1. July 2008Jessica Mulligan1 Virtual Worlds A Brief Tutorial Presenter: Jessica Mulligan jmulligan@imaginventure.com Jessica.mulligan@gmail.com

2. July 2008Jessica Mulligan2 TODAY’S AGENDA Definitions Definitions Some History Some History Numbers and Trends Numbers and Trends Q&A Q&A

3. July 2008Jessica Mulligan3 WHO AM I? EXPERIENCE: EXPERIENCE: 22 years in Online Entertainment 22 years in Online Entertainment 50+ online products, 12+ MMOs 50+ online products, 12+ MMOs CURRENT POSITION: CURRENT POSITION: COO, ImaginVenture SA COO, ImaginVenture SA AUTHOR and COLUMNIST AUTHOR and COLUMNIST Developing Online Games: An Insider’s Guide co-authored with Bridgette Patrovsky Developing Online Games: An Insider’s Guide co-authored with Bridgette Patrovsky A Royal PITA A Royal PITA

4. July 2008Jessica Mulligan4 Definitions Virtual World (VW) A computer-based simulated environment intended for its users to inhabit and interact via avatars.

5. July 2008 Jessica Mulligan 5 Second Life

6. July 2008Jessica Mulligan6 Definitions VWs normally have the following: Persistent Environment: The terrain and objects are the same for all viewers. Persistent Environment: The terrain and objects are the same for all viewers. Persistent Effects: When one person changes something, others perceive the change. Persistent Effects: When one person changes something, others perceive the change. Persistent Avatars: Avatars can have their data changed and reflected throughout the world. Example: Inventory items, skills, attributes. Persistent Avatars: Avatars can have their data changed and reflected throughout the world. Example: Inventory items, skills, attributes.

7. July 2008Jessica Mulligan7 Definitions Types of VWs Social World: The main purpose is the social interaction of the inhabitants. Social World: The main purpose is the social interaction of the inhabitants. EXAMPLE: Habbo Hotel, Second Life, Club Penguin EXAMPLE: Habbo Hotel, Second Life, Club Penguin Game World: The main purpose is to experience and advance within the context of the game rules. Game World: The main purpose is to experience and advance within the context of the game rules. EXAMPLES: Runescape, World of Warcraft EXAMPLES: Runescape, World of Warcraft

8. July 2008Jessica Mulligan8 Definitions Types of VWs Workspace World: Used for internal corporate, government or NGO communications, meetings and collaboration. Workspace World: Used for internal corporate, government or NGO communications, meetings and collaboration. EXAMPLE: Sun’s MPK20, IBM’s Bluegrass Project EXAMPLE: Sun’s MPK20, IBM’s Bluegrass Project

9. July 2008Jessica Mulligan9 Definitions The Park Analogy Social World: The Neighborhood Park Social World: The Neighborhood Park Game World: A Theme Park Game World: A Theme Park Workspace World: An Industrial Park Workspace World: An Industrial Park

10. July 2008Jessica Mulligan10 Definitions AVATAR: The representation of the players in the virtual world. AVATAR: The representation of the players in the virtual world. MMOG: Massively-Multiplayer Online Game MMOG: Massively-Multiplayer Online Game MMORPG: Massively-Multiplayer Online Role-Playing Game MMORPG: Massively-Multiplayer Online Role-Playing Game

11. July 2008Jessica Mulligan11 Some History

12. July 2008Jessica Mulligan12 Generation I: 1969-1978 Connecting more than 2 people to play simultaneously Connecting more than 2 people to play simultaneously Proprietary networks Proprietary networks PLATO PLATO NovaStar NovaStar Mainframes used to play simple text games Mainframes used to play simple text games Original Empire Original Empire

13. July 2008Jessica Mulligan13 1978: The Universe Changes Professor Roy Trubshaw at Essex University asks his students a question: “Can we use UNIX to create many-user programs?” The answer:

