Growth forecasts for the Virtual Worlds sector

We’re excited about the growth in virtual worlds, very excited in fact. As we release our forecasts for the sector, perhaps it’s time to have a quick look back over a frantic few years…

In an unfortunate way, the global credit crunch got in the way a little (the understatement of the year – not just for VWs of course). Late 2006 was the start of things. Sure, worlds like Habbo, There and Second Life were around pre-2006, but it wasn’t until brands started moving into SL that media awareness grew and, of course, users began to notice the metaverse.

Without a doubt, 2007 was the year of Second Life, with over 100 brands setting up islands. This created major attention, good and bad. And nevertheless, while No Brand is and Island, this marketing surge took virtual worlds mainstream. Linden Lab has a lot to be thanked for – Virtual Worlds were on the map in 2007. Additionally, we can’t forget about the Disney acquisition of Club Penguin – the catalyst for Kids, Tweens and Teens (KT&T) related business plans to pop up at an astonishing rate, ‘Chasing the Penguin’ as we call it.

2008? This was growth across many segments. Mirror Worlds came into play, more KT&T worlds were launched and suddenly the sector was rocking. The longer established worlds continued to grow their multi-million registered user bases and the new worlds started to battle it out.

Then we moved into 2009. Everything was looking rosy until the economy stepped in and slowed the launch of new worlds due to lack or drop-off in funding. Interestingly, ARPPU’s didn’t really take a hit, as users continued to spend money in-world. However, generally the growth and momentum seen in the sector upto the end of 2008 was impacted. But, as we start to move towards 2010, what does the future have in store? One thing’s a dead cert – we’ll be producing lots more charts – you can see them all here.

Lot’s of brand-new concepts in the VW space is one area that’s really exciting. More KT&T worlds? Absolutely – we think this age segment will continue to drive growth. And we’re optimistic about older worlds catered towards adults (in an ‘adult’ sense as well as propositions aimed at more mature audiences), with learning and education plus gambling being key genres to watch.

Here’s our forecast for the growth in the number of virtual worlds. By the end of this year we’ll be at the 150 mark for total worlds. We forecast this number to double by the end of 2010.

A rapid increase, driven largely by media sector companies creating IP-driven platforms for the toys, TV programmes, films and other properties. Just as almost every KT&T property has a website, we expect them to have a VW or at least presence in virtual worlds – along the ‘Theme-Park’ approach discussed in the past.

We expect growth past 2010 onwards to come from multiple areas. Education and older age ranges will supplement KT&T growth. Also socnet extension from ‘pages to places‘ is a natural movement. Combine all of this and we get to our 2012 forecast of 900 virtual worlds.

In terms of revenues, our forecast is shown below. This is a global forecast, including Asia. Our year-end 2009 revenue forecast (in USD) is $2bn. This number (and the forecast in general) include revenues from premium subscriptions, marketing placements in-world/on-site, microtransactions from virtual goods and support companies in the supply chain (service providers, server/bandwidth etc).

From 2009 to 2011 we predict a yearly increase of $1bn, driven more by marketing dollars as more brands spend money with VW operators, plus a growing uplift in microtransactions (spent on virtual goods – which we’ll split out in a future post).

Easier payment mechanics such as premium SMS and pre-paid cards (as opposed to credit cards) will lower the barrier for conversion for virtual worlds. This plus an increase in perceived value of virtual worlds (from parents) will assist in the revenue growth.

We forecast 2012 revenues to reach $6bn and 2013 to hit $9bn. All KZero industry forecasts can be seen (and ordered) here.  The new KZero report, Virtual Worlds 2010+ details and explains the key genres driving future growth in the virtual worlds sector.

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