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Virtual Worlds, Real Problems

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One of the more intriguing elements of the social media revolution has to be the growth of “virtual communities” — simulated environments where people “live” and interact with others.  Some of these worlds are developed in the context of gaming (such as World of Warcraft) while others (like Second Life) simply seek to replicate physical interaction through animation.

Of course, like any other community — virtual or otherwise — quite rapidly people conclude that they need, in George Carlin’s immortal phrasing,  “stuff.”  In virtual worlds, of course, you need to purchase virtual products.  And this is where things get interesting. 

Last year, Americans (and yes, this figure only deals with purchases by Americans) spent $1.6 billion in fake stuff virtual goods.  Think about that for a moment.  They spent real money on things that have no real existence except as viewed on a computer screen.  And that ‘s with the limited technology of today — can you imagine how much money will be spent when we can jack our consciousness into a physical space and live inside our avatars?

In any event, the issues that suddenly begin to arise are both fascinating and bizarre.  If you take something from someone else in a virtual world, is it theft?  How can you control your brands in a virtual world?  If you create an “outfit” for yourself in a virtual world that incorporates what would be the proprietary rights of a third party were it done in the “real” world, is that still actionable?  Who actually even owns the content created by members of virtual communities?

There are already lawsuits arising out of these type of concerns.   In Pennsylvania, a class action was filed against Second Life alleging that the ownership rights promised by Second Life’s operator, Linden Research Inc., were undermined by unilateral changes in the terms of service.  This follows another case that held elements of the terms of service to be a contract of adhesion, and thus unenforceable.  The rights of “property” owners within these virtual worlds may be stronger than the creators of those worlds ever imagined.

And even social media games used on traditional platforms are beginning to feel for the limits of the envelope.  Zynga, the folks behind Facebook’s well-known Farmville game, sued earlier this year, alleging unauthorized sale of virtual currency and virtual goods without the permission of Zynga.  Courts will soon have to rule on who, really, is in control in these worlds, and what property really means when it is constructed out of bits and bytes (is it any different than property constructed out of carbon, after all?)

These may seem like esoteric questions, but there is little doubt that the world of social media will gradually move towards the creation of ever more sophisticated simulated worlds, and that means that these problems will eventually be your problems.  So think about whether your “communities’ are moving in that direction, and whether the terms of service you are using (or are subject to) address the realities of modern virtual commerce.

Social media – not a game. Okay, it is a game. But maybe the game is more real than you think…

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The hottest things in social media right now are so-called “social games” like Farmville (Zynga‘s big hit).  78 million people are “active monthly users” of Farmville on Facebook, and (according to a recent article) 235 million people purportedly use Zynga’s games each month on different platforms.  And no, that previous sentence was not filled with typos.  Zynga was recently valued, as part of a private placement, at over $4 billion.  

To give you some perspective, Zynga was founded in 2007

There are already a number of blogs and sites devoted to in-depth discussions of the newest social gaming platforms (Inside Social Games is one of the better ones), despite the fact that the phenomena is a fairly recent one.  Everyone is talking about this — it is the future of gaming.  It is the future of marketing.  It is the future of social connectivity.  Blah, blah, blah.

Marketers have noticed this incredible new development, and it isn’t easy to conclude that putting a social game on your site drives traffic, makes your site stickier, and gives consumers a reason to return.  So, why not put a game on your site to build your brands?  Why not interweave a gigantic, cross-platform promotion with social gaming? Actually, you should consider it — it can be, for many companies, a great idea.  But if you do that, suddenly you’ve gone from being a widget company to a company offering games.  What does that mean for the age of visitors at your site?  Are you offering prizes?  Coupons?  How are you monetizing this new initiative — and are you thus running afoul of the tangle of promotion laws in the United States or other nations? 

But forget about all of that for a moment.  Wired ran a fun article earlier this year that touches on social media game obsessives.  Does this story remind you of anyone?

Kira Greer was sitting in a meeting one afternoon when she suddenly remembered an urgent deadline. The San Francisco instructional designer knew there was no time to waste.

She excused herself, saying she had to go to the bathroom, then rushed back to her desk. Quickly opening Facebook, she began furiously clicking on rows of virtual vegetables, harvesting her FarmVille crops before they withered and died.

“I realized I was hooked when I was planning my day around when I knew crops needed to be harvested,” says Greer, 39.