14. July 2008Jessica Mulligan14 Generation II: 1978 to 1995 The Multi-User Dimension, a.k.a. MUD I

15. July 2008Jessica Mulligan15 Generation II: 1978 to 1995 The Trubshaw/Bartle text MUD kicked off the online VW revolution The Trubshaw/Bartle text MUD kicked off the online VW revolution First game world to allow more than 100 simultaneous players First game world to allow more than 100 simultaneous players The source was distributed to other schools and, eventually, was used to build Internet MUDs The source was distributed to other schools and, eventually, was used to build Internet MUDs Trained a generation of online designers Trained a generation of online designers

16. July 2008Jessica Mulligan16 Generation II Over 20 Major VWs Over 20 Major VWs 1978: MUD I 1978: MUD I 1982: MegaWars I 1982: MegaWars I 1984: Islands of Kesmai 1984: Islands of Kesmai 1986: Air Warrior 1986: Air Warrior 1986: Habitat 1986: Habitat 1991: AD&D NeverWinter Nights (AOL) 1991: AD&D NeverWinter Nights (AOL) 1993: Multiplayer BattleTech 1993: Multiplayer BattleTech Air Warrior by Kesmai, 1987 The Realm by Sierra Online, 1995 Multiplayer BattleTech, 1992 AD&D: NWN on AOL, 1991

17. July 2008Jessica Mulligan17 Generation III: 1996-Present The Internet & flat- rate fees take over. The Internet & flat- rate fees take over. Meridian 59 becomes 1st Internet-capable VW at a flat-rate, kicking off this generation. Meridian 59 becomes 1st Internet-capable VW at a flat-rate, kicking off this generation. Ultima Online by EA, 1997 Meridian 59 by 3DO, 1996

18. July 2008Jessica Mulligan18 Generation III: 1996-Present Online in Asia is BIG by 2001 Online in Asia is BIG by 2001 60 million players! 60 million players! CHINA: Fantasy Westward Journey by Netease, 2004 1 million simultaneous players! KOREA: Lineage by NCsoft, 1999

19. July 2008Jessica Mulligan19 Generation III Over 100 VWs launched so far 1996: M59, AD&D Dark Sun 1996: M59, AD&D Dark Sun 1997: Ultima Online 1997: Ultima Online 1999: EverQuest, Runescape 1999: EverQuest, Runescape 2000: Habbo Hotel 2000: Habbo Hotel 2003: Second Life, There.com 2003: Second Life, There.com 2004: World of Warcraft 2004: World of Warcraft Habbo Hotel, 2001 World of Warcraft by Blizzard, 2004 Runescape, 1999

20. July 2008Jessica Mulligan20 NumbersAndTrends

21. July 2008Jessica Mulligan21 The Current VW User

22. July 2008Jessica Mulligan22 The VW User Hard Core: No time or price sensitivity Hard Core: No time or price sensitivity Moderate: No price sensitivity, lots of time sensitivity Moderate: No price sensitivity, lots of time sensitivity Casual: Both price and time sensitive Casual: Both price and time sensitive

23. July 2008Jessica Mulligan23 The VW User

24. July 2008Jessica Mulligan24 The VW User Movement down the pyramid is easy Movement down the pyramid is easy The Hard Core player will try all types of games The Hard Core player will try all types of games The Moderate gamer wants to find a good MMO, but is comfortable with Casual games The Moderate gamer wants to find a good MMO, but is comfortable with Casual games Movement up the pyramid is hard Movement up the pyramid is hard The Casual player is price and time sensitive The Casual player is price and time sensitive The Moderate player is time sensitive The Moderate player is time sensitive

25. July 2008Jessica Mulligan25 Markets Kids (Age 5-17): A combination of Social and Game Worlds Kids (Age 5-17): A combination of Social and Game Worlds Habbo Hotel Club Penguin Runescape Adults (Age 18 to 42): Mainly Game Worlds Adults (Age 18 to 42): Mainly Game Worlds World of Warcraft World of Warcraft Eve Online Eve Online Age of Conan Age of Conan

26. July 2008Jessica Mulligan26 Markets Workplace: 3 rd Parties building corporate, government and NGO VW spaces Workplace: 3 rd Parties building corporate, government and NGO VW spaces Rivers Run Red Millions of Us Research and Education: The short end of the stick Research and Education: The short end of the stick Few of them Few of them Needs to be more support here Needs to be more support here

