METANOMICS HOSTS MICHAEL WILSON

FEBRUARY 25, 2008

ROBERT BLOOMFIELD: Welcome, everyone, to another episode of Metanomics, and a

path-breaking one at that. Today I am speaking to you not as Beyers Sellers’ personality

from Second Life; instead I am speaking to you from the Virtual World, There, and my guest

today is Michael Wilson, CEO of There. Michael, welcome to the show.

MICHAEL WILSON: Why, thank you very much.

ROBERT BLOOMFIELD: I imagine we have a number of people in the audience today who

do not know what Metanomics is all about, so let me just say we are a weekly talk show,

11 a.m. every Monday at Second Life time--that’s Pacific Time--and we are sponsored by a

variety of real-world companies. We give our thanks to Kelley Services, Sun, Cisco

Systems, Generali Group, SAP and my own, Cornell Johnson Graduate School of

Management, where I am a professor of business and accounting.

Okay. So we’re going to jump right into it since we’re starting a little late. This is my first

experience with There, and it really is a fascinating and colorful place. I understand that the

concept for There, Michael, is what drew you out of retirement. You spent decades, really, in

the online community, one of the very early adopters, and you were the fourth employee at

eBay. So can you tell us a little bit about what it was that excited you about There’s

proposition and to what extent has that promise been realized?

MICHAEL WILSON: Absolutely. May I start off with a quick introductory remark for you?

ROBERT BLOOMFIELD: Oh, absolutely.

MICHAEL WILSON: I just wanted to point out that [this city?] is actually in a place called

CosmoGIRL Village, which is an area we built for one of our partners, which is the magazine

CosmoGIRL. That’s why we’re surrounded by this very unique color scheme and floral

pattern, and that’s because the area’s thematically designed to match CosmoGIRL’s color

scheme and their various branding. So I’d like to thank them in advice for providing this area

for us to hold this talk in.

ROBERT BLOOMFIELD: Yeah, I appreciate that. I got to thank my sponsors, right?

MICHAEL WILSON: Yeah. Just wanted to make it clear that There has got a lot of

environments, including this one, so they shouldn’t view this as the only thing we’ve got

going.

So going back to your question, I actually found There in 2001, when the former CEO,

Tom Melcher, invited me over to see the technology, and he and another person,

Jenna Spivak, had come to work at There, and I’d previously worked with them in the ’90s at

daVinci Time & Space, where we were attempting to build virtual worlds for children based

on Set Top Boxes, which was a really interesting experiment. It was sort of eight months

into the company, we discovered, in order to field the technology, we’d have to dig up all the

streets, so the company actually folded after less than two years of operation. But we

learned a whole lot about virtual worlds and interactive storytelling and nonlinear storytelling,

many things of which you’ll see carried forward in virtual worlds today.

And what attracted me to it was that, just as eBay was a different way for people to realize

their aspirations and communicate with each other, I thought that There.com was the next

step in that evolution because, instead of just expressing yourself as a 2D webpage or your

homepage at the time--remember at that time we didn’t have social networks--you could

express yourself as a 3D avatar and indeed dress yourself or change your appearance and

use the various emotions that you’ve seen in world to communicate with each other.

And that was really exciting to me because I think that the one thing about the Internet is it’s

about communication and people interacting with each other in better ways, and this struck

me as the very next way to do that. And today we are seeing, with the uptick in the interest

in Virtual Worlds, that that whole belief is carried through.

I’d like to just round out the history of the company. I’d like to point out the company was

actually founded in 1997 by Jeffrey Ventrella and Will Harvey, and the service actually

launched in 2003, probably the first social Virtual World. And today is 2007, so we’ve

actually been in business for ten years.

ROBERT BLOOMFIELD: Now, can you talk a little bit about your relationship with Forterra

Systems, which does almost exclusively the Private Worlds and a very heavy sort of

research and serious application focus, and then There and McKenna take over the more

branded social side? Is that right?

MICHAEL WILSON: Yes. It’s sort of a strange story. I think we’ve only got an hour.

Obviously, I sit on the board of There.com. I’m the largest single investor in There.com.

There became Forterra in 2003, so I sit on the board of Forterra; I invest in that also. About

two years ago, I went to Forterra and said, “I think the time has come to really pay attention

to social virtual worlds.” And they said, “Well, that’s really a good idea, but we’re focusing on

the commercial stuff; we don’t have time to pay attention to that.” [AUDIO GLITCH]

And I said, “Well, I think it’s a really good idea.” So, after a lot of discussion, we convinced

them that we should spin out the social virtual worlds--consumer-driven virtual worlds--as a

separate entity known as McKenna Technology so that Forterra could focus on basically

simulation and serious virtual worlds, and we could focus on consumer-based virtual worlds.

So we’re two completely independent companies, though we do talk all the time, and we

work together on many projects, but we’re completely independent.

