Worlds.com Hopes to Be a World Apart - TheStreet

LONDON -- The trouble with making declarative statements about the Internet is that the speed with which it is developing can often result in you having to soon search for a large rock to hide under.

A recent research report by new-media consultancy

Fletcher Research

boldly states that Internet advertising would remain a poor cousin to television advertising "for the foreseeable future." Yet a U.S. company called

Worlds.com

(WLDI)

, in which the U.K. Internet service provider

Freeserve

(FREE)

has a stake, is doing its best to turn that prediction on its head.

Worlds.com is involved in the development and delivery of 3-D content on the Internet. This 3-D technology is integral to what Worlds.com Chairman Steven Chrust and CEO Thom Kidrin believe will be the development of the third phase of the Internet, the first phase being the primitive government service and the second phase today's World Wide Web.

"The Internet will eventually become a new medium, by which I mean a combination of 3-D technology, artificial intelligence, speech recognition, voice-to-text and text-to-voice," says Chrust. "And Worlds.com is a potential platform technology for that third phase."

Although Worlds.com is not planning an official launch until April or May, you can get an idea of what Chrust is talking about by downloading the Worlds.com browser and software from the Internet or getting hold of a CD-ROM from one its partners, such as Freeserve.

Broadband access is not required, although Worlds.com certainly recognizes the potential of that delivery. One of Worlds.com's major partners is

Road Runner

, the high-speed broadband service owned by

Time Warner

(TWX)

,

MediaOne

(UMG)

,

Microsoft

(MSFT) - Get Report

,

Compaq

(CPQ)

and

Advance/Newhouse

.

Once inside the 3-D world, the user chooses an alter ego, or avatar, from one of the hundreds of characters available, which can then be customized. The avatar can then travel around the virtual world engaging in various activities, such as talking with other users through text or speech, shopping, banking or watching a movie. There is also potential for online video games and education.

So what, if anything, does this do for advertising?

The traditional form of banner advertising on Web sites has its limitations: The ads are on the edge of the site, they take the user away from the site they are on and the ads rarely take advantage of Internet's interactivity, which allows marketers and consumers to talk to each other in real time. The Fletcher Research report found that 34% of U.K. Internet users find such advertising "annoying" and 24% consider it a time-wasting diversion. Click-through rates on banners have plummeted as the Internet has developed.

The world of Worlds.com, however, allows advertisers to be much more inventive. There is product placement within the various worlds and a user can choose to dress the avatar in

Gap

clothes or a chi-chi

Versace

number. The ads appear more like billboards, not stuck at the edge of the screen, and there are also things like

Coca-Cola

machines dotted around the place. Clicking on the ads does not take the user out of the world but into a microsite, co-developed by the advertiser and Worlds.com.

In addition to advertising, Worlds.com hopes to garner revenue from e-commerce -- the company currently provides 33 e-commerce sites to artists such as

Elton John

,

Britney Spears

and Net fanatic

David Bowie

-- and subscriptions to the VIP sites that are dotted around the virtual world.

With the site yet to officially launch -- there are about 50,000 active users now -- there is little revenue, although it is growing. Third-quarter revenue grew 157% to $90,664 from the second quarter, and for the nine months ended Sept. 30, revenue was $241,607. The stock closed Monday up 1/4, or 9%, at 3.

Certainly the technology is exciting and has great potential, yet the immediate problem for Worlds.com is acceptance.

Gartner Group

, a U.S. information-technology consultancy, has identified a variety of stages that a new technology goes through before maturity. The first stage is the introduction of the technology; the next stage would be acceptance of it.

Alas, between these two stages there sometimes exists a less rosy phase, which Gartner calls "remediation." Gartner notes that many technologies aren't immediately accepted by the market and instead get stuck in a remediation loop. During this holding pattern, the vendors apply a number of remedies to the technologies to overcome the market's objections to them.

"It took Microsoft Windows three major revisions and five years to gain market acceptance, but once it did, it caught on quickly," Gartner says in its report. It adds, however, that it is hard to predict when a new technology will break out of this remediation loop -- if it ever does, that is.

Interestingly, in 1999, Gartner listed avatars as one of the 10 technologies to watch for. The consultancy says, "Avatars should enhance the consumer's experience online and help spur additional sales."

However, the report finishes by stating that "these applications are years away." Hmm, that sounds suspiciously like one of those declarative statements about the Internet.