-- a commentary by Wayfinder Wishbringer, Founder of Elf Clan
IS VIRTUAL REALITY SATURATED?
Over the past few months a statement has been repeated in the Inworldz forums, namely that the virtual reality market is "saturated"... that Second Life has already pulled as many potential customers from the market as are likely to exist and that any new customers are going to have to come from a totally new-concept market.
Personally... I disagree.
MOM'S AND POP'S--A GREAT PLACE TO EAT
Mom and Pop opened a nice cafe, "Mom's Home Cooking". They had many loyal local customers who raved about their food. They tried to get more customers by varying their menu from time to time, and their current customers appreciated the variety offered. But Mom and Pop's place just didn't seem to grow over the years. It made a profit, they did well and had a great reputation, but as far as growth... there simply was none.
On the other hand, Bob across town opened up a restaurant. His food was decent and filling and of reliable quality, so he drew in customers. Rather than sticking to one restaurant he obtained funding and managers and opened three more in the same city, then expanded through franchising. By the time five years had passed he had the nickname "Big Bob" and there was no doubting his success.
What is the difference here? The answer is obvious: Mom and Pop simply failed to think and move big. Instead they stuck to their one restaurant, working themselves to the bone day after day, hiring a few employes but never doing the things necessary to expand beyond their small business. While they often tried new dishes and recipes and their customers liked them, there was only so much they could do themselves. And after all, there were so many other restaurants out there and they were already over-worked in just keeping one restaurant open; how could they possibly open additional locations? Besides, they must be doing things right because their customers love them and their food is great.
In short, Mom and Pop thought small and remained small. They had dreams of course. They were hard workers and had loyal customers, but they didn't do what was necessary to expand. They did too much themselves and rather than seeking sources of capital for investment, hiring managers and employees and doing all the necessary things that Big Bob did... they merely remained stuck where they were. Mom and Pop insisted on retaining all ownership of their business, didn't want to bring in new partners, didn't want to delegate responsibility or control... and there was only so much Mom and Pop could do in a 16-hour day. So despite having a nice, successful business that customers loved... it remained a small, single location.
SATURATED MEANS "NO MORE CUSTOMERS"
A business website defines a "saturated market" as follows (I paraphrase):
A market in which all prospects already have the product, with new sales resulting only from a replacement situation, with little chance of new-customer sales.
When a market is "saturated", it means there are no more new customers to be gained. We've found such in the area of desktop computers and automobiles. Most people who are going to own a desktop computer already have a desktop computer. As a result, the primary business to be gained in that area is from already-existing customers... either a company's own or the competition's. The same holds true for the auto market except for one classification: those entering or just out of college. That's why auto merchants target that specific market: it's the only "new" market they have.
Is the Virtual market saturated? To be so it would mean that every computer user on the planet that might have tried virtual reality has already tried it... and either accepted or rejected it. Is that the case?
HOW MUCH OF THE MARKET DOES VR ALREADY HAVE?
Second Life claims to have millions of "registered" users. However its regular-user base is a bit below one million. In contrast, there are some 6 billion desktop and laptop computers on this planet. Are we to believe that Second Life has accessed the entire computer market, to the point that there are no new customers to be gained?
That can be ascertained fairly easily by doing very simple amateur market research: ask random people throughout your day if they have ever heard of "Second Life". I have done this. The population I've accessed has ranged from friends to computer professionals.
Would it surprise readers to learn that about half the techs I've spoken with have never heard of Second Life? This means one thing:
If computer professionals haven't heard of Second Life... virtual reality is by no means "saturated".
SO WHY IS VIRTUAL REALITY STAGNANT OR DECLINING?
It's very easy and very convenient to blame lack of growth or even declining numbers on "market saturation". That's the scapegoat within easy reach. Better yet, market saturation means no one is responsible, no one is to blame... because the market is saturated. There's nothing management or sales can do about that.
However there are two problems with saturation-thought:
1) If the market isn't saturated, it means someone in marketing simply isn't doing their job
2) If the market is saturated, it means someone in management isn't doing their job by re-purposing the product and opening up new markets
Either way, someone is failing to see the full potential of what's out there. How do we know this? Because computer companies still sell computers and auto makers still sell cars.
In short, blaming stagnation or low numbers on "saturated market" is a cop-out.