ROBERT BLOOMFIELD: Now, you talked about the social side and the marketing side of

There, and one of the things that strikes me--being someone who spends most of my time in

Second Life--is that you, as the management of There, have actually taken a very active

role in integrating and striking direct relationships with the brands. So for example, my

avatar, Beyers, here in There, is wearing a very nice pair of Levi jeans, which I understand

were--you know, this isn’t just, as it might be in Second Life, someone creating a knockoff of

Levi jeans, but was a concerted effort and resulted in agreement between the company,

with the brand, and There.

So can you talk a little bit about why it is that you’ve taken sort of the direct approach of

engaging with brands yourself, rather than doing this, as Second Life does, through the

intermediary of the residents?

MICHAEL WILSON: You need to return focus to your window so you [AUDIO GLITCH].

ROBERT BLOOMFIELD: Ah!

MICHAEL WILSON: Everyone else knew you weren’t paying attention.

ROBERT BLOOMFIELD: And, actually, I was talking away and being very insightful, if I say

so myself. But I’m the only one who heard me; is that correct?

MICHAEL WILSON: No, no, we heard you. We saw your goggles come on.

ROBERT BLOOMFIELD: Oh, okay.

MICHAEL WILSON: [AUDIO GLITCH] Well, I actually didn’t bring up marketing, but I’m

glad you mentioned it. So let me think about how to go about this. I think that one of the

things that we do is we made a very few rules in There.com, and the rule we follow is,

“Make a few rules and get out of the way.” The rules we made were--the first one was

PG13--which I’m sure we’re going to discuss at some point--and the other was no brand

[bath?]. We have a strong belief that a brand is something you own and that allowing people

to copy other people’s brands and take advantage of them, anywhere, including Virtual

Worlds, is a bad thing. It’s just wrong.

So we review all the content that goes into the worlds in order to make sure that you own it

when you submit and to make sure you’re not infringing on anyone else’s right. The

combination of those two things makes our environment, if you will, very appealing to big

brands. Big brands have a world that they’re used to operating in. It’s called the real world,

which has been in beta test for many, many years now and, in the Real World, there are a

couple things. One is that the use of profanity or non-PG13 behavior in public is frowned

upon. And the second thing is that you’re not allowed to steal anybody else’s brands. So

you can understand that the reason we undertook those two decisions was, number one, to

make the world as comfortable for as many people as possible and, number two, to make

the world as appealing as possible to other businesses.

Then the next thing we did was--we understand virtual worlds are a new thing, and we

understand that getting into them is not trivial. Unfortunately, what happened in the past

couple years was somebody started this rumor that, if you put your brand into a virtual

world, you would instantly make money. You would have to send out wheelbarrows to bring

it in. And you know the old saying about, “If it’s too good to be too, then it must be.” And

that’s exactly what happened, is that lots of brands jumped with little or no preparation or

planning; they just went and built these virtual islands, and then wondered where the

wheelbarrows full of money were. And it’s just like any other new technology that, if you

expect it to work instantly, it’s not going to.

Our approach, since we’re very customer-oriented, is that we go out and we work with the

brands that want to come into the World, on a whole bunch of levels. First of all, we work on

finding them appropriate place to be in world. We work on integrating them with the

community so that our community doesn’t reject them. We work on putting them in highly

trafficked areas of world that don’t disrupt the community. So for example, we’re careful not

to drop things in the middle of popular areas owned by our members.

But, in all, what we’re trying to do is make sure the brands that come in have a complete

experience. CosmoGIRL Village, which you’re sitting in now, we’re sitting in a shard or a

copy of it right now so you don’t see many people, but if we went to the main version of this

you would find it’s full of people, because it turns out that people just love it. There is always

people there hanging out.

The same goes for CC Metro, which is Coca Cola’s place in There.com. Working directly

with brands is the way to guarantee that everybody, including our members, has a really

good experience.

ROBERT BLOOMFIELD: So let me ask just a very rudimentary question, then. Let’s say

that I wanted to take my Metanomics show into There and have it as a regular event

sponsored by brands that I personally have developed relationships with. That would be

something that There staff and management would need to approve. But as long as I’m not

violating any copyrights or trademarks, presumably you’d be okay with that?

MICHAEL WILSON: Of course. All you’d have to do is let us know that you were licensed to

use that content as opposed to just telling us you were.

ROBERT BLOOMFIELD: Okay. Very interesting. So compared to Second Life, a much

more, I guess I’d say, active, hands-on management style to control what you’ve

emphasized as the two prongs of this strategy, which is maintaining the PG13 content and

protecting the intellectual property rights.

MICHAEL WILSON: Well, I think it’s actually a three-prong strategy and, since you gave me

that opening, I’ll just rush right through it.

ROBERT BLOOMFIELD: Go right in.

MICHAEL WILSON: This is a social virtual world and, as a social virtual world, it’s designed

to get as many people possible into it as we can. [AUDIO GLITCH] three things to make that

possible. One was PG13. The reason it’s PG13 is more people are going to be

uncomfortable seeing non-PG13 content than are going to be uncomfortable because they

can’t see non-PG13 content. Because that’s what real life is like. That’s all there is to it.

