Friday, June 27, 2008

Move over MySpace, Gaia Online is here

By the middle of last year, it was attracting half a million unique
visitors monthly; fast forward to last month, and that number is two
million. It’s not a traditional MMO like World of Warcraft; it’s not a
social game like There; it doesn’t originate from Europe like Habbo Hotel or from Asia like Cyworld. You haven’t heard of it partly because the San Jose company has kept a low profile.

Another reason you’re still likely in the dark: it’s primarily
designed for teens. But with online worlds all sizes and styles poised for an explosion, you’ll almost certainly hear a lot more about it soon.

It’s called Gaia Online,
and as a guy on a giant crane behind us tore down the giant Web 2.0
conference banner in Moscone West, I had a chance to sit down with CEO
Craig Sherman— formerly COO with, and an
Entrepreneur-in-Residence with Benchmark Capital, a main funder of
Gaia— for a furious round of questioning. How did Gaia grow so large so
quickly so stealthily?

“The world’s fastest growing online world hangout for teens.”

That’s the way Sherman and his team prefer to characterize Gaia, the brainchild of Studio XD,
a comic art firm which gave the site its anime-influenced look. Gaia’s
online world aspect (which launches in a separate Java-powered window)
is a series of virtual towns where Gaian avatars can socialize (up to
100 in a single space), with apartments they can own, and treasures
they can find. (No combat, however.) It’s just that 10% of total user
activity takes place in the world itself.

Gaia’s Many Experience Channels

The world is just a conduit to the larger activity on Gaia, says
Sherman: in addition, there are website arenas where users can upload
and rate each other’s artwork and other content (7-10% total activity),
or play multiplayer Flash mini-games with group chat (10-15% total
activity.) The largest cohort of activity (wholly 30%) takes place in
the Gaia forums, and here’s where the truly staggering numbers come in:
Averaging a million posts a day and a billion posts so far, Gaia’s
message boards (with topics running the gamut from pop culture to
politics) is second only to Yahoo in popularity.

Gold for Activity

A unique innovation is the way the company distributes its virtual
gold currency: instead of selling it for real money (as with There) or
allowing its trade on the open market (as with Second Life), Gaians are
automatically given gold for participation: You get gold for posting on
the Forums, for riding events, for uploading content, for exploring the
world. Subscribers are rewarded for engaging in Gaia, in other words—
and the reward incents them to engage in Gaia even more.

Gold for Auction

With the gold, Gaia subscribers can buy items, clothing, and accessories for their avatars, some sold by the company, but most of it sold via Gaian-to-Gaian auction. (They estimate some 52,000 auctions are completed every day.)

What pays in Gaia, however, stays in Gaia: the company strongly
discourages real money trading, and works with Ebay to curtail it.
That’s not to say Gaian treasures haven’t been sold online. “One item
sold for $6000,” says Sherman. “Wonderful to tell you, but bad for what
we’re trying to accomplish.”

Gold— for Gaia Interactive, Inc.

Instead of monthly subscriptions, Gaia Online sells “rare items”—
treasures, fantastically cool fashion accessories for player avatars,
and so on— two offered a month for $2.50 each. Subscribers buy them via
credit card, Pay Pay, cellphone—or cash on the barrel. (“We employ
someone full time whose job is getting dollars and quarters” out of
envelopes kids send them, Sherman notes.)

… but first, a world for our sponsors

The company’s other revenue source are ad campaigns created to run
within the world of Gaia. Before launching these, Sherman says, they
solicited subscriber feedback, to find out which potential advertisers
they wanted to see in the world— and which they didn’t. (Cool fashion
brands got the majority nod; big American auto companies, however,

Staffers work with advertisers to create, not passive billboards,
but an extended immersive experience. Gaia’s campaign for New Line
Cinema’s fantasy adventure The Last Mimzy, for example,
challenged their users to accomplish a series of tasks in order to get
their own special Gaian-only Mimzy (a super-intelligent bunny).
Hundreds of thousands of these Mimzyies were given out—meaning some
10-20% of their total user base jumped through the hoops to win the
advertiser’s prize. (By contrast, when Nissan began giving away virtual
versions of their cars in Second Life, far less than 1% of Residents took them up on the offer.)

The Secret to Gaia’s Success

Craig Sherman has been thinking what the value-proposition of his
site in the era of MySpace or Facebook. “In a world where teens are
constantly branding and packaging themselves” on sites like those, he
points out, “Gaia is where you get away from it all.”

Whether that remains the case when the competition reaches full roil
remains to be seen, but for now, the Gaia seems destined to keep

The Gaia Numbers: Demographics and Usage Patterns as of April 2007

300,000 log in daily, according to the company; average unique visit is two hours a day.

Average concurrency: 64,000 users. Maximum: 86,738.

85% of users are based in the US

10% are English-speaking but non-US (with 5% a nebulous Other)

Breakdown by gender: 55% Girls - 45% Boys

About 20% of subscribers put up their real life photo in their avatar profile.

Number of Gaia gold “millionaires”, as of last week: 1385

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