A panel at the 2007 Virtual Worlds Conference titled, 'Demographics and Numbers: Where Things Are and Where They're Headed' brought together Michael Cai, director of Broadband and Gaming at Parks Associates, Mary Ellen Gordon, owner of Market Truths Limited, and K Zero managing director Nic Mitham to parse out the demographics in the virtual worlds space.

Looking at market penetration, Mitham opined, "I think it’s pretty fair to say that virtual growth to date has been heavily based on word of mouth and viral marketing.” Moreover, Mitham expects the trend to continue, calling on the example of companies like BMW opening Second Life islands to widespread media coverage as a driver of Second Life population growth.

Finding New Markets, Developing Existing Ones

One can't rely purely on PR for advertising, Mitham added, stating that he hopes to see traditional marketing to start happening. "We’re seeing children actively adopting Club Penguin, Whyville, Habbo... as they eventually grow out of it, they will be looking for new worlds to grow into. There’s a huge market already there, waiting to happen."

The market is developing globally, too, Mitham said, noting that European countries are also actively embracing virtual worlds. Though typically Russia and South America are slower to adapt, Mitham noted, these are large growth areas that will begin adopting virtual worlds more in the future.

"We don't see much for 'silver surfers,'" Mitham added, noting that older users are also a prime growth area. Similarly, he expects corporate adoption to broaden, as companies like IBM encourage their employees to move into virtual worlds for corporate uses, and educational institutes are using virtual worlds in the classroom for the set aged 8 to 15.

Engaging New Users

It's a matter of product development, he said -- developing new products for marketplaces that already exist. Mitham also noted that better user interfaces and new user orientation will assist in driving more widespread adoption, as will other avenues of access like web-based remote viewers.

Diversification is the other key avenue, Mitham noted -- bringing new products into untapped markets, as with category-centric "vertical worlds". One example Mitham raised is Football Superstars, a virtual world currently in development for people who play football and soccer. Half the world is for playing football, the other half is for living the life of a footballer.

Beyond this, there are platform-centric virtual worlds, such as Sony's upcoming PlayStation Home, which will be used as a convergence tool for gamers. "The reason for going in isn’t the new technology; people are going in for a specific reason,," Mitham said.

Additionally, Mitham said that avatars that can cross worlds -- the interoperability work IBM is currently involved in -- will be "a really good driving factor for getting more people engaged in virtual worlds."

Mitham offered some projections on growth in virtual worlds he believes will take place between the fourth quarter of 2007 to the fourth quarter of 2008. He anticipates growth of registered accounts in Second Life to increase from 10 million to 20 million, 1 million to 7 million for There, .6 to 3 million for Kaneva, from zero to 10 million for the Chinese virtual world HiPiHi, an increase from 3 million to 10 million for Whyville, and from 15 million to 30 million for Club Penguin.

Parks Associates' Michael Cai took the stage. "I’m still trying to formulate my analysis for the industry," he said, explaining that Parks Associates will be launching a new gamer study in the next 3 to 6 months.

The Demographics of User Retention

Cai said that about 6 percent of broadband users visit a virtual world on a weekly basis; 18 percent of them have tried at least once. So, he said, about one third who try a virtual world stay there, though he didn't quantify how many return visits or what frequency of regular use quantifies "staying." Cai says that Second Life is still number 1 in terms of user retention.

He noted that 71 percent of users are aged 18 to 24, numbering more visitors to social networks than virtual worlds "by a large margin." This is mostly because of ease of use, he says, adding that more females use social networks contrasted with more males who use virtual worlds. "People use these things for hooking up, so male to female ratio is important for growth," he added.

Some other interesting numbers -- for teens who play games in general, including but not specifically virtual worlds, 76 percent play with other people, 19 percent play alone, and 42 play with their moms, Cai said.

Promoting Brand Images in Virtual Worlds: Pros and Cons

“So what are the business implications of virtual worlds?” Marketing and advertising is very promising for the virtual world," Cai said. He noted that 500 out of 1000 internet users in a questionnaire were Second Life users, and the same questionaire found that 60 percent of them watched less television. "Advertising needs to migrate to virtual worlds as opposed to in-game advertising," Cai explained.

While Cai noted that the large majority of Second Life users consider the world a good forum to promote brand images, he noted some pros and cons. As a positive, filling Second Life with brand messages creates an accurate real-world replica. It can leverage avatar interaction and viral marketing, thereby not requiring the player's full attention the way an MMORPG does. And virtual world involvement generates a lot of real world buzz.

On the downside, though, virtual worlds presently have a small base of active and concurrent players. Also, they may not be appropriate for traditional in-game ad formats due to low collective traffic in most areas; Cai cited cases where marketers spend 300,000 to make an island, and a month later, there's no one there. Another con is that properties set up by brands in virtual worlds require active management and maintenance. According to Cai, the best results for virtual world marketing are currently delivered through organized events -- however, technical limitations can keep the scale of such events limited.

Making a Good Impression

Mary Ellen Gordon is the owner of Market Truths Limited, who performs market research analysis in both the real and virtual worlds, mainly Second Life. In the company's first quarter 2007 survey of Second Life, Gordon says 40 percent of users had positive impressions of real-life brands in Second Life -- and in the second quarter survey, that number increased to 60 percent. She attributes the increased positive results to making Second Life more realistic and bringing in assets, in addition to population increases in the world.

She suggested marketers broaden their focus in terms of virtual world tactics by doing things like giving away virtual versions of real-life products, sponsoring events and then customizing or co-creating real-life products to reflect in-world events. Still, she noted, most tactics are perceived more positively when undertaken by brands for which pre-existing attitudes are positive.

She concluded the panel by predicting future diversification of the types of brands that are present in virtual worlds.

[Chris Woodard contributed to this report.]