The second is the brand protection--and again that’s because if somebody sees something

that’s branded by Coca Cola or CosmoGIRL, they want to know it’s Coca Cola or

CosmoGIRL. If you went to the store and you bought Diet Coke, and you didn’t know that

maybe it had a, say, high lead content, you’d probably be really disturbed. That is,

somebody had stolen the Coke brand, is what I’m saying.

ROBERT BLOOMFIELD: Right. Right.

MICHAEL WILSON: That’s the second thing. The third thing was to make it possible for as

many people to use our product as possible. So you’ll find that it turns out that our PC

product will run on any PC shipped in 2003 and will actually run over 56K dialup. That’s why

a lot of people look at There--and they say, “Well, it’s cartoon-like,” and that’s because we

limit, for the places that we build, the texture budget such that to make sure you have a

good experience.

I’ll give you an example of how this manifests itself today. We went to Singapore to the

State of Play conference and we actually had set up a little demo table, and we were demo-

ing the product live during the conference. And lots of people from Asia came to us and

said, “Oh, you must have servers in Asia now.” We said, “No, we don’t. We actually are

talking to servers in the United States.” And they could not believe that because, since we’re

built to run on a certain minsBack, we’re able to run reliably on a huge number of

computers. And, again, this is back to the whole social virtual world thing.

ROBERT BLOOMFIELD: Right. This has been quite a big issue, actually, among educators

because, at this point, Second Life is not tremendously accessible for groups that have little

income, low-income students and so on; they need new great computers with great internet

access.

MICHAEL WILSON: Is someone counting the number of times he says Second Life?

ROBERT BLOOMFIELD: Sorry about that. Well, now that you’ve emphasized that point,

let’s take that on a bit, because you mentioned that you’ve been around since 2003, a

longtime player in the market. Second life, I guess, oscillates between being the media

darling and the media beast that everyone likes to make fun of for, as you mentioned, a

number of fairly notorious brand failures. So when you see Second Life getting the media

attention that it is, how has that affected your business strategy?

MICHAEL WILSON: It hasn’t. I mean our business is to serve our customers, which are

both the members of There.com and the consumers associated with our brand. [AUDIO

GLITCH] I’m glad Second Life has a strong PR strategy. That apparently is where they

spend their marketing dollars, and I’m glad that they’re giving lots of stories to the press to

talk about. Does that mean that I get up every day and worry about how many press hits I

get? Not really. In fact, to tell you the truth, they had to beg me to get a PR firm to make

sure we did get some press coverage, which we do. We try to focus on the important stories

that happen with relation to our product, but my job is to serve my customers, not to serve

the press.

ROBERT BLOOMFIELD: I guess many of the [INTERRUPTION]. So let’s talk about some

of the other virtual worlds out there and, in particular, the kids’ worlds. The Club Penguin

has been a roaring success. Webkinz. Disney has a number of new worlds on the horizon.

When you see what’s happening in the kids’ virtual worlds, do you see challenges there or

opportunities?

MICHAEL WILSON: Well, first of all, I think that as more of these worlds have appeared

there, it’s nothing but opportunities in this industry. There’s more than enough room in this

industry for plenty of virtual worlds. I think that kids’ worlds are kind of interesting because--

one of the first reasons is that I’m not sure what the purpose of the kids’ worlds are. I think

it’s great that it gives kids a place to socialize and learn about each other but, from a brand

perspective, is the point, say for example, if Sony has a Virtual World for kids, to hope that

since your five-, six-, seven- or eight-year-old plays in the Sony Virtual World now that will

remind them to buy a Handycam later when they’re 15? That’s the part I can’t quite draw the

connection between there.

But I think anything that encourages [AUDIO GLITCH] to communicate with each and learn

to communicate with each other and interact is a good thing, as long as it’s addressed to

moderation. So we have limits on the [AUDIO GLITCH] age limit to go into the world

because of COPPA restrictions, because we take it very seriously too.

We know that there are all kinds of things that younger children are not able to understand,

and they’re easily misled, and it’s very important to us that parents understand when they

visit There.com and that they understand what sort of neighborhood they’re getting into. We

like to think of ourselves as something like the Disneyland or the family oriented amusement

park but, even in a family oriented amusement park, you have to be aware of where your

kids are. So I’m not sure if that answers your question, but I think that kids’ worlds are really

important, and I think that it’s important for parents to understand which kids’ worlds that

kids are going to and understand what that all entail.

ROBERT BLOOMFIELD: Okay. Thank you. Let’s move on, if we could, a little bit to a more

specific view of the revenue model that you’ve got for There. In particular, you’ve talked

about the four rivers of revenue: subscription payments, in-game currency micro payments,

sponsorships and white labeling, and e-commerce. Can you talk about how that vision of

those four streams of revenue has shaped what you have been doing with There?

