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User Acceptance of Virtual Worlds

- An Explorative Study about Second Life -

M. Fetscherin & C. Lattemann

June 2007

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User Acceptance of Virtual Worlds

- An Explorative Study about Second Life -

Report prepared by Second Life Research Team Please visit our website on

www.secondliferesearch.blogspot.com

Rollins College Potsdam University Dr. Marc Fetscherin Dr. Christoph Lattemann International Business Department Corporate Governance &

E-Commerce 1000, Holt Avenue August-Bebel-Str. 89 Winter Park, 32789 FL 12207 Potsdam United States Germany mfetscherin@rollins.edu lattema@uni-potsdam.de

© Rollins College / University of Potsdam 2007. All rights reserved.

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Table of Contents

1 Introduction..........................................................4 1.1 From Web 1.0 to Web 3.D...................................................4 1.2 Virtual Worlds ......................................................................6 1.3 Comparison of Virtual Worlds...........................................7 1.4 Emergence of Second Life...................................................8

2 Empirical Study .................................................11 3 Empirical Results...............................................12

3.1 User Experience..................................................................12 3.2 Access to Second Life .........................................................14 3.3 User Profile..........................................................................14 3.4 Privacy and Security Concerns .......................................15 3.5 Willingness to Pay..............................................................16 3.6 Usefulness of Second Life .................................................16 3.7 Ease of Use ..........................................................................17 3.8 Motives .................................................................................17 3.9 Future SL Usage ................................................................18

4 Conclusion ..........................................................21

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1 Introduction

The emergence of social networks such as Skype, MySpace,

and Youtube, also known as Web 2.0, enable people new ways and channels to communicate, collaborate, and cooperate. But technology development does not stop there and the most recent one is the emergence of the Virtual Worlds also know as Web 3.D. One of the most famous examples is the Virtual World Second Life. Currently there are about 7 million users and forecasts project more than 25 million users by 2008. There are a wide variety of applications such as e-education, e-business, and e-government among others. This report provides an explorative study of the user acceptance of Virtual Worlds, specifically Second Life.

1.1 From Web 1.0 to Web 3.D Since the advent of the Internet we have seen several stages of e-

business so fare. It started in the mid 1990s with the static presentation of

content and products on web pages, over the interaction with the customer,

to the commercial transaction via Internet, and the value and partner

integration. This was followed by the introduction of more rich media

content and web developments such as Weblogs, Wikis, Podcasts, RSS

Feeds. Famous websites for these applications are Youtube, MySpace or

Facebook, just to mention a few. All those new technologies and

applications are also often referred to Web 2.0. Virtual Worlds create a new

stage of collaboration, cooperation, communication with an even higher

level of interaction, complexity, and value creation. They are undergoing

an evolution comparable to that of the Internet in the mid 1990s and it has

the potential of profoundly impacting the way people interaction and

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conduct business. The following figure, adapted from Gary Hayes (2006)1,

outlines the evolution over time from Web 1.0 to Web 3.D.

Figure 1: From Web 1.0 to Web 3.D

The figure shows that with the Web 1.0, there where a few millions

users visiting and using a website. But in social networks such as Wikis,

MySpace or Facebook the number of users are much higher and ranging up

to over one hundred million users using those technologies or applications.

It is believed that there will be even more users using Virtual Worlds, also

often referred as Multi User Virtual Environments (MUVE).

Due to the nature of higher interaction in Virtual Worlds, not only

education institutions are entering and establishing a presence in Second

Life, such as Harvard University, Ohio or Chicago University, but also for-

profit firms such as Toyota, IBM, American Apparel, or Adidas. Virtual

Worlds provides various applications for companies from product

1 Source : http://blog.kunzelnick.de/category/second-life/.

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development and testing, to marketing, sales, advertising and recruiting.

This may indicate the upcoming of a next generation of electronic business.

1.2 Virtual Worlds Virtual World is a place where people “co-inhabit” with millions of

other people simultaneously. Virtual Worlds are not just games, as there

are no levels, no scores and there is no “game over”. They exist in real time

where individuals communicate, cooperate and collaborate with each other,

like in real world. It can be assumed that the behavior of the users is very

similar to real world behavior.

