Tuesday, December 12, 2006
Interview with Jay Goss, COO, Whyville.net
Jay Goss is the COO of Whyville.net (www.whyville.net), an online virtual world that plays in the same space as Second Life, targeting 8-15 year olds with an educational spin. Virtual Worlds have been getting increasing attention from advertisers looking for new ways to reach their customers, and are seeing increasing interest from the Internet population at large. socalTECH's Ben Kuo talked with Jay last week about the site, its Caltech origins, Jay's views on the next frontier in Internet advertising, and the firm's recent investment round.
For the readers who aren't familiar with Whyville, can you tell us a little bit about the site and it's purpose?
Jay Goss: Whyville is a virtual world website. First and foremost, it's differentiated from ordinary web sites by virtue of being a virtual world. The site targets 8-15 year old boys and girls. Its mission in life is edutainment. it was founded by scientist at Caltech, and those scientists really set out to create Whyville for what you and I would call educational, "good-for-the-world" reasons. There are lots of problems with education in the U.S., which we won't get into here. However, the scientists were looking at those problems from the empirical and scientific view, and creating curriculum which was owned by Caltech and licensed to textbooks. They took that know-how to Whyville, a virtual world with an educational thrust to it. Whyville isn't homework, and it isn't education all the time--there's an entertainment component, so kids will want to be there. The site, which was first opened in 1999, walks a fine line between education and entertainment. It's sort of Neopets meets PBS. It's got this real substance to it.
On the other side, the business model, what's most provocative about Whyville is what's most provocative about virtual worlds. We are able to do for our customer--the advertisers--what has not yet happened on the Internet. Right now, advertising on the Internet is really just banners and web pages. Instead, when we are working with advertisers and sponsors, we build them into the game of Whyville. For example, with a car company, we don't design a rectangular banner. Instead, we design an auto dealership, where users can design a car, pick up their friends, get benefits from ownerships--benefits of having a car that other's don't. The paradigm here is it's more about the virtual world medium than anything else. Print, radio, TV, and the ordinary Internet is passive, one-directional communication. However, what you do inside a virtual world allows you to interact with other people--not in a social networking, message board, or blog sense--with asynchronous communications. In a virtual world like Second Life or a virtual game world, every character has the power to socialize with every other character. That's profound if you think about it.
The car company I mentioned early is Scion and Toyota. Another Los Angeles example is the Museum of Whyville is sponsored by The Getty. Disney's Little Mermaid was also promoted by Whyville--the kids had the opportunity to buy a mermaid tail, which they could attach to their avatar's body. If they then sung the Little Mermaid song, they could go scuba diving, and even had ways to make it into a scene from the movie. When people talk about making Internet advertising being interactive, that's what interactive should mean. I think we wasted the idea of "interactive" on banner ads, which are not much more interactive than advertisements on a page of a newspaper. The interactivity we enable our advertisers to have with their audience is a couple of magnitudes greater than passive advertising.
Can you talk a little more about this interactivity?
Jay Goss: We're not just talking about banner boxes. We just did a project with Celestron, which is the largest distributor of telescopes--the consumer kind you'd buy in a Discovery store. We opened up a planetarium with them in Whyville--sort of like the Griffith Observatory--which is sponsored by them. There, kids have contextually appropriate experience learning about constellations, and at the same time learning how a particular product works. They have a product called the SkyScout, which is a pair of binoculars with GPS, which shows you information about where you are pointing the device. You can also put something in your ear, and it will play you information about what you are looking at. The kids learn how to use the SkyScout in the planetarium. That's the kind of experience you get in Whyville. Contrast that experience with Internet advertising, which is just banner ads on websites--and we think this form is not just a little more effective than banner ads on websites, it's a lot more effective than banner advertising.
Second Life get's the lion's share of press, but for example, we have one customer in common with Second Life, which is the U.S. Center for Disease Control. The CDC has opened up in both places--in Second Life and Whyville. It's the exact same content, which is around creating awareness of getting a flu shot. However, if you compare the experience, in Second Life a few hundred people have bothered to get a make-believe vaccination. On Whyville, in about 10 days, about 10,000 kids have gotten the flu shot in the shoulder. If that's the ultimate way to measure the effectiveness of the campaign, why is it in ten days we get 10,000, and in six months they only get a few hundred? The reason why is it's not just buying a plot of land, we actually sit down with customers to understand objectives, and build something accordingly. We created in the content in a contextual way, by letting kids know that next week, there is going to be a "whyflu" -- a make believe flu outbreak. That flu meant if you catch it, your character in the game will sneeze uncontrollably, and if you're not vaccinated you risk getting the disease. We actually change the capabilities and the power of the avatar if you get sick. It's more than just some superficial thing.
It does look like there's been a lot of interest lately in virtual worlds, why the sudden interest in this space?
