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  Big Boom in Metaverse Development  
Posted 2007-02-26 by Tony Walsh
Third-party metaverse development firm The Electric Sheep Company, which creates content and services for virtual worlds such as Second Life and There has scored $7M USD in a round of financing, reports Reuters (a client of the Sheep). Investors include CBS (a client of the Sheep) and "existing" investors Gladwyne Partners, according to Reuters. It's not uncommon for makers of virtual worlds to receive financing, as shown recently by Areae, Doppleganger, Meez and IMVU: What makes the Sheep investment significant to me is that the financing is going towards a third-party--not first-party--developer.

This is a very exciting development not just for the Sheep, but for all companies and individuals who have entered the rapidly-evolving industry of metaverse development in the past couple of years. The Electric Sheep Company reportedly employs 45 staffers, not including virtual-world labour--by comparison, Linden Lab, maker and maintainer of Second Life employs about 110 people at its San Francisco office. In a Fortune Magazine article, David Kirkpatrick writes "Linden Lab counts 65 companies that have sprung up inside Second Life to serve real-world business customers. CTO Cory Ondrejka says about 350 people work full-time for such companies, and there are at least $10 million worth of such projects underway." Reuben Steiger of metaverse developer Millions of Us responds "I happen to think his estimate of the dollar value of projects underway is low, but it’s cool to see the overall size of the market."

Sheep CEO Sibley Verbeck compared today's metaverse to the Web of 1993 in an interview with Reuters. I think that's a fair comparison on many levels (and one that's been made before by myself and others). Carrying that comparison forward, could we be seeing the metaverse equivalent of a dot-com boom in the next few years? I think it's possible, I just hope we've learned from history and can avoid an industry collapse. In my opinion, it's more lucrative to be a third-party developer in the metaverse space, particularly a developer which has distributed its efforts across a variety of virtual worlds or platforms as The Electric Sheep Company has. I've only just begun to develop virtual goods for sale in Second Life, but I've picked a brand and products that can easily be transported to other 3D environments, in case Second Life goes tits up.
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Comment posted by Prokofy Neva
February 26, 2007 @ 3:48 pm
Good call on Reuters being a client of the Sheep, Tony, I'd totally forgotten about it, even though I once attended a press conference and drilled on it. I see Reuters is now hiring its own builders and scripters, I wonder if it will become less dependent on ESC now.

I've given this story of the funding of ESC a much more critical review here:

And the questions you really need to ask, are as follows:

Yes, it's exciting that people can spin entire metaversal full services companies out of SL. They're all rocking and hip and happening guys, as you can see, meeting them in RL as we just did. But...what are the books like, exactly?

Linden Lab likely pays their programmers out of the 110 staff very top dollar to do what they do. I hear ESC has competitive wages, but do they actually have something equivalent to the 24 developers the Lindens just hired in the last few months, in terms of firepower and salary? The numbers alone don't tell the story; the job descriptions and salaries would tell the story. For example, there might be people earning very low salaries who just do events planning which is merely about prim sweeps and eject buttons, and that may fill up the staff.

And maybe it's apples to oranges.

Re: "Linden Lab counts 65 companies that have sprung up...there are at least $10 million worth of such projects underway." Reuben Steiger of metaverse developer Millions of Us responds "I happen to think his estimate of the dollar value of projects underway is low, but itís cool to see the overall size of the market."

What's amazing to me about all this is how there isn't any trickle down feel yet to the world given the collossal wealth here at stake. It's not like any of these companies brought in hordes of customers that have made a huge impact on the inworld economy.

I mean, sure, some L-Word gals probably buy more Barnes stuff on their island, but overall, the hallmark of these companies is to make presentations or press conferences on their expensive, built-out sims, and then to get old-media coverage and hittage, and lather, rinse, repeat. 3pointd has made the unsupported statement that these companies bring in their own RL customers into SL to benefit the entire world, but we don't see any evidence of that, these islands remain low traffic with only sporadic surges of visitors when they have a media-hyped event. I don't think these sherpas have a way of putting red dye on an avatar to see what their Linden dollar expenditures are in the world anyway, and I'll bet if we did put in the red dye we'd see it all in Hard Alley anyway.

Why should we even care about the world itself and its businesses and residents? Because the whole point of the hype is that there is supposed to be this virtual world there. Remember? Virtual? World?

If the virtual world and the people in it can't sustain themselves, and can only be something for tourists to gawk at or sample briefly, it has the economy of a Thailand or something. It doesn't develop and falls prey to tsunamis, figuratively speaking. What you're saying is that instead of a rich and complex virtual world where people take up identity and socialization and trade, there's merely just a series of points and clicks on groovy media, like on the old 2.D web surfing circuit.

The other question you need to ask is about profitability. Like LL, ESC has attracted a round of funding. And Sibley put in his own money too. Is this profitable already? And what can be shared about this? Probably nothing, because it's not a publicly-traded company and its in a cuthroat environment.

I'm personally just less excited than you are, Tony. I'd rather see 350 jobs created in Second Life by people offering content and services to the world of SL itself, not to RL, and being able to sustain themselves and others doing that, because otherwise, why does RL want to bother with a virtual world? If a virtual world is just a glorified media player with changeable skins, why have the lag and the asset server?

They can do the things they do in RL, talking or sharing media, outside, on the Internet, with less lag and learning curves. So the immersive world is the draw, and that has to be developed, too.

Your question about the bust might have to be moved up a few years (Edward Castranova says 2007 is the year virtual worlds will collapse) because perhaps it will all happen in an accelerated way.
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