From virtual worlds to dating sites to online gaming, there’s no denying that people are spending more time than ever before engaged in digital social media of some form or other. It comes as no surprise then to learn that, in the first half of 2008 alone, venture capital firms invested US $345 million in virtual worlds or related enterprises. As more sophisticated business models emerge around virtual economies, it has become clear that there is now real money to be made online.

In a world where travel costs are spiralling ever upwards, more and more people are opting to stay at home for entertainment. Does it mean that shopping malls, movie theatres and public bars are sunset industries, to be replaced by bits and bytes residing on a remote server? Perhaps not just yet, but rarely a day goes by that we don’t hear about the launch of a new web community, social mash-up or cool online game of some sort. 

Unfortunately research suggests that about 75% of these communities will never even achieve 1000 users. We set up ION almost six years ago and only recently celebrated our millenial sign-up. In any event there must be a limit to the proliferation of online social networks because once users become uber connected there is far less incentive to keep signing up to new networks. As network density increases, the advantage gained by the user decreases.

So when even Bill Gates gives up on his Facebook account, it really makes you question how much value large corporates see in social networks and virtual worlds. Some people continue to question whether or not virtual spaces will ever become meaningful in an enterprise setting. Although businesses have been using applications such as Sharepoint and Lotus Notes as knowledge management tools for years, corporates are still struggling to make the quantum leap into virtual communities and interactive game type environments as forms of collaborative business tools.

On the other hand corporate dinosaurs are belatedly waking up to the power of social media as a marketing tool. This videocast from the Harvard Business School offers advice to large companies about managing the change processes around implementing social media strategies. Now – I’m pretty sure I don’t need to belong to a web community for kitty litter or some other weird or random social network. I would however join a business network or film club that had an online community component for example. Whatever spins your wheels, I suppose.

New Zealand has a couple of promising virtual world ventures of its own. Smallworlds launched recently with a high quality browser based world for young adults that leverages advances in Flash based functionality and graphics. Socialise was an early entrant with a dating and friendship focus. Socialise is a regional community that has secured advertising sponsorship as a revenue stream, whilst Smallworlds is pitched at a global audience and intends to establish a virtual economy within the site.

Smallworlds users create and populate their own individual home spaces, which raises the question of identity portability. If players participate in several communities, plus own a Facebook or MySpace page, how can they manage their global identity? For dedicated social networkers with multiple sites to share and manage, aggregating all those links at one web address would seem to make sense. That’s a problem that we hope to address in a creative way very soon at ideegeo.