Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

::Brainfood::

VirtualityOctober 23, 2007

2

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Introduction

In today’s session of Brainfood, Fallon strategic plannersAki Spicer and Avin Narasimhan break down the vast andcomplex trends of Virtuality and their implicationsfor brands.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

“80% of active internet userswill have a “second life” in a virtual world

by the end of 2011.

Gartner Symposium/ITExpo 2007

4

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Welcome to the first session of Brainfood.What can you expect today?

A brief introduction to Virtuality and how we got here.

Virtual Worlds: the most visible form of Virtuality.

Implications and trends in society.

What it could mean for business.

Key takeaways for you and your clients.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Virtuality: Our lives are increasingly “virtual,”but we often don’t recognize it as such.

6

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

We can trace the roots of our virtual pursuitback to 1955 when Sensorama recreated thefull experience of riding a motorcycle.

7

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Flash forward to the 80s and 90s: works offiction laid the groundwork for the conceptof today’s visual Web.

MetaverseThe Matrix

8

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

And beyond fiction, the work of French socialtheorist Jean Baudrillard helped to explain thebasis of Virtuality as seen in culture.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Virtuality reframes our economy, worldview,and culture.

10

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

As early as the first iteration of Windows, webegan a mass adoption of 3-D virtual surrogateson PC desktops.

11

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

We trade millions of dollars everyday based onthe virtual values.

12

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

We express who we are and how we feel throughdigital representations and alter-egos.

13

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

And many of us, particularly young people, areturning to games instead of movies and TV,driving mass awareness and further blurring lines.

14

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

We’re moving away from 2-D MS-DOS style flatapps towards rich 3D environments that bringthe same data to life.

15

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Digital prototyping enables the real parts to workflawlessly before they’re ever made real.

16

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Virtuality commands real love and attentions.

17

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

We’ve reached the age where what was oncefantasy and “futuristic” is now increasinglybecoming a way of life.

18

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

“Welcome to the desert of the real.”

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Virtuality is no longer nerdyfantasy. It’s real and it’shappening all around us.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

“ Personally, I feel the vague lineaments ofsomething beyond Web 2.0, and they involve

some fairly radical steps. Imagine a Webwithout browsers. Imagine breaking

completely away from the documentmetaphor, or a true blurring of application

and information. That's what Web 3.0 will be,but I bet we will call it something else.

Stowe BoydSocial Media/Web 2.0 Theorist

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

We’ve become beings of a digital worldwherein almost any conceivable life eventcan—and largely does—take place virtually.

22

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Virtuality is reality, and it’s the next evolutionof our increasingly digital social lives.

Web 2.0 Web 3.0

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Virtuality is changing human behavior.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

“One of the things our grandchildren will findquaintest about us is that we distinguish the

digital from the real, the virtual from the real.In the future, that will become literally

impossible. The distinction betweencyberspace and that which isn't cyberspace is

going to be unimaginable.”

William Gibsonauthor, futurist

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Understanding Virtuality can be a vague andsomewhat abstract concept. Today we’ll look atwhat is the clearest manifestation of Virtuality.

26

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Digital Life

Virtual worlds have been buzz words in popularmedia as of late, and myriad forms exist.

Kids Play

Pure Gaming/Fantasy

27

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

It’s not happening on the fringes of society, butrather has engaged us globally.

1% of the world’s population registered World of Warcraft residents.

Time spent in Second Life increased six-fold in 2006.

If NeoPets were a country, its population would be the 5th largestin the world.

Club Penguin has 4M+ unique monthly visitors and generates a50% profit margin, projecting $30 million in 2007 profits.

Swivel Data Research August 2007WikipediaSocial Media Club May 2007

28

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Second Life populations are sky rocketing asthey become more integrated in our daily lives,translating into real world commerce.

Blizzard Entertainment March 2007Blogpulse trend search July 2007

29

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Yet, Second Life may be experiencingslowing growth.

30

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

It’s important to remember that we’re still in theearly stages, and so far these worlds arereminiscent of our first forays onto the Internet.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Exploring Virtuality through the lens of worldsthat let users fully define the experiencereveals the most interesting insights.

32

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

People are people…and even in the metaverse,we still behave like people.

Linden Labs 2007 Technographics Survey

33

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

We’re creating living, breathing societies withunique social mores and culture, which embodythe ideals of autonomy and self-efficacy.

34

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

It’s an evolution of the very idea of “face-to-face”interaction and personal connections.

35

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

They provide a new venue for the exchange ofdialogue and even political movements with noconsideration of physical boundaries or barriers.

GLOBAL IBM CONFERENCE

EXPERT PANEL AT CRAYONVILLE

ADVENTUREECOLOGY ACTIVISTS

36

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

37

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

More and more we see life imitate art asVirtuality redefines traditional experiences.

James Cameron’s new movie—Avatar.

Draft FCB mockumentary of Second Life.

CSI:NY will take murder mystery intothe virtual world.

38

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

“There's real money to be made in themarketplace. People actually earn part or

all of their real-life income from suchbusinesses as party and wedding

planning, tattooing, auto manufacturing,fashion and jewelry designing, real estate

development, architectural design,bodyguarding, publishing, and private

investigation.”

