Marketing Director

Virtual Economies: Gaming and Gambling

Recent news that Second Life, the most popular virtual world, reached $160 million in user transactions for the first quarter of 2010 shows the staying power of virtual worlds; annually that's a $640 million virtual economy. If you are unfamiliar with Second Life people paid one another $160 million to buy virtual goods (1s and 0s put together to make something) between January and March of this year.

The Second Life Economy
How much money is changing hands in these digital economies? Worldwide estimates are between $4 and $16 billion. Second Life may be the leader but World of Warcraft, Ultima Online, Lord of the Rings Online and other virtual good and worlds contribute to the multi-billion dollar virtual economy. The potential to make money is huge but there is another upside to these technologies. Second Life is the second largest provider of VoIP (Voice over Internet Protocol) services in the world. These technologies offer many opportunities for learning, communications, collaboration, exploration and business, but today the talk is about the downside of these brave new worlds.

Buying Farmville cash or coins
Facebook began selling virtual goods in 2007. These transactions are taking on a new form; Facebook credits through games like Farmville and Mafia Wars. More than 11 million Facebook users are accessing Farmville daily. A new study claims that 21% of gamers aware of Farmville play it daily. In March Farmville added Facebook credits to its game. These credits, like Linden dollars in Second Life and Gold in World of Warcraft, are equal to real currency. These virtual economies have a dark side especially for children and young people.

Gambling is against the law for young people but with access to games like Farmville at their finger tips the possibility of addiction becomes quite real. One 12-year-old in the UK was able to rack up $1400 in debt through Farmville in less than two weeks. It's no wonder that Farmville's parent company Zynga Games is valued at an estimated $5 billion.

The boy's mother's credit card was billed $1000 while the child's savings account was emptied of $400. A spokesperson for the mother's credit card company indicated "that had the expenditures been on a gambling site the escalating transactions would have raised warning flags, but since the purchases were technically Facebook Credits, they didn't warrant suspicion". When do online purchases raise warning flags? How are regulators and businesses like Facebook protecting children from this? They're not.


Gambling isn't only bad for kids who do it; it's also bad for kids whose parents do. This demonstrated by the record numbers of children being left in vehicles outside of Casinos around North America (see this exhaustive list of examples from a Massachusetts site against slot machines).

Today thousands of dollars can be gone in a matter of hours through virtual transactions. A debate rages in the UK around whether or not these virtual worlds should be regulated by gambling laws that govern the winning of funds in real life. Some online worlds have entire task forces dedicated to the removal of real currency trading in their worlds. Virtual economies often result in interaction with the 'real' economy as characters, spells and items are sold on sites like eBay for real money thus getting around 'task forces' trying to remove real currency from in-game transactions.

The line between virtual economies and the 'real' economy is blurred. Governments around the world have begun working to account for and ultimately tax this kind of income. In September 2007, the Federal Court of Canada ordered eBay Canada Inc. to provide the Canada Revenue Agency (CRA) with the names of its high-volume sellers, their contact information and their sales records. Last year eBay began releasing that information to the CRA.  In Australia tax authorities have already stated it views all such income, whether from the real economy, or virtual, as taxable income. The IRS in the United States has declared that the question is a matter of when taxation will occur not if. As in any unregulated system these virtual economies are being used more and more to launder money worldwide. This is an even greater fear as illegal funds can easily pass through these virtual economies in small amounts. So how is all this wealth being created?

A gold farm in China
Gold Farming is an exploding industry particularly in Asia. Gold farmers work to acquire 'gold' in virtual worlds which they then sell to other players who want to acquire goods. Gold farming launched in 1997 when Ultima Online and eBay facilitated the exchange of virtual gold for real money. Learn more about gold farming and gold farms on Wikipedia. So is this wealth virtual or real? Who owns the actual wealth and property?

On Second Life a group of users recently filed a land claim suit against Linden labs, the game's creator, for deceiving users about their ownership of the game's virtual property. This April 2010 case uses the precedent set in the 2007 case of Bragg V. Linden which has been cited in a number of articles and research papers from "Virtual World End-User License Agreements" to "User-Generated Content and the Future of Copyright". The rights of users to the virtual property they purchase or create are being established through these precedent setting lawsuits. Are these users gambling or are they gaming?

The lines between gaming and gambling are increasingly blurring and the speed of regulatory change will not help the young people who are currently addicted to Farmville, Second Life or World of Warcraft. Playing video games casually, less than 3 hours a week, can be good for social skills, problem solving and relaxation. Problems arise when we see people, particularly young people, playing excessively in an addictive manner. If you are addicted to a virtual economy where you continually exchange money for virtual goods are you a gambler or a gamer?