How do auto companies sell cars despite decades of a totally-saturated market? They come out with new models with new features. They re-style existing product so that it looks better. They convince customers their current product will de-value if they don't "upgrade". They build intentional obsolescence into their product (something which I detest, but that's what they do) so that the old product wears out and forces people to re-buy. They advertise so that people who have rejected their brand in the past re-visit the concept and re-consider buying.
WHAT VR MARKETS ARE OUT THERE?
There are several VR markets to be tapped, the most obvious being the first:
* Dissatisfied Second Life customers. Just because someone hates Second Life doesn't mean they hate VR. Many of them come to Inworldz to get away from the extreme prices and heavy-handed policies of Linden Lab. That is a ripe market. Further... there is nothing "wrong" with swiping the competition's customers. Businesses do so every day. Note: I am not condoning "sniping" customers, which is an entirely different matter. But if a SL customer is considering leaving SL for Inworldz, there is nothing wrong with presenting to that person every conceivable reason for doing so. That's called sales.
* People who are bored with other computer activities. As computer users get older, existing activities become more "boring". The old slash-and-hack of online computer games are out-grown (hopefully), they wish to move on to new things, they're looking for more of a challenge, they want to be more creative. VR offers that potential.
* People new to computers. While this is becoming less common, there are still people (mostly older ones) who are only now purchasing their first computer. That market is small but it's there. That very demographic group is a prime market for virtual reality. In addition, every year there are immense numbers of people entering high school, graduating high school or college, or opening businesses who will enter the professional computer market for the first time. Even children raised on computers will go from child-based to adult-based activities. That is an entire new market potential being formed every year, several times a year.
* People upgrading computers. Perhaps in the past someone had an older computer with poor graphics and could not use VR properly. But due to lowering prices they just purchased a quad-core screamer and they now have all the power they need to access VR. All they need is to be reminded of that fact.
* Companies who tried Second Life but grew tired of the exorbitant prices, heavy-handed company policies, buggy systems, excessive lag, crashes, poor scripting engine, self-serving nature, unprofessional company conduct, etc etc. Inworldz presents a similar environment at far less cost, considerably more power and leeway in creating, and better technology. There is less lag, fewer glitches, less crashing, more reliability, more prims, megaprims, no link limits... well, we all know what Inworldz has to offer. In addition while Second Life gained a reputation as a virtual brothel and pedophile haven... Inworldz does not have that reputation. It's a different company. Just because businesses rejected Second Life doesn't mean they've rejected virtual reality entirely. They may think they have. But maybe they just haven't been made aware of the features of Inworldz "new model of automobile".
That's just a sample of potential markets. To put this simply: the markets are there. They just need to be tapped.
TO GROW BIG, THINK BIG
If a company is to grow it has to think on growth levels. That means acquiring growth capital, hiring employees, empowering department managers-- and being willing to let go and delegate authority. This is something we see missing in all virtual reality companies save perhaps Second Life. Second Life has of course been the most successful in growth... but even with their significant profit levels and commendable positive achievements (such as putting VR on the map)... they still failed to meet their full potential.
Not being one to sugar-coat, Inworldz itself is a prime example of "Mom and Pop" thinking. This is a company that has been in business for over five years. It's a good company. It has loyal customers and happy customers and they have a good product. They've made significant improvements in the code and serve up "new dishes" from time to time, which their customers enjoy. But for the past three years (or so) the grid has hovered around 800 private regions and has not grown beyond that level. Perhaps that is wise considering the platform isn't yet quite stable enough to attract a huge audience. Perhaps they're waiting to reach that point. That's not a bad way to go.
On the other hand, perhaps Inworldz is so deep in correcting Second Life and OpenSim errors they're missing opportunities in marketing... and perhaps even missing a very limited launch window. I know some will cry "Heretic! They know what they're doing!" and... maybe they do. But consider: in five years of operating time, could they have been further along?
It seems there is potential that has been missed. In a recent forum someone asked why Inworldz, seriously in need of development capital, never attempted to access crowd sourcing (a method of raising immense amounts of money through customer reward-based donations). It's been questioned why the company didn't extensively and actively court the Educational community when Linden Lab gave them the shaft removed their special discounts. Why is it that a company desperately in need of cash has focused more on development than in procuring development capital? Has that lack of funding actually impeded development?
A man can build a house himself or he can hire men to help him build it. Either way it gets built. The question is whether he'll ever get a chance to actually live in it.