Millions of people with Internet access, especially younger people,

live large portions of their lives in these worlds. They establish friendships,

buy and sell virtual properties and assets, and form large social networks

and organizations. Unlike computer games, they enable participants to

construct their own personality, also know as avatar, through which they

interact with other people. They design their own virtual characteristics

and appearance including body proportions, facial features, clothing, and

skin color.

“Virtual Worlds are not just games, as there are no levels, no

scores and there is no “game over”. They exist in real time where

individuals communicate, cooperate and collaborate with each

other, like in real world.”

Users, or in fact their avatars, build a business, establish a social

club, marry a partner, or travel to exotic locations with other avatars. They

use virtual money to purchase property, giving rise to realistic, integrated

economies as more users participate in the Virtual World. In some cases

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there is even a real exchange rate between the virtual money and a real

currency as it is the case with Second Life (SL) with the Linden Dollars.

1.3 Comparison of Virtual Worlds Despite its prominence, Second Life has notable challenges

competitors, including Active Worlds, There, and newcomers such as

Entropia Universe, Dotsoul Cyberpark, Weblo.com, Red Light Center, and

Kaneva. The following table from Oz (2005)2 compares three of the most

discussed, well-known, and well-established Virtual Worlds along various

dimensions. Active Worlds Second Life There Version 1.0 1997 2003 2003 Free Trial Yes Yes Yes Free Account Type Yes Yes Yes Ported to Multi-OS No Yes No 3D Graphics Yes Yes Yes Economy Not Really Yes Yes Physics No Yes Yes Custom Content Yes Yes Yes Custom Avatar to some extend Yes Yes Custom Avatar Animation to some extend Yes Not Really Building Yes Yes Yes Scripting to some extend Yes Not Really Voice Chat No Yes3 Yes Private Servers Yes Yes No Chat/Gestures/Emotions to some extend Yes Yes Streaming Media Yes Yes Yes Age Limit No 13/18 13

Table 1: Characteristics of Virtual Worlds

The rating of the various dimensions is as follows: “yes”, “to some

extend”, “not really” and “no”. The comparison shows that Second Life,

compared to the others, provides more features and functions and this

might be an indication of the future success. This might be even more the

2 Source: http://oz.slinked.net/comparechart.php 3 Planned but not implemented by May 2007

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case as Linden Labs, the creator of Second Life, has made the source code

for the Second Life viewer available to everyone.

1.4 Emergence of Second Life This report is focusing on Second Life as an example of Virtual

Worlds. Based on collected Linden Research's Grid Status data, an

analysis of Residents Online (RO) and Total Residents (TR) was performed

for every hour for the period between August 2006 and March 2007. The

daily average of RO quadrupled from 6,000 to 24,000. This growth was

correlated (coefficient of 0.75) and total residence grew twice as fast from

450,000 to 4 million. Forecasts using fitted second-degree polynomial

trends projected a daily average of 150,000 residents online and 25 million

total residences by March 20084. By June 2007, there are almost 7 million

inhabitants on Second Life already.

“Trends projected a daily average of 150,000 residents online

and 25 million total residences by March 2008.”

We also conducted an inter-day and intra-day analysis of the number

of users being online and total residence5. The following figure provides an

overview of the residence online and new residence created by week day.

First a week average was calculated and then is compared to daily average

where 100 is the week average. Hence, a daily average higher than 100

means on that day there are more people on average online, a daily

average lower than 100 means that on that given day there are on average

4 A critical note on the unit of analysis: Linden Research defines a Resident as "a uniquely named avatar with the right to log into Second Life, trade Linden Dollars and visit the Community pages" - an account, basically. As with most website user accounts, several Residents might belong to one person. And, as with most website user accounts as well, an account remains in existence even without a certain degree of user activity. Therefore, Second Life Residents statistics are neither more nor less meaningful than other websites' user account statistics. 5 A special thanks to Guido Lang, University of Bern for this analysis.

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less people online compared to all the other days. The following figure

provides an illustration and more details about that.

Figure 2: Inter-Day User Analysis

The results show that most users are online over the week-end on

average with a peak on Sunday. However, according to the data there is

not a big difference of the new residence created by week day.

“Most users are online over the week-end on average with a

peak on Sunday. Most users are online between 5pm and 5am.”

