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I took a look at the Flash ecosystem to see if I could spot the fatal flaw. 

The red flows are where people pay out money and the green items are places where people earn money.  Here are the common money sources for the developer: 

• Direct: The game developer sells ads from a generic ad service on their personal website or portal. 
• Game specific ad service: An ad service such as Mochi collects Flash ads that are typically placed in front of a game during loading. 
• Site licenses: A portal pays a developer a fixed fee for a customized site locked version they hope will increase player retention. 
• Sponsorship: A company pays a developer a fixed fee in order to direct customers from other portal to their portal in the hopes of capture those customer’s lifetime ad revenue. 

There is one obvious fact: the entire flash ecosystem is driven by low quality advertising.  Piddling amounts of ad money flows into the developer’s pocket through a variety of obfuscated middlemen.

Ads are a really crappy revenue source

For a recent game my friend Andre released, 2 million unique users yields around $650 from MochiAds.  This yields an Average Revenue Per User (ARPU) of only $0.000325 per user. Even when you back in the money that sponsors will pay, I still only get an ARPU of $0.0028 per user. In comparison, a MMO like Puzzle Pirates makes about $0.21 per user that reaches the landing page (and $4.20 per user that registers)    

What this tells me is that other business models involving selling games on the Internet are several orders of magnitude more effective at making money from an equivalent number of customers. When your means of making money is 1/100th as efficient as money making techniques used by other developers, maybe you’ve found one big reason why developers starve when they make Flash games.  

The effect of 1/100th as much money

Due to the low quality revenue streams, even great games make beer money, not rent money. A good game will make $1000 and a great game might earn $5000-7000.  A rule of thumb is that you need to release 10 good Flash games a year to convince your girlfriend’s father you are not a bum. 

10 games a year may not seems like such a big deal to some, but there is a hidden one-two punch that knocks most developers into bankruptcy 

• Most Flash game developers have little financial cushion and live paycheck to paycheck. 
• Flash game revenue is highly bursty due to a reliance on landing sponsorships upon release of their latest game. 

It is common for a developer to release several games in a row and get sponsorships or licenses for each one. But the inevitable randomness of game development results a month or two delay on your next project.  It only takes missing one or two of those 10 games to force a professional Flash developer into ever waiting arms of endless soul sucking contract jobs.  It is surprisingly hard to change the world when you are stuck re-skinning the latest Mountain Dew advergame. 

Only cockroaches survive without money. 

It doesn’t matter much raw talent you possess. With the right support, you could be the next Miyamoto.  Sorry, not important.  All that really matters is that you possess what I call the ‘cockroach gene’. Can you churn out ‘good enough games’ and survive if your games repeatedly fail to make money?

The following are survival strategies employed by successful Flash developers: 

• Be a full time student:  This is the dominant category of Flash developers. 
  
• Live in a socialist country: I’m looking at you, Scandinavians.    
• Have (rich) family that will support you: I’ve met folks that do this but it is uncommon. 
• Starve for your art: The Jason Rohrers of the world are also rather rare. 

If any of these fit, congratulations.  You are in the small percentage of developers that have the financial support necessary to be a Flash game developer. Everyone else, thousands upon thousands of talented developers, fall in a category called ‘churn’.  They can’t even survive on ramen and passion.  So they move on to richer markets or leave game development behind forever.  

Such a loss. Such an incredible waste.  I’d guess we are losing 95% of our best Flash games because the people with the talent to make great games find the Flash market financially untenable.  

Solution: Players as a revenue source

Ads are a good secondary source of revenue, but surely there are richer sources of revenue?  There is an obvious one, used for decades by all other game industries…why not ask the players for money?

Here’s the theory behind asking for money for a game. 

1. Players have access to lots of games.  Most of which are free.  This is the reality of the market. 
2. However, at a certain point, they start playing your game. 
3. If you’ve created a great game, some players will fall in love.  They will be in the thrall of your reward system and your in game value structures.  At this point, they don’t care that there are other games.  They don’t care that they are playing on a portal. All they care about is your game.  Games create value through play. 
4. When a player is in love, money is no object. If you ask the player for cash in exchange for more value, they will often agree. It is a good exchange in their eyes: They give you a small bit of change and in return, they get proven, addictive experience that they love. 

