1. My name is Sampo Karjalainen and I’m the Co-founder and Chief
Creative Officer of Sulake.
Sulake is best known for Habbo, a virtual world for teenagers. We have
been developing it for over 8 years now and it’s nowadays one of the
biggest virtual worlds in the world. On monthly basis we have over 11,5
million unique visitors per month (source: Google Analytics).
Today I’m going to talk about virtual worlds in general, what are they
good for. I don’t know where this a bit cheesy title of my speech came
from. But anyways, I will try also to talk about how social networks and
virtual worlds could benefit from each other.
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2. What are virtual worlds? People usually think they know when they see
one. But what are the common characteristics of all virtual worlds?
Typically it starts with a computer-simulated space. It can be 2D or 3D
or even textual, but there’s usually some type of a spatial world where
the action takes place.
The users are represented by avatars in the space. They can move
around and communicate thru those characters.
The communication and interaction typically happens in real-time. This
is different from social networking services, where communication is
mostly asynchronous. I don’t think that real-time is better. It’s just
another way of interaction that is appropriate in some contexts, but not
in all.
Virtual worlds typically have lots of simultaneous users. The term
Massively Multiplayer Online Game demonstrates this fact.
And last, the world is persistant. It doesn’t disappear when you log out
and turn off your computer. It keeps on running and developing on the
servers.
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3. I think virtual worlds can be roughly divided into two camps. Although
the line can get a bit blurred in some cases.
On one hand, we have game worlds, which exist primarily for goal-
oriented gaming. In these worlds, the game developer has built the
environment and most of the content in the service. The players come
and play it by consuming the pre-written quests and missions.
On the other hand, we have social and open worlds. They don’t have
pre-defined goals, set by the developer. In that sense they are more like
social networking services that can be used for all kinds needs. The
world and content is often mostly user-created. And the social
experience is important part of the appeal of the service.
This is one way of dividing virtual worlds. Some may divide themby
platform, or by visual representation. For example 3D vs. 2D is the
classic debate. But I don’t think it’s the most important factor. Usually
overall accessibility is much more important than 3D graphics. Too
many of the great 3D virtual worlds are just too difficult to get started
with. And in the end it’s not really the visuals that count, it’s usually
other things as we’ll see in a sec.
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4. How do Virtual Worlds compare to Social Networking Services in size?
Unfortunately virtual worlds (as well social networking services) can be
measured in various ways and even analysts tend to find it difficult to
compare the numbers of different services. So they all tend to avoid
exact lists.
But here’s one of the lists by GigaOM technology blog. It’s “Top 10 most
popular Massively Multiplayer Online Worlds” by active users or
subscribers. As you can see World of Warcraft and Habbo are there on
the top, followed by Runescape, Club Penguin, etc. The numbers have
changed a bit after this. Now the latest from both Wow and Habbo is
11.5M. The list is also missing some Asian games like MapleStory and
Fantasy Westward Journey.
But in general it gives some scale on the size of virtual worlds
compared to social networking services. The latest number from biggest
SNSs are from Facebook’s 175M actives and Myspace’s 125M actives.
So if we just compare the biggest services in both categories, virtual
worlds are one tenth in size.
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5. So the question is…
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6. Let’s first look this from the user’s point of view.
There are four main things that people get out of virtual worlds.
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7. 1. Gaming
People use virtual worlds to compete. Worlds like Maple Story,
Runescape, World of Warcraft are game worlds.
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8. People primarily come for the
game. This is the Massively
Multiplayer Online Game MMOG
area.
There’s an old saying in MMOG
design that “People come for the
game, but stay for the people.” So
they start to play the game, but
then they make friends, set up
guilds and actually keep on coming
back because of their online
friends.
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9. The element of achivement, having
pre-defined goals and reaching
those goals is appealing for many
users.
Many games have missions, quests
or achievements that can motivate
some users to keep on using the
service for a long time.
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10. It’s an element that has been
brought to many of the more casual
social virtual worlds, too.
Goals give people things to do and
make it easier to get started. A
completely open world can be a bit
confusing. What am I supposed to
do?
We have introduced some
achievements in Habbo just for this
reason. We also have some
multiplayer games inside the
environment that appeal to gaming 10
oriented users.

11. Many of the younger kids virtual
worlds have lots of small games.
Actually for example in Club
Penguin, it seems that the small
games overshadow the social
experience. To me it seems like a
wonderful entertainment package,
with a thin social layer on top of it.
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12. Second, people user virtual worlds
to make friends and meet their
existing friends.
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13. Virtual worlds provide a very playful way to meet people. It’s an exciting
experience to meet someone thru an avatar.
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14. It applies to all ages. People use virtual worlds for dating. Couples are
formed in these worlds.
And there’s also some cybersex going on in adults’ virtual worlds.
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15. Third, virtual worlds are really good for creative self-expression.
You can show your own style and interests thru your avatar, your space
and places you hang around.
In Second Life there’s a vivid fashion scene where people design new
clothes and run even magazines on virtual fashion.
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16. Dressing up your character is a big
part of Stardoll, a popular service
among girls. Its focus is not really in
real-time interaction so technically it
may not be a virtual world, but
there’s tons of options for dressing
up your character and furnishing
your space.
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17. Building and furnishing your own
space has become a bit of a
standard feature for all of the virtual
worlds.
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18. And it’s a strong element in Habbo, too. Habbos create all kinds of
rooms that represent their style or interests.
And they also come up with all kinds of creative activities and events in
their own spaces.
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19. This is one example from Habbo. It
may not look like one, but it’s
actually a virtual horse stable.
Some of the Habbos dress up in all
brown, black or white and they play
the horses. The other some in to
take care of them. And then they
roleplay the scenario. We don’t
have any horse stable furniture
available in our catalogue, but they
make-believe this creative scenario
and that’s why they feel like it’s their
own thing. 19

