The Mark Stone Report - CEO Interview with Dave Andrews, CEO of Avaterra.com - October 28th, 1999
This is an interview that was reprinted in the March 27th 2000 edition of the Virtual Planet newspaper. It doesn't seem to survive in the Internet Archive backups of the site, but still exists in some archives sent to us by one of the former Virtual Planet editors. The interview is reprinted in its entirety.
The Mark Stone Report Contributed by: Mark Stone Report Date: October 28,1999 http://www.investorlinks.com//analysis/archive-analysis-9910.html CEO Interview with Dave Andrews, CEO of Avaterra.com The New Face of Internet Chat Forums: Live Action Message Boards with Custom Designed Cartoon Characters. That's Interactive! You've probably seen the MBA-styled cartoon characters in various banner advertisements introducing a wildly popular Japanese web design. Formerly known as WorldsAway, Avaterra.com bought, this past summer, its business from Fujitsu although Fujitsu still owns 10% and has one senior official on the Avaterra.com board of directors. Fujitsu bought the initial design concept from George "Mr. Star Wars" Lucas' creative group, Lucas Arts Entertainment. Believe it or not, this was the first Internet chat concept and has been around longer than nearly any message board. Avaterra.com* (OTC BB: AVAR) is now publicly traded and has a rapidly growing membership. Plus - the company plans a major expansion into the corporate world, which Avaterra's CEO discusses with Mark Stone. Mark Stone: There's been a number of banner advertisements with preppy-looking cartoon characters, such as "Hi, my name is Julie." These advertise your website. What exactly is Avaterra.com? Dave Andrews: Basically, we are an advanced community and chat environment, using avatars and the capability to visit virtual places. An avatar is a small version of a person, a representative of the person on the chat site. Our environment was actually designed and conceived by George Lucas, some years ago, and licensed Fujitsu, in the Japanese market It was very successful in Japan and still is. It was then brought to the US market, and converted into English. It has grown and evolved over the last three or four years. It is originally a division of Fujitsu of Japan. It is now a company, which is a NASDAQ bulletin board stock, Avaterra.com and is 10% owned by Fujitsu. The technology is under an exclusive license and is being marketed exclusively by us outside of Japan. Mark Stone: Great background, but what exactly occurs here? Dave Andrews: The technology provides the capability for people to have a much more rich and interesting experience on the Internet. For example, you come into the web site and you become a little avatar, which is a replica person - a replica of yourself. That person is highly customizable. There are over 2.5 million different mutations of that person. You can be male or female. You can have different body weights, different heads, or accessories. You can color your clothing, your body and skin. Effectively, you become an avatar. It is like a different identity that represents you on the chat forums, of which there are different environments. The environments that you are in have a different theme. For example, there is a theme about radio. You can visit different cities based on romance and meeting people. There are others based on science fiction. There are new zones which are coming up, which are things surround topics such as soccer or all kinds of other interesting concepts. Mark Stone: The soccer zone is in conjunction with Scottish Telecom, one of the largest Internet Service Providers in Europe. How is that going? Dave Andrews: We are getting that going. That is not going to be long - we are expecting it sometime in December. Next year, I think, is the World Cup, and I think we will try to ride that a little bit. The interesting thing about the virtual zones - and the thing that really attracts everybody - is the fact that the environments are incredibly sticky. They are incredibly interesting and the community aspect is so strong. Visit lengths average over three hours per session. Typical visit time per day, per person, is over five hours, which is really akin to television. We perceive that from a large point of view, we are another kind of television, which has interaction and interpersonal communication buried in it. It is very interesting and very sticky for a large portion of people. We are growing very quickly. We have grown almost 100% in the last 30 days. We are up at a total visit amount close to 100,000 per month. Mark Stone: Are these new visitors or old visitors that are renewing? Dave Andrews: Probably 40 - 50% of the people that have been in the zone for a long time. About 50% are new. Interestingly enough, we thought that as we grew, there would be an issue of declining amounts of time in the zones, because we were basically tapping into a new base of people. We found that the new people actually are in the zones almost the same amount of time as the old people. That means that we are picking up a new audience that really does appreciate and understand it. It suggests that potentially we will continue to have this level of stickiness. The more time people are in the zones, the more tokens they accrue. Tokens are like an in-world economy and they allow you to do things like customize your body, buy little accessories, rent apartments. You can trade things. Tokens really become the currency of the virtual zones, and they are the things that allow the economical engine to drive forth. For example, people come back to accrue tokens and then spend them on things they like in the zones that are a part of the adventure of being there. Now, a big chunk of our business, at the moment, is in the consumer area. That is, we are offering services of free access to consumers, then premium services for things that they can do, such as going to certain places and listening to presentations or other kinds of events. Mark Stone: Aren't you planning some sort of pay-per-view of upcoming major events? Dave Andrews: Pricing at the moment is still being finalized, but we think that it will be around $1.95 to $2.95 per session. The session might be one or two hours. It is usually going to be able to be in a particular area with a celebrity, listening to the celebrity, interacting with the celebrity; going through with an information-based seminar, learning something, experiencing something, seeing people or communicating with people that you want to communicate with, but who are rare