Now THAT is a sticky site.   On Facebook alone more than 100 different games claim at least 1 million individual users.  And who knows how many of those sites also include parents playing the game for their children while Johnny is in school.  A mystery for many has been how the companies that make these games plan on profiting — after all, the games themselves are free.  But really, there’s no mystery at all, as the story goes on to explain:

Companies like Playfish and Zynga say their free games are profitable “many times over.” How? Through the sale of virtual goods. While the vast majority of users put in the hours to build their own little slices of nature for free, a small percentage pony up real-world cash to buy the best decorations, seeds, fertilizer and farm animals.

And this is where our little story about games starts to touch on the law yet again.  Social games and other virtual platforms such as Second Life involve the sale or exchange of virtual goods or (in the case of Second Life and some large massively multi-player games) virtual money.  So now virtual objects have real value — which means that all of the laws that address things of value in the “real” world begin to apply to cyberspace. 

The terms and conditions for these sites are effectively creating “laws” for this type of virtual world.  Suddenly, there are thefts, there are vandals, there are mischief makers breaking “real” laws through their actions as fake people on these sites. Some companies have placed restrictions on the transferability of “virtual goods” or “virtual currency” used on their systems , leading to problems with counterfeiting and black markets.  Companies hosting these sites (or participating on these sites — a significant number of well-known brands have a presence on Second Life, and others embed themselves in third party games) need to consider the intersection of real laws and terms of use.  When virtual commerce starts adding (or subtracting) from your bottom line, it becomes more than mere “marketing.”

When cyberspace was first imagined by William Gibson in Neuromancer, it was still an abstraction.  The characters were interacting inside a hallucination, but it was still presented as a kind of formless hacker world that sounded suspiciously like the world of TRON.  Later, in the groundbreaking Snow Crash, Neal Stephenson took that one step further, and imagined users living a realistic existence as “avatars” within a computer network.  The games and virtual worlds that exist today are still quite far from the seamless reality of those visions.  You can’t just shift your consciousness into a faux reality.  But each new generation of technology brings us closer to that dream, and as it does it brings the framework of our legal system ever more into contact with your avatar. 

So don’t assume that your efforts in cyberspace are just a game — the laws (and their implications) can be very real, indeed, and your lawyer may have just as much to say about how you play this game as your customers.

Checking In: Location Based Social Media

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With the launch of Facebook Places, news that Facebook is buying location-based check-in service Hot Potato, and the continuing expansion of services like Foursquare and many others, the world of geotagging and location-based loyalty programs is going completely crazy.

But with this dynamic new technology in the public eye nearly every day, the question must be asked: so what?  Is this really as dramatic a change as everyone is predicting?  Are there legal issues which you should consider as you walk this new pathway?

As for the first question, the answer is quite simple: yes.  More and more of your experience on the Internet is likely to be through mobile devices, and specifically through apps.  This means that an opportunity is present for every marketer on the planet: if they know where you are, they can give you things you need.  If you are in their store, they can give you a coupon through your mobile device.  If they know you are near their store, they can come up with something to encourage you to visit.  If you want access to things and experiences, and those things and experiences can find you(as opposed to the more traditional reverse of that) then you may buy things you didn’t even know were available.  You may participate in games that could not have been created without your personal location being relevant to game play.  In other words, if folks can find out where you are, they can know a lot more about what you want, need or might be convinced to do.

So yes, geotagging will not be going away anytime soon.

But should you be concerned? Of course! Are there any developments on the web that do not concern lawyers?

First, let’s take the obvious: if there is a record of where you are at a given time, suddenly that’s evidence.  There are an almost infinite number of claims where the question “where were you on the night of…” is relevant.  Suddenly, there’s an opportunity for proof, or alibis, or just corroboration.  This may, in fact, present a revolution in the world of e-discovery.

Beyond that, the issues are somewhat more fact specific.  Privacy will, obviously, remain a concern.  If you are publicizing where you are (or if someone is doing so without your consent) and you are endangered for some reason as a result (the amusing but disturbing site pleaserobme is a prime example of how this could be used for nefarious purposes).  How is this information being collected, and is it in compliance with your privacy policy (or, even more concerning, COPPA or foreign privacy directives)?  If this is part of a loyalty program, or a coupon/rebate program, do you have your rules set up properly?  Do you even know that you need rules for a loyalty program (most folks don’t realize that they can’t merely copy the frequent flyer programs used by the airlines — they are preempted out of state laws by the FAA)?

Most critically, though, you need to consider whether knowing where your customers are/will be/have been is useful to you, or are you merely jumping on a bandwagon that has no real relevance to your own business model.  In some respects, that remains the biggest risk of anything in social media: getting so blinded by the brilliance of new tools that you loses sight of what is actually important to you and your business.