The virtual goods economy (buying virtual flowers for a friend on Facebook, etc.) is emerging as a powerful force especially among dedicated users.A study published in June of 2009 estimates that 42 million Americans (12%) spent an average of $30 in the last year on virtual goods. In 2010 Americans alone are expected to spend $1.6 billion on virtual goods according to ABC News.

This convergence of virtual and real economies in our world speaks to larger questions about jurisdiction and the Internet. Who controls the online economy and the ability to tax it when physical borders are no longer part of the equation? If there is a black market for virtual goods is that virtual property taxable? Is the government right to spend millions to recover millions from these emerging economies? How can they regulate and monitor these worlds? Regulators from the UK, US and Canada are pushing to have the onus put on those who manage the virtual worlds and games to submit income statements for users. The potential tax revenue is huge estimated to be $30 billion by 2012 (up from $21 billion in 2008).

The stories lead from one to another and the amount of regulatory change we will see in the next 5 years will be enormous and bureaucratically prohibitive (it will take a long time). I have listed some related stories I found in my search for information on this story:


Original By: Hector Guerra. Remixed under Creative Commons License

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Intellectual Property and Social Media: What is stealing?

Stealing is exactly what Ali Hadi of "Pakistan's First Social Media Company" Proactive Brand Solutions or Proactive Interactive did. Read on for the full story (UPDATE: Ali has requested the removal of the word 'stealing'. What other word could I use?). Last night I had a nice dinner with my family and was describing the video I made last week to my mother who calls me regularly to help her find emails or turn on the TV without turning off the cable box. She asked me if people have to pay for the short video lesson.

I spent the next five minutes unsuccessfully trying to explain the importance of offering information for free on the web. It came down to my personal belief that we can educate the world through the web by providing access to information. She really got me thinking about how I am valuing my intellectual property.

Should I work to create a pay wall? Should the New York Times? Should Wikipedia charge for the information they provide? Doesn't making someone pay ensure they value what they receive in the transaction? What happens to my video once I publish it online for all to see, share, download, show and use?

This story all came to a head today when I took a look at one of my presentations which has been stolen and re purposed without any credit to me. I have embedded the two presentations below, first mine then the other with a crappier layout but the same content. I first noticed it a few months ago through a Google Alert I have setup for my name. At the time I didn't mind and thought that it was flattering. I didn't notice that he was trying to sell the presentation for $100.




Social Media for Beginner's: Personal Branding and Marketing
View more from Kemp Edmonds.


Big three social media
View more from PROACTIVE BRAND.

When I first noticed a few months ago I didn't really mind. I posted a comment mentioning my dismay on the presentation. That comment was deleted. Today I added another comment referring to the stolen presentation but I don't expect it to remain on the slide deck too much longer. 
The worst thing that he has done is offer the presentation for $100 on the last slide in the presentation (UPDATE: in an email he explained that $100 was for a workshop about the "Three Musketeers"). I put it out to my Twitter community to assess the situation. This was a great use of Twitter and the community gave me an idea of what others thought of the situation. They were honest and forthcoming with their opinions:
Intellectual property in the Internet age has become something very different from what it was. The problem comes when there is no attribution and a desire to profit from the work of others. I subscribe to Creative Commons Licensing allowing anyone to use my work for free, with attribution as long as it is not for profit. Creative Commons allows creators to declare how others can use their creations. Alistair makes a good point in the second last comment above: "You should use this as an opportunity to teach people that things on the 'net means anyone can get/use it." Alistair is right that is the point. I often call it "Public Permanence" once it's out there it becomes publicly permanent.

I wouldn't care except this person has used my creation in a manner that is against all of the unwritten rules: for-profit, no attribution and without permission. That's the rub though isn't it. There are no rules to the Internet, just yet. They are being established by stories like this and prosecution that is creating precedents around intellectual property, ownership and privacy. What do you think I should do now? What would you do? Is there any point in doing anything?

UPDATE: Thank you for your comments and creating enough noise around this that the presentation has been pulled. I wouldn't be surprised if most of his 'presentations' were lifted from someone else.

I know bits and pieces of my presentation came from reading the internet. That's where most great information comes from these days. I took the time to rewrite, reorganize and add information for my purposes. This is a line that continues to grey and will surely be the topic of a future post. When does creation stop and plagarism start? When it's exactly the same.

These days we are all learning and increasing our collective intelligence together. The problem comes when some of us try and take advantage of that sharing spirit for financial or professional gain.

