Tuesday, December 22, 2009

Are Forterra and Metaplace Just the First Two Dominos to Fall?

Over the next few weeks you're going to see a lot of analysis, punditry and speculation related to the massive layoffs at Forterra Systems and the January 1st closure of Metaplace's virtual world building site. So I thought I'd add my two cents before all the digital hot air steams up the place.
  • For starters, I'm surprised more virtual world start-ups haven't already bitten the dust. The odds are less than 50/50 that a small business start-up of any kind will survive for four years. So the demise of two ventures doesn't necessarily reflect on the industry as a whole. Especially since they were really in two very different markets. Forterra is an enterprise play focused on government clients. Metaplace is consumer-focused with a user-generated-content business model.
  • That said, the virtual world market is still in an early adopter phase, which is an especially risky time for entrepreneurs. It calls for deep pockets, strong stomachs and very agile management.  I actually see Metaplace's shift from their initial business model into whatever still-unamed direction they are headed as a likely sign of good management. Especially combined with the classy way they are closing the site, giving participants time to grab their assets and setting up a forum so community members can stay in touch.
  • One of the lessons to be gleaned in all this is that just because you build it, avatars won't necessarily come in substantial numbers. And even if they do, you may not figure out how to monetize their presence. And even if you do, it may not create enough revenue to offset your expenses or satisfy your investors. If Google can fail at this (remember Lively) anyone can.
So are Forterra and Metaplace just the first two dominos to fall? Beats me, although odds are that less than half of virtual world ventures will make it past their fourth birthdays.

Okay, let the spin begin!


Ari Blackthorne™ said...

"For starters, I'm surprised more virtual world start-ups haven't already bitten the dust."

Three words: Ditto.

Okay, that's more than three. But I digress. The fact is this: the U.S. economy is in the crapper. The government is close to passing the Bill of Subjugation...er, I mean the "unconstitutional health-care debacle" - which will tank the economy even further.

All this leads to a lot of people pinching their wallets a lot tighter. Read: venture capital is drying-up for "experimental"... well, ventures.

Burhop said...

I agree with both you an Ari although I think there is more to this than a bad economy. I think too many of these companies are missing the mark thinking "cute" will get market share, "business" oriented will make you money, or "ease of use" will make up for missing functionality.

The equation for a good virtual world is much more complicated than that.

Robward Antwerp said...

As a neglectful beta tester for MetaPlace I’ve thought a lot about what worked and did not work for me from the standpoint of a user. Here is a short, incomplete and at times contradictory list.

• Call me shallow… but MP was 2.5D. While I liked that they were focused on the internal community structure… I found the visuals flat to ugly. (I think Blue Mars is at risk for the reverse… shiny new toy with primarily only developer level content). I am not alone in this view (of the 8 friends I invited to the beta test only 2 stayed to create anything).

• I did however like how MP attempted to do a rich browser embedded application. This ease of access is what brought in numbers quickly.

• The community was what drew me (I had some very talented friends and SL builders invite me to the beta test). Hat’s off to the hard work and leadership that Cuppycake put in with her team.

• MetaPlace had faith in and respect for user generated content. For me this is a key… that determines if I am a passing tourist (not likely to contribute to the economy) or a potential resident (and contributor to its economy) in a Virtual World.

In the end I think MP lost out to shiny new toy first impression of Blue Mars and the deeply rich and well developed community of builders, artists and residents that evolved over time (more time than a prudent venture capitalist may be comfortable with in this economy) with in Second Life.

Of course more changes are afoot next year… the Open Sims being the wild card. I am hopeful that Rezzable will reduce the bugginess of Reaction Grid and I look forward to seeing Bryn Oh’s project there.