Marketing to Avatars

AI is transforming the world. And it starts with the right compute. ARM is the AI compute platform trusted by global leaders, proudly NASDAQ listed, built for the future. Visit arm.com discover.

Hello and welcome to the third edition of the HBR IdeaCast, a BI weekly audio show from Harvard Business School Publishing. My name is Paul Michelman. I'm an executive editor here and I'll be your host. Our first segment today is about marketing. Not just any kind of marketing, mind you, but a new kind of marketing aimed at a new kind of audience. An audience of avatars. If you're not familiar with the term avatar, they might best be described as the graphical alternative identities adopted by people in online environments and especially in online games and worlds such as Second Life. In these environments, real life players develop and control three dimensional, and I mean that in every sense of the word, alternative beings. These avatars exist as fully drawn people or occasionally animals or some combination of the two, complete with well developed personalities, extensive wardrobes and even fully furnished homes. And it is these avatars, along with their real world controllers, who have begun to catch the eyes of some highly creative marketers. And in our much shorter second segment, we offer you a quick take on how to live in to your new promotion. So sit back, relax and enjoy the show. First up, marketing to avatars.

Joining us today is Paul Hemp, a.

Senior editor of the Harvard Business Review.

And author of what I believe is one of the most fascinating and indeed mind bending articles ever to grace the pages of the magazine. Paul, thanks for making the time to chat today.

Thanks for having me in.

You bet Paul. In your article avatar based marketing, you take readers on a journey into a world most of us had no idea even existed. Now I know this is a tall task, but can you describe this world to us simply, that is a tall task.

Let me give it a shot. We're talking here about three dimensional virtual worlds accessible via the Internet, in which the users, through an online alter ego that they create called an avatar, are able to play games or simply interact socially with thousands of people simultaneously.

Paul, how big is the avatar market?

Depends what you're talking about. The game market is big and growing by leaps and bounds every day. There's this, that is the people paying subscriptions to enter these worlds and play these games. There is an interesting side market on ebay and other auction sites in which users pay in real dollars for, for skills or weapons or attributes that other people who have created or earned in a particular world and they buy those, take them on for their own avatar and then enter those worlds with their performance or appearance enhanced. Where this piece goes, this article goes, is looking at the internal market of these worlds. Is there an opportunity to sell first of all, ultimately real world goods or market real world goods in these virtual worlds? And one sign that that may not be a crazy idea is that there's a robust in world economy in many of these worlds in which people exchange in world products and services for in world currency. But here's the key. In some worlds, like Second Life, you can take that currency and exchange it into real world dollars or pounds or euros on the Internet.

So Paul, you've gotten us started. How does a marketer begin to make sense of this?

Obviously these virtual worlds because they offer an opportunity for such engagement with other avatars with the action going on. They offer an opportunity for engagement with brands in a way that has nothing to do with passive eyeballs and everything to do with intelligent minds acting in a very interactive, realistic world. But it's not just the setting that is of interest to marketers. I don't think it's the shadow consumers, the avatars themselves. And if you think that advertising has always targeted a powerful consumer alter ego, that is the hip, attractive, incredibly popular person just waiting to emerge with the help of the advertised product, of course, from the all too normal self, well, here there's. Advertisers don't need to dig deep to find that alter ego. They're on vivid display. And people tend to put their best face forward when they create their avatars, or at least a different face. And here is a target for marketers.

So let's step back for a second and look a bit more at the avatar experience. Here's an excerpt from your article. Someone's avatar, or AV as they're known, can evolve from a being created using standard character and appearance options initially offered to new users into a unique and richly developed individual.

The opportunities to create a nuanced and textured personality vary in these different worlds. That's one of the. I think the messages to marketers here is that not talking about these are very different places with very different kinds of beings. And you need to tailor your message to the world that you're targeting. But in some of the worlds there is the opportunity to truly create a unique individual, both in physical appearance through modifications you can do using your own computer manipulation, using tools provided by a virtual world like Second Life to tailor the being's actions and characteristics, and really personality to create a unique being that is your own creation. And I should add that aspect of creating the avatar by definition makes that creation and the user behind it very engaged in the process in the world. Again, it's not a passive process. So if you introduce brands into these worlds in a way that is integrated and doesn't clash with them, there is the opportunity for truly engaged interaction between a user, his or her avatar and the brand.

But not everybody, as you note in the article, wants to or has the time to customize their own avatar. And as you write, those who don't have the time or desire to enhance their avatars on their own spend a combined total of everybody take a deep breath of more than $100 million a year on Internet auction sites for skills and accessories.

Yes, that is, I mean that's an interesting aspect of this is the market in personal characteristics and accessories. And it's a sign of, I think of how much people are voting with their showing. Their money is talking here and people are willing to they care about their creations enough that they're willing to spend money to enhance them.