27. July 2008Jessica Mulligan27 Virtual Worlds Today WoW, Blizzard/US – 10.5m subscribers WoW, Blizzard/US – 10.5m subscribers Habbo Hotel, Sulake/Finland – 9.5 million Unique/Active Habbo Hotel, Sulake/Finland – 9.5 million Unique/Active Runescape by Jagex/UK – 6m Active Runescape by Jagex/UK – 6m Active Club Penguin, Disney – 1m active Club Penguin, Disney – 1m active Age of Conan, Funcom/Norway – 700k subscribers Age of Conan, Funcom/Norway – 700k subscribers Second Life, Linden/US – 500k+/- active Second Life, Linden/US – 500k+/- active EverQuest II, Sony/US – 400k subscribers EverQuest II, Sony/US – 400k subscribers Eve Online, CCP/Iceland – 250k subscribers Eve Online, CCP/Iceland – 250k subscribers

28. July 2008Jessica Mulligan28 Virtual Worlds Today

29. July 2008Jessica Mulligan29 Virtual Worlds Today

30. July 2008Jessica Mulligan30 Behavior Complex Simple HardcoreHardcore CasualCasual

31. July 2008Jessica Mulligan31 Club Penguin

32. July 2008Jessica Mulligan32 Second Life

33. July 2008Jessica Mulligan33 There.com

34. July 2008Jessica Mulligan34 Habbo Hotel

35. July 2008Jessica Mulligan35 World of Warcraft

36. July 2008Jessica Mulligan36 Business Models Monthly Subscriptions Monthly Subscriptions Free-to-Play (FTP) with Adverts/Upgrade to Monthly Subsc. Free-to-Play (FTP) with Adverts/Upgrade to Monthly Subsc. FTP w/adverts and Virtual Item Sales FTP w/adverts and Virtual Item Sales

37. July 2008Jessica Mulligan37 The Trends Revenue continues to be from Game Worlds Revenue continues to be from Game Worlds More movement to free-to-play More movement to free-to-play Supported by adverts, virtual item sales and an up-sell to premium status Supported by adverts, virtual item sales and an up-sell to premium status More Browser-based products More Browser-based products Social Worlds at critical growth stage Social Worlds at critical growth stage Millions use them Millions use them The revenue model is still fragile The revenue model is still fragile

38. July 2008Jessica Mulligan38 Which Governments are Investing in VWs? China: $2 billion USD commitment China: $2 billion USD commitment Equivalent to $14B USD for local COL Equivalent to $14B USD for local COL Universities Universities Private Companies Private Companies Government R&D Centers Government R&D Centers South Korea: About $1B USD so far South Korea: About $1B USD so far Subsidies for VW developers Subsidies for VW developers Tax Breaks Tax Breaks Middleware Initiative Middleware Initiative Paid to bring fiber to 70%+ of homes Paid to bring fiber to 70%+ of homes Canada Canada Provinces setting good tax incentives Provinces setting good tax incentives

39. July 2008Jessica Mulligan39 Summary Virtual Worlds are mainly Social Worlds, Game Worlds and Workspace Worlds. Virtual Worlds are mainly Social Worlds, Game Worlds and Workspace Worlds. Game Worlds are the revenue leaders today Game Worlds are the revenue leaders today Social Worlds are potentially the revenue leader in the future Social Worlds are potentially the revenue leader in the future The business model is trending to Free To Play/Use The business model is trending to Free To Play/Use

40. July 2008 Jessica Mulligan 40 Summary Free To Play/Use is supported by various revenue, including Adverts, Virtual Item Sales and up-sells to subscriptions Free To Play/Use is supported by various revenue, including Adverts, Virtual Item Sales and up-sells to subscriptions The West is not investing adequately in Education and R&D The West is not investing adequately in Education and R&D China and Korea want to own VWs, so are investing billions in education and R&D China and Korea want to own VWs, so are investing billions in education and R&D

41. July 2008Jessica Mulligan41 Thank you for listening! Question and Answer Period