A ‘Virtual’ Escape From Economic Pain – Forbes.com

A ‘Virtual’ Escape From Economic Pain
Mary Jane Irwin,

The Dow plummeted below 9,000 points to a five-year low Thursday. Worldwide, economies are slowing and consumers are worried sick about their future.

Despite all the doom and gloom, one tiny sector is offering a glimmer of hope: virtual worlds. Companies such as Gaia Interactive and Habbo are expecting a boost as consumers reduce spending on real-world goods and luxuries and console themselves with so-called virtual goods–digital copies of products that can cost just pennies, allowing users to indulge their materialistic fantasies without spending much.

“As the ‘real world’ gets worse, virtual worlds get better,” Gaia Chief Executive Craig Sherman told Forbes.com in an e-mail. “As things get worse, people spend more time at movies or spend more time on a site like Gaia Online, which provides a relatively inexpensive respite from the offline world.” Gaia, which targets U.S. teens and twenty-somethings, had more than 7 million unique visitors in September.

Teen-focused virtual world Habbo boasts a similar outlook. While there is some concern the down economy will reduce the site’s ad sales, 85% of Habbo’s revenue is derived from virtual goods transactions. The site’s 2.5 million U.S. users spend an average of $18 a month, and the average time spent on the site has doubled to 40 minutes per session in the past year, says Executive Vice President Teemu Huuhtanen. He expects the number of unique users–currently 10 million globally–to grow as the site introduces new services and activities.

Kid-focused virtual worlds like Club Penguin and Neopets have boomed over the past two years, becoming an attractive investment niche for large media companies. These sites provide a way for kids to interact with a media property–say, Nickelodeon’s legion of characters–in an environment that is cheaper on a per hour basis than seeing the latest flick in the theaters.

EVE Online, a science fiction-themed massively multiplayer game, is going gangbusters. The subscription-based virtual world has gone from 220,000 users to nearly a quarter of a million since the beginning of the year. EVE’s on-staff economist Eyjo Gudmundsson expects the game’s growth to continue over the next six months–particularly as people look for more inexpensive forms of entertainment. The basic EVE subscription cost is $14.95 per month.

Gudmundsson cautions, though, that virtual worlds that are directly linked to the real world may fall victim to some real-world economic frustrations.

Indeed, the number of registered and active users of Second Life, a virtual world that simulates real-world experiences, have flattened out, says Parks Associates analyst Michael Cai. But this might not be a reaction to the economy; it could be due to consumers shifting to other virtual worlds. Cai predicts that corporations will start using Second Life or custom 3D virtual worlds to hold meetings and cut travel costs.

via A ‘Virtual’ Escape From Economic Pain – Forbes.com

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