—Patricia Duebel, PhDThe Journal

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

What could it all mean for business…and brands?

41

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

As with most emerging technologies, thepotential for business application is often hardto see at first glance.

HOW MIGHT OUR BRAND FIT IN HERE?

42

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

43

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Kid-centric fantasy may be perhaps the easiestin-roads for brands…

Answers.com via Wikipedia

44

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

…as youth today are rapidly embracing Virtuality.

2007: 24% of U.S. child and teen Internet users visit virtual worlds.

2008: 34%

2011: 53%.

45

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Even for today’s youth, branded virtual worldsare providing a level of engagement that staticsites can’t compete with.

46

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Companies eager to jump on the virtualbandwagon have learned cost of entry ismore than just “showing up.”

Wells Fargo—Departed. American Apparel—Barren

Business Week Online May 2007

47

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

The right to participate needs to be earned.

The NBA understood this imperative and truly offers a uniqueexperience and commitment to residents.

48

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

With or without brands, resident entrepreneursare reaping lucrative rewards through their owncreations.

BW Online April 2007

Alan GraiefLand Baron

+$1M revenue

Anshe ChungLand Baron

+$1M revenue

Philip RosedaleCreator: SL$19M in VC

Reuben SteigerConsultant

+$6M in fees

Sibley VerbeckConsultant

$15K per project

Kevin AldermanAdult Entertainment

$50K and up

Alyssa LaRocheClothier

$30-$100K fees

49

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Many of these content creators are extremelyprotective and skeptical of those who wouldintrude without respect.

The influx of real world brands is sometimes met with discontentand other times overt hostility.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Brands that add the most value to the userexperience are the future—not just of virtualworlds, but of the social web and how we liveour lives.

51

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

As an example, the desire for connections andcompanionship in these worlds have spawnednew industries.

In-world engagements like sldogs.com allow us to buy andaccessorize a pup to accompany us in digital life.

52

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

And worlds like Neopets attempt to redefine theidea of pets for the digital space.

53

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

As interest in Virtuality grows, some innovativecompanies are cutting out the middleman andbuilding their own worlds.

JC Penneys (Forterra) Novartis (Prontomedia)

BusinessWeek Online May 2007s

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Virtuality soon demands reappraisal of oursocio-political assumptions.

55

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Life’s eternal questions still linger…and take oneven greater significance in Virtuality.

56

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

And these questions spark the collective curiosityof burgeoning societies and new communities.

57

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

The complications of digital life has spawnedethical debates of copyright, decency, freedomand access—since the 90s when the Internetwas in its infancy.

…and they continue still, without clear resolve.

59

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

DISPOSABLE FAD?

IMPRACTICAL?

DEHUMANISING?

UNNECESSARY?

A HAVEN FOR PORN?

60

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

As with any emerging tech, there are bumps inthe road—and even predictions of impendingdoom.

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

“For virtual worlds and metaverses to achievegreater potential in the marketplace and

grow beyond early adopters, the experiencemust be untethered to meet the needs of the

Anywhere Consumer.”

Yankee GroupAnalysis of Second Life, 2007

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

While virtual worlds may not be the finalchapter, Virtuality is the OS of tomorrow.

Boot up.

63

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

We’ve covered a lot today. Some key takeaways…

Virtuality:

Life Remixed: Extension of our real lives.

Worlds Unbound: Expanding global culture.

Spawned Industries: Entirely new economies.

Engage Me: Fueling participation, not just consumption.

Control and Protect: Creative self-expression/control of ideas.

First Life Beta: A new level of try before you buy.

Visual Web: A richer 3D experience.

Half Life: Blurring lines between real and virtual.

…leading us toward a broader ubiquity of Virtuality.

64

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

Continue the conversation on our blog:http://fallontrendpoint.blogspot.com

Life Remixed Virtual Worlds

Virtual Life

Postcards from Second Life

Emoticon

Slurl

Avatar

Instant Message

Worlds Unbound

Spawned Industries

Visual Web

Life Beta

Engage MeControl and Protect

Google EarthWebkinz

User Defined Experience

Fantasy

Self-Efficacy

Autonomy

Digital LifeGaming

3D

Kidz Play

Brand Evangelists

Tech Savvy

Early AdopterMetaverse

Connections

Virtual Culture

Co-Created

Borderless Age

Digital Self

Sacred Creations

Business 3.0

Participate

Humanized

Test Drive

In-World

Residents

Parallel Life

EscapismYouth

World of Warcraft

Entropia

Habbo Hotel

There.com

The Sims

Neopetz

Zwinky Playdo

Playstation Home

Futurist

Customization

Virtuality

65

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.

And look out for the invite to next month’sBrainfood session.

Brainfood is an executive digest of Fallon Planner’s strategicintelligence and bridges the gap between trends, business issues,and actionable opportunities for its readers.

66

Copyr

ight ©

20

07

Fal

lon W

orl

dw

ide. A

ll ri

ghts

rese

rved.