Ask for the money  

When game developers ask for money, they are usually pleasantly surprised.  Their customers give them money; in some cases, substantial amounts. I witnessed this early in my career making shareware games at Epic in the 90s and I’m seeing the same basic principles are in play with high end Flash games. Fantastic Contraption, for example, pulled in low 6 figures after only a few months on the market. That’s about 100x better than a typical flash game and in-line with many shareware or downloadable titles.  

Here are the four steps you need to follow in order to successfully ask for money from your players: 

1. Offer: Offer premium content
2. Tell:  Tell players about what they get if they pay you. 
3. Repeat: Repeat the first two steps until it clicks with the player. 
4. Accept payment: Get the money in your bank account.

Step 1 – Offer

Offer the player something valuable. Take a careful look at what players find valuable about your game and try dividing it up into two buckets: Introductory content and Premium content.  Give away gameplay in the Introductory bucket, but sell the content in the Premium bucket.  Many Flash developers insist on giving away everything for free.  Stop devaluing your work and start creating a premium offer.  Below are some ways of creating premium buckets. 

Time gates	Players can play for some period of time and then they are locked out until until they pay.  For example, players could play for 45 minutes – 1 hour (effective free trial times in the casual space) and then pay to play longer.
Content gate	Players play an initial teaser portion of the game for free and then pay to unlock access to additional content. For example, players could pay to unlock all the levels in a game.  This is how many shareware titles worked.
Aesthetic items	Players purchase non-gameplay additions that increase their identity or status.  For example, players could pay to give their character a cool outfit that they can show off to their friends.
Abilities	Sell unique abilities that let players experience the game in a new way.  For example, players could purchase new jumping boots that let them fly through levels in a way that let’s them re-experience the game all over again.
Bundles	Virtual items can be bundled together to create additional value.  For example, if people love buying food for their virtual pet, let them buy a 10 pack of food for a 30% discount.
Consumables	Some abilities can expire after a period of time or after a number of uses.  For example, you could buy a potion that increases your strength, but you can drink from it 3 times.  Also known as “item rentals.”
Subscriptions	If certain abilities or bonus are a valuable long term, consider charging a reoccurring fee.   For example, you could offer extra storage for advanced players, but charge a monthly fee.
Stackable subscriptions	If certain abilities are additive(such as an experience or currencies multiplier), let players buy multiples of the same thing.
Rare items	Limit the number of items available so that players feel special when they purchase it.
Time limited items	Offer some items for short periods of time so that players feels that they lucked out finding the product in time.
Sale items	Set a standard pricing system for items and then offer some items for sale.  This works great with time limited offers. Again, players love to get deals.
Gifts	Players seek to maintain social bonds by gifting other players with items or abilities.
Accelerators	Many games have a ‘grind’ that artificially lengthens the game. Players with little time are willing to purchase items that let them reduce or eliminate the time consuming activities in the game.
Physical goods	T-shirts and other branded items

Examples of premium content bucketing techniques

There is no need to limit yourself to any single one revenue stream.  There are lots of different types of players and each player values something differently.  Some players may be willing to buy a t-shirt.  Others may want 5 stackable subscriptions.  Others may just want a pretty new character with a panda head.  When you restrict your game to a single revenue source, you miss out on gaining money from all the different types of customers that would have paid you if you had just given them the right offer.        

When you design your game, pick three or four revenue streams and build them into your game.  Here are some categories of users that you may want keep covered. 

• People who don’t want to pay:  Advertising is a good option to keep around. A few hundred bucks is still money in the bank. 

• People who are interested in more of the same: Once you’ve established the value of your game, some players want more.  Give them more levels, more puzzles, more enemies in exchange for cash. 

• People who are interested in status or identity improvements:  Some people see games as means of expression and identity.  Give them items that let them express themselves or customize their experience.  
• People who have limited time: Some people live busy lives and want to consume your game when they desire and how they desire.  Cheat codes, experience multipliers and other systems that bypass the typical progression all help satisfying this customer need.

Step 2 – Ask

Tell the player what they are going to receive in return for their money.  If people don’t understand the promise of what they are buying, they won’t pay.  

