New market research provided by Virtual Worlds Management reveals that 2008 saw approximately $594M invested in the virtual worlds space.  This capital was invested in 63 companies across the virtual landscape, with $101M going to 13 virtual worlds companies in Q4 alone.  While this in itself is a decent number, it does indicate a decline, with Q1 showing $184M invested, Q2 $161M, and Q3 $148M.

Although figures may be sliding, the youth-oriented virtual worlds sector managed to take home more than 10 percent of the total capital invested: $70.47M, spread across 19 companies.  The majority of this funding occurred in Q1 and Q3.  Possible reasoning behind the variances point to this particular sector gaining massive traction, with some investors speculating that the space is already over crowded, while others seeing the market ripe with potential.

Developers active in the non-youth, i.e. adult virtual world space saw a bit slower growth in their sector.  11 companies saw $47.721M, which, proportionally does better than youth oriented virtual worlds, but is spread out amongst a smaller developer base.  Nurien Software was the biggest winner, bringing home $15M for it’s social network/virtual world/casual games products, FooMojo (no affiliation) saw $9.9M flow through the coffers for it’s virtual pets project (see facebook), and EveryScape landed $7M for it’s mirror world that also introduces an advertising play.  Appealing to a wide audience in platform format, Metaplace added $6.7M to the bank account in 2008.  And while not everyone received funding directly, it’s noteworthy to point out that YoVille, a social networking world virtual world was acquired my Zynga, and Metaversum received an undisclosed multi-million Euro investment for it’s virtual world: Twinity.

Given the current global economic slowdown, these figures shouldn’t really come as a surprise, and I don’t see them as any sign to worry, anytime soon.  Investors are simply responding to current market conditions.  What is interesting to note is that virtual worlds investors have made it quite clear: the value of the marketplace is becoming diluted with more and more players involved.  Instead of a massive influx of investment capital over the course of 2009, I believe we’re more likely to see existing cash being leveraged by virtual worlds leaders to merge or acquire lesser players, and induct their users into these newly forged virtual worlds.  And what’s more, these virtual worlds will aggressively start seeking methods to help them monetize.  fatfoogoo anyone?  Let’s talk.

View the full Virtual Worlds Management report here.

Tags: casual games, EveryScape, Facebook, FooMojo, investment, Metaplace, Metaversum, social networking, Twinity, virtual landscape, virtual pets, virtual world, virtual worlds, Zynga

This entry was posted on Wednesday, January 21st, 2009 at 11:58 am and is filed under industry news. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.