The rumor that Microsoft is bidding on troubled virtual world Second Life just got a bit more interesting. It turns out that Microsoft is the previously unnamed company that acquired Vivaty, a virtual world competing with Second Life that went out of business in April. The terms of the deal remain undisclosed but Microsoft definitely paid less than $75 million, according to Microsoft Managing Director of Corporate Development Marc Brown.
The acquisition was confirmed by Vivaty founder Keith McCurdy, in an email to paidContent.org. When Vivaty closed earlier this year, McCurdy said that the company acquiring Vivaty intended to use it as the foundation for an unnamed new project. Given the details that have just emerged, it seems like Microsoft is working on some sort of virtual world or possibly a game-like service with a persistent 3D world.
McCurdy did not disclose to paidContent why Microsoft acquired Vivaty on its deathbed, but ZDnet is reporting that Microsoft is making acquisition overtures to a variety of companies involved in the social gaming and virtual world sectors (including Linden Lab). Microsoft was rumored to be in talks to purchase CrowdStar earlier this year, though no deal went through. While it's obvious why Microsoft might want to own a social game developer at this point, why Microsoft might want a virtual world is unclear.
While the youth virtual world sector is relatively healthy, this year has seen a string of adult-oriented virtual worlds– Metaplace, There.com, and Vivaty– all shut down. All of those companies launched to compete with Second Life, which isn't doing so well itself these days. The dominant theory regarding why Microsoft might want to develop its own virtual world ties in with its Xbox Live platform and its success with virtual goods sales.
Vivaty did monetize through sales of virtual goods and its own virtual currency, VivaBux. Xbox Live sells both virtual goods and a broader range of digital content, but has users make all purchases using a virtual currency called Microsoft Points. Microsoft's competitor Sony has a virtual world for its PlayStation 3, Home, and reports virtual goods sales that are "quite profitable" despite pricing all items in real world denominations (which is generally believed to depress sales).
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