SWOT Analysis: ABC/Reuters
The Australian Broadcasting Corporation has enjoyed some success in the Second Life virtual world. In 2007, they were receiving 1980 visits per week to their site (Winterford, 2007). The company has built this success by offering a wide range of content on their “island.” The ABC island contains a mix of entertainment and information. The entertainment component is particularly strong for two reasons. One is that it contains uniquely Australian content, which is a relatively unique feature and a drawing point. The other reason is that ABC places emphasis on the same types of attention-grabbing entertainment that one would expect in any other medium. Indeed, ABC’s island is in essence a virtual rendering of a newspaper or television channel. This plays to the inherent nature of the virtual world — it is entertainment for the consumer. ABC draws traffic because it provides a variety of entertainment to its visitors. Thus, a key strength in the product offering itself.
Another strength is that the company drives traffic to the site. They have ABC Friends, which allows users to receive updates on new events and announcements with respect to the ABC island. This technique is common for other types of business in the real world, but not for media businesses. The ever-changing nature of their websites and channels is inherent — there is little need to alert consumers to updates. However, within the virtual world this is more of a necessity, in part because the company’s brand does not have as much equity in that world, but also in part because the virtual world has a relatively small population at present.
There are weaknesses to ABC’s virtual world strategy, however. One is that the company is subject to security and vandalism. In May of 2007, the ABC island was all but destroyed by a hacker attack. Without adequate security, the island was bombed by the vandals. Undoubtedly the resulting publicity only helped to drive more traffic to the ABC island, but it also highlighted the weakness ABC has with respect to security in the virtual world.
The other main weakness of ABC’s presence in the virtual world is that it is not profitable. The virtual world, at this point of development, is largely a marketing tool. This explains ABC’s emphasis on content, but at some point the company is going to need to justify the expense and effort with real revenues.
There are a handful of opportunities as well. The Corporation can use the island to drive more traffic to its other media properties. Because the virtual world does not have a platform for direct sales, it serves as another marketing arm. ABC should therefore leverage the traffic that it gains in the virtual world to drive traffic back to the real world properties. In essence, the virtual world island and the real world website can develop a two-way traffic flow.
There are threats, however. The first is the threat of vandalism. Clearly, the hacker attacks on the ABC island in 2007 exposed the company to the negative side of the virtual world. An ever bigger threat is the slow uptake of the virtual world. In any other form of media, 2000 hits per week would be considered terrible traffic. Such performance s accepted because the virtual world is a new media form that has yet to reach critical mass. However, there are questions as to whether investments in the virtual world will pay off, given that traffic at Second Life has somewhat stagnated. For much of 2008, traffic stagnated. However, traffic growth began to accelerate again towards the end of 2008 (Wagner, 2009). The stalled growth, however, calls into question the long-term viability of the virtual world as a media form, representing the most significant threat to ABC’s presence in Second Life.
ABC’s eBusiness model is similar to the one it has established in real life. There is an element of the infomediary model in that ABC provides information and content. There are two drawback to this approach, however. One is that there exists no means to follow through on sales, so the approach generates traffic and attention but does not directly convert it into purchase. The second drawback is that because the virtual world is occupied by avatars, it is impossible for ABC to tell where these avatars come from in real life — they have no sense of the audience they are reaching, only its size (Winterford, 2007). The virtual world model — is a variant of the community business model. For Linden Lab, this model works directly. The benefit for ABC is not to derive revenue from the community, but to become a part of the community and develop the two-way traffic flow. It remains to be seen how viable this tactic is as an eBusiness strategy as it is an emerging concept. It is essentially a form of public broadcasting, but it relies on the two-way traffic flow to bring customers out of the virtual world into one were ABC can gained revenue directly.
At the beginning of March, 2009, global media outlet Reuters closed its Second Life bureau (Reuters, 2009). The company had utilized only a couple of writers at the bureau, and reported primarily on happenings within the virtual world. The departure was explained as a reaction to the stagnant user growth of the first ae of 2008 (Krangel, 2008).
There were few strengths with respect to Reuters virtual world presence. One was that the company maintained strong brand continuity. The Reuters reflected in Second Life was an accurate representation of Reuters in the real world.
In terms of weaknesses, there were several. One was that the Reuters presence in the virtual world was not tied to any overall corporate objective. They reported on events in the virtual world but by segregating their virtual and real world operations they failed to drive traffic between the two. This relates to the second weakness, in that Reuters did not have a discernable purpose in the virtual world. They performed their same base function, but this did not have any virtual or real world revenue generating potential. Moreover, Reuters has a weak real world presence — they have a respected brand but one since they have few proprietary media properties they are less able to engage in real/virtual world cross-promotion in the way the ABC does.
There were opportunities inherent with the Reuters involvement in the virtual world. They could have used their presence to raise their profile among consumers, and to communicate their brand proposition. Reuters could have used the virtual world to reflect real world event, which ultimately are of more relevance to virtual world members than the events in the virtual world. Another opportunity was to build a strong virtual world presence. If Reuters could have established its brand in Second Life, and if Second Life experienced strong user growth, Reuters could effectively have a strong virtual market share, one that could have translate in part over to the real world.
In terms of threats, there were many. Aside from the overall structural threats that also apply to ABC, there was intense threat of competition. There are few barriers to entry in the virtual world, so competitors from all over the world to set up. Given the relatively low traffic in Second Life, this puts the Reuters presence in front of very few eyeballs, dramatically reducing the potential benefits of presence.
One of the reasons that Reuters left the virtual world was that there is no viable eBusiness model in that world. As ABC has learned, the most viable eBusiness model is to drive traffic back to the real world. Reuters’ original entry into the virtual world, however, was to experiment with the concept and discern the possibilities. They were reporting on virtual world events primarily. This was not a revenue generating activity and had no hope of becoming one. Reuters’ separation between the virtual world and the real world precluded any viable eBusiness model, as no model has been successfully adapted to a virtual world with its own virtual currency.
Works Cited:
Winterford, Brett. (2007). Virtual Worlds a Risky Bet for Business? ZDNet Australia. Retrieved April 16, 2009 from http://www.zdnet.com.au/insight/security/soa/Virtual-worlds-a-risky-bet-for-big-business-/0,139023764,339281415,00.htm
ABC Island in Second Life. (2009). Australian Broadcasting Corporation. Retrieved April 16, 2009 from http://www.abc.net.au/services/secondlife/
Wagner, James Au. (2009). Exclusive: Second Life Starts to Grow Again. Gigaom. Retrieved April 16, 2009 from http://gigaom.com/2009/04/15/exclusive-internal-second-life-data-shows-returning-growth/
Reuters Second Life page. (2009). Retrieved April 16, 2009 from http://secondlife.reuters.com/
Krangel, Eric. (2008). Why Reuters Left Second Life, and how Linden Lab can Fix it. Silicon Alley Insider. Retrieved April 16, 2009 from http://www.businessinsider.com/2008/11/why-reuters-left-second-life-and-how-linden-lab-can-fix-it
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