijn, Osterwalder and Pigneur (2005), the concept of business model comprises taxonomies (Timmers, 1998; Rappa, 2001);
29

industry-specific business models (Krger et al. 2004; Methlie & Pedersen, 2007; Rappa 2004; Shubar & Lechner 2004; Yousept & Li 2004, Lazonick, 2005); reference models (Hamel 2000; Linder & Cantrell 2000); and meta-models or ontologies (Gordijn 2002; Osterwalder 2004). All these approaches and methodologies (Lambert, 2006) enrich different proposals of business model literature with their own ontologies (Alves & Roque, 2005). Therefore, it is necessary to identify clear and precise statements to understand and interpret a business model. In this section, the research and contribution of literature to business model is clarified through the theoretical framework suggested by Pateli and Giaglis (2003). They propose a model based on six key elements, including definitions, components, taxonomies, representations, change methodologies, evaluation models, which offer an instruction to compare and contrast various approaches and theories of business model research.

3.1.1

Definitions:

In the light of viewpoints of Linder and Cantrell (2000), a business model is the organisations core logic for creating value, as Timmers (1998) mentions that it is a an architecture for the product, service and information flows, including a description of the various business actors and their roles, and a description of the potential benefits for the various actors; and description of the sources of revenues, and Magretta (2002) adds that it is the story that explains how an enterprise works. In addition, Weill and Vitale (2001) generalizes that business model should be a description of the roles and relationships among a firms consumers, customers, allies and suppliers that identifies the major flows of product, information, and money, and the major benefits to participants. However, there is no consensus to state a unanimous definition of the business model (Shafer et al., 2005).
30

3.1.2

Components

By attempting to dismantle the business models, several significant factors are revealed as attributes, components, functions, or pillars (Afuah & Tucci, 2001; Hamel, 2000; Petrovic et al., 2001; Weill & Vitale, 2001; Rayport et al., 2001). Shafer, Smith and Linder (2005) in turn create a table (see Table 3.1) to illustrate and categorize all possible components of business models as well as construct an affinity diagram (see Figure 3.1)to show four elements of a business model (strategic choices, value network, value creation and value capture) in line with the notion of Pyzdeks work (2003).

Table 3.1: Components of a business model

31

Extracted from Shafer, Smith and Linder (2005, pp.7)

Figure 3.1: Components of a Business model Strategic Choices Customer (Target Market, Scope) Value Proposition Capabilities/Competencies Revenue/Pricing Competitors Output (Offering) Strategy Branding Differentiation Value Capture Developed by Shafer, Smith & Linder,( 2005) Cost Financial Aspects Profit Value Network Suppliers Customer Information Customer Relationship Information Flows Product/Service Flows

Value Creation Resources/Assets Processes/activities

3.1.3

Taxonomies

It is logical to arrange various business models into specific categories, this is reasonable to identify the objective reality and developments from theory to practice (Lambert, 2006). The taxonomic ideology of business model is classified as two elements diversity in standard adopted for business model categorization and diversity in purpose-oriented. As a result, a variety of criteria appear to explain the
32

model, including: Revenue and Position in Value Chain (Rappa, 2001); Interaction Pattern and Value Chain Integration and Functional Integration and Degree of Innovation (Timmers, 1998); Core Activities and Price Value Balance (Linder & Cantrell, 2000); Economic control (both hierarchical and self-organizing) and value integration (Tapscott et al., 2000); Sourcing: What businesses buy (manufacturing versus operating inputs) against how they buy (systematic versus spot sourcing) (Kaplan & Sawhney, 2000); Six parameters that describes the function of business model: value proposition, target market, value chain, revenue mechanism, value network or ecosystem, competitive strategy (Chesbrough, 2007).

3.1.4

Representations

Business models are widely manifested through a combination of textual, verbal and ad hoc graphical formats. Tapscott et al. (2000) proposes the Value Map that outlines all main types of stakeholders (partners, customers and suppliers etc.) and the Value Exchanges that comprises tangible and intangible benefits and known-hows. Similarly, Alves and Roque (2005) incorporate the notion of value net (introduced by parolini, 1999) into the business model which is generally about a set networked group of events that can be executed by various actors. Later, Gordijn and Akkermans (2001a; 2001b; 2001c) introduce the electronic value ontology for identifying the representations of actor, value object, value port, value interface, value exchange, value offering, market segment, composite actor, and value activity. In addition, Osterwalder and Pigneur (2002) summarise to introduce an e-Business Model Ontology which points out the relationships among elements, vocabulary and
33

semantics are crucial in the e-business model. Recently, Methlie and Pederson (2007) have proposed a model in which revenue system, management and strategy associate with the features of the service.

3.1.5

Change Methodologies

According to scholars and practitioners, they recognize that differentiating the means and approaches of business applications are important for firms to survive and compete in a technological advanced market. For example, Pateli and Giaglis (2003) state that a set of steps of changes are either guidelines or frameworks for companies to enhance efficiency, effectiveness and productivity, however, many theoretical frameworks are non-specific to indicate the progress of change-making. Most of researches only state that the importance of change strategy, but there is no advice for the core part of the so-called methodology (p.341-342).

3.1.6

Evaluation models

It is evident that instructions and methodologies are required to evaluate the performance of business models and to address the issue of implementations. Pateli and Giaglis (2003) suggest four major objectives of evaluation, they are comparison with business models of competitors, examination of alternative business models with the same company, interpretation of risks and threats for a company and assessment of an new business model in terms of practicability and profitability.

As stated above, Hamel (2000) extends to integrate potentials of a business model with several indicators in terms of efficiency, uniqueness, fit and profit boosters in order to assess the performance of business model. Efficiency shows how a business concept can deliver customer benefits in a timely manner; uniqueness means the
34

originality of the business concept that can offer a competitive advantage; fit assesses the level of compatibility between various parts of the business concept, and profit boosters measure whether the business concept properly exploits the benefits on increasing returns, competitor lock-out, strategic economies, strategic flexibility. Additionally, Afuah and Tucci (2001) suggest the Measure of profitability that aims to compare and contrast companys profitability with rivals on revenue and cash flows; Profitability prediction that pursues to compare companys profit margins, revenue market share and growth with competitors in the market, and Business model component attributes that serves as a benchmark for assessing each component of a business model.

Although numerous researchers have attempted to identify and define several characteristics and categories of business models for reference, continuous investigation of business model is carried out to pursue a more sophisticated classification. In doing so, Gordijn, Osterwalder and Pigneur (2005) propose a means to interpret the development of business models research from the correspondent literature. A five-stage scheme (refer to Figure 3.2) illustrates the focus of academics changed from typologies to conceptual methods and specific business models.

35

Figure 3.2: Evolution of the business models towards ontologies and applications Stages Define & classify business models List business model compone Describe business model elements Business ontology Apply business model concepts

Outcomes

Definitions and taxonomies

shopping list of

Components Reference as building models and ontologies

Applications and conceptual tools

components blocks

Advocates

Rappa, 2001; Timmers, 1998

Linder & Cantrell, 2000; Magretta, 2002; Amit & Zott, 2001

Afuah &

Gordijn,

Gordijn, 2002;

Tucci, 2001; 2002; Hamel, 2000; Weill & Vitale, 2001

Osterwalder Osterwalder, & Pigneur, 2002 2004; Linder & Cantrell, 2000

(Gordijn, Osterwalder & Pigneur, 2005)

Even though the different stages are not in a chronological sequence, the development is in line with the principle of evolution of business models research. On the basis of business opportunities and environment, the fifth stage is the most significant one as integration of technology and business policy facilitate the processes and progress of companys innovation in order to obtain competitive advantages (Chesbrough, 2003; 2006). However, all of these taxonomies consider mainly revenues and not other
36

intangible benefits such as branding awareness or knowledge. In other words, the traditional business concepts relatively disregard the way of creating value for the customer. Todays end-users are both consumers and producers simultaneously in this extensive electronic and web-based market (Tapscott & Williams, 2006), users are able to take the initiative to pursue and generate value on their own. Hence, a new form of business model logically develops to consider the means of accessing intangible, potential and inexplicit benefits and value for the company, and the ways of engaging proactive users with production processes. It is expectable to find the solutions in emerging markets, virtual worlds seems to be an appropriate marketplace.

3.2

Business Models in Virtual world and Proposed Models in Second Life

In the industrial age (19th century), the Fordist doctrine and ideology influenced the worlds business operations in search of primacy of production and efficient assembly line (Cagnina & Poian, 2007). Academics then were educated value chain management (Porter, 1985), the five forces theory and framework (Porter, 1980) as theoretical tools to understand an industrial context. Sequentially, the technological developments arose in the course of the diffusion of Information and Communication Technology (ICT) and emergence of the Internet. Technology dramatically changed firms and drove them towards competitive advantages that associate with dematerialization, flexibility and global thinking (Parolini, 1999; Evans & Wurster, 2000). Hence, various business model journals emerged to illustrate the way of managing and integrating technology into business plans. Particularly, the proliferation of IT and Internet application has leaded to explore a new market and channel in which e-Business models appear and facilitate online presence as an expansion of firms businesses (Amit & Zott, 2001). Though technological changes
37

and developments modify business applications, companies are unable to adapt the pace of technological advancements. Dot.com bubble is an example of this failure in 90s, todays situation however transits from Web 1.0 to Web 2.0 (OReilly & Musser, 2006) and it is agreed that a possible development of semantic web and 3D Internet / virtual world web(Corchuelo et al., 2002; Schenker, 2007).

As manifested above, the business model and plan differ from conventional forms of e-commerce and it is a relatively new one (Cagnina & Poian, 2007). Prior to understanding the practical implementation and execution of business strategies in virtual worlds, it is essential to find out reasons and motives for firms and brands to create presence in Second Life.

Nick Wilson (2007), the CEO of Clever Zebra and producer of the v-Business Expo 2008, suggests a list of reasons to explain the motives of companies to go virtualized. First, companies have to maintain their competitiveness when their rivals are all joining SLs bandwagon. Companies consider thoroughly their market share and branding against competitors, they perhaps lose out without paralleling with rivals strategies. Second, it is regarded as a virtual investment in the community, the new medium and the vision of VWs even rewards are not immediate. Companies such as IBM aim to invest in a 3D future for establishment of credentials, reputation and goodwill among the community in a way that this plan will envision them in the edge while the VW develops and evolves. Third, real life press coverage draws the publics attentions on launches of firms in SL. Most companies intend to build a shop in SL as marketers aim to establish some propaganda for jumping on a press bandwagon and draw media attention. Forth, some companies meditate to reach technology savvy users and VWs could be a good free platform for them to gather. It would be more
38

effective for firms to exploit more collective intelligence from pro- or semi-professional audience. Fifth, SL properties, facilities and environments serve as meeting point for employees, clients and prospective customers. To build and retain a community exclusive to companies, it cut costs to assemble them globally and it overcomes the geographical barriers.

Although I disagree some of the reasons such as reaching the unreachable that still requires intrinsic and innovative ideas for raising their interests, the above list illustrates several initial considerations for companies to extend business into virtual worlds.

During the recent years, a large number of real life companies reckon the affordable possibility of Second Life as a platform for exploiting business opportunities. Over 160 real world companies excluding education and non-profit institutions has created presence in SL (Cagnina & Poian, 2007, p.18). For a clear classification, some researchers suggest to identify the segmentation of RL brands and companies. Nic Mitham (2008), the founder of KZero - a British research expert in virtual worlds, categories them into 5 main types:

1. 2. 3. 4. 5.

Luxury Brands Automotive Tourism marketing Financial services Technology/software

However, these categories only show the types of companies in the real world, and
39

they are insufficient to introduce and explain the real trend of business models and applications in virtual worlds. To further analyze the form of business in virtual worlds, it is suggested to sort the companies by the nature of core business in SL (Cagnina & Poian, 2007).

RL companies joined the virtual world to expand their real value and coordination mechanisms. They forayed into SL platform in search of potentialities for supporting business and organizations.

RL companies joined to sell virtual items or services such as 3D modelling, application tools, consulting. They are real and usually experienced, but provide a wide range of SL-based items.

Virtual world companies only run in SL and are conceivably founded by individual tech savvy users who specialize in scripting language of SL (Second Life Grid - open source viewer code). Creative goods are commercialized through Metaverse showcases and shops.

However, the means of the above categorizations only show to group up firms and businesses in SL, they are still inadequate to manifest and explain the behaviours and strategies of companies in SL. The concept of virtual business (Immersive Business, V-Business or -commerce) is too new to construct a practical framework for evaluating business models in virtual worlds. Nevertheless, companies have invested in a large number of business models and applications in SL, rationally there requires a criterion to evaluate them. With the inspirations of Kim et al.s typology of immersive business (2008), it is established several precise and specific forms that are as follows:
40

Immersive (Virtual) Prototyping adopting an immersive environment and features in virtual worlds such as Second Life to test product or service ideas, the platform can be used to collect feedbacks on a new product or service and so as to modify the design and concept in a real world. For instance, Starwoods Aloft Hotel and Sears show their prototype in SL.

Immersive (Virtual) Event Simulation simulations of real life events, functions and programs into SL are effective to learn from users comments, feedbacks and reactions. For instance, Weather Channel simulates natural disaster events to collect information from participants reactions.

Immersive (Virtual) Commerce the unique features of SL system offers economic opportunities for firms and residents to engage in trading in Second Life. Either users can exchange virtual items for exclusive Linder dollars (L$) or companies can use SL-based platform to augment business activity in the real world. For instance, American Apparel, Reebok and Adidas adopt this model.

3.3

Proposed Business Models and applications for SL

By the researches and observations in SL, whatever Mithams categorization, Cagnina and Poians induced types of SL-based business or Kim et al.s typology partly concludes with what firms are up to, those are insufficient to demonstrate and embrace the major business models, applications and activities in SL. The existing literatures only explain the business activities within SL without envisioning the models of physicalization of virtual products to the real world, and they focus on the trading in SL without identifying the methods of delivering the virtual products or services and the advantages of the methods. Hence, this dissertation attempts to extend from the above classifications of business models in order to propose three
41

business models and applications in Second Life Virtualization of Real Products; New Virtual Products or Services and Physicalization of Virtual Products or Services. These business models and applications are rather general in nature but comprehensively describe the major behaviours of organizations in SL as well as construct to the main theme of this research.

3.3.1

Virtualization of Real Products (Physical to Virtual, P2V)

All existing products, services and events in the real world are virtualized to serve in virtual worlds that can be generally defined as Virtualization of real products, Second Life is an ideal platform to accommodate various forms of business activities are corresponded with peculiarities of Second Life (virtual world). With regard to potentialities of SL, firms can import real products into a completely new medium and introduce SL residents (avatars) with distinctive prompts. For the reasons of market research, head start of learning experience on prospective virtual online retailing experience and branding or promotions (Whitehead, 2007), firms strive to create value to the SL community with prototypes, introduction of commodities, sports, programmes, events, and even classrooms. There are full of possibilities that users can see in SL as long as firms and organizations are able to seize the opportunities of exploiting the resources. It is better evident to illustrate how firms and organizations virtualize materials from the physical world.

3.3.2

New Virtual Products or Services (NVP/S)

As implied by the literal meaning, the products or services being created in order to offer users exclusively in virtual worlds that can be simply regarded as New virtual
42

products or services. In compliance with characteristics of Second Life, individuals and organizations are able to design innovative products or services which are valuable to SL residents and they wish to purchase them. The products could be very simple as a tiny gadget such as virtual pet and the pet owners could interact with their virtual pets and show off to other avatars. Conversely, organizations can provide SL users with tailored B2B and B2C services such as full solutions to marketing brands and product within SL. The most significant element of NVP/S is the experience of users in virtual world in which users avatars could only perceive and sense what they go through in-world. The level of experience changes with the design of the products and their additional attributive functions. For example, an auto maker brings in its real life car model into SL and it is simply a form of virtualization. However, the company adds to hold an event for users to race with their virtual cars, this combination offers users with a complete new experience in virtual world. Simply, it can be viewed as a NVP/S.

3.3.3

Physicalization of Virtual Products or Services (Virtual to Physical, V2P)

Certain impressively designed products and services which are widely accepted by users in virtual world, organizations intend to further spread out the brand in order to refine and (re)introduce the virtual designs into the real world, it can be regarded as Physicalization of virtual products or services. Normally, they must be in the form of products or services existently in the virtual world as well as those products or services are successful in terms of word-of-mouth promotion, creativity and social presence in virtual world. By taking advantage of the potential of popularity, organizations physicalize them into the real world and integrate with their business strategy both in VW and RL. This gives an edge to the companies over their
43

competitors.

The next question should be considered that is the relations between the features of virtual worlds and their relevance to these models. The following part pursues to recap the VW characteristics and associate them with the business models.