Our intra-day analysis reveals also some interesting findings. Most

users are online between 5pm and 5am GMT and most new accounts are

created between 1pm and 10pm. This indicates a strong influence of US

users despite reports indicating that there are many Europeans on Second

Life6. This moderate increase of activity on second Life between 5 pm and 1

am suggests that most people who are on Second Life are active either

after work or after school. The following figure illustrates the average 6 Source: http://blog.kunzelnick.de/category/second-life/

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number of users’ online and new residence created by daytime over the

selected period.

Figure 3: Intra-Day User Analysis

Again, the value 100 indicates the total average value of the entire

period from August 2006 to March 2007 for all hours. Any value above 100

of a given hour indicates there are more people online or created than the

average and a value below 100 indicates there are less people online or

created compared to the overall average for each hours by hour.

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2 Empirical Study

This report assesses the User Acceptance of Virtual Worlds, with a specific focus on Second Life. By means of a survey with almost 250 respondents this report provides first empirical results to the user acceptance of Second Life. The data has been gathered during spring 2007.

There are a number of reports indicating that Second Life is more a

hype than hope. For example the report from the consulting company

Fittkau & Maass shows that most people are excited and interested in

Second Life but it fails to keep their interest and business applications are

very limited7. We agree that Virtual Worlds have many challenges to

overcome and that for some institutions it might not reveal the expected

Return on Investment (ROI). In order to make it work, it is important to

understand user acceptance of those networks and the technology adoption

process users are going trough in order to accept those networks as new

ways and channels of interaction with institutions. In order to gather data, a survey has been conducted between March

and May 2007. The survey was promoted on various Virtual World related

websites, Second Life mailing lists, in-world announcement to Second Life

users. In order to motivate people to give reliable and valid data, the

respondents were paid 300 Linden Dollars for the completion of the

questionnaire which consisted of 41 questions. Statistical tests on

Cronbach Alpha proved the reliability and validity of the answers.

7 Source: http://www.handelsblatt.com

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3 Empirical Results

90% of respondents have less than a year experience on Second Life. 70% access Second Life from home, 54% with a desktop. 67% of respondents are not afraid of giving personal information. Almost 60% are very likely to buy virtual goods from Second Life, and 42% are willing to use their credit card. 70% perceive Second Life to improve collaboration, 69% it improves communication, and 61% it improves cooperation between people. 56% of respondents perceive Second Life as easy to use. Finally, people are using Second Life not to change their identity, but rather to explore and visit new places and meet people.

3.1 User Experience We assess the various socio-demographical variables as well as basic

user behavioral aspects of the respondents. Of all respondents, 90% are

less than a year on Second Life. The majority (56%) are even less than 6

months active. The following figure provides more details and a breakdown

of the user experience on Second Life of the respondents.

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56%

34%

6%

3%

1%

0-6 months

6-12 months

1-2 years

2-3 years

more than 3years

Figure 4: User Experience

The results are pretty consistent with the product diffusion curve which shows the degree to which consumer’s adoption of new products and

services. The 4% of the respondents who have over two years experience

with Virtual Worlds like Second Life can be classified as being the

“innovators”. All other users can be classified in the group “early adopters”.

Those who are entering soon might be the “early majority”. However, what

is clear is that the majority of users as well as the lagers have still a few

months to one or two years in order to adopt Second Life.

“90% are less than a year on Second Life. Of all respondents,

72% are also using YouTube, followed by Flickr with 47% and

MySpace with 40%.”

We have also asked respondents if they use other social networks

than Second Life. Respondents seem to be highly affine to Web 2.0

applications where 72% are also using YouTube, followed by Flickr with

47% and MySpace with 40% of the respondents. The following figure

provides more details about the usage of other social networks by the

respondents.

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72%

40%

32%

47%

39%

2%

Youtube

MySpace

Linkedin

Flickr

Facebook

Bebo

Figure 5: Usage other Social Networks

3.2 Access to Second Life The majority of respondents (54%) are accessing Second Life by

desktop computers, followed by wireless notebooks (32%) and wired

notebook (14%). 71% of the respondents access Second Life from home,

followed by 17% from the university campus, 11% from work and 1% access

Second Life from a different location.

“71% of the respondents access Second Life from home. The

majority of respondents are accessing Second Life by desktop

computers.”