• Ensure the user sees the offer: Screenshots, feature lists, and evocative language should be placed clearly in front of the user.  You want convey to the player the value, both practical and emotional that they will experience if they were to gain access to the premium content. 
• Tie your offer of premium value to an explicit request for money.  We live in a capitalist society so people understand the concept of buying something.  Don’t ask for a donation.  Don’t ask players to “give you what they feel like giving.”  People will think you are a charity case and in my experience your revenues will drop by 90% or more.  Give the offer a specific price, be it $10 or 200 gold in your favorite virtual currency.  
• Time the appearance of the offer.  You can ask for money when players are caught up in the emotional moment of play.  Which is more valuable to the player? A Pirates of the Caribbean T-shirt at the mall or a Pirates of the Caribbean T-shirt right after you walk off the Disney ride and are flush with excitement?  Both your odds of buy the shirt and your pleasure in owning the shirt are greater when you buy it after the ride.  Use game design to make players fall in love and in their moment of game playing passion, they will be willing to spend money. 

Step 3 – Repeat

Repeat telling and asking several times until the value of your offer sinks in. Players need to see the offer multiple times before they’ll commit to making a purchase. One technique that works well is to put the offer in the natural flow of playing the game. 

• Prominently place the offer in high traffic areas of the game such as entry, save, in game store and exit screens.   
• Email the user periodically to let them know about specials or sales.  By asking them to read an email, you are costing them time, so make sure that what you offer is valuable and delightful or else you’ll end up with angry customers. 

You can risk annoying the user if you do this too much, but in my experience coaching indie and Flash game developers, they err on the side of being hiding their offers. I’ve seen offer screen buried in option menus, guaranteeing that less than 1% of users will ever see them.  I’ve seen offers that appear only if you click a tiny button.  Users see it once and then never see it again.  Don’t be embarrassed. As long as your offer is clear, professional and doesn’t attempt to trick or overwhelm the user, most players will see your purchase button as just another useful, functional part of the UI. 

Step 4 – Get the money into your bank account

Use a payment service to process their order.  The good news is that there are dozens of 3rd party payment systems on the market.  The bad news is that they all have subtle differences that have a huge effect on both your short term and long term revenue. 

The many layers of payment middlemen, each taking their cut.  

(Margins are approximate and will vary depending on the service)

Some things to consider: 

• Margin: How much does the payment service take?  The payment company is providing you with a service and deserves to be paid.  However, you’ll find that some companies take 10% and others take upwards of 75%.  Companies pitch various bundled services such as storage or fraud protection as justification for their increased fees. Some companies will also share some of the margin with portals in return for them carrying the games. Shop around and be honest with the trade off you are making.  Remember you’d need to get 5 times as much traffic to makes the same amount of money if you pick a service with a 50% margin vs a 10% margin. 
• Processing fees: Most Flash payment systems are simply a repackaging of non-Flash payment services with a pretty UI and a bigger margin tacked on top.  The existing payment services already takes a chunk of the user’s money in the form of ‘processing fees’  Ask if the advertised payment company margin is inclusive or additional to the existing ‘processing fees’.  A 30% margin seems reasonable, until you realize that it is on top of an existing 50% margin for a mobile provider.  I like to ask “If the customer pays $10 on their credit card or phone, how much cash ends up in my bank account?” 
• White box or branded?: Some services like Super Rewards can be reskinned so that they are transparent to the end user.  Until the player enters into the actual payment portion of the process, they feel like the stores and such are part of the game.  Services like Noboba and MochiCoins are heavily branded with the payment company’s logo.  Their goal is to get the customer to invest their trust in them, the payment provider.  The downside is that customers don’t invest as much trust in you, the game developer. 
• Customer registration?: In order to track customers and their purchases, you’ll want a secure login system.  Some payment services let you build your own.  Others require you to use theirs so that they can control the primary relationship with the customer.  Often these services will not release customer lists to the developer.  This becomes a problem long term if you release multiple games and want to run cross promotions. 
• Storage support: Once players purchase an item or feature, they’ll want to have access to their stuff when they sign back in.  This means your game will need online storage and a server back end.  Some payment services offer this as part of the package, which is great for the common situation where the developer doesn’t know much about back end programming. 
• Lock-in: Do you have the ability to easily switch to another payment service?  In general, the more comprehensive solutions with customer make it more difficult to switch.  With some comprehensive services, capturing customers is more valuable than your money.  You only provide cash for a single game, but a customer can be sold and resold dozens of times to dozens of games.  Run far, far away from such companies since their best business interests are not aligned with your best interests. 