3.4

Relevant VW Features and Theories to the Proposed Business Models

In chapter 2, background and overview of virtual worlds demonstrate the significant characteristics, also these points lead to a significant approach of entering VWs that require understanding and knowledge of the peculiarities of that environment in connection with business, marketing and communication strategies, organizational configuration and vision. As a result, Amit and Zott (2001) suggest that VWs might not work the same as the conventional way of e-business, and organizations have to caution the coordination between real-life business activities, features of the platform and strategic behaviour in virtual worlds (Cagnina & Poian, 2007). Therefore, it is necessary for companies to consider what virtual worlds effectively are and how to incorporate new strategy into their business models.

By restating the affirmation of Professor Castronova (2001; 2005), we understand virtual worlds are 3-dimensional, digital spaces in which numerous participants interact and collaborate among others through a representation of avatar. However, it is insufficient to depict the relevance of virtual world to businesses, as several profound and representative features of VWs are necessary to establish a more precise and accurate criterion for companies to follow with and integrate with their real-life business. On a large scale, there are three analytical dimensions are practical and
44

contributive to consider with, which are Interactivity, Immersion and Network effects.

3.4.1

Interactivity:

To simplify the lengthy elaboration, interactivity represents all the movements, actions, processes and feedback that occur among users, hardware and software. Interaction indeed is the most distinctive technical feature to explain a large number of participants simultaneously input certain commands (actions) that induce relative commands (reactions) of other users in the virtual community. Especially, the design and functionalities installed in the platform of VWs that lead to learning-by-doing course and skills and operational knowledge attainment. This is exactly fundamental to the application of user-generated content (OECD, 2007), and the process is in terms of social and technological.

3.4.2

Immersion:

In the same way, immersion can refer to both a social (Cova & Car, 2006) and technological (Jaynes et al, 2003) aspect. In particular, it explains the process of engagement and initiative experienced by the participants in virtual worlds, while Klein (2002) suggests that sensory immersion had a positive impact on telepresence and on brand attitude, self-reported product knowledge and on purchase intention (p. 9). The users experience and immerse in a virtual environment in which they influence and are influenced by the sensational dynamic process simultaneously. As a consequence, Second Life is an excellent example of virtual worlds to express the most resembling real world by offering editing programmes for users to create 3D digital virtual objects, to improve scripting language and to share multimedia content.
45

3.4.3

Network Effects (Network externalities)

As information and intangible assets are computerised, digitalized and accessed with the Internet, individual and organizations are more convenient to create economically and overcome the geographical barriers. In this sense, people and assets in electronic and digitalized form constitute a global network through the power of the Internet (Varian et al., 2004), in which the entire economic and business environments are changing under a network effect. Alternatively, many academics refer this network configuration to network externalities too (Tomochi et al., 2005; Church et al., 2002; Liebowitz & Margolis, 1994). In essence, network effects can be viewed as economies of network (Shapiro & Varian, 1999) or demand-side economies of scale (Varian, 2001). This can be simplified that the populations and size of the network joined by new members that influence both the value gains of existing and new participants, so that the larger the network is, the greater the value gains are (Cagnina & Poian, 2007). The dimension of network externalities could be direct or indirect (Stango, 2004). Direct aspects represent the effect and impacts directly drive the value of the participants, as the effect offers per se benefits on the others; indirect aspects show the size of the network itself retain capabilities to attract products, services and resources beneficial to the users, albeit it is not in a direct way. Therefore, it is sensible for companies to review their strategies and policy in order to leverage the network effects and enhance the growth of the network for business opportunities in both direct and indirect externalities. For example, telecommunication networks seriously consider networks and markets (Varian et al., 2004). Similarly, these effects are crucial in virtual worlds and create a virtuous cycle of network development (see Figure 3.3), in which one product or service highlights outstanding network effects, and the size of the network grows with respect to direct externalities in order to create value shared by users in the network. The function and practice of the network is most
46

likely to raise awareness of prospective partners or customers, and this generates values and benefits both for users and the firms. As a consequence, this pattern can give rise to the growth of the network that induces positive feedback among network users and strengthen the effects.

Figure 3.3: The relation between network effects and externalities

Size and Growth of the Network

Direct effects:
The size of the Network influences positively the vaule within the network.

Indirect effects:
The size of the Network influences positively the capibilities to draw other values and benefits

(Cagnina & Poian, 2007)

YouTube and Facebook are examples of a number of successful platforms with the use of Web 2.0 applications and tools to apply network effects. Then, Walsh (2006) simply concludes that, If you can give people a way to communicate, to talk about content, to rate it and express whats cool, then you start a virtuous cycle, because more people want to get involved, more people create content and more people comment on it. Indeed, this is a practical means to the development of virtual worlds.
47

In connection with features of virtual worlds, Second Life is wonderfully compatible with these aforementioned elements for business applications. On account of novelty of business model conceptions, the conforming literatures emerge to explain and evaluate how firms are capable of managing and integrating the technological skills into business models. As a matter of fact, Second Life is currently the most popular and successful among various virtual worlds, and SL embraces all peculiar characteristics for companies to explore a new platform for evaluation of business opportunities and applications, and help integrate their brands and marketing strategies (Cagnina & Poian, 2007).

In this dissertation, it is focused to adopt a theoretical framework based on the field of Management Information Systems (MIS), which was used by Kim, Lyons and Cunningham (2008) on the similar research. To serve as a steppingstone, the proper framework is required to evaluate business models and applications in Second Life, the best representative of virtual worlds (as justified the selection in Chapter 2). Other than adopting Five Force Strategic Model (Porter, 2008) or Resource-based Perspective (Barney, 1991), or Mass Personalization of marketing strategy (Friedman, 2005), or Services-dominant Logic (Vargo & Lusch, 2004), the standpoints of MIS provide basis for traditional e-business and physical business experiences. In addition, the new form of virtual business models is superior to traditional perspective, that implies the virtual outweighs than the clicks or bricks. By the similar token, e-business was agreed to apply the clicks could be more preferable than bricks-and-mortar. Hence, it is rational to particularly investigate Media Richness Theory and Task Closure Theory.

48

3.5

Media Richness Theory (MRT)

MRT is a widely accepted perspective for evaluating the fit between the task or activity and the medium or platform. Kahai et al. (2007), Rice et al., (1992) and Sitkin et al. (1992) are researchers have reviewed the relations between task and medium. Based on the theory, it assumes that individuals, groups and organizations interpret acquired information to minimize uncertainty and unequivocality (Davis, 2006; Galbraith, 1977). Uncertainty indicates the difference between the amount of information required to perform the task and the amount of information already possessed, while unequivocality manifests the ambiguity existed in the task resulted from inconsistent expectations and analyses. For instance, when a task involves highly ambiguous information such as collective bargaining, and so communications and information interpretations have to adequate to support the medium. Thus, a number of face-to-face meetings among users would be a proper means to overcome the issue. In terms of gestures, facial expressions, surrounding contexts, and other sensory clues, it is rich in nature for the face-to-face survey to supplement the shortage of spoken or written worlds. In contrast, when a task entails explicit information such as filling out a form, then a less rich medium such as email can satisfy (Daft & Lengel, 1986).

The term Richness encompasses capabilities to offer feedback, multiplicity of cues, appropriate language and personal focus. Apparently, the cost of holding a meeting is higher than distributing email for surveying as co-existed arrangement is not necessary, but the poor in richness of email highlights the rich of face-to-face meeting. According to MRT, the level is sequenced from the richest media to the last rich media, as from face-to-face, to telephones, to written addressed post, and to unaddressed post (Daft et al., 1987). MRT allows to justify the adoption between
49

emails and voice mails (El-Shinnawy & Markus, 1997), and between different technologies for workgroups on computer-related research (Burke et al., 2001). In addition, MRT has been applied to identify the relationship between the purchase, sales or exchange of goods over the Internet, and it is evident that enhancing richness in media would lead to successful and effective e-business (Jahng et al., 2006; 2007).

3.6

Task Closure Theory (TCT)

TCT is the practical theory to assess the availability of communicators and social environment for selection of media (Markus, 1987; Saunders & Jones, 1992). The notion of close or finish a task is the central consideration for individuals and companies to select and adopt (Parrish, 2006; Straub & Karahanna, 1998). For instance, task closure is accomplished by clicking the send button in the event of email, that is in opposition to the face-to-face meeting if MRT. For the means of email or face-to-face, the task can be closed for email at the unilateral decision of the participant, but face-to-face requires organizing a meeting time and venue that task cannot be simply finished at the decision of one participant.

In short, TCT works to increase capability of perform closure in order to reduce task fragmentation and job stress. Moreover, the level of social presence is supposed to control the need for closure. For instance, executor favours task closure to an undesirable incident such as sacking a staff, it is, however, socially unacceptable to execute by means of email or voice mail. Thus, this theory also suits to clarify preference and use of email (Karahanna & Moez, 2000) and groupware (Robertson et al., 2001).

In sum, it is argued that physical business has a higher richness but the costs are
50

higher. On the contrary, e-commerce entails a high degree of task closure with reduced costs but media richness and social presence are relinquished. To balance between media richness and task closure, virtual business models require to consider a more practical and feasible strategy to reduce costs as well as not to lose too much social presence. For example, Amazon and eBay have been able to target more customers than conventional merchants, without compromising richness of media (Evans & Wurster, 1997). Figure 3.4 demonstrate how e-commerce successfully outperforms traditional physical business.

Figure 3.4: Effect between conventional physical and e-Commerce

Degree of Richness Conventional effect

Effect embedded with technology

Reach By extracting some referential components of these two theories, we can establish a criterion to assess the effectiveness and practicability of business models and applications in virtual worlds.

Elements of MRT: Immediacy of Feedback Multiplicity of cues Language variety Personal focus

Elements of TCT: Task Closure Availability of Communicators Social presence

51

However, these elements were proposed to support the traditional e-Business models and there is still lack of research using these factors as metrics to test the association with the business models and applications. Apparently, there is still no such widely accepted, academically-oriented framework to assess virtual business models. Indeed, this is the main focus of this dissertation in which a self-judged connection is assumed to adopt these elements for the measurements on the proposed virtual business models in SL. SL is supposed to the best representative example among many virtual worlds, so it is relevant to link the major features of virtual worlds to SL platform. Additionally, e-Business could be regarded as the referential model and standard for virtual world business, and the elements generalized from MRT and TCT should lead to some indicators of running a business in virtual world. In this regard, these 7 elements and 3 VW features combine to interpret and assess the business models and applications of organizations in Second Life (elaborated in detail in Chapter 4 Methodology). In particular, this approach contributes an exploratory investigation on the business models of virtual worlds while the VW development is in a nascent stage.

52

Chapter 4: Methodology

In this chapter, research hypotheses are at first constructed to show the means of associating the Virtualization of Real Products; New Virtual Products or Services and Physicalization of Virtual Products or Services with the characteristics of virtual worlds, the elements of MRT and TCT. Next, the justifications of selecting the sample, data collection, evaluations of the business models and applications, measurement of research methods and the statistical analytical methods are elaborated accordingly.

4.1

Research Hypotheses

In the current development, the related research and literature are limited as the studies of virtual worlds are still in the early stage, it is worth investigating into the trend of business model and applications in SL. Virtualization of Real Products; New Virtual Products or Services and Physicalization of Virtual Products or Services are the proposed typology of the virtual business models based on the observation and research on the platform of Second Life, and relevant literature of virtual world studies. These proposed virtual business models are regarded as a holistic business model. To associate with literature, VW features, Media Richness Theory and task Closure Theory are adopted to bridge up to the models.

First, it is logical to consider the characteristics of virtual world and their relevance to business models in SL. Castronova (2005), Amit and Zott (2001) suggest network effects are crucial elements to the virtual world. It is argued that people tend to utilize the online resources and gather to constitute a network for various purposes. Similarly, virtual world provides another platform for users to gather and interact for playing
53

games, communications, conducting research and business opportunities. It is rational for SL companies to leverage this network in order to attract a large amount of participant, this network may lead to a socialization effects which can induce business opportunities if companies can target their needs in the community. Thus, the organizations should consider the means of offering activities can induce the network effects in SL, in turn the effects can potentially attract more people and external resources. A hypothesis can be made as:

Hypothesis H1: SL firms that tend to focus greater on the network effects are likely to be popular in-world.

Second, customer focus and feedback are two main elements for supporting a good business model. Feedback is very significant viewpoints and messages of customers, the collective feedback represents the trends and needs of the market. It is suggested that a company are able to focus on customization of products and services based on feedbacks and requests (Jahng et al., 2006; 2007), it is viewed as a successful strategy of the company. Companies are able to receive feedback from customers and to survey the needs of customers, they are more likely to provide the desirable products or services for the market and so they can gain higher competitiveness. To bridge the feedback from customers and firms, an intermediate agent is required to create presence in order to collect information from the market (Tedeschi, 2007). For example, representatives of firms act as important agent to record viewpoints and feedback from customers, and the customers are more likely to share their views in an interactive ways such as face-to-face survey. In the same sense, it is effective to consider personal focus and so as to offer tailored product or services to the market, so SL companies can apply the same to collect the feedback from customers in-world. A hypothesis is made as follows:
54

Hypothesis H2: SL firms that obtain feedback effectively are more likely to provide desirable products or services in-world.

Third, the environment of virtual world is a three-dimensional space with various experiences similar to the real world. The SL platform also presents richer visual and aural experiences than conventional websites. Due to nature and features of virtual world, SL firms recognize the potentialities for offering intuitive cues such as 3D animated products to explain precisely the objective of the activity or service (). In addition, the companies attempt to offer an excessive amount of non-intuitive cues, which are most likely to distract and confuse the users, even annoy them sometimes. It is deducible to offer clear cues with appropriate amount of multimedia and virtual design, which positively affects companies to successfully provide the desirable products or services for customers with proper guidance in SL. A hypothesis can be as follows:

Hypothesis H3: SL firms that provide proper assistant and cues are more likely to correctly guide participants to react in-world.

Lastly, the main notion of TCT is complete the task that is started within the same environment. Indeed, some of products or services offered are exclusive in SL. It is proposed that task closure is important to provide a kind of activities or experiences that cannot be completed elsewhere (Parrish, 2006). For example, American Cancer Society provides an information community for the disabled users, where the 3D virtual park enables interested users to obtain information and interact with other users that they are unable to attend and interact in the real world due to their conditions. A hypothesis is made as:
55

Hypothesis H4: SL firms that offer products or services exclusive to SL platform are more likely to embed task closure features.

4.2

Initial Preparations

In approaching the data collection, review and investigation of selected sample are crucial to provide a comparatively integrated and comprehensive view towards the business models and applications in SL. First, analysis and interpretation of selected organizations over the Internet sources and websites offer a general summary from various perspectives on the Internet. For example, news releases, press reports, video clips, radio, podcasts, presentations, official website or private blogs, literature or online reviews. In this sense, it is convenient and efficient to collect information on the latest news or reports and tendency in Second Life. Second, it is convictive to personally register an account to enter SL (the registered name is 2ndL1FE Constantine), in order to understand the main characteristics of the virtual world and to immerse in a digital and virtual space with a closest view of first-hand perspectives.

4.3

Selection of Sample

As stated in chapter 2, Second Life (SL) is the ideal platform for interpretation and evaluation of virtual business models and application among other virtual worlds. In addition, SL entails all the characteristics classified for virtual worlds with respect to immersion, interactivity, physicality, persistence, network effects, avatar-based incarnation as well as several potentialities that enable SL an explorative and possible environment for business. Indeed, SL is a virtual world that has many resembled
56

mundane capabilities in which companies are able to aptly integrate their business strategy, brands and marketing plans. In particular, an own currency system of the Linder dollars (exchangeable to US dollars) that constitute a unique economy in which every business transaction process through a real value of virtual currency in SL (Beller, 2007). Firms and organizations have established a wide range of business models and application in this virtual world, though there is limited numerous unquestionable evidence to show a SL presence will definitely result in a profitable return (such as return on investment, ROI). However, a large number of companies have expected the feasibility of SL as a new platform for obtaining business opportunities.

4.4

Selection of Firms/ Organizations in SL

According to the founder of KZero, Nic Mitham, a British research expert in virtual worlds, he suggested in his blog 1 that there is more than 160 organizations created presence in various forms in Second Life in 2008. It is extremely difficult to investigate each organization in SL within the limited timeframe and resources. In this dissertation, it is based on the Companies in Second Life listed on the official blog about Research on Second Life in 4th July 2007 2. Above 50% of the organizations are listed in Fortune 500, which is a list of leading firms ranked by the Fortune Magazine based on firms performance and profitability (USPages.com, 2008) .In this research, 99 companies or organizations are selected to analyze and evaluate their business models and applications in accordance with characteristics of virtual worlds, combination of elements of Media Richness Theory and Task Closure Theory (the detailed summary of each site in terms of activities, social and technical aspects, see Appendix 1, 2).

