SEPT. 20, 2010 • Somewhere between social networks and text chat is IMVU. Since 2004 the service has been perfecting a 3D virtual environment where users deck out their avatars in the fashion style of their choice, and go out to chat with the people they meet. In many ways the concept reads like The Sims Online stripped of the simulation gameplay elements, in favor of a doubling down on user-generated content and player interaction.
IMVU is free to play, but the those who decide to stick around usually avail themselves of the 4 million virtual items for sale in IMVU’s catalog. What’s more, the source of those items are registered user/programmers. As the emphasis is on voice and text chat, IMVU is designed around private rooms were avatars go to meet, not an expansive virtual world. Naturally, users outfitting their rooms will also go to visit the virtual item catalog.
Around 2007, 3D virtual worlds were seen as all the rage. In the past two years, most of the news around the space has not been positive. The most notable virtual world, Linden Labs Second Life, has been on the decline and is subject to a major class action lawsuit. In early 2010, Makena Technologies closed down the long running There.com virtual world. Therefore it comes as somewhat of a surprise that IMVU is the exception to the rule.
In October 2009, it was announced that IMVU was doing a $25 million annual revenue run rate. By April 2010, it was announced the virtual world had reached a $40 million annualized revenue run rate.
One of the big complaints facing many pure virtual worlds, is the lack of things to do beyond chatting with others. To address this issue, in September 2010, IMVU announced that it was going to add a selection of games to its virtual world.
The idea is IMVU will be able to leverage its social network and virtual goods economy to offer many of the games that are now popular on casual game portals and social network sites like Facebook. IMVU is starting with about 75 games from Viximo, Heyzap and OMGPOP. The goal is to go away from the concept of a “virtual world” to the idea of being a social entertainment platform.
Since many in the game industry are unaware of IMVU or its continuing growth, DFC went to chief executive Cary Rosenzweig to learn more about the service and why consumers are attracted to IMVU.
DFC: So give us the big picture overview of IMVU. What are your primary product categories and revenue generators? How many employees do you have? How many users do you have?
Cary: IMVU, Inc. is an online community where members use 3D avatars to meet new people, chat, create and play with their friends. IMVU has reached 50 million registered users, 10plus million unique visitors per month and a $40 million annualized revenue run of more than 4 million items, almost all of which are created by its own members. Founded in 2004, IMVU is backed by venture investors Menlo Ventures, Allegis Capital, Bridgescale Partners and Best Buy Capital, and is located in Palo Alto, CA.
Seventy-five percent of IMVU’s revenue comes from the sale of credits that members use to purchase virtual goods to outfit their avatar or create virtual spaces. Another 10% of the company’s revenue comes from its users buying premium memberships and another 15% from advertising. The company currently has almost 100 employees.
DFC: IMVU has been in open beta since April 2004. Why so long?
Cary: IMVU has recently removed the Beta label. Previously we had maintained the Beta label because we hold IMVU up to a very high standard. When we reached a point where we’ve achieved the quality of service that we expected, and that our members expected, we then removed the beta label.
DFC: What is the core attraction of 3D virtual worlds to consumers? What makes a social network with 3D avatars different from Facebook? What makes IMVU different from Second Life? One comment we have heard from users of is simply not much to do. What are your thoughts on this subject? What are the main activities of users in IMVU?
Cary: First, IMVU is not a Virtual World – IMVU is a Social Entertainment destination that provides our members with a number of entertainment options including the ability to:
• Meet new people from around the world and chat with them.
• Express themselves with 3D avatars, homepages and private rooms.
• Buy virtual items for avatars & rooms from the world’s largest catalog of virtual goods.
• Play popular games
• Join groups and share interests.
• Participate in forums to discuss a wide-range of issues.
• Create your items for sale, ranging from simple 2D stickers to complex 3D items.
While Facebook provides a social experience for its users, much of that experience is asynchronous, which means that people query other members through emails and/or updates and wait for a response. In social entertainment communities like IMVU, members can interact with one another in real time and get immediate responses from people around the globe including interacting in a visually compelling 3D environment.
IMVU is different from Second Life because IMVU is a roombased environment rather than one continuous space that typically defines a virtual world. In addition, members of IMVU can enjoy a broader set of activities such as playing popular games provided by our game partners.