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New Beginnings: How Social Media Changed my Life

@GuyKawasaki and @KempEdmonds at an Olympic Hockey Tweetup thanks to @Jason_Baker
I've had many jobs in my life, almost 50. Today I started my first job that I consider something of a dream job. It all started in 1998 when I made a geocities page and learned about animated GIFs and a href. I knew right then and there that I didn't want to code so I stayed away from the web and computer technology as a vocation for more than a decade

When I traveled years ago I began to see the value in social networks like Hi5, Friendster and the other six I signed up for as I traveled across Canada and throughout Europe. When I returned home I began to see the way that these technologies were transforming our civilization for the better. I was always a wanderer never sure of what I should be doing. All I knew was that it involved people, I love people. While I was on one of these trips that doubled as a job as a "Community Marketing Ambassador" for Bell Canada I met Trevor O'Boyle (that's him eating the sandwich at one of our favourite spots on the tour: Ric's Grill in Lethbridge's old Water Tower).
Trevor was a driven, goal-oriented, high achiever from Mount Royal College in Calgary. He joined our tour after presenting at the Nationals for SIFE (Students in Free Enterprise) formerly ACE. That Summer we built a friendship and I knew that when I returned to school I would have to join this ACE thing he kept talking about. So a few years later upon returning to BCIT the first thing I did was join ACE BCIT (SIFE BCIT) an organization of volunteer students working to advance entrepreneurship in Canada. One day I decided to make a short video profiling the organization to tell other students what makes SIFE BCIT the place they want to be. The video (shown below) was then picked up and featured by YouTube on their non-profit and activism sections garnering nearly 7000 views in 48 hours. That was the moment I understood the possibilities of this new medium. YouTube even let me see which countries the viewers had come from it was amazing.



The next thing I did was create a series of business video lessons. One of those videos has an amazing long tail (lots of traffic over time) as it is titled "5 ways to find new business ideas" and now receives more than 40 views a day from people all over the world looking for new business ideas. I knew at that point that something amazing was possible, we now all possess the ability to publish, to create and to share. The exclusivity on creating content is gone. We can all publish now it's as easy as getting started.





That was the beginning of the journey to my current position with BCIT's School of Business as the leader of a new Centre for Social Media Education in Business. This is a dream job. A year ago I never would have thought as I sat in classrooms and lecture halls concentrating on the evolving social media space via Twitter and Mashable that I would make it here, thank you to everyone. My interest has only increased over time as I share and discuss the knowledge and examples I have collected. I now see that all of us are curious and interested in the evolving role of evolving communications in our lives.
Paul Shorthouse @pshorthouse and @KempEdmonds (1 year after BCIT at Globe 2010)
This is where I hope to make a difference; through education. I have embedded a treat below. It is my number one tip for using Google, social media and Twitter in particular for real-time search. I hope that I will have a new 'number one tip' soon and then another, what would you want to learn about? The more specific the better, please leave it in the comments. Enjoy and please view in full screen 720P HD.




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Facebook's Hottest Scam: Fake Profiles

Do you know Tracey Candace? Whitney Ximena? Kathy Theresa? Bethany Zoe? Micheala Huntsman? I didn't think so and neither do any of the people I know who have befriended these fake profiles. I reported the profiles as fake and one has been taken down at the time of this writing. The question for a few hundred people, many of whom are my friends in real life, is why did you friend them on Facebook? Some good rules were proposed by a few of my friends:
These are a few pieces of good advice. Most often these profiles are for gathering and selling your personal info but rarely for spying. As my older brother said, "Tin foil hatters" may think that these fake profiles are authorities in Canada and the US as has been reported by a reputable news site. Most often they are phishers or people looking to collect data to sell. Fake Facebook profiles have also been used by students to make fun of teachers, by unknowns and administrators to spy on students and by police to bust underage drinkers.
I checked all of Gillian's 170 friends on Facebook and not one had a hint of fake although it's hard to know as she says. Below I have put in screenshots of fake profiles. The top profile, Tracy Candace, is the less sophisticated one and the bottom one, Whitney Ximena, which has since been pulled from Facebook, is more sophisticated using a photo and joining some pages and groups.
Most often these profiles claim to be women born between 1981 and 1990, although the stories referenced above include both fake men and women. They join a network and start friending everyone who will accept. Then they move on to add all of the friends of the first group and so on spreading like a virus. 
Most people could care less and that's part of why they accept these fake friends. We aren't preparing ourselves for the possible repercussions of fake profiles which include harvesting personal info, spreading spyware, phishing scams and many more shady moves. Have you been asked to befriend a 'fake' profile? Has anything bad ever happenned because you did? Do you care about fake profiles? Please comment below.
 
Original Photo by: Darren Hester remixed under Creative Commons License

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