The Sheep get funding

 Posted by (Visited 8648 times)  Game talk
Feb 262007
 

Clickable Culture reports that The Electric Sheep Company gets (more?) funding to the tune of $7m. As part of the article, there’s a quote from Sheep competitor Millions of Us saying that the market for third-party services of the sort these two companies provide is pretty sizable — that the estimate of $10m worth of projects in development is “pretty low.”

For those who don’t know, what these companies do (and others like them) is act as third-party content and systems creators for virtual worlds. If you want to have a presence in Second Life, or make a pile of clothing for IMVU, or build a Virtual Laguna Beach, you call one of these companies and they will make the stuff for you.

It’s quite likely that the business the Sheep and others are in is like the RMT business for games in some key ways — that is to say, potentially bigger than the actual provider business, and certainly a hell of a lot easier. The investment seems to validate this — it’s a figure comparable to, if not larger than, some of the investments in virtual world creators.

The flip side, of course, is that the purpose of building this sort of thing is essentially marketing — and right now, there’s a hell of a lot more actual marketing value derived from the press release saying that you have an island in Second Life than there is from the actual island, which is likely to be poorly attended, a nine-minute wonder, and reach rather few people when compared with other marketing efforts. It can be argued that the SL population is core influencers, but I simply don’t think that is the case for some of the brands jumping in there.

No, what I think we are seeing are forward-looking companies trying to get a handle on a new medium — and savvy companies spending a tiny amount of cash to generate a trendy press release. Either way, the spend is pretty negligible in the case of most companies; a decent marketing campaign can be very expensive, and doing an SL build is pretty cheap.

With the trend towards media companies wanting their own worlds, we’re going to be seeing them turning towards the Sheep and others more and more as essentially content creators. The opportunities for RandomCompanyA to put up a kiosk in one of those worlds won’t be there — you can be sure that any such presences in Virtual Laguna Beach are tightly controlled by MTV! — but instead, the whole world will be one giant marketing and branding opportunity.

So these companies are occupying a niche much like that of the content companies used by ad agencies and marketing departments the world over — just with a new medium. Just as we saw tons of web-centric companies of that sort spring up as the Web grew, we’re likely to see more of them now with virtual worlds.

There are some pre-requisites, however. For a diverse ecology, you have to have a wider array of worlds that actually allow marketing builds. And not via the partnership route, either. Think of a world like a magazine, where the branded worlds are like a house organ. Branded worlds right now (be they social or gaming worlds) are paranoid about allowing competitive brands anywhere near their world, like a house organ mag is. But the place where the marketing community really flourishes is in independent magazines which are not beholden to a single brand. Think of something like the women’s magazines — powerful tastemakers, but not house organs.

Will virtual worlds get there? It requires an interesting balance between content provided by the publisher (a magazine of nothing but ads is called a “catalog,” and it has far less value to marketers and less cachet with consumers) and freedom for advertisers to come in. Right now, nothing much seems to be following that precise path. But it does seem inevitable that some worlds will trend this way.

Either way, the ad agencies and creative bureaus tend to make a better living than the actual magazines do. Individual magazines may live close to the edge, but there’s always more out there. In that sense, placing a bet on Sheep over worldmakers seems like a good play.

  13 Responses to “The Sheep get funding”

  1. Raph / Raph’s Website: The Sheep get funding — Clickable Culture reports …

  2. Awesome, its a case of those with the technical creativity getting paid appropriately. Would you call this virtual middleware?

  3. Was wondering if/when this announcement would hit. Funding for anything dealing with virtual worlds is a good thing imo, so I consider this good news.

    As to the marketing/branding aspects, I just sent Roo Reynolds over on IBM’s eightbar blog an email regarding a post of his (Link) and developments along the lines of Spore’s auto-distribution and rating systems. I believe those thoughts dovetail with what you’ve posted above. Not sure how, exactly. Gotta give it some more thought.

  4. Not surprisingly, I had a much more critical take on all this here and ask a lot of questions about it all.

    Raph, I like the way you’ve likened this to “house organs” and “independent magazines” and you could even add in for fun “poetry chapbooks sold only at your neighbourhood bookstore” if you like, or “samizdat”.

    You talk about “worldmakers” as if there is the original, official company that still has proprietary ownership of the software, Linden Lab, and then the Electric Sheep or the Millions of Us or whomever, who then take that software and add on to it, the middleware men, sometimes getting special perks and heads-up from the Company.