IMVU is officially launching casual and social games on its platform via partnerships with popular 3rd party game developers Heyzap, OMGPOP and Viximo. Some of these games will be customizable allowing players to use virtual goods bought on IMVU to personalize game play. Others will allow players to purchase in-game virtual goods with IMVU credits during game play. And yet others will allow IMVU members to add friends between IMVU and the games.
DFC: Please describe your access structure and subscription costs. What do users get for free, and what changes for them with every level of subscription?
Cary: IMVU is free to use, and we provide 1,000 promotional credits to get members started as well as a variety of virtual goods and a private room. If members want to purchase additional digital products to make theirexperiencemorepersonal and unique, they can do so by purchasing virtual credits and buying digital goods from IMVU’s digital goods catalog.
DFC: Give us an understanding of your user demographics: age, gender, income, etc.?
Cary: The core of IMVU members are young adults age 18 to 24. However, many members are older. In fact, 7% are over 35. Additionally, approximately 40% of IMVU’s members come from outside the United States. That means you can meet and interact with people from all over the world. It is important to note that members must be at least 13 years old to use IMVU.
DFC: What is the percentage of active avatars that are female and male?
Cary: Sixty-five percent are female.
DFC: How is IMVU policed for objectionable content?
Cary: IMVU takes abuse reports very seriously and will quickly take action. If someone does something that a members finds offensive, abusive or inappropriate, we encourage them to close their chat window and/or use our “report abuse” to submit a formal complaint.
IMVU has zero tolerance for any activity or content that does not conform to federal, state or provincial laws and will take immediate action when discovered. Also, IMVU abides by DMCA rules.
DFC: What happens when an avatar or room are reported for objectionable conduct or content?
Cary: We provide our users with Terms of Services that clearly defines conduct and content. An IMVU user can be blocked by another user at any point and a user’s content or actions can be reported by another user. This includes their homepage content and pictures, their messages to other users, their catalog products, as well as their chat conversations.
A room can be reported for its status (example: AP room being displayed as GA) and content (AP/UFI items included in the room). Conversations in the room can also be reported for inappropriate content, spam, etc.
When content such as this is flagged by a member of the IMVU community, the person who files the report gets an email confirmation. The report is then sent to our customer service team for review. The content is not hidden but stays active until a CS review is complete. A CS rep reviews the images/content/chat logs, etc. in context to our Terms of Services and takes appropriate action.
The action can include any of the following: immediate disablement of the account, a temporary or permanent disablement of the account, a warning for user to change the content/product, etc., immediate re-rating of the homepage or room (GA to AP), or immediate reset of the homepage avatar image, etc.
DFC: How many registered users do you have, and how many registered programmers?
Cary: IMVU has reached 50 million registered members and 10 million unique visitors per month. There are usually between 80,000 to 120,000 concurrent members interacting with one another at any given moment on most days.
There are currently more than 200,000 IMVU members who are registered today as Creators (developers). These Creators create the vast majority of the virtual goods in IMVU’s virtual goods catalog. IMVU has the world’s largest virtual goods catalog of more than 4 million items with approximately 5,000 new items added every day, almost all of which are created by its own members.
DFC: Do registered programmers share in revenue? If so, under what circumstances and what percentages?
Cary: Not exactly. IMVU earns revenue by selling virtual currency called IMVU credits. By contrast, our Creators earn credits when they sell an item that they’ve made in our catalog. Via a secondary market that is separate from and not administered by IMVU, Creators can sell their earned credits to resellers who will buy Creator credits and pay them cash. These third-party resellers earn margin by marking up the credits they purchase from Creators to a price that’s still attractive to regular IMVU users in that it’s discounted to be lower than the “retail” price at which IMVU sells credits directly, 10,000 credits for $10, for example.
DFC: What percentage of registered users are free players, Access Pass holders, etc.?
Cary: We currently don’t disclose this information.
DFC: Under what circumstances is voice chat available to users, and where is voice chat available in IMVU? How important is voice chat to the user experience?
Cary: Voice chat is available to all users in private 1-to-1 chats for free. Voice chat is no longer available in public rooms because of user feedback that chats became hard to follow if more than a few users were using both voice chat and our in-room music service simultaneously in a public room. Voice is a very important part of the IMVU experience for a small subset of our total user base, but we are still experimenting with ways to increase the prominence and usability of voice within IMVU. We expect also that usage will increase as more and more users have headsets/microphones as standard components of their home systems.
