Is the Metaverse Falling Victim to Large Platform Monopolies?

6a0120a51c39be970b0120a597d2b4970b-800wi There's no denying it – despite a worldwide consumer recession and spiking unemployment, virtual worlds are still growing with impressive speed.

A report by the Virtual Goods Summit shows that purchases of virtual clothing, weapons, and accessories will top $1 billion for the first time, and will nearly double to $1.6 billion by 2010.

There's only one thing missing: competition..

The Virtual Market is Booming

While it was expected that virtual worlds would draw in hundreds of billions this year, it appears increasingly likely that virtual worlds will top $1 billion with months to spare.

If this is the case, one company is doing the heavy lifting: Second Life alone boasts nearly $500 million in virtual sales.

What is so interesting about the Virtual Goods Summit report? For starters, it shows that consumption patterns are changing. More virtual world users are purchasing items with real money than in previous years, meaning this all-important revenue stream is moving away from the hands of a few "power users."

In other words, virtual worlds are expanding their membership not only to curious new players, but new players willing to spend money. As Facebook browser-game creator Zynga's rapidly-expanding pay-to-play figures show, more paying customers lowers the risk of a flight of virtual capital.

Unfortunately, the virtual economy will be especially susceptible to shocks and sudden declines so long as one world controls nearly 50% of all revenue. However, with Blue Mars set to tap major developers as a revenue stream, Second Life may find its position as the Metaverse commercial center challenged by an upstart.

Despite initial suspicions, this challenge will be good for the Metaverse. Concentration of capital, as we've seen in the United States, leads to economic boom-and-bust cycles. If a suitable challenger to Second Life develops over the next year, it will be a net gain for the Metaverse.

A world where Second Life only controls 30% of U.S. virtual world revenues may mean a reduced position for Linden Lab, but it also means a more stable virtual environment.  A dose of competition might spur Linden Lab to fix the myriad bugs, broken features, and user-unfriendly elements of its otherwise solid virtual world.

The Metaverse has plenty of money. What it needs is a good dose of competition.

One thought on “Is the Metaverse Falling Victim to Large Platform Monopolies?”

  1. I suspect you are bit overly optimistic about Blue Mars. It’s Windows-only interface and lack of content creation for entrepreneurs could just as easily portend failure to “find traction.”
    Of course, Avatar Reality might avoid the Linden Lab mistake of not advertising in mainstream venues. Then social users who don’t want make anything could keep the world afloat.
    That said, I’m betting that the future of virtual worlds will involve some sort of painless Web interface like Unity, not some graphics-intensive client with a steep learning curve.
    That’s certainly what the edu crowd wants, and despite the downturn, our schools still have a lot of money for innovative technologies that help teaching.

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