    But what about the rest of us chickens? This is supposed to be about user-made content, no? Oh, you mean only professional users, pro-sumers, skilled-up connected-up users who have the chops to pull in big corporate contracts? And the amateurs don’t count? Or the not-yet-noticed-professionals? Is it all supposed to be a casting call to get these IT guys jobs?

    I think these worlds can’t be healthy and can’t even be what they’re supposed to be — “better” — if you can’t have a wide variety of abilities and levels of content production, and if you can’t escape the marketing imperative. If you have a wasteland of these corporate islands that sit empty, or that use various gimmicks just to pull people in for various events, you don’t have a world.

    A certain percentage of people who come into the world want the freedom and flexibility to buy or rent their own land, chose their niche, pick their clubs, wander around, have the ability to change, etc. There’s a lot of fluidity and mobility in the world now.

    If you come in as a corporate-worlded customer, however, your free land and your content, whether the cool car culture or the cool Lesbian culture depends pretty much on that uber professional content creator lays on for you. It’s like that failed chain of kids venues you may be familiar with called Wondercamp, where they had such a variety of activities — but standardized, controlled activities — that the kids didn’t gel with it and cried to go home and it failed.

    I wonder if the 25 islands that the L-world are going to lay out now won’t be filled up with rentals so that people do all their living, clubbing, and shopping on these sims and don’t integrate with the rest of the world — which they may be happy to do to escape griefing or lag or whatever. These will be like company towns.

    Having these old dinosaur media make up a bunch of latter-day company towns on continetns and lay on content for people with the services of professional prim wranglers isn’t going to be so new-media, though, is it. In fact, I would submit that this is the same old media concentration that we thought we fled when we stepped into virtual worlds.

    The corporations already have a kind of polish branded “look” on their own in RL — and by having only about six sherpa companies do all the building for them, the look is even more homogenized. Everybody wants to get away from flying penises and Victorian houses and crappy Goth castles, but is it only going to be replaced by gleaming California condos and malls and beaches? How much latitude — or incentive, or inspiration — will these big corporations, and their sherpas, who are actually their masters — going to give for other kinds of cultural experiences to emerge?

    Not everybody can be satisfied with an AOL branded skateboard and t-shirt and a thing to jump on and stick up your avatar.

  5. I think the CBSes of the world expect you to be a consumer, or at best a fansite creator, not a true competitor. I have zero doubt that they are thinking about this from the “broadcast” model, honestly — much like they still think about websites, come to that.

    So to answer your questions from your blog post:

    “will the Sheep care at all about the ways in which SL is broken now for small inworld business, and many casual customers?”

    Individual Sheep may, but the company probably will only care insofar as it affects their business. I think the folks at ESC are smart enough to realize that SL is not a great consumer environment, since its strengths lie in creation. That leads to a few answers: one, don’t rely so much on SL; two, make SL a better consumer environment; three, don’t chase off your own audience. I think they have already given clear signals that they are pursuing paths 1 and 2. #3, who knows?

    “Will the Lindens become jealous of their wunderkind, who are now pulling in as much as they were getting in venture capital financing, but who apparently already make a profit, unlike LL itself?”

    Of course they will. 🙂 The question is whether LL will be philosophically opposed to ever entering the content business themselves and thus leaving money on the table.

    “What happens when a complicated caper that the ESC and CBS team set up becomes whole dependent on LL — and spectacularly crashes?”

    I think the answer to that depends on what the caper is, and how much it affects others. Ultimately, I think the answer is “nothing much.”

    “Will the combined pressure of CBS plus the main metaversal sherpa agency be something that absorbs or buys out or influences heavily LL?”

    Follow the money. Unless these drive significant revenue to LL, the answer is no to the influence factor; as far as buyouts, I think LL is positioned nicely as an acquisition target for a major media firm.

    “Will the pressure of all these big corporations bearing down on tiny Linden Lab make them start to set up a second or third or 20th grid with a separate asset server?”

    Of course. It’d be a walled garden server, to boot. But then you have to ask if SL is the right platform for walled garden servers. I suspect there’s a reason why MTV went with Makena instead.

    “As Forseti is always reminding us with his constant claiming of this subject, the SEARCH is where the gold will be, because that means sales.”

