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Virtual Worlds See Shakeout

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A couple of years ago, MTV seemed to be onto the next wave in digital media, as it introduced to much hype several virtual worlds tied to its hit series Laguna Beach and The Hills.

Last week, even as the new season of The Hills premiered, the Laguna and Hills worlds were nowhere to be found. The site virtual.mtv was still live—but it featured a nearly empty theater designed for fans to gather and watch the MTV Movie Awards—which took place last June.

It appears the conventional wisdom that Generation Y was about to become the avatar generation may not have been so wise. For example, The CW quietly shut down its two-year-old Gossip Girl-themed virtual world a few months ago. Earlier this summer, the teen-targeted vSide.com shut down. And in August the once-promising young adult hangout There.com drew just 265,000 unique users, per comScore.

Meanwhile, virtual.mtv.com didn’t even register with comScore. Said Dermot McCormack, head of digital media for MTV Networks’ Music and Logo Group, in a statement: “The company is currently evaluating our approach to virtual worlds.”

To be fair, the virtual world phenomenon is hardly dead. Worlds aimed at kids (like Disney’s Club Penguin) and tweens (Stardoll) remain popular. The teen-skewing Gaia Online has run several campaigns for Procter & Gamble, while the Finland-based Habbo recently built a virtual hangout for fans of the “Twilight” movies.

But the “older” end of the virtual segment has struggled. “Clearly the economy has had a serious impact on the overall space,” especially as both venture funding and experimental ad budgets have dried up, said Barry Gilbert, an analyst at Strategy Analytics.

Plus, social networking—once viewed as static compared to virtual worlds—has only gotten more dynamic (apps, games) and sticky. “The older demographic has really gravitated to the platforms with the largest populations,” said Michael Cai, analyst at research firm Interpret.
Videogames have also gotten far more social over the past few years as more people play via some sort of Web connection.

“It’s not necessarily that people don’t like the idea of an alternate universe,” said Erin Matts, chief digital officer at OMD. “But adults are OK with having Facebook as their social connector. And they go to platforms like Xbox and PlayStation with a purpose that isn’t just ‘I’m going to hang out with my friends.’”

It’s that lack of purpose that may have undone some virtual words—particularly those built around traditional media. “The biggest challenge with virtual worlds is sustainability,” said Kelly Twohig executive vp/digital activation director Starcom USA. “You wonder if one story is big enough. When a show like The Hills is off the air, you constantly have to build back your base.”