MICHAEL WILSON: Well, actually, I think that more of the vision of There and our attitude

as a company has shaped those streams of revenue. The subscription model, I think, is

something that everybody aspires to. My belief is a subscription model doesn’t work very

well unless you have tons of content for people to visit. So if you looked at the largest social

Virtual World, which is World of Warcraft--and we can talk about why I believe that’s true or

not--they have at least 300, if not 600, hours of content there for people to visit. And they

paid several tens of millions--I think close to $100 million--to develop that content to that

program. That’s where a subscription model makes sense.

We are constantly exploring new subscription models, especially with our younger members

who don’t want to have to hit up their parents every ten minutes for some more of their

bucks to spend. But, in general, that’s a smaller part of our [AUDIO GLITCH] The largest

part of our model is virtual currency sales, and I think that that’s well understood by your

audience and yourself that that’s the coin of the realm, and that’s how people do business in

There.com, and so that’s where our largest source of revenue is.

The third, which is sponsorship for advertising [AUDIO GLITCH] is something which is very

nascent, and we’ve paid a lot of attention to. Again, we want to make sure that people who

have paid for sponsorship for advertising have a great experience. Scion is a good example.

We have those giant car clubs, which, I don’t know if you’ve visited them, but Scion asked

us to give them a concept for sponsorship. Instead of doing the usual thing, which is little

Scion cars in-world, we created giant nightclubs shaped like Scion cars.

Now, the absolute truth is our community’s somewhat divided on how many like it and how

many don’t, but the fact is it was pretty innovative, and Scion liked it so much they came

back and re-upped with us, which we were very excited about. So that’s advertising.

Now, one thing I’ll say about advertising is it’s not well understood. In fact, I’ve said many

times--maybe you have some students that would be willing to take me up on this--but it is

not well understood how you monetize advertising in a virtual world. Because it’s not a

simple case of click-through advertising, which you pay pennies for. In fact, we’ve got

studies that show that advertising in virtual worlds gets a much, much higher rate or

recognition than it does on the Web. And that’s only the smallest part of it. For example, if I

sell you a shirt that says Coca Cola on it, and you wear it around the world and generate

millions of viral impressions, what do you charge for the sale of that shirt? What do you

charge the [AUDIO GLITCH] so that’s an entire field of study, which is how you monetize

that, which nobody understands yet.

The third area--

ROBERT BLOOMFIELD: Oh, go ahead. Go ahead. We’ll come back to that, but that is a

fascinating issue. Let’s go on to the third area.

MICHAEL WILSON: The next area--actually this is the fourth area--is e-commerce, and that

is, I see a virtual, say, a pair of Vuarnet sunglasses, and I also see I like to buy a real pair,

and I buy them. That’s a whole area that we’re just beginning to explore, and we’re very

excited about it because we think that there’s a certain parallelism, though it’s not 100

percent between your virtual self and your real self and the stuff you buy for your virtual self

and the stuff you buy for your real self. So that’s a very exciting area.

And the last thing is, of course, the white labeling [AUDIO GLITCH]

ROBERT BLOOMFIELD: Okay. I’d like to go back, if I could, to the marketing issue. You

emphasized monetization. But then the other issue of it is really the data. What data can you

get that you can go back to your sponsors with and say, “Here’s how well things are going

for us.” And then similarly using that data actually to craft the detailed marketing experience.

So I’d like to ask you about some comments you made when you were being interviewed by

Virtual World News correspondent Joey Seiler, and you were talking about this topic. You

talked about throwing terabytes of data back to your advertisers, and you said, “Well, we

know when someone gets near an advertisement who they are, how they interact with it,”

and then you talk about also being--and you say, “We have far more information. We have

your entire history in the virtual world. We can identify you as someone with a female avatar

friend who has a birthday coming up, and then we can look and see that friend is looking at

some sunglasses for a while and didn’t buy them, so we can advertise those to you,

presumably as a gift for your friend.”

I guess I have a few questions on this. One is, how far are you from being able to realize

that type of marketing? And second is, naturally, how are you going to deal with the balance

of making marketers happy with the great information and putting it to good use and

balancing that against privacy?

MICHAEL WILSON: So let me correct some of those quotes there. I’m sure I didn’t speak

well. We don’t throw terabytes at our sponsors. We do throw enormous amounts of data,

terabytes probably in total, of facts, which are information about what avatars do. But as far

as giving it to our sponsors, of course--we actually have a guy named Charles Morrow who

we do a lot of work with and he once made the mistake of asking us for some detailed facts

on 10,000 avatars. [AUDIO GLITCH] blinded, of course, so that it didn’t expose privacy

data. And we kept trying to send it to him. Finally he had to send us a disk drive to put the

data on so he could do a study. So again, going back to the challenge of how do you take

this enormous mass of data and put it into a form that’s useful.

The second thing, you know, privacy, to me, is tremendously important. Again, if you look at

the track record of the companies I’ve been with, privacy has always been a very, very

important thing. And we’ll never give out data about customers in such a way that offends

their privacy. And I’ll tell you a couple of ways we run into it. We’ve had people say, “Well,

don’t you record the conversations”” It’s like, “Well, no we don’t.” “Don’t you write them out”?