We are in the early stages of the Flash payment market.  Often new game developers will unthinkingly jump on the first service that they happen across.  In this low information environment, payment services can charge unreasonably high margins and very few developers will complain. Many will be excited to give away 50% of their money because they weren’t earning any money previously. 

A payment provider should be a reliable commodity service, not a major business partner. Over time, I predict we’ll see more transparency and competition which should drive down prices.  The ideal payment service is one with low margins, low switching costs, no branding and APIs that let you cheaply and easily tie into generic, developer controlled login and storage services.  This will come about as a competitive market works its magic, but until then the opportunists are out in full force and Flash developers will pay a premium for their ignorance.  By asking, comparing, and publicly publishing information about margins, developers can encourage payment providers to compete openly and honestly. 

The good new is that some generic payment systems are cheap to hook up to your Flash game and allow for experimentation.  On one project, we used SuperRewards and reskinned their front end to it fit nicely into our game.  They charge 20% margin on all purchases, but we can now transparently swap in primary payment provider for credit cards, mobile etc.  By mixing and matching we can build a payment front end that makes us more money.  We own our own virtual currency and we own our customer data.  

This was accomplished with one programmer in 2 weeks of work and can be reused across multiple games.  Such a path isn’t for everyone, especially if you lack web programming skills.  However, with a little elbow grease, you can tap existing, proven, generic payment services to roll your own with very little downside. 

Execution matters

Most Flash game developers are ignoring all of these steps.  A few are doing a couple steps poorly, failing and then running about screaming that you can’t make money off charging for premium content.  Instead of jumping to ill formed conclusions, try executing with vigor some of the basic business lessons learned in the past 2000 years of capitalism.  Just going through the motions isn’t enough. 

Here’s an example of a good idea poorly executed. Dan Hoelck is the very talented developer behind the polished Flash game Drunken Masters, a game that attempts to charge for premium content.  He created a content gate, displayed his offer to the player and integrated a payment service.  Unfortunately, the resulting sales process is torpedoed by multiple fatal flaws.  As a result his conversion rates are miserable: 0.01% of users purchase his offer.  You’d hope to see numbers closer to 0.1 – 1%. 

• The call to action isn’t clear.  The offer is labled ‘cheats’ (not a positive connotation) and then crams lots of little detail in a tiny font at the bottom of the screen. I’m looking for a big ‘buy now’ button and some pretty pictures telling me all the lovely things I’ll get. This is nowhere to be seen.  
• The value of the offer is questionable.  He gives 90+% of the game away for free, and lets you purchase a few miscellaneous features that most people don’t need. A good rule of thumb when using a content gate is that your premium content should be seen as twice as valuable as the demo experience.  
• Making purchasing difficult: In order to purchase, you need to manually type in a URL, find the right link to click on and then purchase. Is this necessary? Every step of the pipeline, you are going to lose large numbers of users. As much of the purchase flow should be within the game as possible. 
• Charging too little.  Dan charges $1.50 for his game and this is likely too little. Beware your natural tendency to undercharge.  People who love your game are surprisingly price insensitive. For example, in the microtransaction-based MMO Domain of Heroes, prices range from “$0.99 to $349.99 and about 80% of the revenue comes from purchases at the $19.99 pricepoint.” With a little price experimentation I suspect Dan could have increased his price to $5 or $10 and increased his overall revenues substancially.

It is okay to fail.  The basic system Dan made took him ~40 hours to implement and it is obvious he has learned a lot of lessons from the experiment.  Building an effective sales pipeline is just as much a craft as making a great game.  As a game developer you need to approach the task as a new skill to master that you likely aren’t going to get right the first time.  Put in the basics, measure your results and apply what you’ve learned to your next project.  

But people will hate me if I charge money! 