Some will argue that Inworldz only has three Founders and one employee and a small handful of volunteers and there's only so much that can be done with limited staff. That is quite true. But the question arises: why not then procure the capital to hire more staff... especially in the marketing and coding areas? One can understand waiting until the code foundation was solid before making a big marketing push, and I certainly won't deny the wisdom of doing so. But has significant opportunity been missed during a crucial time... a time before anyone else had a chance to start ramping things up? Could the company have benefited from hiring additional coders and management staff so that they could achieve their goals in three years rather than five? Will they have time to achieve their goals at this stage of the game?
Aside from the obvious counter-market competition by companies such as Facebook and online computer games... VR is facing potentially severe competition within its own ranks. Linden Lab has announced plans for a Second Life 2, a totally-revamped virtual reality system. It is a fact that since Linden Lab's announcement of SL2, members of Second Life have been jumping ship and coming to Inworldz. But that's luck market. Should we expect all (or even a significant number) of Second Life users to take that step? Inworldz may experience some region growth due to that announcement, but until SL2 appears and people find out what it really is even that growth potential will be limited. Until then, SL2 very likely poses a greater competition threat than growth boon.
Philip Rosedale, ex-CEO of Linden Lab and founder of Second Life has announced his own project based on open source code, in which anyone can run their own virtual world. Despite popular thought, in my opinion he is not to be underestimated or taken lightly. Philip knows how to start a company (he's done it before) and he has significant personal investment resources. There is a chance he just might pull it off.
In addition, great concern comes from a little company named Yahoo... which has been suspiciously buying up gaming and virtual reality firms... and has been very closed-mouth about what they're planning to do with such assets. Google once tried VR and failed. All that means is that Yahoo has a very good example of what to avoid. It would be foolish for anyone to ignore this potential heavy-hitter in any endeavor they tackle.
A SHORT WINDOW OF OPPORTUNITY
I believe there is a short window of opportunity for virtual reality "as we know it" to get its act together. Our home Inworldz not only needs to succeed at its current goals, it needs to grow and expand with intent to compete with these potential major market threats.
Linden Lab has already made it very evident that they consider the current Second Life to be old beans. That would include anything based on the SL concept-- which includes both OpenSim and Inworldz. The fact that Linden Lab has showed pretty much zero concern for the existence of OpenSim or Inworldz either one is strong indication of how lightly they take either operation as an actual threat to their dominance. Perhaps that's a foolish stance... or perhaps it's because they've been planning the next generation of VR for some time. Despite any ill-will and disrespect one may justly have for Linden Lab as a company-- it would be most foolish to ignore them as a force-to-be-considered. After all, they pretty much created VR as we know it.
So do the virtual reality worlds continue to operate as "Mom and Pop's" restaurant, keeping the business close-to-home and operating their companies as a "family business"... or do they do what is necessary to pull in essential investment capital to fund needed development and management staff? Do these companies continue to stagnate, failing to change current methods that have proved unsuccessful in promoting growth-- or do they follow the established methods of business proved over decades and start thinking like the "big dogs"?
MAKING GROWTH HAPPEN
One does not have to give away a company or shaft customers in order to succeed. I fully believe if Linden Lab had put their customers first, treating their customers with respect and ethical behavior, they could have been ten times, a hundred times larger than they are. Failing to protect customer interests, failing to keep their word in operations, destroying customer relations-- these have been their biggest mistakes. "Make the customer happy and the money will follow." Tick off the customer... and you lose the customer.
It's possible to put the customer first and still be a highly successful company. Amazon is proof of this. Gevalia Coffee is proof of this. But such success doesn't come by keeping such a tight hold on the horse's reigns that it can't run. For a business to grow, management has to think growth.
A bonzai tree has its growth severely stunted, intentionally, and although it may be beautiful and gain great admiration and be a work of art... it will never be a fully-grown tree. So in such things, one has to decide on the desired results. Bonzai shop or productive apple orchard? The outcome depends on what the owner decides to do now.
If one decides to not obtain necessary seed and attendants to plant and nurture an entire orchard because it's believed the apple market is "saturated"... that opinion will likely be self-fulfilling. The question isn't whether the market is saturated... it's what will virtual worlds (especially Inworldz) do now to expand and own that market? If current VR waits too long, if we think too small and thereby fail to progress quickly enough, there is good chance someone else will beat us to the punch. That is one of our world's greatest threats-- and should therefore be one of its greatest concerns.