Jay Goss: I think the simplest example is the unfulfilled promise of the Internet. All of these ad budgets have shifted from traditional advertising, to banner advertising, and there's now dissatisfaction with banner advertising. Money is gradually being shifted into Internet advertising, but that's mostly banner advertising rather than search engine advertising. Most traditional agencies and cutting edge interactive advertising agencies are tired of their clients coming and asking if there's anything they can do except a banner ad campaign. Banner ads are what people could come up with on short notice, and are really a carry-over on display and classified advertising. It's an appropriate thing to quickly monetize, but the general feeling for some time, except those whose bread is buttered around banner ads, is that advertising can be more than web rectangles on web pages. That's a big reason why Second Life and virtual worlds get all this attention.
Saying a virtual world is a web site, is like saying TV is like radio. It took the same technology to get a signal from the tower to radio, as it took to get a signal a tower to a TV antenna, but the medium of TV was fundamentally different from radio. You start by typing www to get to a virtual world, but the experience is profoundly different. If you and I both log onto ESPN.com after this call, you don't enrich, and you don't diminish my experience. That sounds a lot like TV to me. With a virtual world, we could be at the same sports bar, and discussing the Clippers/Lakers score with each other, and interacting with each other at the same time. Human beings are social animals, and we've never had a medium to be social in. Virtual worlds are a social medium that can accomplish this. Other than Superbowl Sunday, which is the only time advertising enriches the TV medium, we don't jump up and down when CSI Miami says they are going to add two more minutes of commercials. Commercials are a necessary evil because we're too cheap to pay the full cost of television. If you look at Whyville, it's more like a theme park. If you imagine Whyville is like Disneyland, it's a place you can buy cotton candy, souvenirs, and ride on rides. Imagine on April 20th of 2006, there were 100 roller coasters in Whyville, on April 21st--using the Scion example--they opened up this car roller coaster. There are now 101 things to do. It's an innovative way to get an audience of kids. They jump up with joy when we add new advertisers.
Getting a little philosophical here, that doesn't happen in print. Every time we bring in a new sponsor it represents a new roller coaster. As long as we do our job right, and build it right--whether that's a planetarium, and auto dealership, or the mermaid tail--the relationship goes from being a necessary evil to the opposite of. From the business model, and the bet that investors are making in this company--everything translates into a higher CPM. Assuming if we all basically spend money to acquire traffic, whether that's Internet traffic, circulation, TV viewership, or readership, the one who can charge the highest for those thousand eyeballs wins. We think this form of advertising--and it's bearing out with our clients--provides incremental value. Instead of $0.50 or $5 CPM, it's significantly more. And over time, it will be more and more.
Can you tell us about the investors in the firm?
As I mentioned we were founded by scientists at Caltech. Until August of this year, the company had raised money from twelve angel investors--really one angel at a time. Over those seven years, we raised about $1.5M, putting in as little as $25,000 to hundreds of thousands of dollars. However, we never had an official round and never sat down with VCs. In August, we started our first Series A, which ended on November 30th. We brought in eleven investors, five of them existing, and six new ones. It was around half a million dollars. Almost in parallel, we have started pursuing a Series B round with Silicon Valley VCs and other venture firms here in Los Angeles. We're going through that dance right now, but first and foremost, we're deciding which firms feel right. We've got scientist DNA, and are not a garden variety Internet company. We have to be careful on which venture capitalists will work well with scientists.
Whyville has been around for a few years, why did you decide to go out for venture funding now?
The honest answer is that the company and the board had enough wisdom at the beginning to realize that it didn't make sense to commercialize the company until we really understood what we were working with. The company was given five and a half years to get to understand the implications of a virtual world. Our investors and board back in 2000 had an unusual amount of patience. They wanted to let the scientists and non-scientists play with the medium. In 2004, the board said okay, looked at their watch, said it's been 4-5 years, we think you've had enough time to play with the clay, what do you want to do? At that time, Internet advertising was coming out of the dog house. It's obvious to us now, it was not so much in 2004. We were looking at the possibilities to point the underlying technology at, in terms of markets, and thinking we might take it to school districts, or sell it shrink wrap, and maybe even as an application for the Pentagon for military training and recruitment. There were lots of schools of thought. I was brought in to work through the options. It ended up that Internet advertising went from cold to lukewarm, to very hot. It was then obvious to focus on Whyville. While I want to say I'm the smart guy in the room, the business model actually found us. In 2005, we set course to raise a little more from angel investors, and in 2006, we have really been in execution mode to get more kids into the service, more sponsors to advertise, and to really prove the business model. In some respects, we're an 8-year old company, in other respects we're a 1-2 year old company. I like to say we're an 8-year old R&D operation, but only a two year old actual commercial enterprise.
Thanks for the interview and good luck!