DFC: A year ago it was said IMVU was bringing in $2 million in monthly revenue. We have heard indications that this is up significantly in 2010. Is this true? If so, what is spurring your revenue growth? How does this growth compare to 3D virtual worlds?
Cary: For the last two years, revenues have roughly doubled from $11 million in 2008 to $22 million in 2009 and now $40-plus million annual run rate in 2010.
Seventy-five percent of IMVU’s revenue comes from the sale of credits that people use to purchase virtual goods to outfit their avatar or create virtual spaces. Another 10% of the company’s revenue comes from members buying premium memberships and another 15% from advertising.
IMVU’s successful growth is mostly attributed to providing a quality user experience to our members while adding new features and activities. We do not track or compare IMVU to Virtual Worlds as we don’t have data and we are not a Virtual World.
DFC: Has your virtual goods catalog surpassed 2 million items?
Cary: IMVU has the world’s largest virtual goods catalog of more than 4 million items with approximately 5,000 new items added every day, almost all of which are created by its own members.
DFC: How many of these goods are IMVU generated versus user/programmer generated?
Cary: More than 99% of products are user-generated. The only goods that IMVU created are the 1,000-plus generic products that became the building blocks from which all other products in the IMVU catalog were derived.
DFC: Are user/programmer generated goods reviewed prior to being purchasable?
Cary: Yes. We have a “peer review” process by which content creators and other engaged users review all content that is submitted to IMVU’s catalog against a very detailed set of guidelines and rating policies as explained in our “Virtual Goods Policy”.
For 13-17 year-old users, only “General Audience” content is permitted. For 18-plus users, IMVU does not allow any mature content other than what might be considered “R-rated” in film parlance. No item submitted to our catalog is displayed to users for sale until it has received a sufficient number of passing votes according to these criteria from peer reviewers. Items that do not receive enough passing votes never get displayed for sale in the catalog. And if any inappropriate content somehow gets through this peer review system on the front-end, we also have a standard postsubmission flagging process in place by which any user may flag any user, chat, product or room for review by IMVU Customer Care, who will then take down inappropriate content immediately if necessary and/or suspend offending users’ accounts or products.
DFC: Under what circumstances will IMVU users and members see third-party advertisements?
Cary: Members who subscribe to IMVU will not see 3rd party advertising.
DFC: Please describe what it takes to be a registered programmer, how their apps are integrated into IMVU, and what kinds of apps are they creating?
Cary: Any IMVU member who owns their avatar name (a $19.99 purchase) and elects to become a Creator may create products and submit them to our virtual goods catalog. Creators create an extremely wide variety of products, including 3D clothing and furniture, 3D rooms and scenes, full 3D avatars and outfits, complete 3D bundled experiences focused on a specific theme (e.g., a vampire’s castle, luxury beach house, or fantasy forest), 2D stickers for users’ profiles, and even 3D avatar actions, poses, and animations that are applied to avatars in-game via our actions system.
DFC: What percentage of Access Pass rooms are classified adult?
Cary: Only 18-plus users who have paid a one-time fee of $19.95 to purchase an “Access Pass” are allowed to enter Access Pass rooms. Access Pass content never goes beyond what is commonly regarded as “R-rated.” Our company guidelines clearly define what is and is not acceptable as “Access Pass” content. Users who are under 18 (13-17) see no mention at all of Access Pass on the IMVU site.
DFC: How are adult rooms and content regulated?
Cary: Room owners are expected to understand our TOS guidelines and rate their rooms appropriately – AP versus GA. Room owners and moderators for a room can block users from accessing the room, remove them from their rooms and report them and their conversations using the flagging system. The CS team will review such reports and take appropriate action including re-rating or disabling the room.
DFC: What lessons were learned from the failure of There.com that helped IMVU?
Cary: The co-founders came from There.com, and they learned a couple lessons. First, they learned to create simple products and put them in front of consumers quickly, asking them to pay for some features. Only when someone buys something do you learn if your product offers real value. Second, they learned that most consumers prefer a simple, avatar-centric product to the “world-centric” experience at There.com.
DFC: How is the Mac client coming along?
Cary: IMVU’s Mac client is currently available in Alpha. The Beta version should become available during the week of September 21. We are also simultaneously launching our first mobile app called IMVU 2Go for Apple’s popular iPhone and iPod touch devices.
DFC: We understand additional language localization is being readied for IMVU. What languages and what markets?
Cary: IMVU is currently being localized for several countries in Western Europe.