It’s like, “No, we don’t.” And they say, “Well, can you”? And we say, “Well, no, we won’t.”

Then there’s this long discussion about business goals and all that, and I just say, “The

answer is no, we won’t do it.” We could certainly look for key words to see if people are

mentioning brands and do that in such a way that it doesn’t invade somebody’s policy. We

haven’t done that. But we’re not going to do something which is going to invade your privacy

because then, again, we wouldn’t be a good social virtual world.

In terms of working with marketers--now this is a really interesting thing--is that we can and

we do work with marketers to talk about how popular areas are or they’re not. And so we’ll

go back to someone and say, “Hey, this area you’ve created, everybody really loves this

feature, but they really hate this feature.” And what will happen is that we’ll say, “Why don’t

we pull these things out and put these things in?” And since it’s a living virtual world; that is,

we can create and take things out on the fly, we can actually tune the experience very

quickly to make it work well. And that’s something we take a tremendous amount of pride in.

The other thing we do with marketers is we have our community group, which has been

doing this since 2003, and I’ll tell you is the best in the business,--I think Vasché(?) is a

member of it too. Everybody give a hand to Vasché--is that they work closely with the

marketers, which is pretty amazing, because they are in touch with our community, and

they’ll work with them to create events that they think our community will appreciate. I call

them the Colin Cowies of virtual worlds. And if you don’t know who Colin Cowie is, you

should go look him up, because his whole job is entertaining.

ROBERT BLOOMFIELD: Okay.

MICHAEL WILSON: Yeah. I mean that’s part of--a branding successful is making sure that

the brand integrates well with the community. And the fact that we can help with that makes

a big, strong statement. So let’s see. I’ve probably gotten off topic here.

ROBERT BLOOMFIELD: Well, it’s still fascinating stuff. But we were talking a little bit about

the marketing and the data. You brought up community, which is actually something I’d like

to pursue a little further. So you talked about the Scion nightclubs, a fascinating, creative

idea, very popular among some residents, very unpopular among others. And so now you’re

in the position, I guess, of being the benevolent dictator where you’re not identifying what is

uniformly popular and helping the consumer do more of that, you’re actually here trading off

the wishes of different factions of community members. So can you talk a little bit about how

you do that when there are people who want very different experiences in world?

MICHAEL WILSON: Well, I hate the idea of being a dictator of any sort, despite what my

staff might tell you. No.

ROBERT BLOOMFIELD: I’ll interview them next.

MICHAEL WILSON: You know, you’re right. We run into that all the time. I mean, I know

that I agonized over the Scion cars because some people said they didn’t like them. But

then when I went to them, I noticed lots of people did like them. In fact, the clubs are

crowded on a regular basis. So I think it’s--again, I just fall back on real life. In real life, you

see buildings, you see locations that people love, and then there are people that don’t like it.

And the fact of the matter is, is that you can’t please everybody all the time. But you can at

least listen to them.

And I think, in many cases, we’ve been put in a tough position where we’ve had some

people very vocally say, “We don’t like this.” And we said, “Well, we understand that,” but

we try to put it off where it’s not going to bother people, and it turns out a lot of people do

like it. In fact, lots of people like it, and you may be in the minority. And it’s just one of the

calls we have to make as a business. Don’t get me wrong. I think the Scion clubs are

amazing. But, if anything, I’m honest, and I’ll say that some people didn’t like it. But, you

know what, most of the people did, and it’s a very popular item, and we’re going to continue

to do it.

ROBERT BLOOMFIELD: Okay. Let’s move on. I guess I’d like to talk about a few of the

kind of bigger issues across the Metaverse, getting a little outside of .com.

MICHAEL WILSON: Oh, wait. There are other virtual worlds?

ROBERT BLOOMFIELD: Well, we’ll get to interoperability in a moment. But before we do

that--so I just returned with, I don’t know, 100-some other people. We met at Palo Alto for

the Metaverse U convention, which was preceded by a Metaverse Roadmap meeting, and

one of the things that I heard a number of times is that people would start a comment by

saying, “This is just like the Internet in--,” and then they would put in their year, and some of

them would say, “This is the Internet--Metaverse is in the state of the internet as of 1994,” or

1999 or 2000 very early in the year. And so you were in eBay very early on. You’ve got a

great perspective on this. Do you see the analogy being a useful one, seeing the Metaverse

as if it’s in some early stage of the Internet? And, if so, what’s your favorite year?

MICHAEL WILSON: I thought a lot about this question, and the answer is no. It really isn’t

very useful. And here’s why. This is why I think those analogies are troublesome. You’ve

probably heard of this thing called Facebook or MySpace?

ROBERT BLOOMFIELD: I have.

MICHAEL WILSON: And so it’s this product, right, where you can go, and it’s very easy for

you to create a membership and go and create this page about yourself. Right? And put

other people’s pages--and do stuff. And many people look at that and go, “Oh, my

goodness! It’s the next big thing. It’s innovation,” yadayadayada. Well, do you remember

something called Geocities?

