In its second-largest acquisition, Amazon buys the company for $970 million.
Retailers look for real value in virtual worlds—but their expectations of what defines success have to change.
1-800-Flowers.com launched a new online store in June, but it isn’t looking to traditional e-commerce metrics to measure the store’s success. For one thing, visitors to the new store can’t buy anything. What they can do is collect a free assortment of virtual flowers and enter contests such as the recently-concluded Virtual Bouquet Design competition or the Fields of the Virtual World snapshot competition.
They also can interact with other store visitors and communicate in-store with representatives of 1-800-Flowers.com. Meanwhile, visitors to 1-800-Flowers.com’s flagship e-commerce site can view and comment on snapshots from the new online store. It’s in these last activities that the company is looking for value from 1-800-Flowers.com in Second Life.
“We recognize that this is not just a place to jump into so we can sell more flowers and gifts,” says 1-800-Flowers.com president Chris McCann. “It’s a different environment and an emerging world.”
The comic-book look
1-800-Flowers.com is a recent addition to a small roster of major brands that have set up shop in Second Life, one of the most widely-known of a number of graphically-enhanced, 3-D, Internet-based virtual worlds where visitors interact with the environment and each other through online figural stand-ins called avatars. Owned and operated by Linden Research Inc., known as Linden Labs, the Second Life platform, and other virtual worlds like it, are attracting the attention of marketers on a continuous lookout for the Next Big Thing.
Under the usual metrics retailers apply to their e-commerce sites, Second Life doesn’t measure up. While a major online brand counts monthly visitor traffic in the millions, Second Life’s entire visitor population-defined as the number of resident avatars-though growing, was at around 9 million in August. And Nielsen/NetRatings market measurement reports a unique user base of 774,000 in May. Some experts say transaction functions in parts of the still-developing virtual world aren’t as robust as in the conventional online environment; while fulfillment in the real world provides another challenge.
The depiction of virtual products in Second Life–say a shirt for an avatar-is more comic book-like than photorealistic, the polar opposite of e-commerce site functionality that shows products in ever-greater clarity and detail. Merchandise in Second Life is paid for in Linden dollars, which could be purchased in August at in-world exchanges at the rate of one U.S. dollar for about 270 Linden dollars. So far, the revenue on sales, when converted back to U.S. currency, isn’t going to move the needle on any retailer’s financial results.
But none of this bothers the brands busy developing outposts on Second Life because that’s not why they are there. Which leads to the real question: What is the real-world pay-off for retailers in a virtual world?
Visiting Second Life is akin to being in an online video game. In fact, that is one venue to which Second Life traces its roots. Popular multi-player online games such as World of Warcraft have helped introduce the concept of how human players could propel an avatar through a 3-D online virtual environment. Another foundation for the 3-D look of virtual worlds was the need to present in some comprehensible format the tons of data that supercomputers were spewing out 15 years ago, says Michael Rowe, manager of Internet and interactive at IBM Research. “They generated such a volume of data that it required some pretty complex visualizations to allow people to consume the data in a meaningful way,” Rowe says.
Sharing and manipulating that data and those visualizations among workers across IBM’s global network also suggested a better way for workers to collaborate. Last year, IBM formalized grassroots efforts within the company and formed a new division, the digital convergence emerging business opportunities unit, to look for ways to leverage that same knowledge base in new offerings.
One outcome of that initiative is Second Life’s IBM Island. IBM Island, which opened late last year, is home base to the virtual showrooms launched this year by retailers Sears Holding Corp. and Circuit City Inc. Linden Labs owns all the “land” on Second Life, but it makes “islands”-basically, servers capable of holding a defined number of avatars simultaneously-available for sale. To set up a facility on Second Life, companies buy an island or sublease land from someone who already owns one. IBM Island has leased real estate to both Sears and Circuit City; at the same time IBM works with both retailers to build out their presence there.
At Sears in Second Life, visitors can configure a kitchen in an immersive 3-D environment that may yield information not so visually apparent in a 2-D room planning tool, according to Rowe; seeing immediately, for example, that a planned sink is too far from a key appliance.
Reaching a new segment
Sears in Second Life doesn’t actually sell products, though visitors can click from Second Life to be transported to Sears.com. For Sears, as with other retailers having Second Life installations, today’s virtual world isn’t about sales. “This is a new way to reach a segment of the population for whom Sears may not have had the same resonance it did with their parents or grandparents,” a Sears spokesman says. “People are coming to the Second Life store, maybe folks that have not been in a Sears for a while, and they are saying, hey, these guys have some cool stuff. And if they do get transported to Sears.com, hopefully they are buying.”
While Second Life’s most frequent users overlap the early-adopter crowd, tech-savvy 18- to 24-year-olds typically aren’t interested in buying refrigerators. But Second Life reports participants’ average age as 35-within the range of peak home-equipping years.
Like Sears, some retailers also find value simply in being an early player in an emerging venue or enterprise on the chance that it might develop into something big. 1-800-Flowers.com, for example, has experimented throughout its history with new channels and new media, including toll-free phone numbers and the web itself, where it was one of the first retailers to open an online store.