1 2

Source: http://www.kzero.co.uk/blog/?page_id=2094 Source: http://secondliferesearch.blogspot.com/2007/07/companies-in-second-life.html 57

4.5

Evaluation of Business Models and Applications in SL

Prior to the statistical analysis on organizations in SL, an inductive analysis is logically adopted to provide a holistic approach on how firms and organizations are performing in SL. Unlike the simple categorization of SL companies suggested by Nick Mitham (2008); typology of SL business models proposed by Cagnina and Poian (2007); or Kim et al.s typology of immersive business in SL (2008), an own elaborated taxonomy of business models and applications in SL is generally summarized from the previous related literature and personal observation and analysis through an registered avatar in Second Life. The self-elaborated taxonomy encompasses Virtualization of Real Products; New Virtual Products or Services and Physicalization of Virtual Products or Services in which their objectives attempt to summarize an accurate adopted form of SL companies as well as to offer a practical insight into how they perform their business strategies and applications in SL. From the perspectives of general literature reviews, it is recommended to assess the performance and effectiveness of business models and applications in virtual worlds. However, the general focus of literature is not the main theme of this dissertation.

Due to the design of SL, it is not possible to collect revenue reports of the companies in SL, as they indeed carry out the experiment of the business models and they are exploring in expectation. Thus, it is not possible for firms to disclose this sensitive report around their rivals and it is difficult to assess the performance of the business models in SL based on value of tangible profits. In addition, SL does not provide an accurate visitor counter to record the frequency of visits and number of avatars in specific locations in-world. Unless, a personal research is adopted to count the rate of visiting frequency one by one on site, this exhausting method takes substantial time and resources to carryout, which is not possible to process on one person or small group of
58

research team. In this research, conversely, a reverse analytical method is adopted to identify the most adopted business models and to examine which business models entail certain elements and characteristics in line with the literature and virtual world researches. It is worth investigating into the relationship of the VW features with the proposed virtual business models. A thorough investigation is completed in the section of inductive analysis and statistical analysis.

4.6

Assessment on each Firm/ Organization

In terms of data collection and assessment, it was proceeded from 8 August to 15 September, 2008. Due to a number of organizations from the sample have been defunct in Second Life, these organizations are evaluated by means of researches over the Internet sources such as news releases, official website or private blogs, literature reviews, that are mentioned before. For the data collection of existing organizations in Second Life, logging-on with SL account to spend up to 20 minutes for each site in-world. During the investigation in SL, rating is taken with respect to peculiar elements originated from the features of virtual worlds, Media Richness Theory (MRT) and Task Closure Theory (TCT).

4.6.1

Measures

For the measurement of characteristics of virtual world in SL, Interactivity, Immersion and Network Effects (externalities) are used to assess each organization accordingly (Castronova, 2001; 2005). The other measures such as Feedback Capability, Intuitive Cues, Avoid Overburdened Non-intuitive Cues, Personal Focus, Task Closure, Virtual Availability and Social Presence are based on Media Richness Theory (Kahai et al., 2007; Rice et al., 1992 & Sitkin et al., 1992) and Task Closure (Parrish, 2006; Straub & Karahanna, 1998) respectively. For the defunct sites or organizations, an indirect
59

evaluation means was used to analyse based on all related information about the specific organization such as news releases, press reports, video clips, radio, podcasts, presentations, official website or private blogs, literature or online reviews.

Interactivity: Interactivity shows the capability of a SL site enables users to give and to receive in terms of actions, movements and behaviours interacting among other participants, hardware and software (Sinha et al., 2001). For example, the number of facilities and interfaces provided in that virtual site for participants to use and provide feedback; the number of space for participants or employee to interact and the number of activities and events organized for interactive purposes. The coding method was formatted in terms of a four-point Likert scale anchored by minimum degree and maximum degree.

Immersion: Immersion manifests that a SL site provides users with experiencing the process of engagement and initiative. It is focused on the editing programmes for users to create 3D digital virtual objects, to improve scripting language and to share multimedia content. For example, the design of the site is whether realistic or surrealistic compared to the real life environment in terms of building structure, social space and multimedia cues such as video, audio, human voice, sound effects etc. In short, the higher level of synthetic immersibility demonstrates at the site, the higher score the design of the site obtains. A four-point Likert scale was adopted coding between minimum degree and maximum degree.

Network Effects (externalities): This can be simplified that the populations and size of the network joined by newcomers
60

that influence both the value gains of existing and new users, so that the larger the network is, the greater the value gains are (Cagnina & Poian, 2007). To assess the effects of organizations in SL, the size of the network within each site joined by avatars that simultaneously create network effects to attract more users to join or to converge other resources such as derived virtual products or services. For example, the number of avatars stay to engage in activities is a good indicator, indirectly, the number of news reports on the events or activities published in-world and real world that could raise awareness and growth of the network. A four-point Likert scale was adopted and anchors of the scale were minimum degree and maximum degree.

Feedback Capability: Sales representatives serving in a physical shop normally offers better feedback capability than a website. In general, customers would not prefer to provide feedback by clicking opinion, comment or contact us button on a web page, however, a feedback made to salesperson probably is not officially recorded. In SL, the capability of the site can be designed to record feedback while participants are experiencing and expressing views or comments at site. For example, the number of interfaces for users to post feedback and the number of staff appear to observe the participants or interact with them are two main indicators. A four-point Likert scale was adopted and anchors of the scale were minimum degree and maximum degree.

Intuitive Cues: In the real world, there are relatively more cues than on websites, and a practical virtual model has to exploit augmented 3D cues over a web page. For example, immersing an avatar in a 3D building or environment might lead to the stickiness of users at site in order to enhance the purchase intention or brand awareness. The intuitive cues in turn
61

provide accurate information of what business the site is doing and so as to facilitate users to react properly. In this measure, the explicitness of the design offers the obvious cues for users to percept and to react correspondingly such as the availability of signs, counter, staff, products showcase etc. A four-point Likert scale was selected and the anchors were minimum degree and maximum degree.

Avoid Overabundance of Non-intuitive Cues: For the business purposes, any design aims for the sale of product, services except for other additional value such as branding, customer researches. Thus, there would be an issue that arises from excessive cues, as overabundance of non-intuitive cues would potentially distract, frustrate, dilute, or confuse customers come to a purchase or to use the service (Tedeschi, 2007). A good business design is able to drive customers towards intuitive cues but away from confusing cues (Nielsen, 2000). For example, it is attempted to evaluate the excessive amount of complicated 3D animation designs and additional mini-games provided in a virtual shop, overburdened non-intuitive cues would confuse the judgement of users at site. The higher score represents the site avoids excessive amount of complicated distracting cues, while the lower score shows the site entails excess non-intuitive cues. A four-point Likert scale was adopted with the anchors between minimum degree and maximum degree.

Personal Focus: Innovative developments have promoted to create the paradigm of mass personalization, Customer Relationship Management (CRM) software, collaborative filtering and Really Simple Syndication (RSS) feeds are examples of these technologies. However, the most effective and efficient means of delivering personal focus is to provide representative in order to tailor and customized focus for the customer in a face-to-face manner. For
62

example, the number and richness of dialogues with customers are indicators to illustrate how the company focuses on its customers within the site, and the availability of interface or script that can record customers behaviours and requests for next customer-oriented design of products or services. A four-point Likert scale was adopted with the anchors were minimum degree and maximum degree.

Task Closure: In the case of e-business, a customer purchases an item on the website and will receive the shipped products in a period of deliver times. Based on the research of Kim et al. (2008), customers prefer to purchase and use the item or service within the SL, this is in line with the task is started and finished within the virtual world. For the measure, the level of completeness of the task within the SL and the number of procedures to use the product or service in SL are metrics to assess if the offered experience can be started and completed within SL without running in the real world. A four-point Likert scale was adopted with the anchors between minimum degree and maximum degree.

Virtual Availability: In SL, avatars are available to receive views, messages, opinions, requests and information that highlight the experience of task closure for message conveyors, as participants can witness the messages received by other avatars in a sense that is difficult with email or voice mail. The ability for avatars to meet, interact and have conversations with employees or representatives of the site is crucial to obtain customer satisfaction. For example, the measure is to rate the availability and number of representative of the organization in SL. A four-point Likert scale was chosen to use with the anchors between minimum degree and maximum degree
63

Social Presence: Social presence is necessary to accomplish a task in SL. In the case of activities in virtual or physical world, an adequate number of participants are required to perform certain task. Hence, the capability of organizations to leverage the social presence to achieve a critical mass is significant to generate positive effect on a successful business model or application. For example, the measure assesses the ability of the organization to attract a large number of users to visit their site in order to record feedback from the community; the availability of design to exploit more participants for social presence such as promotion interface in popular events or venue in SL. A four-point Likert scale was adopted and the anchors were between minimum degree and maximum degree

4.7

Inter-Rater Reliability

According to the data collection of the above measures, they are rated with respect to the self-judgement on which level or degree the sites of organizations should obtain in Second Life. This may lead to a biased observation or judgement on reliability problem. In addition to this issue, it is argued that the observers judgement is adversely influenced by measurement errors and so this misjudgement can cause failure in follow-up investigation, analysis and statistical study (Shrout & Fleiss, 1979). Thus, an approach on reliability of rating the above measure is necessary to ensure unbiased data and judgement in advance of testing the hypotheses.

In the light of George Kuks research (2002; 2006), an inter-rater reliability approach is adopted to pursue the unbiased and fair rating in this research. This approach of rating scheme tests the consistency and conformity among two or more assessors judgements and observations with the same means of measurement, this aims to reach the consensus between the assessors and to establish the reliability of the rating scheme. Gwet (2001)
64

suggests a higher level of agreement tends to justify a higher reliability of the instrument or measurement. Therefore, three assessors were invited to perform the same task of rating the 99 SL organizations in line with the same measures aforementioned above, these assessors at least possess a university degree with independent academic backgrounds. They were explained the methods of rating the SL sites provided with several examples, as well as given with the literature of the characteristics of virtual worlds, Media Richness Theory and Task Closure Theory.

First, assessors were familiarized with the notion of the theoretical frameworks in order to understand explicitly the definition of the measures and variables. In this process, they were trained with instructions to rate each site. Then, they began to evaluate the SL companies separately and independently within an adequate amount of time. Between three assessors, an initial discussion was held to understand their viewpoints and discrepancies on each measure. The results of each measure were then discussed in terms of definitions, judgements and personal interpretation in order to reach consensus, eventually a 90% agreement was achieved.

4.8

Data analysis:

This research attempted to test the effects of three major characteristics of virtual worlds (VW), Media Richness Theory (MRT) and Task Closure Theory (TCT) on outcome measures of three virtual business models and applications (i.e. P2V, NVP and V2P) in Second Life using regression analysis, the procedures of statistical analysis were consulted by the research of George Kuk on Interactivity in e-Commerce (2002). Prior to the regression analysis, a principal component analysis and the varimax rotation were adopted to examine the factorial validity of the measures related to VW features, MRT
65

and TCT. Then, screen test and Kaiser criteria were selected to determine the number of factors to remain and the composite mean score of each factor was in turn computed.

On the basis of Factor analysis (FA), it interprets a large number of variables such as the 10 variables extracted from the theories and it seeks to check whether they have a small number of factors in common which explain their intercorrelations. Thus, it is adopted to summarize the data by identifying the data meaning for grouping the data and reduce the data into fewer variables by retaining the representative variables. In the process of FA, the orthogonal varimax rotation is the most popular means to bunch up on the principal factors. To interpret the value of factor loadings, generally the minimum value is 0.40 which was the standard for this research as the sample size was not relatively a large one, 99. The reduced factors would then be labelled, with regard to which variables each factor entails and variables with highest loadings are taken, while all factors with Eigenvalues over 1 were considered as significant. In this research, four factors accounted for 65.6% which is over the minimum of 60% and so regarded as good, the curve started to be horizontal at 4 from scree plot that confirmed 4 factors could be a solution (Child, 2006) Therefore, four composite variable was computed with weighting the factor loadings and saved for further analysis of regression.

These new set of compact variables are useful for a further formal test to support the choice, such as linear regression analysis and Pearson's correlation coefficient. First, regression analysis is for interpretation of how a given variable is explained by other variables but a linear relationship is assumed among the variables, as the research aims to test which factor best explains the business models. In this analysis, certain number of variables can be found to help explain or predict the other (virtual business models), while the coefficient is very significant if the p-value is smaller than 0.02; it is
66

significant if 0.02<p<0.05; it is fairly significant if 0.05<p<0.1 (Babbie, 2007). Second, Pearsons correlation is used to measure the strength of a linear relationship between two variables (while regression analysis is able to measure that of relationship among two or more variables). For example, it is utilized to explain the trends of adopting a business model in SL.

67

Chapter 5: Results and Discussions

In this chapter, two analytical approaches embracing inductive analysis and statistical analysis are discussed. Based on the findings, it is comprehensive to discuss the firm behaviours and the choices of adoption of the proposed business models, and then to illustrate the relation between attributes of 10 measurements and the proposed business models and applications in Second Life.

5.1

Inductive Analysis

This dissertation attempts to identify and generalize three business models and applications in Second Life Virtualization of Real Products; New Virtual Products or Services and Physicalization of Virtual Products or Services. The following sections seek to provide a practical insight into what firms are actually doing in SL, and attempt to verify major firms are doing these 3 types of business models and applications. With help of attributes of 10 measurements (they are Network Effect, Social Presence, Personal Focus, Immersion, Feedback, Virtual Availability, Interactivity, Avoid Non-intuitive Cue, Intuitive Cue and Task Closure), this approach aims to identify which business models encompass correspondent elements or factors.

5.1.1

Virtualization of Real Products (Physical to Virtual, P2V)

In the sample of 99 brands and companies in SL, 43 out of 99, about 43% of organizations from the list selected the business model of P2V. This proportion embraces prototypes, technical supports, regional landmarks, exhibitions, classrooms, meetings etc.
68

However, only 11 firms of the entire list concentrated on sheer model of P2V. Therefore, a number of firms simultaneously were adopting one more one business model. The following cases are representative of the model and application.

Starwoods Aloft Hotel: This is a classic example of the model, you would easily find its prototypical characteristics being intensively discussed in every research about SL. Starwood Hotels successfully developed a SL-based of its new project of hotel design, Aloft. The SL version established in 2006, indeed the new hotel did not physically open until recently in 2008 3. Their objective was to test the design, encompassing to receive feedback from visitors by observing how they move through the venue, what areas and types of furniture they gravitate and ignore. The ultimate goal is to attract young, tech savvy users to the brand and to ask them for practical ideas and suggestions. A real world clone of the hotel in White Plains, New York has been completed through feedbacks and observations on aesthetic and architectural details which obtained from SL (Jana, 2006).

American Apparel: The other practical example of selling virtualized products in SL. Though American Apparel is a now defunct virtual store, they promoted virtual clothing for SL avatars. As one of the early garment retailers in SL, American Apparel aimed to provide stylish clothing with its own brand, consumers possibly purchased the virtual clothing for the cost of less than a US dollar. SL shoppers could also be redirected to its traditional online retailing website in order to browse and buy RL apparels. However, the sales of RL clothes were defeated by the virtual ones (Jana, 2007).

Source: http://aloftagogo.typepad.com/about.html 69

Cisco: Initially, Cisco created an infrastructure with help of pre-existing web content and structure and the site in SL was intrinsically the replica of Cisco website. Not surprisingly, the frequency of visit was terribly low according to its own findings. In relation to tackle this issue, they led in their Application eXtension Platform (AXP) and redesigned the virtual space into a meeting place for employees and customers in order to generate creative, interesting and constructive dialogues. There are virtual classes of product training and technical support to SL residents as a communication channel for their clients; executive briefings with international staff and user-group meetings offer high efficient synchronization of internal messages even participants are not necessarily co-existed. The degree of interactions within SL has been reported to be more satisfactory now (Hillis, 2007).

Harvard Law School: The Harvard Extension School was established in SL for law students to learn and experience videos, discussions, classes, lessons, lectures through a 3D immersive environment in virtual world. The virtual school enables students to interact with others in real time from every corner in the world as long as they are equipped with connected computers. The building design is based on Harvards architectural style, students are able to take a distance course in order to develop a real sense of community and immerse with many other fellows in a virtual college campus 4.

