Most people have something specific in mind when the phrase ‘virtual world’ is mentioned, be that Second Life (SL) or World of Warcraft (WoW), but the truth is that there are a multitude of applications that could reasonably be said to fall under the banner.

Virtual worlds are any connected computer space that simulates certain characteristics of reality. Members or players participate there through an avatar - a computerised representation of themselves or their persona. This avatar can be personalised to a greater or lesser extent. Normally there is some persistence about this world - it will be as you left it the next time you join. This persistence extends to the appearance and state of your avatar, its vital statistics, the physical appearance of the world and the rules which govern it.

A further distinguishing feature of virtual worlds is that they are very ’sticky’. The massively multiplayer role-playing game (MMORPG) Ultima Online is now ten years old. Nonetheless, some 20% of its current player base have been playing for the whole of that period. Getting your avatar to the state you want it in (be that level 70, virtually rich or very well-dressed) typically takes a long time and so members are often loathe to give up on those avatars. The World of Warcraft virtual world is already the subject of several addiction studies.

There are almost as many variations as there are commonalities, however.

The main distinction is between worlds that have their own client software (SL, WoW) and those that are browser-based (Club Penguin, Runescape). These attract very different audiences. Mulligan suggested that there is less than 10% crossover between the two types. Currently, the main revenues are earned by worlds based on a Client/Server model - perhaps ten times as much as browser-based worlds. However, the balance between the two is likely to change as the capabilities of web browser software increase.

The second way to distinguish between virtual worlds is the extent to which they are games or social spaces. Games are typically a very directed experience, with specific aims and missions to fulfil. Social spaces, on the other hand, are more about "Hey dude. Look how cool I am!" (Mulligan).

Source: Forrester Research, Inc.

The main revenue for game worlds tends to be monthly fees. In social spaces, buying items to enhance your avatar or their personal spaces is more likely to be the revenue model. Currently, premium games such as WoW account for 90% of revenues in virtual worlds. However, this will change and boutique web game models will rise in importance, starting in the East and moving west. WoW currently has 8mn active users paying $20 a month to participate in the world. In a later presentation, the game was described as "the largest and most important entertainment product ever created". Social spaces account for around half the users of virtual worlds, but a far lower proportion of the revenues: perhaps $400mn a year at present. This is often because these worlds are directed at children, with less disposable income - the typical Habbo Hotel member spends around $10 a year.

Mulligan predicted a continuing divide between games and social spaces. Second Life notwithstanding, most worlds that are social spaces will be accessed through a web browser. Client software is perceived as too complex for the casual market. Geographically, Asia provides around 50% of the revenues from virtual worlds at present, but they will increase in popularity in the West over the next five years. Again, browser-based worlds will continue to rise in importance from their current position, though no estimates were available as to when a balance between the two forms would be likely.

Podcast of Paul Jackson’s presentation.

Podcast of Jessica Mulligan’s presentation.