Digital real estate a hot thing for MNCs

By siliconindia   |   Monday, 08 January 2007, 18:30 IST
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NEW DELHI: The quest for new business models has, of late, led companies to plunge into real estate deals, with a twist. The prime properties, unlike the ones we own, are located inside the video game territories. Surprised? IBM recently purchased 10 islands (sort of digital real estate) in the virtual game Second Life to develop new platforms for interaction among employees, test out new products and get customer feedback. And it’s not alone. Cisco, Sun Microsystems, General Motors, Nissan, Starwood Hotels, American Apparel, Sony, BMG and other MNCs have bought properties in Second Life, which boasts 1.6 million players globally, reported the Economic Times today. IBM clearly has a head start in this approach. In addition to the 10 islands, it has also set up a virtual store in Second Life, where people can look at products in a 3-D (three-dimensional) space. The $11-billion deal with consumer electronics retailer Circuit City allows users of the game to click on any product in the virtual store. On such occasions, people will be directed to Circuit City’s website to purchase it. IBM also hopes to lower travel expenses by conducting meetings and training sessions at the Second Life islands. Cisco Systems’ island in Second Life includes an amphitheatre too. Though Second Life, developed by California based Linden Labs, is four years old, companies have recently realized the potential of the virtual real estate. Most of the developments in Second Life (an open-ended 3D virtual game in which residents create nearly all the content, including imaginary buildings, vehicles, and outfits) have happened in the past two weeks. Linden Lab’s business model requires anyone who owns (digital) land to pay maintenance fees. Each island is stored on a single server — and the company charges fees from those visiting the island. Philip Evans, senior vice-president, Boston Consulting Group (BCG) told ET: ‘’Enormous amounts of resources are being deployed to understand virtual space. Second Life is growing (that is, number of users) at 10% a month. There are 50 million bloggers, wikipedia has over one million articles, there are 35 million players in the virtual world globally, 70 million teenagers on MySpace. All this provides exciting opportunities for companies to tap the virtual world for new products and services and that’s what they are doing in Second Life.’’ Products go through a virtual-testing phase this way before being bought in the real world. Added Evans, “At the American Apparel store in Second Life, you can try a shirt off a virtual shelf and look in a virtual mirror before buying it. A 3D environment can radically change how things are bought and sold.’’ IBM, with over 300,000 employees worldwide, will use Second Life islands for chat and socializing for employees. Industry watchers say that while instant-messaging programs and videoconferencing have been available for some time now, Second Life offers creative freedom. Rod Smith, IBM’s vice-president for emerging technologies said, ‘’With bandwidth availability, increasing computing power, rapidly improving technologies, it’s possible to create rich 3D environments. I see such technologies becoming common in the next generation of internet.’’