MTV: MTV selected to create presence in SL by replicating real life shows location in order to organize fashion events, concerts, nightclubs and dance competitions. SL avatars are
4

Source: http://blogs.law.harvard.edu/cyberone 70

more likely to change the habit and experience from listening to music to actually watching the show, even they can engage in the show. The immersive feature of virtual worlds like SL in which 3D avatars could immerse, interact and socialize in real time, this is far more expressive than any plain website could ever be 5.

Toyota: Toyota built a showroom of its Scion brand in SL, they planned to sell 3 virtual Scion model in the beginning. In its Scion City in SL, avatars could purchase a virtual car model for $300 Linden dollars (about $1 US dollar). Owners are allowed to customize their models and share the new designs in a special Showcase gallery, different users gather to celebrate and participate in virtual launch party while players avatars can also enjoy concerts and test-drive Scions. Toyota regarded it as aftermarket strategy in order to spread the brand virally as well as to collect ideas from customers for modifications in the physical world.

In summary of P2V model, network effects and social presence are the major elements for adopting this business model, while there are some other secondary factors such as personal focus, immersion, feedback and virtual availability. As the factors of network effects and social presence explain a large community to support the operations of the site, events and activities in order to attract more newcomers to join, this phenomenon can occur sustainably and lead to repeated revisit to their SL sites as well as to potentially to induce customers to use their products or services and provide word-of-mouth promotion. Those secondary factors are supplementary to provide a mechanism for impressing participants on the friendly arrangement of the site in which users are able to meet and interact with other users or even employees and
5

Source: http://secondlife.com/community/music.php 71

representatives. This psychologically influences users to be happy with staying in the site and so to enhance the business opportunities and brand awareness. Task closure is another factor to illustrate the importance of beginning and finishing the activities and even purchase behaviours in-world.

5.1.2

New Virtual Products or Services (NVP/S)

Based on the findings, 73 out of 99, almost 73% of organizations adopted the business model of NVP/S. In addition, 48 firms of the list focused on sheer NVP/S, it is the most popular business model and application in SL universe. Some remarkable examples of the model are discussed in the following.

Active121: This Italian company created a SL-based office which is specialized in providing firms with B2B solutions of online marketing and web usability services. They aimed to offer Customer Relations Management (CRM) for SL companies which enabled firms to collect a large amount of information about users behaviours in SL. The services comprise bolstering firms to extend business into SL, business positioning in SL, offering strategy for optimizing the SL usage etc.

American Cancer Society: In 2005, a successful virtual fundraising event, Relay for Life, was launched in Second Life, the event gathered volunteers to sell virtual products for charity and avatars engaged individually and in groups to navigate a course designed by volunteers in the SL community. Additionally, virtual blimp rides and sailboat races were held for charity purpose and entertainment. Participants came from various locations in the world. They
72

raised $5000 US dollars in the year, but the fund successively increased to $41000 in 2006 and to $115000 in 2007 (Strohm, 2007).

The Electric Sheep Company: The Electric Sheep Co. is professional to design and create online social and virtual world in terms of strategy, design, production and technology 6. This US Company is specialized in compiling the best of online games, virtual worlds and socialization features to create products and marketing effects for their customers. In fact, the key competence of the company is to use Second Life Grids open source viewer code in order to create customer feedback counter for gathering views, advice and complaints.

IBM: Computer services giant IBM manifolds its products and services in Second Life such as establishing their own virtual shops and holding internal conferences and meetings. However, the most innovative project has ever created by IBM is the Virtual Business Centre which allows users to teleport from SL to other virtual world. It is run by an OpenSim server which enables an avatar to move from one virtual world to another. This is first and revolutionary technique to move beyond the boundary between different virtual worlds 7.

Manpower Inc.: The organizer is one of the most successful virtual employment events in Second Life, the company aims to help people understand and realize hiring and job-seeking in the world of virtual work. In addition, job seekers, employers and entrepreneurs can join the

6 7

Source: http://www.electricsheepcompany.com/about/ Source: http://www.ibm.com/3dworlds/businesscenter/us/en/ 73

special expert panel to learn and explore the possibilities of virtual work, also to discuss virtual team collaboration and cultural issues in SL. There is virtual orientation session for guiding new comers to realise recruitment in virtual and physical world 8.

To conclude this NVP model, this is rather an innovative business model in SL and so the characteristics of the model tend to more specific and customer focus. For example, Manpower Inc. and Electric Sheep Company have to tailor the service to meet various needs of users in-world, thus personal focus and feedback are significant to the model adopters. In addition, interactivity and immersion are also the other considerations for SL companies to design interface and provide avatars to interact and record the behaviours and opinions of users at site.

5.1.3

Physicalization of Virtual Products or Services (Virtual to Physical, V2P)

According to the findings, 24 out of 99, about 24% of organizations from the sample chose to further develop their business strategy and integrate with virtual business into the real world. It is noted that this unique business model and application has to be combined with either the Physical to Virtual or New Virtual Products/ Services. The model is still in the phase of exploration and experiment, thus only a small proportion of organizations adopted it. The following sections manifest how firms use and develop the model in Second Life.

1-800-flowers.com: 1800 Flowers created a successful virtual event, namely 1-800-Flowers Ultimate Virtual Bouquet Contest, in Second Life in 2007. All SL avatars were welcome to join the
8

Source: http://www.manpower.com/press/secondlife.cfm?mode=secondlife 74

competition for design and creation of their own bouquet, all virtual pieces of participants would be exhibited in its virtual gallery in the showroom, judges opinions and the virtual public preference concluded the champion of the contest. The winner was even eligible to record the production of virtual bouquet and his peculiar story which would be shown in RL Times Square in New York 9.

Intel: Intel Software Network is a remarkably innovative product in Second Life, in this virtual network platform not only provide virtual trainings for employees, meet-the-experts for staff and customers, also a space for developers to use SL Linden Scripting Language (LSL) to create computer programme for robots. The LSL is exclusive to Second Life and Intel experts cooperate and collaborate with developers for innovation developments from all over the world. A very famous event of Braniac Warbots contest was held in SL in which developers write scripts and command to build robots that compete. This kind of creative competition and events facilitate Intel engineers and developers to meet and discuss community resources from virtual world and they can take advantage of the cooperative outcome to refine the real world development in computer services 10.

Iwantoneofthose.com: This virtual gadget and gift store in Second Life allows avatars to purchase products in the store, but the real product is delivered to your door in the real Life. The direction of the model is from Virtual to Physical. This is one of classic example that displays virtualization of product list from the real world, avatars can pre-shop and the company can study the buying behaviours and refine the product list in the real world.

9 10

Source: http://blog.1800flowers.com/secondlife/ Source: http://softwarecommunity.intel.com/articles/eng/1283.htm 75

In conclusion of V2P model, intuitive cues and avoidance of non-intuitive cues are two important factors to direct and guide SL users to purchase a product from in-world and receive it in the real world. If the guidance lacks explicitness, it may distract users from acting the expected behaviours such as purchase act and proper response. Similarly, feedback would be logical to explain the understanding between the service providers and recipients, the gap can be overcome through clear communication and, give and receive feedback.

5.2

Statistical Results

Table 5a illustrates the factor loadings and solutions after varimax rotation for characteristics of virtual worlds (VW), elements of Media Richness Theory (MRT) and Task Closure Theory (TCT). The first factor was labelled as popularity as it embraced network effects and social presence, that both leverage to reach a popular effect on attracting more users. The former represents the power of a mature network lead to the further growth of the network which creates awareness of the network and the community; the latter shows a certain number of participants are required to perform a task in SL. The second factor was then labelled as direct responses as it entailed personal focus, immersion, feedback and virtual availability. All these incorporated elements commonly explain the ability of SL sites to provide interfaces or representatives to receive views, opinions and feedback directly from users and to take relevant responses in a timely manner. The third factor was decided to label as guiding assists though it encompassed interactivity, intuitive cues and avoid non-intuitive cues. It is because all related designs aim to provide a guidance and direction to train users to accomplish certain tasks such as purchasing item or service, interact in events or
76

activities. The final factor was still the original one, task closure, which is the unique factor to demonstrate the task is started and finished within SL. In addition, the Cronbach alphas were presented in Table 5.2. Based on the result, the reliability of factor direct responses was relatively low but tolerable, while that of popularity and guiding assists were high, 0.85 and 0.66 respectively.

Table 5.1: Factor solutions and Loadings of elements of VW features, MRT and TCT Measures Network Effect Social Presence Personal Focus Immersion Feedback Virtual Availability Interactivity Avoid Non-intuitive Cue Intuitive Cue Task Closure F1 0.93 0.91 -0.08 0.14 -0.02 0.10 -0.04 0.08 0.48 0.02 F2 0.11 -0.01 0.80 0.79 0.51 0.50 0.07 0.14 0.06 0.05 F3 -0.02 0.09 0.20 -0.03 0.01 0.14 0.83 0.79 0.53 0.01 F4 -0.03 0.11 0.08 0.17 -0.43 -0.21 0.01 0.05 -0.19 0.89 65.62% Note: Loading over 99 was in bold. Variance

77

Table 5.2: Reliability Analysis of Popularity, Direct Responses, Guiding assists & Task Closure Factors 1. Popularity 1. Direct Responses 2. Guiding assists 4. Task Closure Cronbach alphas 0.85 0.57 0.66 1

In Table 5.3, it shows the intercorrelations among various variables. In terms of popularity and direct responses, they were both positive and correlated significantly to P2V. With respect to the direct responses and guiding assists, they were negative and related significantly to NVP. In terms of task closure, it was negative and significantly related to V2P. In addition, the intercorrelations between P2V, NVP and V2P were found to be valuable. The effect of model of P2V on NVP was negative and significant, while that of P2V on V2P was positive and significant. In terms of NVP, it was negative and related significantly to V2P.

78

Table 5.3: Means, Standard Deviations and Intercorrelations

M 1. P2V
2. NVP 3. V2P 4. Task Closure 5. Popularity 6. Direct Responses 7. Guiding Assists 0.38 0.75 0.21 3.64 2.01 3.35 3.07

SD
0.49 0.44 0.41 0.98 0.87 0.69 0.57

1
1.00 -0.74** 0.25* -0.15 0.23* 0.25* 0.17

1.00 -0.38** 0.14 -0.20 -0.25* -0.20* 1.00 -0.64** 0.09 0.14 0.13 1.00 0.04 -0.05 -0.03 1.00 0.11 0.26* 1.00 0.25* 1.00

Note: N= 99; Coding: P2V, NVP and V2P: 0 = No, 1= Yes; * p < .05; ** p <.01

In Table 5.4, it manifests the beta coefficients of popularity, direct responses, guiding assists and task closure regressing against the models of P2V, NVP and V2P. With regard to the model of P2V, effects of popularity and direct responses were positive and statistically significant out of four variables. In terms of NVP, the only factor of direct responses was the merely significant but negative. With respect to the model of V2P, task closure was the only one which was statistically significant but negative too. Nevertheless, according to the beta coefficients, the effect of guiding assists was not significantly related to any proposed models.

79

Table 5.4: Regression of P2V, NVP and V2P against Popularity, Direct Responses, Guiding assists and Task Closure Predictors Popularity Direct Responses Guiding assists Task Closure F-value P2V 0.19* 0.21* 0.07 -0.15 3.53*** NVP -0.15 -0.20* -0.11 0.13 3.27** V2P 0.09 0.08 0.06 -0.64*** 18.25***

* p < .07; * p < .05; ** p <.01; *** p < .001

5.2.1

Analysis of the Statistical Results

The findings illustrate that popularity and direct responses positively influenced the model of P2V. This can be considered as consistent with the assumption of H1. In particular, popularity entails network effects and social presence respectively. Network effects display the effectiveness of firms on harnessing the SL platform to build a network and attract members to join in order to create a virtual community. Social presence functions in the same way to attract more participants by offering social events and activities for a large number of users such as parties, competition in SL. These two factors combined as popularity to support the model of P2V as this model is virtualization of physical products, that there is higher possibility for the market to recognise the products existed in the real world. When the avatars discover the familiar products in SL, it is easier for them to recall the information of that product and this memory facilitates to efficiently understand the potential usage of the product as well as
80

to share views with others on the common focus (Cagnina & Poian, 2007). This effect in turn leverages to achieve a critical mass of number of participants in order to promote the virtual products of P2V.

On the other hand, the factor direct responses encompasses personal focus, virtual availability, feedback and immersion. This is also consistent with H2. First, personal focus displays the availability of representative or interface to provide customized focus and response to users with respect to their request and need. Second, virtual availability shows the efficiency of the SL companies record the request and needs from the users, it is important for firms to deliver service in a timely manner. Third, feedback simply represents the all the messages of users should be received by the SL sites. Forth, immersion enables users to experience the more real in SL and in this sense users are feeling comfortable and willing to provide more feedback and personal viewpoints (Kim et al., 2008). These four factors constituted as direct responses that crucially support the effectiveness of P2V model in SL. Since, firms aim to leverage the P2V model to reach more customers for purchase opportunities and brand awareness, they need to address the design of how to deliver an effective and efficient direct response in order to achieve a large number of participants in SL.

In addition, the findings displays that direct responses negatively affected the model of NVP. As mentioned before, direct responses embraces personal focus, virtual availability, feedback and immersion. In contrast to the prediction of H3, these four factors are supposed to be important to the all the proposed business models in SL, however the result was surprisingly in opposition to the assumption. The possible explanations might be the development of virtual world is still in a nascent stage and the platform of SL is extremely new to traditional online websites, though companies are in
81

an attempt to explore the potentiality and how realistic this new platform can incorporate with. Thus, in the process of innovating a product or service, the company would be more likely to employ the principles of simple and direct messages for the design. This messages of the design should be intuitively perceived by the users and users can instantly understand the operation of the product or service. For example, American Cancer Society introduced a virtual activity namely Relay for Life, it is an innovative fundraising event in which participants are able to easily notice the objective of the event and so they can directly understand the objective of the event on raising funds and react accordingly to buy the virtual items or services.

In this regard, the effects of direct responses might be not that salient on helping users understand what to perform and react in response to the NVP. In short, the product or service design of NVP itself is intrinsically simple and intuitive, initially inappropriate direct responses may hinder the participants from seeing the central meaning of it or even annoy the users (Nielsen, 2000). Compared with P2V, though this model is to virtualize the existing products from the real world, there is a variety of types of P2V products or services in SL. To some extent, it is harder to follow all the meaning of the products or services of P2V model, even users probably understand partially the idea with impressions of the product in the real world. Possibly, users are not reluctant to accept the product but not immediately to understand how to use it. Thus, the availability of direct responses could facilitate the process of P2V products or services.

To illustrate more, one obvious finding manifests task closure was significant but it is negatively related the model of V2P. This perhaps partially explains the assumption of H4. Task closure is directly extracted from the TCT which is the main focus of the
82

theory, it simply explains its importance of starting and finishing the task within the same platform, SL. It is not surprising to obtain this kind and is expected by the literature and the nature of the V2P model. V2P model suggests that physicalization of virtual products or services into the real world, which is the function of the model. On the other aspect, task closure of TCT mainly proposes the SL firms to introduce the virtual products and services in-world as well as to accomplish the task on the same space such as transaction, exchange of information, so this factor contradicts the implementation of the V2P model. In essence, V2P model intrinsically does not conform to the notion of task closure. Therefore, the result exactly proved this sensible but negative relation between these two perspectives.

To supplement the integrity of the analysis, it is unfair to ignore the effect of guiding assists though there was no significant result with regard to this variable. Guiding assists entail interactivity, intuitive cues and avoid non-intuitive cues. Although that effect cannot be proved according to this sample, this research endeavours to select the representative amount of organizations in SL, it is not possible to collect all the information of every business entity in-world by the limitations of time and resources. As the exploration and related literature virtual world are currently limited. Based on the MRT and TCT, it is logical to adopt the guiding assists for the enhanced performance of the online business models, and it could be in turn applied to the virtual business models. Perhaps, the development of the virtual world business is still an early stage, it is too early to assert and assume there is no relation between guiding assist and virtual business models. At the moment, this situation is said to be statistically not significant and could not explain the relationship based on this result of the specific sample.