Some developers I’ve talked with worry that they’ll alienate others by charging directly for their game.  Here are some common concerns: 

• Bad reputation: Many Flash game developers are not in it for the money, but to be part of the indie community. The threat of a poor reputation can be frightening. The truth is that modest, self effacing developers that find financial success are worshiped like heroes. Just ask Colin of Fantastic Contraption how he was received at GDC.  If you are worried about your reputation, stop starving yourself into hipness.  Instead create great games and be generous to others. A good reputation follows naturally. 
• Players complaining: So what if you end up being hated by a few kids that feel entitled to free stuff?  It isn’t the end of the world. Usually the money and thanks from delighted customers more than make up for a few sour grapes tossed about on dark and skanky corners of the Internet. 
• Bad rankings: It is true that players will occasionally mark down paid games out of ignorance and spite. Luckily there is a solution.  If you offer real value to customers in love with your game, your fan’s rapturous applause will drown out whiners.  Players, in aggregate, tend to forgive great games, even if they need to pay for them. 
• Sponsors: Sponsors don’t want the game they serve competing directly with their primary source of revenue, ads. If you can promote that your premium game results in better player engagement and repeat plays, most portals will happily take their cuts of the resulting ad revenue and leave you to monetize your customers.  A smaller number will worry that your premium content will pollute their ‘free’ label.  An even smaller number will be greedy and ask for a cut of your hard earned customer revenue.  In the short term, you can ignore demanding portals.  The market is highly fragmented (30,000 portals!) and no portal owns more than 5% of the players.  At this point in the market, developers have the ability to walk away from the greedy minority.  Suggest reasonable terms where portal keep their existing ad revenue and you keep all in game revenue.  If they balk, leave the bastards to rot. 

If you make a great game played for hours on end by millions of people, you deserve to be paid.  Stop worrying about how people ‘might’ react.  Ask a fair price for the value that you provide. 

Quick monetization check list

• Are you asking users for money? 
• Are you telling users what they’ll get if they pay you?
• Have you hooked up a payment system before you launch your game?
• Are you tapping multiple revenue streams that appeal to different types of users?
• Are you basing your design decisions on the behavior of people who make you money? 
• Are you appropriately filtering the feedback of people who do not make you money?

Go to Source

Jonathan Kinkley, who has just completed his Masters Thesis in Art History at University of
Illinois at Chicago, ask if we could share his research.  We're always happy to link to new work on virtual worlds.

The full paper is available here:
http://www.scribd.com/doc/15860034/PostnationalSodalitiesSecondLifeJKinkley

His thesis analyzes the visual culture of Second Life and explores the complex spaces that online social networks create. Jonathan explains:

In Second Life's Caledon, we get a glimpse what an online social formation looks like. It is a society based entirely on shared interests – a themed community built of a patchwork quilt of Victorian-era iconography. Elsewhere in SL, artists like Cao Fei (SL avatar China Tracy) are fascinated with this idea of creating a sense of place out of virtual space. Her RMB city isn't about China, it's about China-ness – an amalgam of all the icons, stereotypes, and archetypes past and present of China. This paper is about the types of spaces in SL and how and why they are created out of the iconography of visual culture.

Go to Source

Thanks to Andy Schwarz for tipping us to this article in Information Week reporting on a Chinese government press release supposedly banning the sale of virtual stuff for real money. In the backchannel, Julian Dibbell reminded us that Korea did the same thing a couple of years back to no effect. No effect because it is hard to do without redesigning the virtual economy, and also because the law's intent was not actually to ban RMT. As we all know, some laws regulating a practice are not really intended to stop it – whatever the preamble might say – but to control it merely.

So: What is China up to?

Go to Source

Making Virtual Worlds: Linden Lab and Second Life, by our own Thomas Malaby, has its official release today, and the timing couldn't be better. I'm writing from the midst of State of Play VI — "The Conference on the Serious Study of Virtual Worlds" — where Thomas's book will be feted this evening and where the mood, in general, is that of a not entirely unwelcome intellectual hangover. The hype surrounding Second Life (and the broader phenomenon of virtual worlds for which it's been so fallible a proxy) has come and, finally, gone, and there's a sense that only now can we begin to dig beneath the shiny, first-pass questions that provoked the hype and get a deeper handle on what we've been talking about. It's a challenging, exciting project, and if the thoughtful, game-changing ethnography Thomas has produced is any indication, it's off to a promising start.