ROBERT BLOOMFIELD: Barely.

MICHAEL WILSON: Well, Geocities was this tool that people made a long time ago, and it

was so that you could create web pages and create home pages and do it very easily, and

everybody went and did it. And it was sold to Yahoo! for some enormously large [AUDIO

GLITCH] bet you they wish they had right now. And it did exactly the same thing. So I guess

the point I’m trying to make is that the context for where things are shifts over time. So

saying that virtual worlds is like the Internet was in 1990-whatever, how does that inform--I

mean, if that was going to inform something, then Geocities should be the Facebook of

today, which obviously it’s not.

The other thing that’s very different is, if you look at the population, the population of the

Internet in 1990-whatever was largely male, it was largely older folks--I mean, that is, people

over 21--and the demographic was very different than what it is today, which is, today we

see a very balanced gender mix on the Internet. In fact, there was a study that came out last

week that reminded us men that women were behind all the creative content on the Internet-

-something that I’ve always known, by the way--and that there are many more young people

involved.

So I think you can make sage statements about, “Oh, yes, this is just like the good old

days,” and I think that’s exactly it. I mean, all you need is a rocking chair and a corncob pipe

to remind you how smart you are to say those [AUDIO GLITCH]

ROBERT BLOOMFIELD: Now, let me ask you, if we think in terms of the Gartner Hype

Cycle--are you familiar with these terms, like the peak of unrealistic expectations? Right now

there is quite a bit of hype. Do you see the hype as exaggerating the short-term future of

what we can expect in the virtual world industry?

MICHAEL WILSON: I think the one thing that is informed historically by both the Internet

and everything else in the world, from the Internet to tulips in Holland, is that if you believe

that just going ahead and buying something or getting into something very easily is going to

cause you to make instant riches, you’re bound to be disappointed. And I think, just like any

other business or any other advertising campaign or any other branding exercise, that you

have to approach virtual worlds from a standpoint of careful thoughtfulness and take baby

steps before you take giant steps. You need to understand what you’re about to get into

before you go and invest a bunch and promise your boss and your boss’s boss that they’re

going to have to find a new offshore account to put all the money into.

So I’m very familiar with the word “hype,” and I think that the answer continues to be that

virtual worlds will continue to grow, and the people who will be successful in them are the

ones that are thoughtful and the ones that actually work with the communities they’re going

to go into.

And, again, this is just like that thing they call “real life.” If you go into a community and say,

“I’m going to open a hardware store,” and you fail to notice that there are five Home Depots

in that community, you’re probably going to be disappointed. The same thing happens in

virtual worlds. You need to understand where you’re going and what the community wants

before you turn around and assume you’re going to make a lot of money there and buy into

the hype.

ROBERT BLOOMFIELD: Now, there are, I think, literally dozens of new virtual worlds in the

offing over the next couple years. Do you think the market is too crowded?

MICHAEL WILSON: No. I mean if you look at the total aggregate population of all the virtual

worlds and you compare it to any--I think if we all--added together, would be happy as many

members as World of Warcraft, in the United States. We’re not even counting Asia. So I

don’t think the market’s too crowded.

ROBERT BLOOMFIELD: So let me actually ask you some questions about populations

because one of the things--I talk with a lot of people about the difficulty of making the sale to

a company that is not invested in Virtual Worlds. They have a brand or they have an

enterprise model. Maybe they want to do teleconferencing or whatever, and they’d like to

use virtual worlds. And they want data. They want data on how many people are in the

various worlds. And most of the worlds are not particularly forthcoming on that. So I’m

wondering what your take is. There have been a number of people--Christian Renaud of

Cisco Systems, for example--has famously called for an organization to collect reliable data

on the number of users in all of the different worlds out there, and get the worlds to make

that public. What’s your take on that type of endeavor?

MICHAEL WILSON: Well, I think somebody comes up with a widely accepted standard for

reporting and it’s in our business and our clients’ best interest to report that, we’ll report it.

But until then--you know, we have this discussion all the time. And we used to have this

discussion on eBay, so this is not a new discussion. Because people say, “Well, what does

a member mean? And what does an ex-member mean? And what does an auction mean?”

Etcetera, etcetera [AUDIO GLITCH. And the truth of the matter is, is we’ll tell you we’ve got

over a million members. I won’t tell you how many over a million, and I won’t even tell you

how many people are in the MTV worlds, because I’m not allowed to talk about it. And that’s

what I’ll tell you because I would rather focus on figuring out what it is my customers need

than try to come up with the latest set of good numbers to go into the press or go into some

report. I know that sounds very high-and-mighty of me, but we all have limited bandwidth in

this business. We’re all small companies. If I have a choice on whether I’m going to spend

my time trying to refine what my definition of an active customer is this week or reacting to a

change in what the imaginary definition of the imaginary active customer is, or I’m going to

go spend my time figuring out what the next new feature is for my customer, I know what I’m

going to do [AUDIO GLITCH]

ROBERT BLOOMFIELD: Yeah. Okay. Fair enough. You mentioned Geocities before, and

I’d like to talk about one aspect of a difference that many people have discussed, which is

the early model of the Internet was very much not easily interoperable. And that certainly

seems to be where we are now with virtual worlds, that, at this point, we don’t have

standards. So people have talked about Open Source, where the companies would actually

just let their code out there. Open Standards, where Virtual World companies agree on

standards that would allow portability of World assets or 3D modeling. And so I guess I’m

curious where do you see There, and, more generally, the OLIVE platform involved? Where

do you think you’ll be taking this?