83

5.2.2

Trends of adopting a business model in SL

It is evident that not every organization is using one single business model and application in SL, only a number of companies adopt one model but this situation is in a small proportion comparatively. In general, most of the firms from the sample are adopting more than one business models and applications in SL. More specifically, an interesting finding shows the tendency of how firm behaviours adopt certain business model in SL. This trend can further account for the selection of business models and application, and it can imply rationale behind the decision. According to the Table 5.3 on intercorrelations between models of P2V, NVP and V2P, P2V was significantly related to V2P, while negatively related to NVP. Meanwhile, NVP with significance was negatively related to V2P too. SL companies adopting P2V would consider adopting V2P model too. It could be because virtualization of existing physical products or services (P2V) is more convenient, as firms require not much resource to develop and create the product except need to consider the business strategy and technological technique. The planning or success of that virtual product or service could lead to reintroduce it to the real world in a redefined and enhanced approach (Salomon, 2007). However, developing a complete exclusive new virtual products require substantial investment in developing the product and targeting the market. This is most likely to dilute the position of the original virtual products developed from the real world; additionally, it would confuse users to identify the main focus of the site and so as to ruin the potentiality of the business strategies and opportunities (Salomon, 2007). Moreover, V2P model requires an existing successful approach in SL, and companies take advantage and companies plan to leverage the success to extend the successful products or services to the real world. There is no conflict between P2V and V2P models, companies can adopt both models as long as their strategies allows to manage the operation properly and smoothly at the same time.
84

For the companies adopting NVP models tend not to V2P, the possible reasons might be introduction of new virtual products or services requires numerous resources to research, design, develop and test the product in line with innovative knowledge and skills. This model needs a firm greatly focused on the effect and performance primarily in the virtual world, then it could be considered to physicalize that product or service when it obtained a greater level of success as well as the approach could be profitable to bring it to the real world. Such as IBM and Cisco are the technology giants, they both already possess substantial resources and support from all over the world. For smaller companies and organizations, it is possible that their resources are inadequate to develop a new virtual product and introduce it to the real world at the same time, therefore they rather mainly concentrate on the NVP in the initial stage and examine the effectiveness of the model in-world (Hargrove, 2007).

In fact, the platform of virtual world is completely a new market, companies can focus to develop the NVP in order to achieve the profitable and successful business model in-world. Possibly, there is no immediate need for them to physicalize the virtual product from SL. In the long run, it is deduced that V2P would be another important development for companies in SL or even in virtual world, as the integration of virtual and physical business plan and strategy proceed and influence the future business models at the same time. This development probably would dominate in the marketplace of advanced technology, as long as the public are well-trained as experienced users with relevant skills to harness the platform of virtual world (Arakji & Lang, 2008).

In compliance with inductive analysis and statistical analysis, this research is contributive to suggest that the primary adopted business model is the New Virtual Products (NVP) model; the secondary is the Virtualization of Real Products (P2V)
85

model and the least is the Physicalization of Virtual Products (V2P) model. Although P2V is considered as prone to the easy and convenient business model that only requires the ideas and design of the existing products in the real world, the outcome suggested that P2V was not the most popular business model in SL. It is possible that the convenient aspect is restricted to the innovation and development of a virtual product, but the implementation and operation of the virtual products could be difficult in line with the incorporation of original design and operation of physical world into the platform of virtual world.

Unlike the P2V model, the simple and direct principle of NVP model proposes that more firms tend to design intuitive products with comprehensible features for users to interpret in SL. SL is a new marketplace of virtual world, companies are looking forward to test the level of user acceptance towards these new virtual products in-world. Normally, the virtual products have to be designed as simple as possible, especially for new virtual products. It is important to follow this principle in the experimental stage in SL, so apparently NVP model was more adopted by SL firms than P2V. Conceivably, V2P model is the least adopted in SL as most of companies are still exploring and experimenting the business potentialities on this new virtual platform, it is risky to adopt the V2P model without an in-depth research and understanding on the virtual world in the first place.

86

Chapter 6: Conclusion

In this dissertation, it is argued that virtual worlds and the Internet would become the enabling technologies and development for the future of the Web-based and Internet business models and applications, practices and innovations. Simply, it is viewed as virtual business (or v-Business, v-Commerce). The dissertation attempts to explore the possible business models and application adopted by firms and organizations in virtual worlds. However, there is no practical theoretical framework to evaluate various business models and applications in virtual worlds, due to the novelty of virtual business and virtual world development. By attempting to investigate theories of traditional business models and applications, this dissertation takes the initiatives to provide a practical insight into the virtual business models and applications.

Although there are numerous virtual worlds, the most appropriate platform for developing this framework is Second Life. SL has 15 millions of registered members that entail a variety of organizations who have established presences and storefronts or facilities. Based on the research on virtual worlds and relevant literature, the business models and applications in SL can be classified as Virtualization of Real Products; New Virtual Products or Services and Physicalization of Virtual Products or Services. In the light of research on virtual worlds, the major characteristics of VW embrace Interactivity, Immersion and Network Effects. After investigating the Media Richness Theory and Task Closure Theory, some elements generalized from these theories form some theoretical-based indicators to evaluate the 99 selected companies in Second Life. These theories suggest several significant factors which include Feedback Capability, Intuitive Cues, Avoid Overburdened Non-intuitive Cues, Personal Focus, Task Closure,
87

Virtual Availability and Social Presence.

With the applications of these theories and VW features, this dissertation aims to analyze the relationship between SL business models and those relevant factors. First, the adoption of proposed business models and applications in SL is identified. The most adopted business models is the New Virtual Products (NVP) model; the secondary is the Virtualization of Real Products (P2V) model and the least is the Physicalization of Virtual Products (V2P) model.

Second, the trend of adopting a business model in SL is then examined. For example, SL companies adopting P2V would consider adopting V2P model too, so they could adopt both models simultaneously. However, few companies adopt P2V and NVP at the same time as they need to consider the resources and marketing issues. Additionally, companies adopting the NVP model that is unlikely to use V2P model, possibly because this model needs a firm greatly focused on the effect and performance primarily in the virtual world, then it could be considered to physicalize that product or service when it obtained a greater level of success as well as the approach could be profitable to bring it to the real world.

Third, the dissertation attempts to illustrate the relations between proposed business models in SL and ten factors aforementioned before. For the P2V model, the findings indicate SL firms that adopt this model are more likely to focus on network effects, social presence, personal focus, virtual availability, feedback and immersion. For the NVP mode, the findings indicate SL firms that adopt this model should not firstly focus on personal focus, virtual availability, feedback and immersion. For the V2P model, the findings indicate SL firms that adopt this model are most likely to neglect the
88

consideration of task closure.

Based on these interesting findings, the findings generalize the firm behaviours and adoption tendency of proposed business model and applications in SL as well as relations between peculiar features and the business models. However, the dissertation has accomplished the exploration and research to investigate the general phenomenon and initial data collection within the limited timeframe and resources, a large scale of research should be conducted to obtain more accurate and in-depth result in the future.

6.1

Limitations and Future Research

Due to the novelty of the virtual world research, there is limited theoretical framework to analyze the business models and applications in virtual worlds. Based on indirect literature of traditional e-business studies and research on virtual worlds, only an exploratory analysis is conducted on examining the adoption trends of business models and applications and their relations with VW features and elements of MRT and TCT.

In addition, it is not possible to collect revenue reports of the companies in SL, as they indeed carry out the experiment of the business models and they are exploring in expectation. Thus, firms are not willing to disclose this sensitive report around their rivals. Therefore, it is difficult to assess the performance of the business models in SL based on value of tangible profits. In addition, SL does not provide an accurate visitor counter to record the frequency of visits and number of avatars in specific locations in-world. In fact, there is very inaccurate visitor counter in SL, which is Linden Traffic.
89

However, it is reported from the official Second Life forum 11 that the counter is extremely inaccurate and so the collected data will be invalid. It is because some firms or land owners will pay avatars to join and boost the traffic rate, and the traffic rate only counts for the frequency of visits on specific regions in SL but not particularly for any firms, unless the entire land or island is owned by that firms or brands. This can indirectly manifest performance of the firms on their marketing strategies, so it is not valid to adopt the traffic rate counter to interpret the performance of the business models and applications.

6.2

Future Research

In search of a more accurate measurement to assess the performance of the business models and applications in SL, the leading virtual world researcher, Nic Mitham proposes a number of metrics for the assessment (Mitham, 2008). He suggests VW marketers have to consider the following key areas:

audiences acquisition / retention / churn engagement community customer service ROI

He has not precisely introduced the practical content of how to measure and collect the data with respect to the above metrics. However, a workshop will be arranged by him to discuss the practical methods of conducting them and he will cooperate with other
11

Source: http://forums.secondlife.com/ Note: you can only read the content as a registered member. 90

researchers who are interested in this field. The proposed workshop will be held in the event of Virtual Worlds Forum in London in 2008 12. After their discussion, the outcome and suggested methods are contributive to aid the research of this dissertation, in order to further investigate the performance of the proposed business models and applications in SL.

12

Source: http://virtualworldsforum.com/workshops/on/establishing_metrics/ 91

Bibliography:
Afuah, A. and Tucci, C.L. (2001) Internet Business Models and Strategies: Text and Cases. The McGraw-Hill, Boston. Alves, T.R. and Roque, L. (2005) Using Value Nets to Map Emerging Business Models in Massively Multiplayer Online Games. Proceedings of the Ninth Pacific Asia Conference on Information Systems, PACIS 2005, Bangkok, Thailand, July 2005. Amit, R. & Zott C. (2001) Value Creation in E-business, Strategic Management Journal, 22(6/7), pp. 493-520. Arakji, R.Y. and Lang K.R. (2008) Avatar Business Value Analysis: A Method for the Evaluation of Business Value Creation In Virtual Commerce. Journal of Economic Commerce Research. Note: The final version of this paper is forthcoming in the Journal in November Atlas, S.A. (2008) Inductive Metanomics: Economic Experiments in Virtual Worlds. Journal of Virtual Worlds Research, Virtual Worlds Research: Past, Present & Future Vol. 1 (1) Au, W. J. (2001) Playing God. Lingua Franca: The Review of Academic Life 11(7) 12-13. Babbie, E. R. (2007) Adventures in social research : data analysis using SPSS 14.0 and 15.0 for Windows. 6th ed. Thousand Oaks [Calif.] ; London : Pine Forge Press Balkin, J. M. & Noveck, B. S. (Ed), (2006) The State Of Play: Law, Games, And Virtual Worlds. New York University Press, New York. Barnes, S. (2007) Virtual Worlds as a Medium for Advertising. The DATABASE for Advances in Information Systems, Vol. 38, No. 4:45-55, 2007. Barney, J. B. (1991) Firm resources and sustained competitive advantage. Journal of Management, 17, pp.99-120. Bartle, R. A. (2004) Designing virtual worlds. Indianapolis, IN: New Riders Publishing.

92

Bartle, R. A. (2006) Why Governments arent Gods and Gods arent Governments. First Monday. Retrieved 10 September, 2008 from http://firstmonday.org/issues/special11_9/bartle/. Bell, M. W. (2008) Toward a Definition of Virtual Worlds. Journal of Virtual Worlds Research, Virtual Worlds Research: Past, Present & Future Vol. 1 (1) Beller, M. (2007) The Coming Second Life Business Cycle, Retrieved 23 August, 2008 from http://www.mises.org/story/2640 Bers, M. U. and Chau, C. (2006) Fostering civic engagement by building a virtual city. Journal of Computer-Mediated Communications, 11, 748-770 Blizzard. (2008). World of Warcraft Reaches New Milestone: 10 Million Subscribers. Blizzard.com. Retrieved 10 September, 2008 from: http://www.blizzard.com/press/080122.shtml. Book, B. (2006) Virtual worlds review. Social Science Research Network. Boyd, D.M., and Ellison, N.B. (2007) Social network sites: Definition, history, and scholarship. Journal of Computer-Mediated Communication, 13(1), article 11. Retrieved 10 September, 2008 from: http://jcmc.indiana.edu/vol13/issue1/boyd.ellison.html Burdea, G. C. and Coiffet, P. (2003) Virtual Reality Technology. Hoboken, NJ: John Wiley & Sons. Burke, K.; Aytes, K. and Chidambaram, L. (2001) Media effects on the development of cohesion and process satisfaction in computer-supported workgroups: An analysis of results from two longitudinal studies. Information Technology and People, Vol. 14(2), pp.122-142. Cagnina, M. R. and Poian, M., (2007) How to Compete in the Metaverse: The Business Models in Second Life. University of Udine Economics Working Paper No. 01 Carnevale, D. (2007) To save a Second Life. The Wired Campus. Retrieved 10 September, 2008 from http://chronicle.com/wiredcampus/index.php?id=2541 Castronova, E. (2002) On Virtual Economies. CESifo Working Paper No. 752. Category
93

9: Industrial Organization (July). 1-39. from http://ssrn.com/abstract_id=338500.

Retrieved

10

September,

2008,

Castronova, E. (2004) Synthetic worlds. Chicago: The University of Chicago Press. Castronova, E. (2008) Synthetic Worlds as Experimental Instruments. Video Game Theory Reader II. Routledge. Spring. Chesbrough, H.W. (2003) Open Innovation: The New Imperative for Creating and Profiting from Technology, Harvard Business School Press, Boston, Massachusetts. Chesbrough, H.W. (2006) Open Business Models. How to Thrive in the Innovation Landscape Harvard Business School Press, Boston, Massachusetts. Chesbrough, H.W. (2007) Business Model Innovation: Its Not Just about Technology Anymore. Strategy & Leadership, 35(6), pp. 12-17. Child, D. (2006) The essentials of factor analysis. 3rd Ed. London: Continuum Church, J.; Gandal, N. and Krause, D. (2002) Indirect Network Effects and Adoption Externalities. Discussion Paper n. 3738, CEPR - Centre for Economic Policy Research, London. Coda, V. (1988) Lorientamento strategico dellimpresa, Utet, Torino. Corchuelo, R.; Arjona, J.L. and Ruiz, A. (2002) Automatic Extraction of Semantically-Meaningful Information from the Web. Upgrade, Vol .3 (3), pp. 44-51 Corchuelo, R.; Arjona, J.L.; Ruiz, A. (2002) Automatic Extraction Semantically-Meaningful Information from the Web, Upgrade, 3(3), pp. 44-51. of

Cova, B. and Car, A., (2006) How to Facilitate Immersion in a Consumption Experience: Appropriation Operations and Service Elements. Journal of Consumer Behaviour, 15, pp. 4-14. Daft, R. L. and Lengel, R. H. (1986) Organizational information requirements, media richness, and structural design. Management Science, 32(5), pp.554-571 Daft, R. L.; Lengel, R. H. and Trevino, L. K. (1987) Message equivocality, media
94

selection, and manager performance: Implications for information systems. MIS Quarterly, Vol .11(3), pp.355- 366. Davis, A. (2006) Theories used in IS research: Media richness theory. Retrieved 8 August, 2008 from http://www.fsc.yorku.ca/york/istheory/wiki/index.php/Media_richness_theory Elliott, J. and Kruck, S.E. (2008) Help Somebody Robbed my Second Life Avatar! Journal of Virtual Worlds Research, Virtual Worlds Research: Past, Present & Future Vol. 1 (1) El-Shinnawy, M. and Markus, M. L. (1997) The poverty of media richness theory: Explaining people's choice of electronic mail vs. voice mail. International Journal of Human Computer Studies, Vol. 46(4), pp.443-467. Evans, P. B. and Wurster, T. S. (1997) Strategy and the economics of information. Harvard Business Review, pp.71-82. Evans, P.B . and Wurster, T.S. (1997) Strategy and the New Economics of Information. Harvard Business Review, Sep-Oct, 75 (5), pp. 70-82. Evans, P.B . and Wurster, T.S. (2000) Blown to Bits. How the New Economics of Information Transforms Strategy, Harvard Business School Press, Boston Massachusetts. Evans, P.B., Wurster, T.S. (1997) Strategy and the New Economics of Information, Harvard Business Review, Sep-Oct, 75 (5), pp. 70-82. Foster, A. L. (2007) Virtual worlds as social-science labs. Chronicle of Higher Education, 53(44), A25. Friedman, T. (2005) The world is flat: A brief history of the twenty-first century. New York, NY: Farrar, Straus, and Giroux. Galbraith, J. (1977) Organization design. Reading, MA: Addison-Wesley Gordijn, J. (2002) Value -based Requirements Engineering - Exploring Innovative e-Commerce Ideas, Doctoral Dissertation. Amsterdam, NL, Vrije Universiteit.
95