Right now that is real world commerce we're talking about. So now let's look at virtual world commerce. Another excerpt. The real world marketing potential of online worlds is suggested by the act of virtual commerce that already takes place within them.

This is true in probably a minority of worlds. But again, Second Life, being perhaps the most technologically and sociologically advanced of the worlds, is not alone in having this in world commerce. And this is a hard idea to get your mind around, but I'll try to make it quick. In my explanation is that residents in Second Life spend in the local currency called Linden dollars, which is available actually at ATMs in the world, the equivalent of $5 million a month currently on resident to resident or place player to player transactions for in world products and services, things like clothing, things like brokerage services for buying land, things like design services. And where do we get that $5 million from? Well, they can take those Linden dollars and exchange them for real world currency at an exchange on the Internet. So while there are the sort of services you might expect, the sort of things I mentioned like clothing and furniture design, event planning, real estate brokering, there are also in Second Life avatar businesses or avatar run businesses that include detective agencies which keep an eye on virtual infidelity. There is a notary public who guarantees the legitimacy of avatar contracts. There's an advertising agency which designs and places ads for other avatar operated businesses. There are in addition the inevitable, given the online setting, sex shops in which sell not only racy garb and paraphernalia but also computer code that allows two avatars to enter into a passionate embrace. And shall we say, beyond that?

What struck me in reading your article was a question of the reality. It's a bad word to use, I know, considering the context of some of the messages or some of the commercial experiences and some of the risks to marketers. So let me throw out. Well, let's work through a couple of examples here. The first that comes to mind, and I'll quote your article in Sims Online, another one of these virtual worlds, McDonald's installed virtual fast food kiosks, complete with.

Automated employees working at the counter, and.

Able to serve up free virtual burgers.

And fries to residents.

So, Paul, I have to wonder, if you order your Big Mac without pickles.

Do you have to wait longer?

I'm not sure how detailed. I don't know if you can have it completely your way in Sims Online.

But okay, a couple other examples. Nike has sold virtual shoes that allowed wearers to run faster than other avatars. Now, I'll say this a bit tongue in cheek, but with a serious undertone. Isn't that false advertising?

I guess it's not false advertising insofar as any advertisement at least suggests that this will enhance your performance or your appearance in some way. Why this is seen by some as a particularly successful example of product placement in these virtual worlds worlds is that it was integrated into the world itself and did in fact enhance the performance of the avatars participating in it. That is so key in these worlds, you can't have Pepsi cans littering the banquet table of a medieval hall. They need to be seamlessly integrated in and sought by the resident avatars and probably not forced upon them. Otherwise it becomes 3D spam. It needs to be marketing that the avatars seek out and choose to engage with.

So the issue of choice or free will of avatars in my mind brings up some risk to marketers. And let me again cite an excerpt. The American Cancer Society staged its Relay for Life event in Second Life. Resident avatars walked a virtual course, lighted virtual luminaries, and raised virtual cash, which was converted into more than $5,000 in real cash. So on the one hand, well, that's a wonderful piece of marketing and in fact, a successful bit of fundraising. Given the freedom of the avatar and the relative anonymity of the avatars, the separation between the avatar and its owner, I would think there are some risks. So let's say, and I would never do this, Paul, that my avatar participated in the Relay for Life, but about Halfway through, my nicotine fix kicked in and I decided to light up a Marlboro. What does this do to the American Cancer Society brand, or arguably to the.

Marlboro brand if it wasn't sanctioned by Marlboro? I think those are risks that a marketer takes in virtual worlds, as it does to a certain extent in the real world.

And Paul, I believe you have some first person experience with the virtual worlds.

Yes, I do. In fact, I have my own avatar in Second Life and some of my interviewed several avatars for this article. They declined to provide their real world identities, but I was interested in their take on what their response would be to an incursion of the marketing of real world products in a place like Second Life.

And what was their take?

Well, I think the people who've been there longest are maybe hardcore avatars. Hardcore is the wrong word. Purists in a way, who see these worlds as an escape from an unpleasant real world and the idea of tarnishing it with real world commercial activity is unappealing to them. I think these worlds are growing so fast and especially with younger people who are maybe more used to product placements in movies or everywhere they turn. I think that ethic is probably on the wane.

You ask an extremely provocative question, one that I find just a tad bit scary, frankly, and that is but will avatars actually buy real world products that are marketed in virtual worlds, in effect purchasing real world goods for their creators? So I have this vision and this perhaps will show you how old I am, but I see Charlie McCarthy sitting at his laptop ordering up a new sweater for Edgar bergen@lands end.com as if Edgar doesn't even know what's going to that Edgar doesn't even know what's happening.