That's not to say that plenty of vital ethnographic work on virtual worlds hasn't already preceded Making Virtual World. But the critical move this book makes is to 

Go to Source

Yesterday at State of Play, Bart Simon made a tongue-in-cheek suggestion: that journals like Games and Culture adopt a five-year ban on articles that focus on Second Life and World of Warcraft.

He wasn't seriously arguing that this should happen but it is a pretty useful way to poke researchers about the degree to which these two places have become defaults for study as well as for play or social interaction in virtual worlds.

So as a reminder, if you're doing research, justify a focus on them. Here's a list of legitimate reasons that I thought of right away.

1.     

Because
they constitute most other virtual worlds, maybe on a metropole-periphery model, even. E.g. that World of Warcraft now determines what most other game-like worlds will be, and Second Life will shape any primarily social world in the future, in all likelihood. (I can see the very strong influence of many Second Life institutions on Metaplace, for example.) So you study them because they're determinant, and because in many other worlds, you'll just studying them from a distance.

On the other hand, there are a whole host of casual games, kids' worlds and so on which aren't determined by these two poles.

2.     

Because
any virtual world is just as good as any other for studying certain problems or questions. E.g., throw a dart at the dartboard, and if it lands on WoW, and what you're interested in happens there, why not?

3.     

Because the researcher is attracted to/interested in a given world, or have an investment of time
that allows him/her a good qualitative understanding of a given world. We don't tend to admit in some cases that we pick our fieldsites because of a prior affinity for that place or culture, or at least that doesn't express itself as a justification for that work in formal publication. But it's still a good reason: if you know a place, and more people know Second Life and WoW than other games, why not make use of that experiential knowledge?

4.     

Because
WoW or Second Life has a particular feature that is most distinctively realized
or expressed in them, or a sociology that is best vested there. If you're interested in the sociology of raiding, arguably WoW is now one of the best places to study that.

5.     

Because
there’s a literature, a canon, and it lets the researcher not have to explain everything
that I would have to explain about a more obscure game; or because there is a
community of colleagues who provide scaffolding/support. Obviously that's a kind of closed feedback loop which if you take it too seriously means that there is never any reason to study something which is not already heavily studied.

6.     

Because there are tools or affordances, some created by other researchers, which make the collection of data in these two worlds easier. I don't think that actually works as a justification for World of Warcraft, which is still a frustrating thing to study (or to demonstrate to classes).

Others? Still, the point is sound: there are other worlds that are studied, and some which should be studied vastly more than they are. (Yes, I know what you're all going to say next, EVE Online, and I agree. Maybe that's another post: why isn't EVE studied even more than it already is?)

Go to Source

The regulation and governance of technology has tended to be based
around industry sectors such as film, radio, television etc., or on things such as the radio spectrum or personal data.

I propose that we change this on a global scale and frame regulation in terms of the relationship between Functions and rights.

The Problem
Any practical taxonomy (including the one that I propose) has gaps. In the world of ‘old’ media this was not too much of a problem as media were relatively separate and static. Radio was Radio, TV was TV.

In the world of Convergent media (to use Jenkins’s term) this type of notion becomes problematic. Not only do particular technologies and notions of media change rapidly, they also blend, overlap and re-mediate each other. What’s more taken at face value even the notion of ‘media’ be it convergent or not may be inadequate to capture key features of the socio-technical practices that we see around us.

For example – ideas of virtual worlds as ‘places’ where speech may occur is a much more useful concept than ‘media’ for many purposes, though for other purposes is inappropriate.

We are thus left in a position where governance in its many forms has gaps, overlaps and contradictions. We also have initiatives that are likely to find that as their ink dries the intended objects of governance have evaporated.

The Solution
There is no simple solution to this. However what I believe will help as an approach to (at least some) regulation and governance bodies is – to see the universe of regulatatory objects in terms of Functions and collections of Functions, and not in terms of industries or applications.

What’s a ‘Function’?
Search, is a Function, as is User Registration, or Ranking. Each of these are processes that:

• occur in a number of application;
• have been relatively stable over time;
• are capable of being understood in within regulatory frameworks and boundaries.