Gordijn, J. and Akkermans, J.M. (2001a) A Conceptual Value Modeling Approach for e-Business Development. Proceedings of K-CAP 2001, First International Conference on Knowledge Capture, Workshop Knowledge in e-Business, pp. 29-36. Gordijn, J. and Akkermans, J.M. (2001b) Ontology-Based Operators for e-Business Model De- and Re-construction. Proceedings of the First International Conference on Knowledge Capture, October 21-23, Canada, pp. 60-67. Gordijn, J. and Akkermans, J.M. (2001c) Designing and Evaluating E-Business Models. IEEE Intelligent Systems, 16(4), pp.11-17. Gordijn, J.; Osterwalder, A. and Pigneur, Y. (2005) Comparing two Business Model Ontologies for Designing e-Business Models and Value Constellations. Proceedings 18th Bled eConference eIntegration in Action. Bled, Slovenia. Gwet, K. (2001) Statistical Tables for Inter-Rater Agreement Tables Providing Exact Critical Values For Testing Statistical Significance. America: Stataxis, Retrieved 18 September, 2008 from http://www.stataxis.com/6statistical_tables.pdf Hamel, G. (2000) Leading the revolution. Boston, Harvard Business School Press. Hargrove, L. (2007) Innovation and Emerging Collaboration Technologies at IBM. Ontario Research & Education Summit 2007. IBM Corporation. Harkin, F. (2007) In another life. Financial Times Weekend, 7. Retrieved 10 September, 2008 from http://search.ft.com/ftArticle?queryText=%22In+another+life%22&y=0&aje=true &x=0&id=070519001059&ct=0&nclick_check=1 Helmer, J. (2008) Second Life and Virtual Worlds. Learning Life Limited. Published October 2007 Hemp, P. (2006a) Are you ready for e-tailing 2.0? Harvard Business Review, DOI: F0610F . Hemp, P. (2006b) Avatar-Based Marketing. Harvard Business Review, Vol. 84, No. 6:48-57, 2
96

Herman, L.; Horwitzk, J.; Kent, S. and Miller, S.(2008) The History of Video Games. Gamespot. Retrieved 10 September, 2008, from http://www.gamespot.com/gamespot/features/video/hov/ Hillis, S. (2007) Companies shifting virtual world strategies. Reuters Newswire. Retrieved 8 September, 2008 from http://secondlife.reuters.com/stories/2007/10/11/companies-shifting-virtual-worldst rategies/ Jahng, J.; Jain, H. K. and Ramamurthy, K. (2006) An empirical study of the impact of product characteristics and electronic commerce interface richness on consumer attitude and purchase intentions. Systems, Man and Cybernetics, Part A, IEEE Transactions on, Vol. 36(6), pp.1185-1201. Jahng, J.; Jain, H. K. and Ramamurthy, K. (2007) Effects of interaction richness on consumer attitudes and behavioral intentions in e-commerce: Some experimental results. European Journal of Information Systems, Vol. 16(3), pp.254-269. Jana, R. (2006) Starwood hotels explore second life first. BusinessWeek. Retrieved 8 September, 2008 from http://www.businessweek.com/innovate/content/aug2006/id20060823_925270.htm Jana, R. (2007) American apparel's virtual clothes. BusinessWeek. Retrieved 8 September, 2008 from http://www.businessweek.com/innovate/content/jun2006/id20060627_217800.htm Jansz, J. and. Martens, L. (2005) Gaming at a LAN event: the social context of playing video games. New Media & Society 7(3) 333-355. Jaynes, C.; Seales, W.; Calvert, K.; Fei, Z. and Griffioen, J. (2003) The Metaverse A Networked Collection of Inexpensive, Self-Configuring, Immersive Environments. ACM International Conference Proceeding Series, Vol. 39. Johnson, R.A. and Middleson, J.M. (2008) Accounting for Second Life. Journal of Accountancy. June 2008 Kahai. S.S.; Carroll, E. and Jestice, R. (2007) Team Collaboration in Virtual Worlds. The
97

DATA BASE for Advances in Information Systems. Vol. 38, Number 4, November 2007 Kaplan, S. and Sawhney, M. (2000) E-hubs: The New B2B Marketplaces. Harvard Business Review, May June, pp. 97-103. Karahanna, E. and Moez, L. (2000) E-mail and v-mail usage: Generalizing across technologies. Journal of Organizational Computing and Electronic Commerce, Vol .10(1), pp.49-66. Kelly, K. (1994). Will Wright: The Mayor of SimCity. Wired (January). Kim, H. M.; Lyons, K. and Cunningham, M.A. (2008) Towards a Theoretically-Grounded Framework for Evaluating Immersive Business Models and Applications: Analysis of Ventures in Second Life. Journal of Virtual Worlds Research, Vol. 1 (1) Kirkpatrick, D. (2007) Its not a game. CNN Money, 155(2), 56. Retrieved 10 September, 2008 from http://money.cnn.com/magazines/fortune/fortune_archive/2007/02/05/8399120/ Klein, L. (2002) Creating Virtual Experiences in Computer-Mediated Environments. Review of Marketing Science Working Papers, n. 1. Kock, N. (2008) E-Collaboration and E-Commerce In Virtual Worlds: The Potential of Second Life and World of Warcraft. International Journal of e-Collaboration, 4(3), pp. 1-13 Koster, R. (2004) A virtual world by any other name? [Msg 21] Retrieved 10 September, 2008 from Message posted to http://terranova.blogs.com/terra_nova/2004/06/a_virtual_world.html Krger, C.C.; van der Beek, K. and Swatman, P.M.C. (2004) New and Emerging Business Models for Online News: a survey of 10 European countries. Proceedings Conference, Bled 2004 17th Bled International Electronic Commerce Conference, Bled, Slovenia, June 21-23. Kuk, G. (2006) Strategic Interaction and Knowledge Sharing in the KDE Developer Mailing List. Management Science, Vol. 52 (7) pp. 10311042
98

Kuk, G. and Yeung, F.T. (2002) Interactivity in E-Commerce. Quarterly Journal of Electronic Commerce. Vol. 3 (3). pp. 223-234 Lambert, S.C. (2006) Do We Need a Real Taxonomy of e-Business Models? School of Commerce Research Paper Series, 06-06. LaPlante, A. (2007) Second Life opens for business. Information Week, Wired February 24, 2007. Retrieved 10 September, 2008 from http://www.informationweek.com/industries/showArticle.jhtml?articleID=1970083 42 Lastowka, F. G. and Hunter, D. (2006) Virtual Worlds: A Primer. The State of Play: Law, Games, and Virtual Worlds. Ed. Jack M. Balkin. New York: New York University Press. Lazonick, W. (2005) Evolution of the New Economy Business Model. Business History Conference, Retrieved 8 August, 2008 from http://www.thebhc.org/publications/BEHonline/2005/lazonick.pdf Lederman, L. (2007) Stranger Than Fiction": Taxing Virtual Worlds. New York University Law Review 82(6) 1620-1672. Liebowitz, S.J. and Margolis, S.E. (1994) Network Externality: An Uncommon Tragedy. Journal of Economic Perspectives, 8(2), pp. 133-150. Lindenlab.com (2008) About The Company. Retrieved 10 September, 2008 from http://lindenlab.com/about Linder, J. and Cantrell, S. (2000) Changing Business Models: Surveying the Landscape, Accenture Institute for Strategic Change. Magretta, J. (2002) Why business models matter. Harvard Business Review, May. pp 86-92. Mahadevan, B. (2000) Business Models for Internet based E-Commerce: An Anatomy. California Management Review, 42(4), Summer, pp. 55-69. Markus, M. L. (1987) Towards a 'critical mass' theory of interactive media universal
99

access, interdependence, and diffusion. Communication Research, Vol. 14(5), pp. 491-511. Mennecke, B. E.; Terando, W. D.; Janvrin, D. J. and Dilla, W. N. (2007) Its just a game, or is it? Real money, real income, and real taxes in virtual worlds. Communications of the Association for Information Systems, 20, 134-141. Mennecke, B., E.M. Roche, D.A. Bray, B. Konsynski; J. Lester, M. Rowe, and A.M. (2007) Townsend, Second Life and Other Virtual Worlds: a Roadmap for Research, 28th International Conference on Information Systems (ICIS) Methlie, L.B. and Pedersen, P.E . (2007) Business model choices for value creation of mobile services. Info - The journal of policy, regulation and strategy for telecommunications, 9(5), pp. 70-85. Mitham, N. (2008) KZero, Research and case studies in virtual worlds. Retrieved 8 September, 2008 from http://www.kzero.co.uk/blog/?page_id=2093 Monahan, C.; Harvey, K., and Ullberg, L. (2007) BP tries Second Life for employee ethics and compliance. Second Life Education Workshop, August 24-26, 2007, 93-95. Murray, S. (2005) High Art/Low Life: The Art of Playing Grand Theft Auto. PAJ: A Journal of Performance & Art 27(80) 91-98. Nielsen, J. (2000) Flash: 99% bad. Retrieved from http://www.useit.com/alterbox/20001029.html 20 September, 2008

Nielsen//NetRatings (2008) Global Index Chart. Retrieved 8 August, 2008 from http://www.nielsen-netratings.com/resources.jsp?section=pr_netv&nav=1 Nissim, B. (2007) Virtual World Transition: What SL Business Model Works Best? Retrieved 8 August, 2008 from http://www.marketingprofs.com. Normann, R. (1977) Management for Growth, John Wiley and Sons, Chichester. Nuttal, C. (2007) It was science fiction - now it's just normal. Financial Times, 2, FT Report Digital Business. Retrieved 10 September, 2008 from http://us.ft.com/ftgateway/superpage.ft?news_id=fto050920070646515402

100

OReilly, T. & Musser, J. (2006) Web 2.0 Principles and Best Practices. OReilly Media. OReilly, T. and Musser, J. (2006) Web 2.0 Principles and Best Practices. OReilly Media OECD, (2007) Participative Web: User-Created Content. OECD Report, Retrieved 8 August, 2008 from www.oecd.org/dataoecd/57/14/38393115.pdf Ondrejka, C. (2005) Escaping the Gilded Cage: User Created Content and Building the Metaverse, New York Law School Law Review, Vol. 49, No. 1. Ondrejka, C. (2006) Escaping the Gilded Cage: User-Created Content and Building the Metaverse. The State of Play: Law, Games, and Virtual Worlds. Ed. Jack M. Balkin. New York: New York University Press. Osterwalder, A. (2004) The Business Model Ontology - a proposition in a design science approach, Ph.D. thesis, University of Lausanne, cole des Hautes tudes Commerciales HEC: 173. Osterwalder, A. and Pigneur, Y. (2002) An e-Business Model Ontology for Modeling e-Business, 15th Bled Electronic Commerce Conference, e-Reality: Constructing the e-Economy, Bled, Slovenia, June 17-19. Parolini, C., (1999) The Value Net, John Wiley and Sons, Chichester. Parrish, J. (2006). Theories used in IS research: Task closure theory. Retrieved 8 August, 2008 from http://www.fsc.yorku.ca/york/istheory/wiki/index.php/Task_closure_theory Pateli, A. and Giaglis, G. (2003) A Framework for Understanding and Analysing eBusiness Models.16th Bled eCommerce eConference eTransformation, Bled, Slovenia, June 9 11. Paul, R; Stroulia, E. and Lyons, K. (2008) A Typology of Virtual Worlds: Historical Overview and Future Directions. Journal of Virtual Worlds Research, Virtual Worlds Research: Past, Present & Future Vol. 1 (1) Petrovic, O.; Kittl, C. and Teksten, R.D. (2001) Developing Business Models for
101

e-Business. Proceedings of the International Conference on Electronic Commerce 2001, Vienna, Austria, October 31 November 4. Phillips, A. (2008) Aspergers therapy hits Second Life. ABC News. Transcript available at http://abcnews.go.com/print?id=4133184 Porter, C. E. (2004) A Typology of Virtual Communities: A Multi-Disciplinary Foundation for Future Research. Journal of Computer-Mediated Communication. Vol.10 (1), Article 3. Porter, M. E. (1980) Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York. Porter, M. E. (1985) The Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York. Porter, M. E. (2008) The Five Competitive Forces that Shape Strategy. Harvard Business Review, (January) pp. 79-93. Pottruck, D.S. and Pierce, T. (2000) Click and Mortar: Passion-driven Growth in an Internet-driven World, Jossey Bass Inc. San Francisco. Prandelli, E. and Veron a, G. (2006) Marketing in rete. Oltre Internet, verso il nuovo marketing, McGraw-Hill, Milano Pyzdek, T. (2003) The Six Sigma Handbook, New York, McGraw-Hill. Rappa, M. (2001) Managing the digital enterprise - Business models on the Web. North Carolina State University. Retrieved 8 August, 2008 from http://digitalenterprise.org/models/models.html. Rappa, M. (2004) The Utility Business Model and the Future of Computing Services. IBM System Journal, 43(1), pp. 32-42. Rayport, J.F. and Jaworski, B.J. (2001) e-Commerce, McGraw-Hill, New York. Reliability. Psychological Bulletin, Vol. 86 (2). pp. 420-428 Reuters/Second Life, Second Life News Center, (2007) Adam Reuters: Gartner sees 80
102

% virtual world penetration by 2011. Retrieved 8 August, 2008 from http://secondlife.reuters.com/stories/2007/04/25/gartner-sees-80-virtual-world-pene tration-by-2011/ Rice, R. E.; Hart, P. J.; Torobin, J.; Shook, D.; Tyler, J. E. and Ruchinskas, J. (1992) Task analyzability, use of new media, and effectiveness: A multi-site exploration of media richness. Organization Science, 3(4), pp.475-500. Robertson, M.; Srensen, C. and Swan, J. (2001) Survival of the leanest: Intensive knowledge work and groupware adaptation. Information Technology and People, Vol . 14(4), pp.334-352. Salomon, M. (2007) Business in Second Life: an introduction. SMART INTERNET TECHNOLOGY CRC. Swinburne University of Technology Saunders, C. and Jones, J. (1992) Temporal sequences in information acquisition for decisionmaking: A focus on source and medium. Academy of Management Review, Vol. 15(1), pp. 29-46. Schalch, K. (2007) Virtual recruiting for real-world jobs. NPR. Retrieved 10 September, 2008 from http://www.npr.org/templates/story/story.php?storyId=13851345 Schenker, J.L. (2007) Battle for the Future of the Net, Business Week Online, 7/26/2007, pp. 16. Schenker, J.L. (2007) Battle for the Future of the Net. Business Week Online, 7/26/2007, pp.16 Second Life Blog (2008) Second Life Virtual World Expands 44% in Q2 (8th July, 2008). Retrieved 10 September, 2008 from http://blog.secondlife.com/2008/07/08/second-life-virtual-world-expands-35-in-q2/ Second Life Grid (2008) How Organizations Use the Platform. About Second Life. c http://secondlifegrid.net/about/how#ip Second Life.com (2008) What is Second Life? Secondlife.com. Retrieved 10 September, 2008 from http://secondlife.com/whatis/

103

Second Lifes Economic Statistics (2008) Economic Statistics. Retrieved 10 September, 2008 from http://secondlife.com/whatis/economy_stats.php Shafer, S.M.; Smith, H.J. and Linder, J.C. (2005) The Power of Business Models. Business Horizons, 48, pp. 199-207. Shapiro, C. and Varian, H. (1999) Information Rules: a Strategic Guide to the Network Economy, Harvard Business School Press, Boston, Massachusetts. Shrout, P.E. and Fleiss, J.L. (1979) Intraclass Correlations: Uses in Assessing Rater Shubar, A. and Lechner, U. (2004).The Public WLAN Market And Its Business Models An Empirical Study.17th Bled e-Commerce Conference, Bled, Slovenia. Sinha, R.; Hearst, M. and Ivory, M. (2001) Content or graphics? An empirical analysis of criteria for award-winning websites. Conference Proceedings: 7th Conference on Human factors and the Web Sitkin, S.; Sutcliffe, K. and Barios-Choplin (1992) A dual-capacity model of communication media choice in organizations. Communications Research, 18(4), pp.563-598. Song, S. and Lee, J. (2007) Key factors of heuristic evaluation for game design: towards massively multi-player online role-playing game. International Journal of HumanComputer Studies 65(8) 709-723. Stango, V. (2004) The Economics of Standards Wars. Review of Network Economics, 3(1), pp. 1-19. Stein, J. (2006) My so-called Second Life. Time, 168 (26), 76. Retrieved 10 September, 2008 from http://www.time.com/time/magazine/article/0,9171,1570827,00.html Straub, D. and Karahanna, E. (1998) Knowledge worker communications and recipient availability: Toward a task closure explanation of media choice. Organization Science, Vol. 9(2), pp.160-175. Strohm, S. (2007) Foundation with real money ventures into virtual world. New Yor k Times. Retrieved 8 September, 2008
104

from http://www.nytimes.com/2007/06/22/us/22virtual.html Tapscot,t D. and Williams A. (2006) Wikinomics. How Mass Collaboration Changes Everything, Penguin Books, New York. Tapscott, D.; Ticoll, D. and Lowi, A. (2000) Digital Capital Harnessing the Power of Business Webs. Harvard Business School Press, Boston. Tedeschi, B. (2007) Awaiting real sales from virtual shoppers. New York Times, E-commerce Report. Retrieved 18 September, 2008 from http://www.nytimes.com/2007/06/11/business/11ecom.html Timmers, P. (1998) Business Models for Electronic Markets. EM - Electronic Markets, 8(2), 07. Tomochi, M.; Murata, H. and Kono, M. (2005) A Consumer-Based Model of Competitive Diffusion: the Multiplicative Effects of Global and Local Network Externalities. Journal of Evolutionary Economics, 15(3), pp 273-295. US Pages, (2008) The definition of Fortune 500. USPages.com, Retrieved 11 September, 2008 from http://www.uspages.com/fortune500.htm Vargo, S. L. and Lusch, R. F. (2004) Evolving to a new dominant logic for marketing. Journal of Marketing, 69, pp.1-17. Varian, H. (2001) High-Technology Industries and Market Structure. Retrieved 8 August, 2008 from http://ideas.repec.org/a/fip/fedkpr/y2001p65-101.html. Varian, H.; Farrell, J. and Shapiro, C. (2004) The Economics of Information Technology. An Introduction, Cambridge University Press, Cambridge. Weill, P. and Vitale M.R. (2001) Place to Space: Migrating to e-Business Models, Harvard Business School Press, Boston. Whitehead, P. (2007). On a mission to second life. What are companies up to in there? Financial Times, 5. Retrieved 8 September, 2008 from http://www.paconsulting.com/news/about_pa/2007/On+a+mission+to+Second+Lif e.htm
105