and unreachable any of the other times. Those are the kind of events that we plan to do most, but then there are others places that you can go. We may provide a six-month premium package at $9.95. You are able, then, to go anywhere in the virtual zone at any time, plus you are able to go to places where you are able to get rare items using your tokens. You won't get those things if you don't subscribe. Mark Stone: But, don't people come to the Internet to try and get things for free? Dave Andrews: They do, and they can. They can get all the access they want to these locales. The thing is that when there is something special going on, they have to pay a little extra if they want to. But, it doesn't restrict them from being in the virtual zones and experiencing a good chunk of everything that is going on, on an ongoing basis. Mark Stone: Isn't Avaterra.com going to concentrate more on business-to-business or corporate universe creation as opposed to a consumer-only focus? Dave Andrews: No, we plan to add another capability that is a logical extension of our current business. We will be focusing on business-to-business and business-to-consumer applications. But, I can't discuss those right now. There should be news out shortly. Mark Stone: In your "ad objects," you do a sort of non-advertising type of advertising through your corporate sponsors. Will the corporate sites have advertising? Dave Andrews: The corporate stuff is usually something that is provided as a freebie by the company. For example, business-to-consumer, they are going to want to have their own ads on there, but they may also want to have partners there. They may want to have ads of their Internet partners. The business-to-business stuff is probably not going to include advertising whatsoever, but will be a more serious think-tank sort of setting. Mark Stone: How are people going to be communicating? Is there going to be a chat forum or something? Dave Andrews: There is basically going to be an environment that allows customers, business-to-business-type customers, to come in and communicate with the vendor, who owns the virtual zone. Then they will be able to learn about things, get information, go to seminars, get product information, or go to meetings. It is really a facilitator. It is very much more like an intranet or extranet application, than it is anything else. Mark Stone: Is the product you are offering going to expand what you are doing, corporately? Dave Andrews: Yes, it is the same basic technology, applied in a different way. It is a way to do a grand extension without any R&D cost. Mark Stone: Will this for customers-only or business partners-only? Dave Andrews: With one of the corporate universes, this would be for a very elite group of people in a very technical area, and the information in there is going to be specifically for them. This is a very elite community, so it is like, "are you good enough to join?" You have to be an engineer, with a particular focus, working for a particular group of companies' world-wide, and then you can get in. Mark Stone: Is this a particular pattern that might be occurring across the Internet, where boundaries are established - fences keeping out the unwanted and exclusive members-only clubs that don't welcome outsiders? Dave Andrews: I think the nature of community is something that we have only just touched on - on the Internet. I truly believe that there is a vast opportunity for community on the Internet. We are the best tool there is right now for that. Community breeds all sorts of things. What it breeds is longevity, loyalty, knowledge, interaction, you name it. So, yes I see lots of community situations occurring, whether they are large communities, like all of small business, or small communities, where they are all engineers working on a similar topic. Whether they are with competing companies or not, they still have a commonality of interest, and they are a community in their own way. Look at the PR group, there are clubs, press clubs for example, and there groups of people in the PR industry. Mark Stone: Right, but usually on the Internet, you don't have the closed groups. It is often where, if you are on the Internet, you can get in and may have to pay a membership fee, but you get in. In this case, you can't get in unless you qualify? Dave Andrews: I think that is just a function of people just trying to drive traffic, because numbers mean everything. However when you get down to a level where people get rational - and they start to look at quality over quantity, they know that you don't want a bunch of people that don't know what they are talking about, because it destroys the community. For example, let's say that there is a meeting where all of the PR people get together in New York, and there is a bunch of people in there from the plumbing industry that know nothing about it, and start asking some dumb questions. That isn't exactly going to help. The Internet will eventually recognize that community is about people that are like-minded, and only works if the community sticks together and has that same kind of cohesion that you would get in the real world. Mark Stone: Are the corporate Virtual Zones going to require dressing up, as opposed to the Casual-Friday look?. Dave Andrews: There are going to be less variations to the heads and things. There are not going to be any duck heads or anything like that. There are only going to be about 30-40 different heads that you can have. You can be male or female and have all the normal body sizes and shapes. You will be able to color your clothing, but there will be less accessories in there that allow you to have, for instance, devil horns or a tail or something like that. You will have business-oriented things. Those accessories will include items such as briefcases, portfolios, and phones. Mark Stone: Is that just basically to keep people corporate looking? Dave Andrews: No, it is just to set the mood. The mood is a business environment. You can have fun while you are doing it, but it doesn't help if someone is an engineering meeting, talking about a very serious topic, with a chicken head on. It kind of breaks it up a bit. Can you imagine being in a meeting talking about a really important topic and somebody has a chicken head on? How would you feel? Mark Stone: Probably feels ridiculous. Now, the last time we talked, you were in New York and working on deals to promote celebrity events on Avaterra.com. Dave Andrews: In fact, one of our people is in New York right now, meeting with some people. I think she