Are Virtual Worlds Good Investments?

The short answer is NO. Any VC who invests in a closed, 1stop virtual world concept these days is wasting their money. The space is simply too crowded. Especially on the kiddie, youth, teen side. You would be better off throwing darts trying to predict the future than trying to pick the next big virtual world for teens or kids.

Why is that?

Simple, the industry is mature (virtual worlds are mainstream entertainment - Got it??? - and instead of their being 10 big virtual worlds with millions of users there will soon be hundreds of virtual worlds with 100's of thousands of users) and technology (any small group of devs can pop up a virtual world) cheap and available (think flash). So where are the investment opps in this massive space with 450mill+ users?

1. Platforms - think technology that is disruptive and can be licensed to devs to build stuff like http://www.yogurt3d.com/

2. Payment Systems - the reliable tried and true proven to make money off web sites like Ukash http://www.ukash.com/global/en/home.aspx, Global Collect and Wallie www.wallie.com

3. Interactive Toy Manufacturers And Distributors - if Howard Ganz will not sell you any of Webkinz World, think startups like Shidonni http://www2.shidonni.com/ http://www.virtualworldsnews.com/2009/11/shidonni-mixes-plush-with-pixels.html

4. Mobile virtual worlds - Think MoiPal http://www.moipal.com/index.jsp and .......hmmmmmmmm no one else comes to mind other than LOSER Bobba http://paymentguy.blogspot.com/2009/10/kill-bobba-now.html - thus the opportunity!
5. Mixed reality stuff - think Twinity http://www.twinity.com/en Johan Brenner, formerly of Benchmark now Balderton, is on the Board. This is a mirror world with an augmented reality approach.
6. Virtual Currency Guru's - companies that can figure out how to consolidate, trade and sell all these weird and wacky virtual currencies under 1 system and across social networks (think Peanut Labs for example http://paymentguy.blogspot.com/2009/10/stop-working-for-peanuts.html ... . Know any? Drop PG a line ...