Williams, D., Ducheneaut, N., Xiong, L., Zhang, Y., Yee, N., & Nickell, E. (2006) From tree house to barracks: The social life of guilds in World of Warcraft. Games and Culture, Vol.1 (4), pp. 338-361. Wilson, N. (2007) Why are Companies in Second Life? Second Life Research. 18 May, 2007. Retrieved 16 August, 2008 from http://www.metaversed.com/18-apr-2007/5-reasons-why-companies-are-streamingsecond-life Winter, D. (2008) Arcade Pong. from http://www.pongstory.com/arcade.htm Retrieved 10 September, 2008,

World Economic Forum, (2007) Annual Meeting 2007: Shaping the Global Agenda: The Shifting Power Equation, Davos, Switzerland 24-28 January. http://www.weforum.org Yesha, S. (2008a) 3D3C Real Virtual Worlds Defined: The Immense Potential of Merging 3D, Community, Creation, and Commerce. Journal of Virtual Worlds Research, Virtual Worlds Research: Past, Present & Future Vol. 1 (1) Yesha, S. (2008b) DrYesha - Connecting Real and Virtual Worlds. Dr. Yeshas blog. Retrieved 10 September, 2008 from http://www.dryesha.com/ Yousept, I. and Li, F. (2004) Online Supermarkets: Emerging Strategies and Business Models in the UK. Proceedings 17th Bled e-Commerce Conference, Bled, Slovenia. Zhuang, Y. (2005) Does Electronic Business Create Value for Firms? An Organizational Innovation Perspective. Journal of Electronic Commerce Research, Vol. 6, No.2:146-159, 2005.

106

Appendix 1: Selection of SL companies

Firms/ Brands URL

1.

1-800-flowers.com

http://ww.1800flowers.com/second-life

2.

Aloft Hotel (Starwood Hotels)

http://aloftagogo.typepad.com/about.html http://secondliferesearch.blogspot.com/ http://amarettosl.blogspot.com/2007/09/jewelry-expo

3. Active 121 4. Amaretto

.html http://secondlife.reuters.com/stories/2006/10/23/intervie w-amazons-jeff-barr-on-the-future-of-shopping/ http://www.pocket-lint.co.uk/news/news.phtml/6711/77 35/amd-launches-site-second-life.phtml http://americanapparel.net/presscenter/secondlife/ http://www.cancer.org/docroot/GI/content/GI_1_8_Sec ond_Life_Relay.asp http://www.zdnet.com.au/blogs/bigpicture/soa/Gettinga-Second-Life/0,2000065904,339282994,00.htm http://www.hr.com/SITEFORUM?&t=/Default/gateway &i=1116423256281&b=1116423256281&application=s tory&active=no&ParentID=1119278002800&StoryID=1 174616442985&xref=http%253A//www.google.com/s

5. Amazon

6. AMD 7. American Apparel 8. American Cancer Society

9. Australian Info Ind Assoc (AIIA)

10. Bain & Company

earch%253Fq%253DBain+%252526+Company+second +life%2526ie%253Dutf-8%2526oe%253Dutf-8%2526aq %253Dt%2526rls%253Dorg.mozilla%253Azh-TW%253A official%2526client%253Dfirefox-a

11. Bantam Dell Books 12. Bartle Bogle hegarty (BBH) 13. BBC Radio 1 14. Best Buy co. Inc.

http://www.randomhouse.com/bantamdell/ http://www.guardian.co.uk/media/2006/sep/29/newmed ia.advertising http://news.bbc.co.uk/1/hi/technology/4766755.stm http://www.reuters.com/finance/stocks/option?symb ol=BBY.N 107

15. Bigpond

http://angelaathomas.com/2007/03/10/bigpond-enters%E2%80%9Csecond-life%E2%80%9D-virtual-world/ http://www.beatenetworks.com/blog/index.php?/archive s/372-BMW-Leaving-Second-Life.html http://www.3pointd.com/20070321/calvin-klein-launch es-scents-in-second-life/ http://www.channel4radio.com/features/view.php?Id=1 1 http://blogs.cisco.com/virtualworlds/comments/cisco_li ve_in_second_life/

16. BMW

17. Calvin Klein

18. Channel 4 Radio

19. Cisco

20. CNET 21. Coca Cola 22. Comcast

http://news.cnet.com/8301-10784_3-6120349-7.html http://mashable.com/2007/04/17/coca-cola/ http://www.comcast.com/About/PressRelease/PressR eleaseDetail.ashx?PRID=676 http://direct2dell.com/one2one/archive/tags/Second+Lif e/default.aspx?PageIndex=2

23.

Dell

24.

Exploratorium Museum

http://www.exploratorium.edu/worlds/secondli fe/
http://www.kzero.co.uk/blog/?p=69

25.

Fox Atomic

26.

Gabetti property Solutions (GPS)

http://www.gabettigroup.com/eng/secondlife/iniziative. html

27.

Greenberg n Lieberman

http://www.law.com/jsp/article.jsp?id=1170237755271 http://www.hrblock.com/presscenter/articles/secondrele ase.jsp http://blogs.law.harvard.edu/cyberone/

28.

H&R Block

29.

Harvard Law School

30.

IBM

http://news.cnet.com/8301-10784_3-6127448-7.html

31.

Infinite Mind

http://www.lcmedia.com/SL1.htm 108

32.

ING

http://www.3pointd.com/20070221/virtual-holland-com ing-to-second-life-from-ing/ http://softwarecommunity.intel.com/articles/eng/1283.h tm http://www.pocket-lint.co.uk/news/news.phtml/8681/97 05/IWOOT-launches-in-second-life.phtml http://www.aicpa.org/PUBS/jofa/jun2008/second_life.h tm#VIRTUAL%20REALITY http://kellysecondlife.com/eprise/main/web/us/customer s/secondlife/index.html

33.

Intel

34.

Iwantoneofthose.com

35.

KAWG&F

36.

Kelly Services

37.

Kraft Food

http://promomagazine.com/retail/news/kraft_l aunches_second_life_supermarket_050707/
http://mmorpg.qj.net/Lacoste-hosts-Second-Life-fashio n-contest/pg/49/aid/88946 http://www.adverblog.com/archives/002834.htm http://slambling.blogspot.com/2008/01/logica-cmg-revi sited.html http://www.secretlair.com/index.php?/clickableculture/e ntry/major_league_baseball_comes_to_second_life/ http://www.manpower.com/press/secondlife.cfm?mode =secondlife http://www.worldcarfans.com/2070219.006/mazda-hak aze-concept-car-now-at-second-life http://www.memescience.com/ http://www.escapistmagazine.com/news/view/68787-M ercedes-Benz-Opens-Virtual-Brand-in-Second-Life http://reddevnews.com/columns/article.aspx?editorialsi d=2626

38.

Lacoste

39. 40.

Leo Burnett Logica CMG

41.

Major league baseball

42.

Manpower Inc.

43.

Mazda

44.

Meme Science

45.

Mercedes Benz

46.

Microsoft

47.

MovieTickets.com

http://www.movietickets.com/secondlife.asp

48. 49.

MTV NASA

http://secondlife.com/community/music.php http://blog.secondlife.com/2006/05/20/nasa-needs-you/ 109

50.

Nat. Basketball Ass (NBA)

http://www.nba.com/news/second_life_070501.html

51.

Nat. Oceanic & Atmosp. Adm(NOAA) http://www.esrl.noaa.gov/outreach/

52.

New Business Horizons

http://www.nbhorizons.com/ http://www.secondlifeherald.com/slh/2007/04/nissan_re tools.html http://www.paconsulting.com/news/about_pa/2006/Sec ond+Life+silicon+article+about.htm http://www.penguin.co.uk/static/cs/uk/0/articles/secondl ife/index.html http://www.experientia.com/blog/philips-enters-secondlife-to-co-create-with-end-users/ http://www.phoenixmedia.co.uk/phoenix/NewMedia.ht m http://www.pressdispensary.co.uk/feed/991182.php http://www.3pointd.com/20070612/playboy-disrobes-in -second-life/ http://www.autoblog.com/2006/10/23/pontiac-buying-p roperty-in-second-life/ http://www.pressdispensary.co.uk/releases/c991421.php http://taotakashi.wordpress.com/2006/10/03/reebok-stor e-opened-in-second-life/ http://www.guardian.co.uk/technology/2006/jul/09/seco ndlife.web20 http://www.f1technical.net/news/5687 http://news.bbc.co.uk/1/hi/technology/6054352.stm http://www.sapphireasiapac.com/page/media_release?id =127 http://www.techdigest.tv/2006/12/save_the_childr.html

53.

Nissan

54.

PA Consulting

55.

Penguin

56.

Philips Design

57.

Phoenix Film & TV

58.

Plachta Law Office

59.

Playboy

60. 61. 62.

Pontiac/ GM Press Dispensary Reebok - closed

63. 64. 65. 66. 67.

Regina Spektor Renault Formula 1 Reuters Sapphire Technologies Save the children charity

110

68.

Saxo Bank

http://secondlife.reuters.com/stories/2007/03/02/danishbank-moves-to-offer-trading-in-second-life/ http://www.scioncitysl.com/ http://taotakashi.wordpress.com/2006/10/03/reebok-stor e-opened-in-second-life/ http://www.semperllc.com/metaverse/ http://stephenslighthouse.sirsidynix.com/archives/2007/ 01/sirsidynix_and.html http://www.journalism.co.uk/2/articles/53301.php http://slambling.blogspot.com/2007/03/softlab-launches -in-second-life.html http://www.marketingvox.com/music-labels-smell-mon ey-in-second-life-025808/ www.sonyericsson-secondlife.com/downloads/Pressemi tteilung_Second%20Life_CeBIT_English.pdf http://aplink.wordpress.com/2007/04/28/sta-travel-unve ils-second-life-presence-itsreal/ http://news.cnet.com/Sun-rises-in-Second-Life/2008-10 43_3-6124577.html http://www.sundancechannel.com/blogs/secondlife/390 063628 http://www.wired.com/techbiz/it/news/2006/08/71593 http://www.talis.com/tdn/node/1506 http://www.techsoup.org/community/secondlife/ http://www.3pointd.com/20060811/rl-telco-says-hello-t o-sl/ http://slambling.blogspot.com/2008/03/telstra-experienc e-centre.html http://www.text100.com/virtualworlds.asp http://secondliferesearch.blogspot.com/2007/04/thomps on-netg-education.html http://www.tmp.com/articles/press_00004.html 111

69.

Scion

70. 71. 72. 73. 74.

Sears Semper International SirsiDynix Sky News SoftLab Group

75.

Sony BMG

76.

Sony Ericsson

77.

STA Travel

78.

Sun Microsystems

79. 80. 81. 82. 83.

Sundance Channel Suazzne vega Talis TechSoup Telus

84. 85. 86. 87.

Telstra Text 100 Thompson NETg TMP Worldwide

88.

Toyota

http://www.christiansarkar.com/2006/10/marketing_toy ota_on_second_lif.htm http://www.plm.automation.siemens.com/en_us/about_

89.

UGS

us/newsroom/press/press_release.cfm?Component=341 01&ComponentTemplate=822 http://www.unitrindirect.com/HelpCenter2/Services.asp x?id=News# http://www.3pointd.com/20060614/universal-artists-hitsecond-life-june-2526/ http://www.kzero.co.uk/blog/?p=565 http://www.slnn.com/article/visa-europe-slnn/ http://blog.secondlife.vodafone.com/ http://www.3pointd.com/20060522/warner-bros-to-laun ch-album-in-second-life/ http://www.slnn.com/article/weather-marvel/ http://really.blogs.xerox.com/2007/03/21/xerox-in-seco nd-life/ http://application.nokia.com.br/2007/br/2ndlife/ http://www.electricsheepcompany.com/

90.

Unitrin Direct

91. 92. 93. 94. 95. 96. 97. 98. 99.

Unitvaart.com Vauxhall Visa Europe Vodafone Warner Bros Weather Channel Xerox Nokia Electric Sheep Co.

112

Appendix 2: Activities, Technical Aspects and Social Aspects of SL companies

Firms/ Brands Activities Technical Aspects Social Aspects

Virtual product: Ultimate Virtual Bouquet 1. 1-800-flowers.com Contest. Tell Your Avatars Story in RL Times Square Advance design of new hotels in SL 2. Aloft Hotel (Starwood Hotels) SL platform

contest to attract avatars to design and compete for the title of Bouquet. Avatars join and can win to star a video in RL times square avatars move around the place behaviours will

Prototype (test-market) to collect feedback platform- rapidly prototype the evolving be observed by staffers - see what they gravitate from avatars about hotel and new design concept; make financial sense to save cost and ignore; encourage users to post views in RL blogs; attract hip young tech-savvy customers offer CRM in SL about internet marketing & web usablity service; a personal fashion line - shops and showrooms;

3. Active 121

B2B solutions for optimizing SL usage, CRM for SL

SL platform - provide solutions optimizing for SL usage

4. Amaretto

Sell virtual fashion items to SL avatars

SL platform

selling virtual items in the SL; rising the interest of the groups of users within the metaverse.

