Virtual Worlds Management released a report stating that $1 Billion has been invested in virtual world companies over the past year. However, as Joseph Weisenthal astutely points out on paidContent.org, there are some serious problems with taking this number at face value.
The first big pitfall we run into is the Disney deal. They purchased Club Penguin earlier this year for $350 Million, plus another $350 Million based on certain performance metrics. That accounts for $700 Million, or 70% of the total figure.
Next we have Intel's purchase of Havok, which isn't a virtual world at all. It's physics software that could possibly form a component of a virtual world when combined with several other, equally complex pieces. That's another $110 Million, or 11% of the total figure that we can't count.
What's left is $197 Million in investments spread across 33 companies, a few of which could only be considered glancingly related to virtual worlds (see Weblo). Still, it does show some tangible activity and interest on the part of venture capital firms, and the $197 Million figure could prove to be a metric worth keeping in mind when compared to next year's figure.
As I stated on the paidcontent.org comments page, the $1 billion number is virtual world companies - which includes technology companies behind virtual worlds as well as the worlds themselves. Intel's $110 purchase of Havok falls into this category as do a number of the other companies in the $197 million round up.
I won't debate the Disney acqusition here because no one knows what those performance metrics happen to be. In principle Disney agreed to the $700 mill so I believe it to be a fair number to document.
Play with the entire grouping of numbers as you please - they are all laid out on our web site - and no matter how you slice them Virtual Worlds companies (companines throughout the value chain) still garnered a respectable amount of investment capital in the past 12 months.
Hi Christopher, thanks for commenting. I guess what we're trying to get at here is that when numbers are quoted they need to be useful. If you don't go to great lengths to point out that Disney is a statistical anomaly, then none of the statistics that come afterward mean nearly as much as they would have. If you include Havok, you have to include everything related to video game technology, and soon you're struggling with the definition of "virtual world" again.
(I'm still struggling with Weblo being called a virtual world, but maybe that's just me...)
Having said that, I agree with you that $197 Million isn't insignificant. It's just, well, quite different than $1 Billion. When future statisticians are charting these things, it's the lower number that will tell them something of value. That higher number, if taken at face value, is a dangerous over-valuation of the current interest and may falsely give the impression next year that "the bubble burst". What happens then?
This is the early stage of a rapidly RADILY growing industry. Other than Second Life and There.com the term "virtual worlds" was rarely associated with other products, companies and services prior to 2006. Largely the industry is in flux and the term as we see it now applies to a variety of companies.
Clearly we called attention to both the acquisitions in the release - Disney and Havok. You can't tell me that the Disney acquisition doesn't count because we don't want to give the impression that a bubble burst in 2008. If you do that then who's playing with the numbers... We very clearly call attention to the acquisitions.
And your comment about "if you include Havok...." ... I'm sorry no you don't have to include everything related to video game technology. That idea is a quick, not very intuitive, view of someone who doesn't understand the game industry and the technologies involved. Havok is a principle underlying technology in Second Life so they were included.
"Other than Second Life and There.com the term "virtual worlds" was rarely associated with other products, companies and services prior to 2006."
i suggest anyone in the tech or media industry in 1996 would disagree.Within 4 years almost all web3d virtual worlds companies where out of investment, money and business. The business plans of the "leading" virtual worlds companies look identical for the most part as those in 1996-9. Only a few offer any new thoughts.
In 1996 "small' companies like SGI, SONY, Microsoft and then CA all spent millions...they formed a vr frenzied bubble, one that looks very close to being repeated again today.
history forgotten, future written
I said the term "virtual worlds". I didn't say the marketplace. Yes VR has been around for a while. So have the terms VRML and web3D and MMOG and MUD and others. sheeesh I worked for a "distributed computing" company in 2001 and now that same company is billed as a "grid computing" company the business model did not evolve the branding did. Same here.
I accept your rebuttal, Chris, except for this little bit:
That was hardly your queue to get personal Chris. You know as well as I do that Havok has been used in several dozen games, and just happened to also be used in the one virtual world. Intel's purchase, while interesting to us because of the implications to Second Life, wasn't necessarily an investment in virtual worlds from their perspective.
Also, if this is your rationale, future versions of this compilation should include whatever moneys went to Windlight and Vivox. We have to be careful here though. If Vivox gets purchased by someone else with the express intention of providing VOIP service on the web, one could construe it as a virtual world investment - as in Havok's case.