Now this is already partially applied in various forms of regulation; e.g. the EU have specific laws on the treatment of personal data. However statute in this area tends only to be at a highly abstracted level. Here I propose to move up one level of abstraction from notions such as ‘personal data’ and ‘common carrier’ to ‘Function’.

Across and Down
Let’s look at this two ways.

First let’s take ‘Registration’. What I mean by this is the bundle of processes whereby a user registers with something. Here we have a mixture of best practice and pre-existing statute e.g. the Data Protection Act in the UK which regulates how certain data are stored and treated. Though we might want to include other things into the understanding of what might be governed as a Function e.g. display and consent to terms and conditions during the registration process – which might be subject to industry best practice.

When we look at things in these terms we can see that there can be quite a rich set of Functional sets that would be highly common across applications. So registration for Club Penguin is very much the same as for Flickr and Facebook and Maple Story or for the Huffington Post.

To take a second Function – Ranking. There has been a recent controversy over YouTube’s ranking system wherein ‘Most Viewed’ and ‘Most Favorited’ videos are in fact not Most Viewed etc., as certain content is demoted. This seems the kind of area that may companies might want to do.

I’m not going to get into whether this is correct or not, rather note that this seems exactly the kind of Function that all stakeholder might want to see a consistent approach to – even if that approach is clarity (exempting trade secrets) in how the system works. It would help me as a user to know what I’m looking at if I’m told something is the most popular room in Metaplace or most popular group in Facebook – and I don’t want one to fall under ‘virtual world regulation’ and another to fall under ‘SNS regulation’ excepting in those places where there is something conceptually exceptional.

Now if we look down the Functional stack and take, say, Flickr we can see that it might have a bundle of Functions that overlap in many places with Second Life – especially in the areas of user generated content / IP. Second Life and World of Warcraft may be common when it comes to in-world money (though there we have an interesting question of sub-division which is well worth debating – I suspect there is a large common set between all virtual currency systems from a regulatory point of view).

EULA Freebie
Readers will probably be ahead of me here also in noting that with such a system we can see how at a certain level we can also start to move towards a common system of EULA not just across virtual worlds (as has been discussed in a few places) but across all online applications that have EULAs.

More Functions
Below I’ve suggested a few more Functional areas that look like they may be suitable objects of governances. As you see this is list is nested. I think this is critically important as it allows people to agree one what is common and leave what is unique or contested at the appropriate level of details – hence, while we might not know a specific thing about a virtual currency in a game with a fictional setting, this does not mean that we don’t know a whole lot about how virtual currencies in general should be governed.

• Ranking
• Registration
• Search
• Virtual Currency
  • Closed economy (no RMT)
    • Fictive / game based
    • Non-fictive
  • One way exchange (currency buy systems)
  • Exchange based (fully exchangeable virtual currency)
• Provider based content provision
• User Generated Content
• Synchronous textual / symbolic communications
  • one-to-one
  • one-to-several
  • one-to-many

Governance
Almost lastly I should point that that I am not advocating a highly top down system of government regulation. I’m NOT suggesting more governance – in fact viewing the world this way may expose overlaps which would lead to less governance (should we live in a world were redundant statutes etc were ever taken off the books).

What I am suggesting is that we look at what the objects of governance might be in a more rational way for the internet age and then decide whether they need to be governed at all and if so who by.

We may determine that some things are simply down to user choice, other things may fall under standards created by industry or even cross-industry groups and / or by regulators and state actors.

The framework I propose is wholly neutral about the from of governance that may or may not apply to any Function, what the contents of that governance, if any, are and who the governing actors are – it’s and empty framework.

Rights
I made not of ‘Rights’ at the top of this post as I tend to think about these matters in terms of individual and group rights.

Let’s think globally for a moment – after all, that’s what the internet is, global. This proposal might help to set the scene for a slightly different tenor of internal debate.

There are various rights frameworks such as: those from the UN, EU Convention on Human Rights and the US Constitution. The Functional approach may open up an illumining debate about matters such as the various conceptions of free expression and Functions related to things like User Generated Content and Search.  A US / EU debate over raking systems as interpreted under Article 10 of the Convention on Human rights and the 1st amendment would be a fascinating thing.

Again, while not a panacea this is another way to approach the international debate over regulatory harmonization (or lack of) and the burden that this places on any business seeking to use the internet and any user seeking to use a system based on the internet.