will have more information for us shortly. She was meeting with people from music labels. I don't know the outcome yet. Mark Stone: Is your content going to continue improving? Dave Andrews: Well, it is one of those moving targets. You always want to have more and more. People will always come back for more. For example, every time you tune into ABC, on the television, if it was the same programming, you wouldn't come back very often, would you? Part of our content is dynamic. That is, it is the chat. Mark Stone: Are your members creating your content? Dave Andrews: They are the content in a lot of ways. We also want to increase other content, so that we can make sure there is always some level of interest. A lot of times, the content that we provide is the icebreaker that gets people to chat about, talk about, and experience things together. You always want to have more and more of this stuff. The deals that we have with our partners includes a constant stream of new stuff coming in. Mark Stone: What is the attrition rate on your zones? Dave Andrews: My guess - and it is really only a guess - is probably 20%-25% within the first visit. Then it plummets, because if they come back, on the second visit, probably 95% will be there for at least six months to one year. A lot of the people have been here for a long time, maybe three or four years. They go in every single day, at least two or three times. Mark Stone: Why? There has to be a why for returning to the site everyday. Dave Andrews: It is community. Here is a great quote, and it's not mine I stole it from someone, "They come for the technology, because it is interesting. They stay for the community." The technology slides into the background. It is kind of fun and interesting, but the reason that people come back, and come back often, is to see their friends. Mark Stone: Is it because they make friends on Avaterra.com? Dave Andrews: Yes, and they make friends on an ongoing basis. Everyday, there are more people. Mark Stone: Is there any learning experience, which causes it to be so sticky? Dave Andrews: Community. First of all, an Avatar becomes an extension of you. If you come back three or four times, you may become addicted to your Avatar. Now, that may not happen for everyone, but it happens for a lot of people. They like to be recognized in the zones, and have someone walk up and know who they are because they have seen them before and maybe chatted to them before. Those things are important, and those are the reasons that people come back. The other reason has to do with additional ongoing content. The content is not only the people that are there, but also other stuff as well. It is events and games going on and stuff. Mark Stone: How do you add to that? How do you create that? How do you make that happen so that these people do keep coming back? Dave Andrews: We have events everyday. Sometimes there are 70-80 events in a day. We have three or four event managers. They are all volunteers. We have a world manager, who coordinates everything. Then, we have other people that coordinate events coming in from partners. The events are already orchestrated, held and managed by the members, themselves. We don't really get involved in that. Remember it is a community, and a community ends up running itself. Mark Stone: How many people do you have at any given time? Dave Andrews: In one particular zone, we will have from 500 to 600 at any given time. In fact, both of the zones look at that kind of number. Mark Stone: How much can you get it up to before you go into overload? Dave Andrews: There are two different views to that. One, would be overload based upon the size of the zone: How many places you can put these people? That is really unlimited. We have tested it out to 20,000 simultaneous Avatars and it didn't break the server. Mark Stone: What is the most that you have had on at a given time? Dave Andrews: Probably about a couple of thousand. Mark Stone: How frequently would you be having events? Dave Andrews: We have lots of events going on all of the time. It just depends. On weekend there's more. Mark Stone: What times of the day is the website heavily loaded up? Dave Andrews: We basically follow the moon. Our heaviest traffic is when people get home at night. For example, in the morning, 6:00 am West Coast time, more Germans enter. They are getting home and they are beginning to talk. Then, it moves around and gets less German as it moves towards the UK, and then across the Atlantic. What happens is, our peak time starts at about 3:00pm West Coast time and goes until about midnight Pacific Coast time, because our biggest chunk of audience is in the US. Mark Stone: How much of your audience is non-US? Dave Andrews: Our guess is about 40%-45%. Mark Stone: Where would you say your next big concentration is behind the US? Dave Andrews: The United Kingdom. And then Germany, followed by the Pacific Rim. Mark Stone: This started off in Japan so is the Japanese site still part of the Fujitsu Empire? Dave Andrews: Yes it is, but we have separate websites and our own server. Fujitsu owns 10% of Avaterra.com and licensed us the underlying technology. We're enhancing it here (Santa Clara, California) and in Toronto. They don't have the rights to the new enhancements. We're building our own. They've got about 100,000 members - about the same as we have, but they've been going for three years longer than us. It's been big in Japan and it's caught on in the US and growing. Incidentally, we've built a new interface for this thing which we probably will end up licensing back to the Japanese. It is really interesting - the capability now to have video/audio streaming within the virtual terms. This is something Fujitsu always wanted to do but never had the technology to do. We figured it out. -------------------------------------------------------------------------------- © 1999 by The Mark Stone Report. The Mark Stone Report consists of primary and independent research into the markets: fundamental research of small cap stock opportunities and technical research for trading opportunities in NYSE & NASDAQ stocks and stock indices. This is not a solicitation or offer to buy or sell securities mentioned herein. 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FYI: I used http://www.alltheweb.com for an in-deapth search on Avaterra.com Inc and found over 160 articles... For those interested in how Avaterra.com Inc is doing on the stock market, please go to the following URL. *http://biz.yahoo.com/n/a/avar.ob.html Ticker symbol AVARE.OB.