That's a terrific example, and it highlights the somewhat artificial nature of this argument. In fact, it's Edgar Bergen who is clicking on the Land's End go to checkout button. But again, I would say that that decision of Edgar Bergen to click on that button is somewhat influenced by the fact that Charlie McCarthy is sitting on his lap. And Charlie's Persona may play some role shaping that purchase decision. And the technology is there. There actually was a somewhat bungled attempt by Pizza Hut several years ago in an online combat game in which you could click on a Pizza Hut logo and indeed a pizza would appear at the user's door 20 minutes later. It wasn't handled very well at the time, but the technology is certainly there to do just that.

Paul, as marketers muster their creativity and I think their courage to enter the world of virtual advertising.

What are some of the warnings they should heed?

There's obviously not virtual, but real challenges and real risks here. And it's a world in which marketers are at this point still pretty naive because no one's really, in a widespread way tried this sort of thing. There are all kinds of problems. There are technology constraints. Some of these worlds require pretty decent hardware on the part of users and you wouldn't want to in many cases slice lop off a whole group of potential consumers because they didn't have a strong enough graphics card. There is the danger of residents of these worlds resisting or there being a backlash against the incursion of real world marketing into their worlds. Perhaps the biggest concern is this issue of privacy and how upfront companies would have to be in making their marketing pitches to avatars rather than doing it surreptitiously in the way we were talking about a minute ago. And you lose a little control over your brand when it's floating around a virtual world like this. So it's not without risk. But the potential, I think most people would agree, is tremendous.

Paul Are there any plans to have this article, and I'll put this word in quotes, published in Second Life? Can I go to the can my avatar go to the newsstand and buy.

This issue of Harvard Business Review?

Actually, not at the moment, but your avatar can go to the newsstand in Second Life and buy several In World publications that will bring you up to date on recent events in the world. You can get a subscription to those publications, which will be mailed either to your Real World inbox or to your home in Second Life. And there are reporters who roam Second Life, both bloggers who report on the world in Internet blogs but also report on the world to other residents via in World newspapers. And HBR will be there soon, I hope.

Yes, let's hope so, Paul. At this point, I don't know what else to say except this is virtually unbelievable. Thanks for coming today.

Thanks so much.

If you'd like to learn more about marketing to avatars, you can pick up a copy of the June issue of HBR, available at newsstands everywhere and at harvardbusinessonline.org. Next we offer you a quick take on how to live in to your new promotion.

You walk into the office Monday morning to a round of hearty handshakes and congratulations on your promotion. It's the kind of opportunity you've been working toward your entire career, a chance to help move your company into new markets and launch new products. It's a position of true influence and leadership. And if you're successful, even bigger things could be on the horizon.

Everything is great, right?

Well, it could be, but only if you make it so. In most organizations these days, receiving a promotion is only the first step in leaving one job and entering another. Indeed, most of us never quite managed to leave behind many of the responsibilities we had in our quote unquote old job. Companies aren't very good at this part of the promotion process. In fact, most bosses would rather not worry about who's going to take care of all those important tasks you were responsible for before your promotion. Many would prefer that it continue to be you, but that just won't work. If you don't free yourself from your old job, you'll never be able to fully succeed in your new one. Thus, make it a top priority in your new position to successfully transfer your old responsibilities to the person or people best suited to handle them. There are as many different ways to go about this transition as there are circumstances and personalities within organizations, but a few key thinking points will help root out the best approach. Number one, is there someone within your department or unit who is well suited to move right into the role you're vacating? If there is, seek that person out, gauge her interest, and help position her to take over. Two, Is there a promising candidate who is not quite ready for the full job? If so, what can you do to help them transition into your old job? If you think this person needs, say, six months to fully take over, would you be willing and able to retain some form of executive oversight of this person to help ease them into their new role? Could your old responsibilities be effectively dispersed among several individuals? This may not provide quite as clean and easy a break as having a single successor, but in some cases it's a more realistic option, especially if the company doesn't want to add any additional employees. In this scenario, you'll need to think about how your old responsibilities can be naturally apportioned. For instance, if you're in sales, this might mean reassigning different clients or groups of clients to different people. Or perhaps each of the three units you manage could be given to a different colleague. 4. Can you carry some things forward and leave others behind? When there's no clear organizational plan to hire a replacement for your old job? Perhaps the most realistic approach is for you to decide which tasks you can effectively carry forward with you and which simply must be transitioned elsewhere. What are the things that you have been doing that will most cleanly fit with what you will be doing? Can a few of them stay with you without causing undue drag? And finally, number five, how will you sell your plan in any of the scenarios we've talked about here? You are affecting those around you, maybe.

Your boss most of all.

Think carefully about the rationale for whatever approach you propose and have a step by step plan at the ready.

We hope you've enjoyed this edition of the HBR IdeaCast. This is a new venture for us and we'd love to hear your thoughts and ideas. Please send them to my attention. That's Paul Michelman at this address, ideacastbsp. Harvard. Edu. And for more information on any of the subjects covered in today's program, please Visit us@harvardbusinessonline.org Thank you, and we hope you'll join us again soon for our next IdeaCast.