Endnote
Lastly as with any sweeping suggestion like this I awaited someone to tell me that there is an entire library on the subject, or it’s been tried and failed or it’s exactly what’s going on already. I’ve not read anything that propose this form of governance but please supply reverences if it’s already out there it will simply add weight to the idea.

Oh, and the pun that this is both a system of Functions and a system that should actually Function is well intended

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I figured that it was time to share with my secret stash. I’ve been using Google Reader to tag interesting articles and publish them all to a single location. Occasionally, I’ve added snarky comments. You can find the entire treasure trove here:

What a glorious summer day,

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“Bacchus is a multiplayer dancing game with a religious theme. The selling point is its ability to evoke intense emotions.

Imagine if you will, a decrepit theater filled with writhing, dancing people. The lights flare and swoop in time and the people chant in unison. A massive screen shows a mirror image of the hall like some surrealistic portal into an alternate universe. Instead of blokes and lasses in street clothes, the on screen spirits are clad in ornate ritualistic garb. The movements on each side of screen are eerily synchronized. The pitch of the chant rises.

The screen zooms in on a girl in the center of the room. The crowd, as one, turns and watches her figure on the screen. She begins to dance. At first her movement is controlled and intricate. The screen pulsates and she yells to its beat. The room takes up her words and amplifies them, giving them god-like resonance. Bass mixed with reverb mixed with primal, guttural passion. Her dance becomes wild. The pace increases and she begins to confess.

The theater reacts. Each word she utters shimmers on screen, merging with ghostly photos from her past. In a beat, the entire room witnesses her sorrow over the death of her mother, her time alone in an empty apartment, and her first kiss. An inhumanly beautiful electronic chorus rises, matches and turns her words into a song. Her movements become a blur. Her glowing eyes are ecstatic. At the peak, her spirit on the large screen explodes in light and the girl collapses to the floor in fervent religious swoon.

The crowd goes wild. The screen zooms out and the next god dancer is chosen. 

Later, the girl writes to her online friends that the night she danced was the single most powerful spiritual and emotional experience in her entire life. It was the night she was touched by a higher power while playing a video game.”
(http://www.gamasutra.com/view/feature/1992/constructing_artificial_emotions_.php)

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This August, Lee Sheldon and I are hosting VW², a one-week workshop on the possibilities and pitfalls of using virtual worlds for business and research. Our aim is to help professionals who are new to the field from wasting several years and heaven knows how many millions of dollars re-learning the same old lessons. Our focus is practical, not academic: Here's what you do, and here's what you DO NOT do.

In designing the program, we've been fortunate to have the input of an illustrious advisory board. Rich Vogel and Ron Meiners are coming to give keynote lectures. Participants will learn by developing applications specific to their own environment. This includes pitching ideas, writing design documents, setting up hiring plans, choosing tools, and building their own virtual environments. On exit, participants will have created a shovel-ready virtual world project for their home organization.

More information about the board and the workshop here.

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At the Digital Entrepreneurship conference, I remarked on the rising number of bankruptcies of virtual worlds or companies that develop them (most cleverly illustrated by Woody Hearns' bugzapper at gucomics, here, here, and here).  I'm interested in what we can learn about the bankruptcies of virtual worlds. 

What I wanted to ask the Terra Nova community is this: Is there anything special that we should think about or plan for when a virtual world goes under?

Questions include:

• Can virtual property be used as collateral for loans, such that secured lenders get first priority in bankruptcy? 
• If courts treat users as having merely non-exclusive licenses for software, can users enforce those licenses over the world creator's objection under Bankruptcy Code 365(n)?
• Can virtual worlds use 365(n) to retain rights under licenses governing user-generated content?
• Is there less, or more, of a problem valuing virtual assets than valuing intellectual property in bankruptcy more generally – on the one hand, we have grey-market economies to provide a value baseline.  On the other hand, the world only has value on its own terms: if the world is gone, its assets aren't worth much.
• Is there any reason to treat intangible assets like virtual property differently than, say, a bank account (given that both are more or less contract rights in an entry in an electronic database)?

I value your questions and ideas more than those I've posted above! What catches your fancy about the end of worlds?

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