3.3 User Profile Of all respondents, there are 53% female compared to 47% of male.

Hence, no gender gap can be derived from the survey data. The age

structure of our sample is well balanced where the youngest person is 19

and the oldest person is 77 years old. In this respect, the survey-

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participants seem to represent a similar age and gender structure than the

one of the Internet.

However, when looking at the educational degree, our sample has a

high proportion with almost 29% of respondents with a Ph.D. degree. This

indicates that the survey result might be biased by an academic shift.

However, the majority of the respondents (62%) have a College degree8 as

their highest degree followed by 9% with a High School degree.

“Respondents of this survey are from 37 different nations”

Respondents of this survey are from 37 different nations. Most of

them come from the US (56%) followed by members from the UK (8%) and

Canadians (8%). Members from Europe in total count 12% of the

respondents which is a different result than other studies9 which state that

German make up an overall share of 13,5 % of all Second Life user. Hence,

this study might be biased towards US users and results might be

interpreted with caution.

3.4 Privacy and Security Concerns By using Second Life, users give away various personal information,

such as e-mail addresses and when they want to buy or sell virtual

properties, they also have to provide either their PayPal account

information and/or credit card information. We assess the user acceptance

of providing such information. Our results show that 67% of respondents

are not afraid of giving persons information in order to use Second Life.

There are 16% which are indifferent, 16% who are afraid of giving personal

information and 1% did not know or answer the question.

8 Bachelor or Master’s degree 9 Source: http://blog.kunzelnick.de/category/second-life

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“67% of respondents are not afraid of giving persons

information in order to use Second Life.”

3.5 Willingness to Pay We also assess the willingness to buy virtual goods from Second Life

as well as the likelihood to use the credit card to purchase on Second Life.

59% of respondents are very likely to buy virtual goods from Second Life,

compared to 21% who are not likely to buy virtual goods in the near future.

The rest was either indifferent or did not know. In terms of the usage of

credit card to purchase on Second Life, 42% are willing to use their credit

card to purchase on Second Life compared to 34% who are not willing. The

rest was either indifferent or did not know it.

“59% of respondents are very likely to buy virtual goods from

Second Life. 42% are willing to use their credit card to purchase

on Second Life.”

3.6 Usefulness of Second Life In order to assess the user acceptance, we assess the perceived

usefulness of Second Life for users. Second Life enables, among others, to

improve communication, cooperation, and collaboration between people.

Our results show that 70% perceive that Second Life improves

collaboration, 69% state that SL improves communication, and 61%

perceive that Second Life improves cooperation between people. These

results indicate that Second Life is perceived by users as being useful and

it provides an attractive way and channel to accomplish those goals.

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Around 70% perceive that Second Life improves collaboration

and communication, and about 60% state that Second Life

improves cooperation between people.

Second Life is a social network and hence it enables also to search

and meet people and places. Of all the respondents, 49% use Second Life to

search and meet faster people and 52% perceive as Second Life is effective

to accomplish this goal.

3.7 Ease of Use Research on user acceptance also assesses the ease of use of the

given technology or systems. We have asked various questions in that

respect where 56% of respondents perceive Second Life as easy to use

compared to 24% who disagreed. The rest of the respondents was

indifferent to this question or did not know it.

“56% of respondents perceive Second life as easy to use.”

There are 47% of respondents who agree that it is easy to become

skill full at using Second Life, but there are still 36% who do not agree

with this statement. The rest of the respondents was either indifferent or

did not know it.

3.8 Motives User acceptance is also strongly driven by the motives of using the

type of technology or system. We have asked respondents about five main

motives to use Second Life which were the motive to (1) visit virtual places

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and (2) to learn more about Virtual World, followed by (3) playing, (4)

meeting people, and (5) changing the identity.

“People are using Second Life not to change their identity, but

rather to explore and visit new places and meet people.”

The following figure provides more detail about our results.

92%

86%

68%

66%

37%

Visit VirtualPlaces

LearningProcess

Play

Meet People

ChangeIdentity

Figure 6: Motives to use Second Life

Our results suggest that people are using Second Life not to change

their identity, but rather to explore and visit new places and meet people.