    Verbeck, whose 45-employee company’s headquarters is in Second Life, admitted that despite the media attention Second Life has attracted, it remains tough to learn for new users.

    “We see virtual worlds at a very early stage right now,” Verbeck said. “Perhaps like the Web in 1993.”

    Electric Sheep plans to use the financing to create software to make virtual worlds ready for mainstream consumption, he said.

    – From Reuters

    “When you see the sheer magnitude of bigness, influence, and money revolving around the Sheep, with all the names of their clients, you have to wonder about two things. Are they incredibly important and influential now, with big very big heads and money to burn? Or…are all those big deals of the old dinosaur media so really unimportant now, that they will all be scrambling and lining up to be led by a child into the wilderness?. It’s wild. I think probably the latter.”

    To the media companies, most of these spends are tiny (stuff like VLB excepted). They are pilot projects, most of them.

    Bottom line, where does this leave you and the other small scrappy, independent creators? Nowhere at all. It’s like the vast collision of asteroids, when you’re lichen stuck to ’em. The asteroid just doesn’t care. All it wants to know is whether it harbors life or not, but it’s not very interested in what the lichen wants to do. 😉

  6. Prok: Yer kinda hosed, no matter how you look at it. One of two things happens to any new system, venture, entertainment product, medium, etc. over time.

    1. It fails on some level. Whether it’s an artistic failure, and keeps going economically but sucks (“ER”) or was great as art, but somehow fails to gain economic support (“Firefly”)… it just stops. In which case, all the people who love it are without it.

    2. It succeeds, in which case new players come in to take part in the success. Why? Because the definition of “success” is that it outgrows its niche. That’s the way we work in capitalist societies. Growth is the way we measure better results. Either something grows in gross numbers because more people prefer it to the alternative(s), or it grows in net profit, because the operators drive costs out. Either way, growth ultimately means change for those who were in the system initially.

    Failure or success. Those are your two choices. And both bring about change.

    You don’t like the techno-priests who started the whole she-bang out? Who lord their Early Connections to the Game Gods in a way that makes them special over noobs? Well… marketers and corporations can help nullify some of those effects, can’t they? If my MegaCorp can pay some relatively new dev-team mega-bucks to come in and craft me a big ol’ chunk of land that’s roughly the size of last year’s entire grid… that gives “new” a much bigger stake in the action. And it’s a counter-balance to the “old guard” that I’ve often read you go off against.

    Corporate, marketing, big-moola sugar daddies can also provide a stay against goonism. The spaces they inhabit do not necessarily have to be sterile or overly-plastic or willfully un-artistic or unfriendly to individual tastes. Rupert Murdoch bought MySpace and it’s just as ugly-ass and out-of-control as ever. Why? Because he wants to listen to what those people are doing/saying. If I was a big content-related corp with an interest in SL, I’d buy a huge chunk o’ land and do some zoning regs, yeah… but not against art or speech or architecture. I might put in some “chair camping free zones” and maybe limit sex-play a bit, or ban it altogether if I was trying to attract different kinds of commerce. But my main rules would be about the kinds of things *you* hate; abject griefing. Why? Because while different styles of art, building, speech, etc. are incredibly useful from a marketing/psychographic research perspective, grief is simply a waste of company resources. Grief don’t pay.

    Why is it that only individuals can grasp these “new world” concepts you (and I) are so fond of? Why can’t corporations get on the ball and “get it” and really be trying to do something new and funky with the space? Why is it OK for a single individual to do really, really ugly crap in SL (over and over, in some cases), as they attempt to learn the system… but for companies to get in there and mix it up is somehow anathema?

    The world is full of decent people and crappy people, decent companies and crappy companies. If the IBMs and American Apparels and other big corps bring in some new ideas, new money and (most importantly) new players that wouldn’t have otherwise entered in… more power.

  7. […] Some critics have called our projects all buzz and no substance. Even Raph (whom I highly respect) has jumped into the game: The flip side, of course, is that the purpose of building this sort of thing is essentially […]

  8. I like Andy’s take on this, also I think its important to realize no matter how big a game or VW gets theres always a cohort of the earliest participants/players that the operators seem to listen to, I’m not sure if this is the case with LL but I would hope that they listen to thier non-tech early adoptor playerbase also.

    “Rupert Murdoch bought MySpace and it’s just as ugly-ass and out-of-control as ever. Why? Because he wants to listen to what those people are doing/saying.”

