Credit Crunch ripples into Metaverse: Economy down 70%

This morning I spent some time in a traffic jam listening to the radio. Still hot news are the recent credit crunch developments and suddenly the news turned to the Metaverse. The announcement was that the effects of the credit crunch were also noticable in Second Life, World of Warcraft and Entropia.

The basic message of the report was that these worlds are also suffering from the credit crunch. At it's peak, early 2007, the value of the entire Metaverse economy was estimated at about 1 billion dollar, which supposedly has dropped 70% and will probably end at a value of just a few million dollars in the near future.

A slight nuance, the drop already started in august 2007. Many inworld Financial institutions have gone bankrupt. Perhaps they have been a foretelling of the current, real world credit crunch. Many of these financial institutions have played tricks, similar to those in the real world which lead to the credit crunch.

The report was an interview with Dr. Jacob van Kokswijk, Professor of Virtualisation at the University of Leuven. If you understand Dutch, you can listen to a podcast of the interview this morning.

Dr. Jacob van Kokswijk is researcher into 'Future vision of New Media' at the Department of Psychology & Communication of Health and Risc at Twente University. He is Professor in "virtualisation" at the Medical Faculty of the University of Leuven in Belgium. He is carrying out academic research into the multimedia and (user) profiling in virtuality, the aspects of behavioral patterns, the self learning support of user interaction vs user in control, and the defining and certifying of (user) competences, at the Computational Neuroscience Research Group of the Department of Neurosciences. Dr. van Kokswijk is also Adjunct Professor HCI at KAIST Graduate School of Culture Technology (Daejong/Seoul, Korea) and Visiting Professor at foreign universities for Interactive Digital Media and Human Machine Interaction. Recently Jacob was doing research into "virtual identity" at the Lawschool of the University of Strathclyde in Glasgow (UK) (see: Digital Ego )

This is an impressive cv. I tend to disagree though. I agree that we've seen a huge dip in Metaverse appreciation in august 2007. I'd also agree to the fact that since that time the number of companies jumping without forethought into Second Life, and thus investing in the Metaverse economy, has come to a sudden halt. However, this does not mean that the Metaverse economy stumbled.

Second Life did get hit last august, yet concurrent usage has been steadily on the up, and also the amount of money changing virtual hands is rising again.

(Second Life Economic Statistics: User to User Transactions)

True, last year has seen quite a bit of rubble with the Second Life financial market, with some dirty games, but also implementing new regulations for banks and the gambling ban has affected the inworld economy last year. Many thought these actions would kill the Second Life economy, yet they've been just ripples and it did not take long for the economy to stabilize.

If you look at the Dutch Exchange, a Dutch money trader in Second Life, you'll see no credit crunch there. Business has steadily been growing over the past year and still going strong. Also, the chart above does not reflect a 70% drop.

As I said, we saw a huge fall in companies entering Second Life, on the other hand, dozens of Universities have started investing in Second Life and hundreds of companies invested into new platforms, dedicated branded worlds or other 3D applications. The industry did not drop, it has grown despite the negative media sentiment.

Correct me if I'm wrong, but I do not take this report seriously. What this is about was the failure of Second Life as a marketing platform. To neatly project the Gartner Hypecycle on it, a year after and spicing it up with a credit crunch sauce and ignoring what's really happening in the Metaverse is a huge disqualifier, whatever the CV looks like.