Bridge Aamazon Web service with SL 5. Amazon Platform: developers innovate to use amazon.com tech n data Developer Outreach program meetings, lectures, training platform using Amazon.com shopping tech & data AMD Dev Central Pavillion

communicate with developers all over the world; encourage to see its collection of web services; stores coupled with ecommerce service virtual space for meetings, lectures, training courses and network opprtunties

6. AMD

113

virtual store resemble RL store raise brand 7. American Apparel Virtual fashion items SL platform awareness - bolster RL sales; low price strategy to attract avatars Relay for Life event - gather volunteer to sell 8. American Cancer Society Fund raising events in SL American Cancer Society Island in SL virtual items for charity fundraising; blimp rides, or holding sailboat races for enjoyment and charity purpose exploratory stage to test the market response; 9. Australian Info Ind Assoc (AIIA) Sell virtual technology of ATMs, mobile phone, flat screens SL platform offer a place to introduce and sell virtual tech to SL avatars help identify new talent and recruit consultant 10. Bain & Company Bain Virtual Recruiting Centre identify new talents n recruit consul. Bain Virtual Recruiting Centre in SL by potentially cutting a step or two from offline process; summer internship candidates join inaugural event in SL avatars attracted to stay and hang out by 11. Bantam Dell Books Build community SL platform literally-themed aspects of the books they publish a department to bring agency and advertisers ; a 12. Bartle Bogle hegarty (BBH) Leo Ideas Lab virtual creative depart. To bring creatives globally Leo Ideas Lab in SL community to collaborate the best approach in social networking virtual tropical island in SL avatars gather here where it can stage online music festivals and throw celebraity parties

13. BBC Radio 1

Virtual broadcasting TV prog, parties

114

customers buy the product can ask advice from 14. Best Buy co. Inc. Geek Squad Island- tech supports offer free computer advice 10-20 visitors a day Geek Squad Island in SL officers in SL, it's more immersive and straigeforward than website or emails avatars interested in iconic Australian landmarks 15. Bigpond Build Australian themes & recreations The Pong in SL such as Sydney harbour Bridge can gather and interact 16. BMW Discussion forum talk brand/ products about 2020 SL platform introduce the brand and ar models without have a traget strategy on customers using spray perfume to initiate sprayee to do 17. Calvin Klein Photo contest virtual perfume to spray among avatars SL platform Calvin Klein animation- it's fun and leverage advestising effect; avatars photo contest to collect avatars to compete avatars listen to Channel 4 radio program and 18. Channel 4 Radio Music community SL platform discuss and feedback on the programme that create experience to tailor made for new audience Application eXtension Platform (AXP)Application eXtension Platform- integrate with downloadable SDK enable sa 19. Cisco the branch network, applications, and IT infrastructure. tighter integration between the branch network, IT and application infrastructure. 20. CNET Interviews held in SL SL platform as a forum for CNET reporters to come and virtual classes to SL avatars as a communication tool for their customers; user-group meetings and internal meetings for international staff

115

discuss about stories; CNET reviewers to talk about tested products, CNET videos, meetups and events Coke Virtual Thirst Pavilion Crayonville 21. Coca Cola invite people to design coke vending machine 22. Comcast Comcastic! Island amusement park offers rides, races and surprises & freebies Comcastic Isalnd in SL SL platform invites avatars to design a Coke dispensing machine for use in SL; attract Coke enthusiasts n others virtual theme park - offers activities highlighting the co.'s services and interact with avatars a wide range of interactive ways to attract 23. Dell Virtual press conference Dell island avatars - 3D interactive view of products, build own system in world, order real system from dell.com; extended foray into SL for customers SL platform as a exhibit prototyping National Optical Astronomy 24. Exploratorium Museum Observatory eclipse; Sploland prototyping n pro development and pro development workshops for web developers, meseum pro and educators users from around the world gather at the amphitheatres and share experience each other; voice commentary, Q&A about the exhibits virtual studio with stages and facility for users to 25. Fox Atomic Fox Atomic Studios virtual studio with stages n facility Fox Atomic Studios in SL choose; users can have a sneak peak at never-before-seen scene; meet place branding; experimenting new Virtual B2B corporate innovation, marketing and sales Virtual Estate co. in SL job recruiting systems; exploiting the 3D capabilities in order to reduce projecting times;

26. (GPS)

Gabetti property Solutions

116

selling real properties by means of virtual replicas in SL (enhancing the experience of the customers). help avatars handle SL disputes with resort to 27. Greenberg n Lieberman Virtual law firm gather pro to form virtual arbitration SL platform real courts n costs and non-lawyers cooperate to formalize online arbitration customers connect with digital tax pro share free 28. H&R Block Virtual tax preparation tax pros share free advice, host tax-related events H&R Block Island in SL advice, offer access to tax prep products, host tax-related events; connect n communicate with new people in SL anytime, anywhere Harvard Extension School virtual 29. Harvard Law School learning course for law students, videos, discussions, lectures, etc SL platform Students from anywhere in the world can interact with one another in real time; build a college campus for avatars to immerse Tours- users Take a guided tour of the IBM Business Center and the Green Data Center in Virtual Business Centre in SL - use 30. IBM Virtual internal meetings; help firms to build virtual retail stores OpenSim Server allows avatars pass freely between virtual worlds Second Life; Speakers- We host virtual world enthusiasts from across IBM; Conferences-Delight in full streaming interactive conference sessions. 31. Infinite Mind Virtual broadcasting facility lecture room, studios etc SL platform the facility to showcase broadcasting studio for avatars - lecture rooms, library, meeting space

117

32.

ING

Virtual Holland place for residents to own and run business

Virtual Holland Intel Software Network - "Braniac

avatars can own land and run business in a place featuring Dutch architecture, landscape etc. Intel Engineers and developers meet and discuss community resources and activities - training, webcasts, multi-core processors avatars buy products from within SL and buying behaviours will be studied for VW place to attract next generation of young pro to

Intel Software Network training, 33. Intel meet-the-experts; for developers to use Linden Scripting Language (LSL) Gift and gadget virtual store buy in-world but deliver real items in real life CPA Island accounting training in public accounting

Warbots" contest where developers use SL Linden Scripting Language (LSL) to build robots SL platform

34.

Iwantoneofthose.com

35.

KAWG&F

CPA Island in SL

work in public accounting; voice chat wit presenter inworld premier connection within SL and RL job for

36.

Kelly Services

Virtual human resources centre help SL residents to find a RL job

SL platform

job placement and career development - public seminars, conferences, job fairs, interviews, training

Phils supermarket food marketing 37. Kraft Food institute show to showcase 70 new products Best dressed avatar competition submit 38. Lacoste photo for show n people vote for 100 most SL platform beautiful avatars 39. Leo Burnett Virtual department connect 1600 SL platform SL platform

branding of virual supermarket n show products, SL shoppers can preshop for real world items, personalize product lists avatar modelling contest - avatars join the virtual photo shot to compete for 1 million L dollars connect global creatives to work in SL for

118

creatives to interact n share work exp Virtual meeting and networking facilities for Logica staff

designing and creating items or buildings private area offers meeting and networking facilities for Logica Staff; internal collaboration Home Run Derby event - staged in SL

40.

Logica CMG

SL platform

41.

Major league baseball

3D baseball stadium re-enactment of the Home Run Derby

SL platform

simultaneously with the RL event held in Pittsburgh; avatars can see liveupdating score for all 8 players in SL expert panel discuss recruiting and job-seeking

Virtual employment event help people 42. Manpower Inc. understand recruiting & job-seeking in the World of Virtual Work in SL world of virtual work

to virtual collaboration and cultural issues in SL; job seekers, employers and entreprenurs join to learn and explore the virtual work; orientation trail to teach newbies residents can discuss, drive and own the popular

43.

Mazda

Virtual driving exp Mazda Hakazes available for avatars to drive n own

Nagare Island in SL

Mazda Hakaze; buy some Mazda virtual items in store

create innovative products and clients Generic virtual business development 44. Meme Science company SL development, 3D social networks, community building tool and knowledge for preparing the challenge of doing business in SL platform

offer services to customers including private clients and Fortune 500 companies; team training with best practices to harness emerging platforms inworld test drives for avatars; digital

45.

Mercedes Benz

In-game test drives offer Mercedes car driving services

SL platform

communication with customers and SL residents as a marketing strategy; virtual dealership,

119

interactive tour, freebies of the brand Microsoft Virtual Studio - create and retain Virtual software developers platform 46. Microsoft Microsoft Virtual Studio Imagine Cup Microsoft property coder's cove island community of developers, promote the software; Imagine Cup Gallery - contestants chat and collaborate with software design teams; virtual career fair to meet and interview candidates designed to offer avatars RL ticketing, SL platform movie-related content, participation in promotions; RL movie ticketing options replicate show's location from RL and run 48. MTV Virtual Hills virtual online extension runs special events, nightclubs Etc. Virtual Hills in SL fashion challenges, concerts, nightclub and dance chanllenges; avatars can try from listening to music to watching it education for creating and managing innovative 49. NASA NASA CoLab educational programmes about NASAs projects NASA CoLab in SL activities, events, products, services; regular weekly meeting for the community realtime 3D diagrams of live games, inline 50. Nat. Basketball Ass (NBA) Virtual NBA headquarter realtime 3D diagram of live games, slam dunk contest SL platform trivia, slam dunk contest, a shop of virtual NBA merchandise; multiplayer games designed to draw repeat visitors

gallery create n maintain community for in SL developers Virtual Movie theatre offer residents RL

47.

MovieTickets.com

ticketing, movie-related content n take part in promotions

120

SciLands project create a communnity of 51. Nat. Oceanic & Atmosp. science and tech; immersive designed Earth system research lab (ESRL) experience natural phenomena NOAA island in SL environment offer a chance to witness a tsunami, hurricane; avatars can feel the natural situation in SL Virtual Business Park enable companies 52. New Business Horizons to experience and explore business benefits Blue Horizon in SL in SL such as sales, marketing, PR tool Virtual model allow avatars to drive on a virtual race track Virtual marketing company spread the 54. PA Consulting brand and engage the interest of SL residents 55. Penguin Virtual book seller bring real book inworld Co-creation Experience engage avatars 56. Philips Design to create new products; gain feedback on innovation concepts Full business provider for SL offer consultancy, develop long term marketing SL platform Club Penguin in SL store in SL enable companies to experience the environment and explore business benefits, marketing, PR tools; full-time support and maintenance by staff users drive virtual car models on a race track; 53. Nissan Altima Island in SL built to transport avatars into a mesmerizing world that balance virtual and RL features branding and engage interests of SL avatars with avatar-specific product; marketing for companies bring in top sale of books into SL; offer it for RL reading; reach more clients in SL gain feedback on innovation concepts, engage avatars in co-creation and explore new ways to collaborate; investigate people's motivations and desired experiences in SL SL platform offer consultancy, design and development services to enable business to take full

Adm(NOAA)

57.

Phoenix Film & TV

121

strategies

advantage of new virtual medium; regular free seminars offer more to learn about doing business SL; clients from wide range of industries can access to the office in SL and discuss encourage avatars to approach initial

58.

Plachta Law Office

Virtual firm encourage residents to use initial consultations on legal matters

SL platform

consultations on legal matters and RL clients from around the country can save time and expense of getting to physical meetings virtual retail store- avatars interested buy virtual

Virtual naked marketing playboy island 59. Playboy offers retail store, host events, sell playboy-branded apparel Playboy in SL

related items featured merchandise from its ecommerce sites; a variety of events create social opportunities to avatars to join and dance avatars can buy virtual version of Pontiac

60.

Pontiac/ GM

Motorati island sell virtual version of Pontiac Solstice GXP, host virtual concerts

Motorati island in SL

Solstice GXP, join virtual concerts and stage car races; communally develop auto-based racetracks steady flow of RL clients who needs advice on

61.

Press Dispensary

Virtual PR agency press release services in SL Reebok store- modify and customise a blank pair

permanent bureau in SL

planning activities in SL; offer public relation strategy

62.

Reebok - closed

Reebkot Store in SL

avatars can pay to modify one blank pair ; collect feedback from avatars to investigate the

122

market in SL segment virtual listening party- virtual presentations, 63. Regina Spektor singer - release virtual album SL platform avatars buy tickets to join and enjoy the fun in the event virtual press conference - present a unique virtual community - share passion, 64. Renault Formula 1 interact with team members, post-race events SL platform chance for enthusiasts n new comers to F1 and share passion, views; debate and chat with F1 team in postrace events - fan interaction Reuters News Centre - offer feeds of both RL and SL stories, news; avatars can meet and discuss events offer IT pro with a new way to access job 66. Sapphire Technologies Specialist IT recruitment company SL platform opportunities, offer candidates greater choice in how they select to engage with it pro;info n advice and so to extend the productivity save the children - sell virtual yak at Yak Shack; 67. Save the children charity Fund raising- sell virtual yak SL platform make the most of cutting-edge web tools to reach new audiences eg. Youtube, other social networking sites VirtualTrader - customizble and will 68. Saxo Bank Virtual Trader - trading service in SL virtual headquarters - reach new clients; cyber

65.

Reuters

virtual news centre - keep up-to-date with Reuters in SL - report news exclusively news, discussion platform to SL

add option for clients to receive trading hothouse for capital markets-in-the-making and profit in Linden dollars so to attract avatars to try and repeat use

123

avatars can customise Scion models; Whyville 69. Scion Scion City - virtual driving exp of Scion xB Scion City; Whyville in SL platform for teenagers to buy a scion, customise and driver friends around; members take out virtual loans from science to money management Sears Virtual Home in SL - bridge the 70. Sears Sears Virtual Home - showroom prototype virtual and real world to benefit customers a place allows avatars to recreate their living rooms and furnish with sears products, check how it looks in RL; develop to allow users to order from SL and deliver in RL in the future the immersive environment best fits with 71. Semper International employment office - avatar-based environment for interviews hiring tool in SL interviews ; develop a talentpool of people skilled in developing in SL and develop them to other SL dev firms strategic technology solutions for libraries 72. SirsiDynix bring knowledge to people and communities Eye4YouAlliance in SL Alliance offers education, consulting, resource sharing and delivery services to members; offer RL libray services to avatars virtual newsroom - Sunday Live program 73. Sky News virtual studio and newsroom SL platform which can field questions from avatars; a replica of the sky news centre for avatars to wander around lounge atmosphere n disco atmosphere - try to 74. SoftLab Group IT consulting company SoftLab group Island in SL attract people n arise branding and proposition awareness

124

75.

Sony BMG

Sony Music Media Island - music, music videos, album preview

Sony Music Media Island in SL

Music Island - attract users to listen to music and watch music videos; host album previews CeBit stand in virtual trade fair - for those who

76.

Sony Ericsson

Virtual trade fair- virtual new stand in SL Sony Ericsson Island in SL

cannot physically join the event will have a chance to visit the virtual one;

77.

STA Travel

travel centre - avatars use dorms as a meeting area

with help of Electric Sheep Co. to design the place in SL

virtual dorms for avatars to customise and use for meeting other SL users; encourage to repeat visits and use of the venue virtual Sun Pavilion - Fortune 500 virtual press conference; CommunityOne, JavaOne technical Q and A sessions, presentations, and focus groups for developers network an island to focus on non-mainstream

Virtual Sun Pavilion - CommunityOne; 78. Sun Microsystems

Sun Solaris Immersive Campus in SL-

JavaOne - help developers of online games download OpenSolaris - discuss and with server-side technology refine and develop;

79.

Sundance Channel

community - access to non-mainstream entertainment

Sundane Channel island in SL

entertainment - eg. Four Eyed Monster event, to target the different taste of people

80.

Suazzne vega

push performance into different singer - release virtual album Alliance Library sytem - Alliance SL Library 2.0 for Talis Mashup Competition dimension in SL test the role of library in SL

a venue to reach fans to listen to live concerts about avatars of artists a project to create sharing information of librarians from all over the world via SL

81.

Talis

82. 83.

TechSoup Telus

community of non-profits - creative community-building tool Shinda land - extend and enhance the

collective creative community building offer a rich non-profit enviroment for avatars tools Shinda island in SL to collaborate nn explore new territory a team of SL avatars for builds and handsets on

125

brand experience for the corportation's mobile products

Canadan mobile brands

The centre for avatars to tryout various products 84. Telstra Telstra Experience Centre - tryout chance of new technologies arriving soon Telstra island in SL n services offered by the co. n its partners; immersive experience to RL builds used as a prototype Virtual Office to educate staff on 85. Text 100 virtual office- provide firms a way for marketing, customer support or feedback Corporate Learning solutions - education, training in e-related subjects Recruitment Advertising agency - new way 87. TMP Worldwide of corporate recruitment in TMP island of TMP island in SL platform SL showroom - aftermarket develops as 88. Toyota avatars customise cars and sell them, get ideas for engineering modifications in RL PLM softare - enables the New Product UGS innovation connection - provide 89. UGS Siemens product lifecycle management (PLM) Development (NPD) - use Software as a service (SaaS) across internet and SL ; develop to leaverage 3D modelling, visualizations and tech and so to Scion City in SL platform - a scion city for users to show design and have fun SL platform communication ideas in SL and work with clients SL platform a campus approach to offer tech solutions - labs, classroom to facilitate shared learning a space where recruiters network and interact with job seekers; job fairs to host events, canduct employee presentations an 'aftermarket' develops as avatars customise and sell cars - spread brand virally; show brand's RL car models use UGS innovation connection in SL to collaborate with customers n business partners; immersive way to experience solutions similarly in daily life

86.

Thompson NETg

126

improve business process / innovation

90.

Unitrin Direct

auto insurance company - offer latest tech on outstanding auto coverage

SL platform

test avatars in SL in order to improve the auto insurance a place to gather views and advice from users on

91.

Unitvaart.com

funeral company - virtual crematorium

SL platform

funeral services; start a memorial memento in Garden of memories a place attracts users to tag and rank top places

92.

Vauxhall

Corsa car - create user-generated guide of favourite places in SL

SL platform

in SL using Vauhall Corsa guide; branding strategy participate in forum to share what's customers'

93.

Visa Europe

credit card company - brand marketing

SL platform

need on visa service and technology; develop potential

94. 95.

Vodafone Warner Bros

introduce virtual handsets interactive listening party, sell clothes,

SMS instant messaging service sl platform

discuss and feedback on virtual handset buy clothes and discuss the TV series like Gossip Girl experience and share feelings about extreme

96.

Weather Channel

Epic Conditions - interactive experience of extreme weather on sports events

SL platform

weather - for adventure seekers and extreme sports enthusiasts

97.

Xerox

Xerox Innovation Island - private space

SL platform

internal ideas and views sharing for innvoation

127

for employees for explorations and experimentations N95 Panoramic Photography Exhibition Shot 98. Nokia Nokia Island - Nokia Connected Worlds virtual meeting Sheep Island - offer strategy, design, production, and technology Second Life Grid Platform - open source viewer code SL platform share views of phototaking of Nokia N95 Panel Discussion customer feedback counter - gather views, advice and complaints

99.

Electric Sheep Co.

128