MICHAEL WILSON: Well, that’s a big long question.

ROBERT BLOOMFIELD: Yeah. Sorry. I’m learning my interview skills on the job I’m afraid.

MICHAEL WILSON: Okay. See, this way I can pretend I forgot parts of it. So let me start

with the easiest part first, which is something that’s really common to There and OLIVE, for

example. And I’m not going to say too much about OLIVE because we can get somebody

from Forterra to come talk about OLIVE. Right. We, from day one, have used Open

Standard to get geometry into the world. So if you want to build something like the stage

we’re on, you can use a tool like 3D Studio Max [AUDIO GLITCH] or Maya. We’re working

on a COLLADA-based exporter right now to build the 3D geometry and get it into world

[AUDIO GLITCH] and that has been a boon to us because that means, when we work with a

client like MTV or Coca Cola, we can go to someone like Imaginary Forces, which is a very

high-end art house in L.A., and have them build structures for us and produce stuff that is

right on par with their Transformers trailer, for example.

So we firmly believe the 3D geometry in supporting Open Standards, and I think that that’s a

really important part of our whole mission is to make it easy for people to get content in the

Worlds [AUDIO GLITCH] Now it’s true you have to run through the gauntlet of putting the

content through our review process, but we all understand what that’s for. Right? That’s to

make sure that you don’t put in giant walking appendages which are inappropriate or giant

flying appendages which are stealing somebody else’s brand. So we’ve always supported

them.

ROBERT BLOOMFIELD: Mm-hmm. Oh, go ahead.

MICHAEL WILSON: As far as interoperability, I have a bunch of answers about that, most

of which sound very sort of sarcastic, but let me just talk about them. The way that we

decide what features to put in the product next at this company is, we ask the members. We

have the top ten list that we try to get to as many things as we can, and our members here

will remind you that we always never get to the ones they want, but that’s how we get input

for what features people want. And that’s really important, and that’s something I learned at

eBay. In fact, at eBay, I think, with one exception the entire time I was there, every single

feature the members thought up was a success. Every single feature we came up with, with

one exception, was not a success. My view is that, if you’ve got millions of customers that

will tell you what they want in the product, maybe you should be listening to them to figure

out what to do next instead of making things up on your own.

So how does it relate to interoperability? Well, in all the times that I have ever spoken to any

of my customers, they have never, never, ever never, ever never ever asked why they can’t

use their There.com avatar in Second Life or in World of War [AUDIO GLITCH] or in _____

online. Interoperability, from our customers’ standpoint, has yet to be an issue.

Now, if our customers ask for it or if we have a customer in the form of a third party that

believes interoperability is important, we have been participating in those discussions, and

through both ourselves and through Forterra, and we’ll be happy to address it at that time.

But for us to go and divert resources so that we can invent a feature that our customers

don’t want doesn’t make a lot of sense. I mean that’s part of the whole gestalt--I look at

Nordstrom for a lot, for [AUDIO GLITCH]. I have yet to see Nordstrom’s put in a place to get

your oil changed. And why? Well, probably because none of their customers ever asked

[AUDIO GLITCH].

And the other thing is the whole practicality of the thing. I mean I’m not quite sure that I

want--let’s say that this is my There.com Virtual World--a lot of my friends are. I really am

not quite sure I want interoperability to let my friends here know that I am a large female

cow in World of Warcraft. I mean part of the thing I don’t understand is, people say, “Well,

you should be able to walk directly from World of Warcraft into There.com,” for example.

Well, your appearance obviously can’t shift. You can’t [AUDIO GLITCH]. I can’t bring my

sword from World of Warcraft in to use it on the members here in There.com. (You know

who I’m looking at here.) So the whole thing about interoperability I’m little unsure of.

Now, to be completely honest, to show that I’m wrong all the time, I used to say, “Well, do

you remember that thing called Microsoft Passbook?” Do you have a Microsoft Passbook?

ROBERT BLOOMFIELD: I do not.

MICHAEL WILSON: And then I used to say, “Well, do you remember that thing Open ID?

Whatever happened [AUDIO GLITCH] Well, now I have to eat a little bit of crow here

because [AUDIO GLITCH] people finally are starting to sign up for Open ID, which means

that they can share their authentication credentials, that is, user name and password across

Flickr, on Yahoo! and a number of other platforms.