3.9 Future SL Usage Second Life has many challenges to overcome in order to become

mainstream and widely accepted by institutions and users. It has also

notable competitors, including Weblo.com, Active Worlds, There, and

newcomers such as Entropia Universe, Dotsoul Cyberpark, Red Light

Center, and Kaneva. Experiences from other technologies showed that

when few competing and incompatible products coexist in a market,

potential users face a choice between these products and the alternative of

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deferring the decision. This principle is named tippiness10. As a result of

network effects11 only one or two competing platform will survive in the

market as it is the case with the website e-Bay or Amazon.

Even if the Second Life viewer Software is free, open source and the

usage is free of charge, the usage of such a platform is bundled with

switching costs due to lock-in effects12. Lock-in in this respect is a situation

in which a user is so dependent on the Linden Lab services that he or she

cannot or hardly move to another platform without substantial switching

costs, real and/or perceived.

“Second Life has many challenges to overcome in order to

become mainstream.”

Also our results suggest that there is a positive perceived usefulness

and ease of use of Second Life. It is of importance that there is a positive

network effect and people continue to spend time to build up social contacts

and to learn about the platform, investments have to be made to build a

presence and to define the avatar. Hence, it is of importance that the used

platform last for a certain period of time to guarantee to keep the losses of

personal investments low or to have an adequate input/output relation,

whatever that means for every single user.

“53% of respondents intend to buy property in Second Life

and 41% intend to earn money in Second Life.”

Therefore we asked respondents about their intend to use of Second

Life in the future. 76% of respondents intend to be on Second Life regularly

10 Gladwell, 2000 11 Varian and Shapiro, 1999 12 Farrell and Klemperer, 2004

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in the next few months. 53% of all respondents intent to buy a property in

Second Life and 41% intend to earn money in Second Life.

Our results suggest that Second Life users intend to invest, build up

a business, and to use the platform regularly in the near future. These are

all indicators for a sustainable trend which enforces the creation of

network effects which are important to win the race to become the future

platform in the fierce competition among the existing Virtual Worlds.

However, these results are suggestive rather than conclusive and it’s too

early to make any final conclusion.

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4 Conclusion

This report provides an explorative study about the user

acceptance of Virtual Worlds with a specific focus on Second Life. By means of a survey we provide some first empirical results also they are more suggestive rather than conclusive. Nevertheless they bring some light into this important topic.

The emergence of social networks such as Skype, MySpace, and

Youtube enable people new ways and channels to communicate,

collaborate, and cooperate. The latest emerging technology are Virtual

Worlds, also know as Web 3.D. One of the most famous example is Second

Life. There are a wide variety of applications such as e-education, e-

business, and e-government among others. This report assesses the user

acceptance of Virtual Worlds, specifically Second Life. By means of a

survey with almost 250 respondents this report provides first empirical

results of the user acceptance of Second Life. The data has been gathered

during spring 2007. Our results show that 90% of respondents have less

than a year experience, 70% access Second Life from home and 54% with a

desktop. There are 67% of respondents who are not afraid of giving

personal information. Almost 60% are very likely to buy virtual goods from

Second Life, and 42% are willing to use their credit card to purchase on

Second Life. About 70% perceive Second Life improves collaboration and

communication, and more than 60% perceive that it improves cooperation

between people. 56% of respondents perceive Second life as easy to use.

Finally, our results indicate that people are using Second Life not to

change their identity, but rather to explore and visit new places and meet

people.

If users accept Virtual Worlds as a new way and channel to

communicate, collaborate, and cooperation and if institutions arrive to

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provide value to users, Virtual Worlds might become then next generation

platform for Internet users. However, in order to become mainstream,

Virtual Worlds like Second Life have many challenges to overcome and

where user acceptance is probably the most important one. But, this might

be possible supposing that network effects, lock-in effects and tippiness

effects do exist in the market of Virtual Worlds as they exist in the

Internet economy.

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User Acceptance of Virtual Worlds

- An Explorative Study about Second Life -

Rollins College Dr. Marc Fetscherin International Business Department 1000, Holt Avenue Winter Park, 32789 FL United States

Potsdam University Dr. Christoph Lattemann Corporate Governance & E-Commerce August-Bebel-Str. 89 12207 Potsdam Germany

© Rollins College / University of Potsdam 2007. All rights reserved.

Report prepared by Second Life Research Team, please visit our website on

www.secondliferesearch.blogspot.com.

Special thanks also to Guido Lang from University of Bern.