Will Harvey’s Case Study of IMVU
Will Harvey, founder and CEO of IMVU and founder of There.com, gave an afternoon keynote talk here at SDForum titled “Virtual Worlds Meet Instant Messaging,” which is what IMVU is all about, Harvey said. Not only that, but IMVU is “the best 3D instant messenger,” he said — though he noted that the competition isn’t very stiff at the moment. The talk was, for the most part, a case study in how IMVU has developed up to now.
Harvey described the landscape as consisting of social networking apps, virtual worlds, instant messaging and online games. “IMVU sits right in the middle, borrowing elements from all of them,” he said. Sounds like rich territory, but you can’t get the world’s 300 million instant messaging users to pay the kinds of fees that online gamers do, for a variety of reasons. “3D doesn’t add value to many kinds of communication,” Harvey said. In addition, IM isn’t used exclusively for socializing. And it may not be possible to make a lightweight app that has the entertainment value of online games.
So where’s the upside? Harvey pointed out that customer acquisition is easy, that customers will pay real money for virtual items, and that similar models have worked in the past, if you look far enough to take in Korean environments like CyWorld. On the other hand, retention is difficult, virtual items retain their value only as long as you use them, and if you look at the Asian success stories more carefully, you find some of them questionable. CyWorld really isn’t about meeting new people, it’s really just a network for connecting with current friends, Harvey said.
How is a company to proceed, then? Harvey looked back at earlier mistakes, including at There.com. Don’t scale (in terms of hiring and spending) before proving your hypothesis of business, he warned. The more spending and coding you do, the more committed you are to a path. It’s important to remain nimble enough to shift course. And don’t do any press until you’re ready to benfit from it.
IMVU started in April 2004 with a business model of virtual item sales. The company was committed to getting customers in the feedback loop as quickly as possible, so Harvey committed to ship a product wihtin 6 months of launch. “As a consequence, the product sucked. I can’t say anything good about it except that we actually shipped it,” he said. But the business model passed the early tests, though continuing development was harder than he’d expected. IMVU had a goal of $300 in sales in the first month, and they barely made it.
As IMVU moved on, the company sought to iterate with real customers. Their initial marketing budget was $5 a day — which buys only 500 click-throughs, but that turned out to be enough, he said. The company presented to its advisory board on a regular basis. The company also focus-grouped with users three times a week.
What they learned was that users wanted a separate client and were happy to build a new social network. Having a client that was just an IM add-on confused people. Switching costs were lower than the company expected. As iteration continued, the company built the product out as a standalone IM service. Customers responded that meeting new friends was as important to them as communicating with their existing friends, which went against IMVU’s expectations. Therefore, a complaint was that there weren’t enough new people to meet — and that there were too many bugs. Interestingly, users also complained that IMVU should be a game.
IMVU raised its ad budget to $40 a day and started fixing bugs. But “we ignored the comment about its needing to be a game.”
The next step was to embrace developers — the most passionate, addicted and vocal users of the product. So IMVU incorporated them into their business model in a first-class way, Harvey said. “We decided that we would only be successful as a company if we were successful through our developers.”
The lessons from IMVU’s “developer stage” were that developers would tolerate “bad tools” if they were powerful, that they would come up with ideas that the company never would, and they they created a liquid secondary market for IMVU credits.
But developers alone were not enough. IMVU needed users to buy the developers’ products. “We came up with the idea of derived products,” Harvey said. Basically, this let people create skins and other decorations for original developers’ products. Everyone makes money in each transaction, and it helps bring original developers in, Harvey said, since they get residuals when someone modifies and re-sells one of their products. (Harvey noted that the world runs on the DMCA model in which IMVU isn’t responsible for policing the product to see that IP rights are respected in the absence of a take-down notice sent by someone who believes their rights have been violated.)
All that work doubled the company’s revenue — from $300 a month to $600 a month. Revenue appears to have double or tripled again since then, if I’m reading Harvey’s chart correctly. Further lessons: Users are forgiving of mistakes if the company is responsive, they will tolerate “bad software” if it is getting better, and they will defend decisions they were a part of. IMVU has still never issued a press release, and is now getting something like 1,500 new users every month. Metrics haven’t indicated that the company needs to scale up development yet, Harvey said. For the time being, it will continue in the iterative development mode that they’ve used so far.
Feeds
I asked a follow up question to Will Harvey: what is the value of the transactions of resale of developers’ objects i.e. avatar clothing per say in USD? Answer: developers sell to customers, but customers don’t sell to each other. “There’s no flea market,” I was told. Until there is a free market in which not only creators get to harvest gold but everybody can sell, there isn’t likely to be a significant world.
As a member of IMVU, I agree that a flea market would generate more interest in the site. There have been numerous suggestions to that bent. Presently the site has numerous bugs that staff is working through, but I have been a member for almost a year, and am pleased with the site as a whole. I have made many new friends and would recommend it to anyone, as long as they understood that right now it is still in “beta” mode.
Will Harvey has made one of the best 3d environments I have grown to kno. But it seems on IMVU no one managing the economic aspects for developers and allowing others to take over and ruin it. IMVU would be so much better if it were properly managed, and if more respect and attention were given to devlopers and their work. I would love to contact Will myself and ask if he would volunteer to save the 3d world of IMVU
IMVU needs a serious makeover. Separate the kids from the adults. IMVU does NOT SAY anywhere, when you are MAKING A PURCHASE that they hold the right to YANK and REMOVE the item from your inventory at ANY time, WITHOUT compensation> As an adult, I KNOW what I am buying, and I buy to KEPP, NOT RENT. BUT, because of the kids, adults are suffering and losing money in this program.
After recient events at imvu. Most adults will be leaving the site. IMVU made a Product called: “Access Pass”. There were about 4000 users(before the people search timed out) that bought this. Access pass was advertised at the time to be a pass to access unrated content. They then changed the advertising at the beginning of april. Forcing the people that bought it before under the new advertising. There for are in a false advertising clause. They then yanked any and all items that they do not think fit for their new company image with out notice to the entire community. I personaly now am waiting on a responce from imvu about my refund I am requesting. I then will be quiting imvu for extremely harsh customer relations.
Vaudevillian is correct. IMVU is in a lot of trouble with its members. Go to IMVUs website and read the Access Pass forums. I too have been burned at IMVU.
If the virtual world is expected to uphold the laws of the real business world, IMVU should have been sued for fraud as they intentionally misled people with their advertisement of the access pass. When they changed their policy, the access pass was no longer worth the 20 bucks people paid for it. It no longer delivers on the purpose that it advertised.
With a few slick and slimy moves, IMVU tried to cover its butt and they must have succeeded, because no one that I know of received a real refund- their method was to refund in “credits” that cost them absolutely nothing, while we lose the money we spent for the privilege. The things that you gain access to now with the pass, should not require a pass to access. If PG is too risque for the kids of this generation, they may as well make the whole thing G rated and eliminate the pass altogether. TV commercials during daytime cartoons are more “adult” than what the pass allows you to see.