Doing Business in Virtual Worlds

Synthetic worlds are big news these days, with visitors to these so-called virtual environments coming from a wide range of backgrounds–including presidential candidates and movie stars. In addition, numerous large and midsize companies have explored synthetic worlds, though many eventually abandoned them.

Synthetic worlds are computer-based simulated environments that allow multiple users to inhabit and interact with each other through two- or three-dimensional graphical representations of humanoids and other forms, known as avatars. These virtual environments resemble the real world, with rules such as gravity, topography, locomotion, real-time actions and communication.

Though more than 50 individual synthetic worlds exist, according to, a social virtual environment called Second Life has gained a lot of attention during the past year. Many people believe synthetic worlds are elaborate games, but there is real business going on in Second Life. Its service provider, New Business Horizons, counts scores of businesses and retailers, such as Coca-Cola and Sears, that have set up virtual stores to market products and test prototypes. And INSEAD, an international business school with real-world classes in France and Singapore, has built a virtual campus and classrooms in Second Life to supplement in-person learning.

A growing number of companies use synthetic worlds to connect with customers or interact with employees, thereby significantly reducing business travel time and expenses. At Deloitte Consulting, for example, we used this environment to host our 2007 Global Excellence Awards ceremony, allowing employees from around the world to “attend” the event.

More recently, Second Life covered the 2008 World Economic Forum in Davos, Switzerland. It provided virtual interviews and discussion forums with key attendees.

Understanding the Virtual Market

Skeptics may find it hard to understand all the fuss about virtual environments, especially when they find large deserted areas in synthetic worlds such as Second Life. For the most part, these areas were set up by corporations that used them for a one-time media blitz and then abandoned them. This short-term view has resulted in what media critic Mark Glaser characterizes as a hype-and-backlash cycle, which has cast doubt over the potential business value of synthetic worlds.

The phenomenon is reminiscent of the dot-com era of the late 1990s, when a large number of Internet-based companies were formed after the explosive popularity of the Internet. These enterprises dismissed standard business models and focused on the common goal of “getting big fast.”

Unfortunately, thousands of these startups failed, burning through their venture capital–often without ever making a net profit. However, some companies did make it through the dot-bomb, including Amazon, which differentiated itself through a business model that was tailored to suit the new market environment.

Learning from the dot-com experience, some enterprises have identified a key factor that’s necessary to successfully establish a virtual presence, whether for marketing purposes or commercial gain: Develop a strategy specifically suited to consumers of this new environment. In order to do that, companies must first understand the virtual market and its users.

Though surrounded by controversy, virtual environments such as Second Life can have a huge impact by quickly redefining personal and business interactions. In fact, the emerging social computing networks–online communities of people who share interests and activities–are predicted to redefine customer relationship management and business relationships within the next five years. This trend is gradually moving toward immersive 3-D environments, where there has been a tremendous increase in the number of synthetic world users. Virtual world consultancy K Zero estimates that synthetic worlds have registered close to 174 million users.

Some companies have developed innovative ways to integrate synthetic world technologies into their business model, effectively generating value for their business. In December, for example, Luxembourg hosted its first virtual job fair, bringing together professionals from 45 countries worldwide.

The Working Worlds fair, hosted in Second Life, welcomed 2,000 visitors who conducted more than 300 job interviews, with more than 50 of the candidates invited to Luxembourg for face-to-face meetings, according to GAX Technologies, the IT services firm that organized the event. Luxembourg, which faces significant recruitment difficulties due to an insufficient number of job candidates, has used this method to open the recruitment market internationally–with no travel expenses and low operating costs.

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