20. Fourth, virtual worlds provide a get-
away to a fantasy setting.
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21. It doesn’t appeal to everyone, but for some it’s important. It can be
dungeons and dragons,…
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22. Or space science fiction. Eve online
is a complete universe of its own,
consisting of over five thousand
star systems. Players have their
own ships and professions and can
form corporations and alliances.
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23. So in short these were the four main appeals of virtual worlds from
user’s point of view.
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24. Then, business. There are two main areas: User revenues and
advertising.
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25. The classic user revenue model in MMOG Games has been the
monthly subscription. Players pay a monthly fee to play the game as
much as they want. It’s a solid model, but it requires a bit of dedication.
But an active player and subscriber can remain with the game for a long
time. Especially when they achieve higher levels and get friends in the
game, they may stay subscribers for a long time, even when they are
not actively playing anymore. They pay the monthly fee just to keep
their status and friend network available.
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26. With Habbo, some 8 years ago, we started with a micropayments
model. Instead of subscription, we let users buy Habbo coins with
various payment methods. And this where 85%-90% of our revenues
come from. Users can buy coins with premium SMS, IVR phone lines,
credit cards, scratch cards, internet biling and so on. There are over
150 different payment channels available around the world.
With these Habbo coins, the users can buy virtual content from the…
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27. … online catalogue. There are all kinds of virtual brands and items
available, some decorative and some functional. We also have some
rare items that are on sale for a limited time only. Collecting and trading
items becomes a big part of the experience for some of the users.
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28. Active traders and collectors
set up their own web pages
where they list the values of
different goods. They may buy
some items now and put them
‘on ice’ for a certain period and
wait for their value to rise.
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29. And the same happens in other
virtual worlds, too.
If you type in World of Warcraft gold
into Google search, you get tons of
sites selling virtual gold.
The virtual asset sales and trading
has become a sort of a game and a
major business on top of these
worlds.
But virtual asset sales have a bit of
different role in games andsocial
virtual worlds. In some games, it’s
seen as cheating when you buy a 29
level 60 character. But in social
worlds it’s usually more about self-

30. It’s an area of research. Why do people buy virtual goods? It’s a valid
question. Once we understand the motivations, we can extend this
model to other services, such as social networks. Facebook has had
the gifts for some time already.
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31. So, user revenues are one part. The second part is advertising.
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32. Here are some examples from campaigns done in Habbo.
The campaigns typically contain elements such as virtual furniture, …
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33. Branded rooms. Activities taking place in these rooms.
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34. Habbo home pages, billboards and special competitions. So, this is the
secondary revenue source in Habbo.
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35. In general we want to have brands that bring some interesting content
with them into the service.
In US, we have partnered with American Idol and we have all kinds of
related activities taking place in Habbo.
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36. Business: 1. user revenues and 2. advertising.
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37. In short, virtual worlds provide a good basis for monetisation, either with
user revenues (people are willing to pay) or engaging advertising
campaigns (brands are interested in them).
How could social networks utilize these ideas?
There are at least two ways. Some elements of virtual worlds can be
brought into SNSs. Things like virtual asset sales, achievements, and
so on.
Or the other way is to build a virtual world extension to the SNS. As said
here at the conference, we need to give basic functionalities for free to
build a sizeable community. But the virtual world can be a way to
monetise it.
As a last concrete example, lets have a look at what already exists.
Facebook’s app platform has been a good ground for virtual world
meets social networking experiments.
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38. If we look at the most active games in Facebook…
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39. we can see that some of them have virtual world –like features.
Seventh there on the list, with 4,5 M monthly actives, is actually quite a
full-blown virtual world, YoVille.
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40. It’s also available in MySpace, and if we combine the numbers from
both, it starts to look like it could be bigger than for example World of
Warcraft in the US.
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41. So it looks like this.
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42. You can create a character, your own space, meet people and so on.
You and utilize your existing Facebook friends in the service and offline
users are reprented with avatars as well.
You can earn one game currency by playing…
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43. Or buy more with real money.
There’s also another link for earning more…
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44. … in which they link to all kinds of questionnaires and promotions that
users can follow to earn YoCash.
I don’t know if this is truly successful marketing for all of the parties, but
similar activities take place in Second Life, too. It’s a way of turning
users’ attention into an asset in the virtual economy.
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45. So in summary, it can be either the developer of the SNS who wants to
monetise the service better by introducing a virtual world component or
virtual assets to the service. Or it could be a brand who provides a
virtual world experience as an app or a widget to engage users of SNSs
and get great results. If the social graph becomes more portable
between services, it may also be that it can be a totally independent
party who just taps into the existing friend networks in a successful way.
It’s still a bit of an uncharted territory, so lets see what we come up over
the next years.
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46. Thank you.
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