So that’s an example where I think interoperability fits just right. It’s kind of like the Three

Bears. There’s too much, too little, and just [AUDIO GLITCH]. I think that supporting

something like Open ID, which helps you and me remember I have one user ID and

password across multiple platforms. Yeah, that makes a lot of sense. But should I be able to

take my goods from one Virtual World to another? I still haven’t heard the compelling case

to make that happen. Frankly, part of me thinks that the people that want interoperability the

most are the ones that need and want the most members, which are the companies.

ROBERT BLOOMFIELD: Yeah. So I’ve heard two types of groups talk in favor of forms of

interoperability, which aren’t quite the “I want to bring my sword in from World of Warcraft.”

One is the builders and the people and--I’m sorry to bring up Second Life again, but that’s

where I spend a lot of my time and where a good deal of our audience is. We have people

who are going into Second Life and building a great deal of content and I think would like to

know that that content is going to have some value potentially outside of Second Life. If they

could bring that into There, rather than starting from scratch, that would reduce some of the

risk they face in making that investment.

And then the other group--you already have a very like client, which, as you said, works on

any machine that’s 2003 or better: cell phones. Right? So maybe you call this permeability,

that you can actually get into the World, at least in small ways, maybe on your cell phone or

on your Blackberry. So do you have much sympathy for those two views? Do you hear your

customers thinking those might be good ideas?

MICHAEL WILSON: So access from cell phones. One of the things we’ve heard from our

customers is they would like a lighter weight experience of our World, even lighter weight

than they have been. We’re already working on that. Some people here have been super

secret beta testers of an even lighter weight version of our product. But if you go beyond

that, be able to chat with your friends on cell phones [AUDIO GLITCH] I completely agree

about the ability to get connectivity between Worlds, which is different from interoperability.

Right? That I can get on a cell phone and send a text message to somebody in World or

vice versa, that makes tremendous sense. And that’s very different from being able to take

my goods from that other place into There.com.

Now, as far as your first issue about taking goods from the other place and putting in

There.com, well, we support 3D Studio Max and all the modeling tools that I named there,

that’s pretty open. So I guess I’m kind of unsure of your position here. It’s like we support all

these Open Standards that are used by these popular tools, and somehow we’re not open

because we don’t support someone else’s proprietary geometry?

ROBERT BLOOMFIELD: Good point. Okay. Let’s see. We’re just about out of time,

actually, I see. And I’d like to give you a chance to just talk about what you see in the future

for There or for the Metaverse, so you can take your pick. You want to make a short-term

projection, something we can expect in the next few weeks, longer term for There or for the

Metaverse more generally what [AUDIO GLITCH]

MICHAEL WILSON: Well, I think what I will say in the short term and the long term is, I

believe that these virtual worlds, or this Metaverse, becomes successful when real

businesses come in, join the Metaverse as a tool to engage with their customer. I think

there’s been a lot of talk about virtual economies and things which are completely

contained, but what I think the beauty of virtual worlds is that it’s a new way for real people

and real businesses to interact with each other.

So when one of our members here sells a piece of merchandise that they’ve made, what

they’re doing is that real person is actually interacting with another real person, and they

happen to be selling them a piece of virtual stuff, but it’s real business. And I think that, as

long as that’s the ball you keep your eye on, from the standpoint that you need to deal with

people in the Real World and real businesses, and you need to conduct yourself and

conduct your world that way, you’ll be successful.

As long as you believe that, “Oh, we’re a Virtual World, and we’re independent, and all

those silly laws don’t apply to us,” well, you’re going to find that people who are used to

doing business in the Real World are going to have problems understanding that, and you’re

going to have a problem accepting. So if I wanted a short-term prediction, it’s that you’re

going to see more real businesses playing in virtual worlds, but you’re going to see them

playing in places where people pay attention to what it is they need as opposed to making

them fit into some imaginary environment that we’ve invented.

ROBERT BLOOMFIELD: Okay. Well, a very practical strategic approach that you’re

outlining here, which is consistent for someone who was in on the ground floor of one of the

great success stories in the early Internet. So I wish you the best of luck, Michael, with

There, and I hope that your predictions are exactly right.

MICHAEL WILSON: Well, thanks. If you’d like to continue to hold your show in There.com

[AUDIO GLITCH] you have [AUDIO GLITCH] we’d be happy to find a great place and be

happy to work with you in building a great place for it.

ROBERT BLOOMFIELD: Well, that’s a great offer. We are working hard to rise above

Second Life, which is where the roots of Metanomics were, but I guess you’ll know I had

Robert Gehorsam on the show from Forterra. We’ve done work in Active Worlds as well,

and our plan here is to continue spanning the business and policy issues across the

Metaverse. So, welcome back.

So I would like to just very quickly at the end thank all the people who have made this

possible. First, thanks to the Second Life Cable Network for filming across Worlds. You can

all see this show on SLCN.TV. You’ll see it on there. And I’d also like to especially thank

Michael Wilson and Vasché Community for helping us do our first show in There. And,

Michael, thank you for your offer. I certainly hope we’ll be back. Bye-bye.

[END OF AUDIO]

Document: cor1008.doc Transcribed by: http://www.hiredhand.com