Technology | Media | Telecommunications

Monday, August 11, 2008

Virtual Worlds Create the Ultimate Money Pit

Strategy Analytics, which guides companies in terms of expected returns from virtual worlds investments, believes that real profit is still elusive.

"Virtual Worlds have witnessed considerable growth among consumers, but companies have lacked the economic justification, metrics, and process to guide investments," according to Harvey Cohen, President of Strategy Analytics and chief architect of their study.

Barry Gilbert, Vice President and Research Director of the Strategy Analytics Virtual World Strategies program, adds "Companies will require more specific measurement tools in order to continue their investments in virtual worlds."

Their market study finds that many companies have found that investments in virtual worlds have not met expectations. Their problems begin with poorly implemented media strategies that do not include virtual worlds as part of an integrated PR and promotional effort, and end with a lack of understanding of the appropriate metrics for assessing economic impact.

In addition to a five component total economic return (TER) model, Strategy Analytics examines the primary and secondary benefits of virtual worlds and provides a process for evaluating investments based on both hard and soft benefits.

"Virtual worlds can serve as a strategic catalyst for penetrating youthful markets as well as a checkpoint for demonstrating a company's focus on innovation," said Cohen.

While companies can access virtual worlds with a small development investment, they often find that building and sustaining consumer momentum requires an on-going budget of at least 60 percent of their initial investment.

Multi-billion dollar global brand companies looking to target the global youth market should be investing a minimum of one percent of their advertising and promotional budget in virtual worlds," notes Gilbert.

Frankly, I wonder why any informed marketer would want to throw new funds down the virtual worlds bottomless money pit. With so many other more interesting ways to squander a marketing budget, why choose this one?