Knowledge Map of theVirtual Economy

Dr. Vili Lehdonvirta, University of Tokyo / HIIT FPD Forum, 7 Apr 2011, Washington DC

Contents

1. Introducing the Knowledge Map of the Virtual Economy–What do we mean by “Virtual Economy”?–What are some of the industries in the VE?–What is the development potential of the

VE?

2. Mobile Microwork Challenge–Preview of an upcoming infoDev competition

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KMVE: Research process

•Assignment: “Development potential of the Virtual Economy”•August 2010 –> January 2011•Two researchers + research assistants

1. Literature review (academic, market studies)

2. 13 interviews, one survey, data from a corporate database

3. Workshop at ICTD 2010

4. Peer review3

The Demand

•Users desire goods and currencies in online games, social networks, etc.•Brands are after Facebook likes, Twitter

followers, Digg votes, etc.•E-commerce sites need digital

microwork, such as tags on images, transcriptions of scanned forms, de-duplication, etc.

= “Virtual assets” that are valuable to someone, yet scarce 4

The Supply

•For each of these virtual assets, there is an emerging industry that supplies it

•The production, exchange and use of scarce virtual assets = the virtual economy

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Demand

Scarce

supply

Markets

Sectors of the Virtual Economy

Third-party gaming services industry

“Cherry blossoming” industry

Microwork industry

Micro-content industry

Sectors of the Virtual Economy

Third-party gaming services industry

Professional gaming studio outside Beijing, China. Photo: Jared Psigoda

Third-party gaming services

•Total revenues: $3.0 billion (2009)•Approx. 100,000 full-time equivalent

workers

•Involves negative externalities–Net social value can be negative–Legal status contentious

Game operator

Producer Retailer Customer

Sectors of the Virtual Economy

“Cherry blossoming” industry

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Sectors of the Virtual Economy

Microwork industry

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Microtask Ltd

Microwork

Samasource workers in rural Kenya. Photo: Samasource

Microwork industry

•Emerging industry; some benchmarks for potential market size:

–Paid crowdsourcing: $500 million (2009)–IT and business process offshoring: $92-$96

billion (2009)

•No negative externalities: 100% positive contribution to society

Infrastruct. provider

Microworker

Work aggregato

r

Work transform

erClient

Task size Source of workers

Workers’ tools

Skills

Crowd-sourcing (Howe 2008)

From tiny tasks (2-30s) to large projects (days or weeks)

Open call on the Internet

Workers may require external tools

From basic computer skills to languages and professional skills

Microwork Tiny tasks (2-30s)

Open calls, staff members, contractors, BPO providers, online games

All tools and information embedded into the workers’ user interface

From basic computer skills to languages

Microwork vs. crowdsourcing

Current development impact

•Compared to e.g. the global coffee industry ($70 Bn in 2002), the amount of real money circulating in the virtual economy is modest•But most earnings in the VE are captured by

the producers -> significant development impact

–in the coffee industry, producing countries capture less than 10% of total revenues

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Infrastruct. provider

<30%

Microworker

0-70%

Aggregator

10-30%

Transformer

20-60%Client

Game operator

<1%

Producer70%

Retailer30%

Customer

Third-party gaming services value chain

Microwork value chain

Future development potential

•In the future, wage competition is likely to limit producers’ income (low entry barriers)•In the gaming services industry, developing

countries have been able to move up the value chain towards customer-facing functions•Can developing countries achieve the

same in the microwork industry? 21

Infrastruct. provider

<30%

Microworker

0-70%

Aggregator

10-30%

Transformer

20-60%Client

Game operator

<1%

Producer70%

Retailer30%

Customer

Third-party gaming services value chain

Microwork value chain

Potential upgrading strategies

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Horizontal coordination Individual microworkers banding up to share resources and improve bargaining power

Product upgrading Producers expanding up/down the value chain

Functional upgrading Pushing higher-value-added products into the value chain, e.g. business intelligence

Inter-chain upgrading Using skills and experience to engage a totally different value chain, (e.g. microwork services for personal users: photo album tagging etc.)

•Important enabler in least-developed countries: mobile technology

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MobileMicroworkChallenge

Converting the Virtual Economy into Development Potential: Phase 2

Photo (CC) by whiteafrican

Mobile Microwork Challenge

•Online competition organized by infoDev to speed up the development impact of microwork in least-developed countries•Challenge: develop new concepts for

mobile microwork–What problem is addressed, who is the

customer?–How is the problem addressed by

microworkers using mobile (feature/smart)phones?

•Winning concepts awarded support for implementation and piloting•Accepting submissions opens in fall

2011

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Virtual Economy

Digital Economy

ICT infrastruct

ure

• Virtual goods, currencies, tasks, endorsements, links• Online services, communities, games

• Online shopping, eCommerce, eGov• Broadband connectivity

• Wireless networks

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