    Thanks Andy that caused me to laugh so hard I choked on my coffee this morning. What would happen to Myspace if you removed the ability of its users to make thier profiles as craptastic as possible…..

  9. What on earth is a “house organ” ??

  10. A company magazine, one that is purely in order to sell the company’s products. Nintendo Power is a classic videogame example.

  11. Raph,

    Thanks for answering those questions so fully. A few quick comments. I don’t see why we need to accept that “$7 million is a tiny amount for these companies” so literally. Yes, it’s a tiny amount for the making of a movie, or a shoot where they get some exclusive interviews or set up some bureau or whatever it is TV spends money on. Having worked for TV companies, I know they spend bunches and bunches on the most absurd insane stuff, and then after awhile they can’t justify it. But…somebody does have to make an accounting. What was that $7 *for*? It didn’t yield up any *more* advertising dollars, eyeballs, awards, market share whatever, it went down the hole. So that’s not good. That’s why even if the amount is small, it does have to show something.

    And what can it show? After all the sherpas get paid, the dog barks, the caravan moves on, then what value is left? That’s why Ed Castranova says 2007 is the virtual worlds crash, unless of course the illusion is fed even more deeply and gets a further run.

    I find it touching that you don’t think our Lindens are already in the content business, and have *always* been in the content business. They have several kinds of content they make: beautifully landscaped sims that emulate land; various builds and educational stuff in world to teach you the game-crossout-thingie; their own Better World stuff that takes various forms like their promo of educational FIC. For a supposed world made entirely by its residents, it’s got A LOT of content. And when you figure that the way to become a game god is to be a super content-producing resident and level up to becoming a Linden, and then after that, be allowed to spin off your own “MDC” (“metaversal development company” as the kids call it), why, you’re missing the biggest content thingie of all: content creators themselves!

    You know, I contemplate the media aquisition thing a lot. And I always have this feeling that none of those big companies are quite a fit. I mean, Google has search and all, but what if they had a super super fast efficient cool search…and you couldn’t find anything but XXXX cum fest Tringo villas? That wouldn’t be so cool. Or what if Sony bought it to show off music, but they never solved the church-basement problem (only 40-100 allowed by the fire code on the sim)? Or what if Amazon found out that nobody reads books anymore really, they just pass around reviews and jpegs of the covers? or what if Yahoo came to hook up Groups, Pipes, Small Business but then everybody fled to Kaneva or Outback? I guess I just see these water buffalo coming to feed at the pond of Second Life as long as the water lasts, and then they’ll thunder on unless somebody digs it deeper.

    Well, thanks for calling me a “scrappy little creator” but honestly, I don’t create stuff of the inventoriable content type. Still, I think the future is more about immersiveness and inventoriable content than they wish to admit.

    Grief does pay. Lindens monetarize their griefers online. They make a nice juicy fruit for them, they come and feast endlessly, the Lindens crowdsource them for developing the software. They even put names for them in the People list like “hax” to make them pick those names so they can keep an eye on them in one place. It’s all planned. Like their other miracle, turning socialism into capitalism and back on the land market, the Lindens have franchised griefing productively.

    Again, what I don’t get is why a Sony or a CBS or whatever wouldn’t just have a department of their own people who surely know how to do graphics. I mean, what, a TV company where nobody knows how to run Autocad or Maya or whatever? I guess this is a phase.

  12. @Prokofy

    Again, what I don’t get is why a Sony or a CBS or whatever wouldn’t just have a department of their own people who surely know how to do graphics.

    The short answer could be because a TV company can’t do it as well or as cheaply as a smaller specialist company. Let me give an example from a different setting. I do research on r&d networks in biotechnology. There are literally thousands of r&d agreements between large pharma companies and smaller biotech companies. Why does big pharma ‘outsource’ so much of their r&d to the biotechs? Surely they can do their own research? They can for small molecule stuff and have done so for years but when it comes to big molecule stuff [i.e. proteins] they can get more, better, cheaper research from small specialist shops.

    The big media companies may end up doing virtual worlds but in most industries those diversifying moves tend to happen through external acquisition rather than internal development.

  13. […] Some critics have called our projects all buzz and no substance. Even Raph (whom I highly respect) has jumped into the game: The flip side, of course, is that the purpose of building this sort of thing is essentially […]

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