Will China own the next Internet?

According to most predictions – including mine – the next generation of the Internet will be three-dimensional, fully immersive, a multi-media smorgasbord for the senses.

And, according to those same people – and me – we already have a sneak preview of that Internet in the form of massively multiplayer online games like World of Warcraft and virtual reality platforms like Second Life and IBM’s OpenSim.

Entrepreneurs always want to get ahead of the new technology. Who doesn’t want to be the Yahoo, Google, or Amazon of this new world?

Unfortunately, it’s never obvious at the beginning what exactly it is that the new world is going to need, and who is going to be doing it and how. Oh, and whether it will ever make any money.

So far, the two areas of virtual worlds that are making money are gaming and sex – just as was the case with the early Internet.

A few companies have attempted – and mostly failed – to use this platform for e-commerce or for events. We’re still missing the Amazons, the Googles. Mostly, that’s because we haven’t yet had the Netscapes yet. We have separate, isolated little islands of virtual reality – Second Life over here, IBM’s OpenSim over there, World of Warcraft way way over there – without any way to move between them.

China is one of the top places for virtual worlds. It has the users used to working in a three-dimensional online environment. It has armies of programmers used to working with life-like physics engines. It has a government mandate to improve the country’s technology infrastructure and education.

Is this enough? Can China create the next generation of the Internet? The next World Wide Web – the 3D Web?

So far, China has not had a great deal of success in setting world standards, as the 3G rollout has shown.

Major legal obstacles include a lag in intellectual property laws, restrictions on content, and prohibitions against alternative currencies.

Beyond that, China still has a love-hate relationship with its millionaires.

If I had an idea that had the potential to make me the next Bill Gates, I would want to grow my idea in the United States or another country where my achievement – and wealth – would be celebrated.

I heard a story at a recent business get-together, about someone building a new online company. The laws were vague about whether what the company was doing was strictly legal or not. The company founder happened to be at a conference which Chinese regulators also attended, and he cornered one and asked him directly whether what he was doing was legal. The answer? As long as the company stays below a certain size, there would be no problems.

This story is typical of a lot of activity in China. And it is a reason why some companies prefer to keep intellectual property and headquarters offshore, in Hong Kong, in Europe, in the U.S., and have only limited operations inside China.

The language barrier is another issue. Early tech adopters world wide speak English. An English-language launch of a new platform guarantees the largest possible international audience. A Chinese-language product launch may have an equally large user base – but it wouldn’t be international.

So where do I think the next Internet is coming from? Personally, I think it will be build based on the work already done by Linden Labs’ Second Life project and by IBM’s OpenSim platform. I attended an IBM virtual worlds conference this week in Second Life, and the IBM team has already achieved some limited interoperability between the two platforms, with the ability to move virtual objects and virtual people from one platform to another.

It’s not an easy system to learn. Second Life requires a fast computer, fast Internet connection, special software (a free download), and hours of time learning how to move around, how to get dressed, and how to talk to people in the virtual world.

There are already people making money in the new system. According to Second Life, several entrepreneurs are earning at least US$1 million per year from Second Life. Top-grossing companies include firms dealing in virtual real estate, virtual goods such as fashions and furniture, and virtual events.

And these are the pure plays. Other companies make a living in Second Life but get paid outside the system. For example, there are marketing and consulting firms who help businesses outside of Second Life set up their Second Life operations, or help them with marketing events, or conduct research. Since the payments take place outside of Second Life, it is harder to track this part of the Second Life economy.

Interested in getting involved? Go to www.secondlife.com and get the free download. Then follow the instructions to set up your account and create your virtual self. I’ve found that the best way to get to know what Second Life is about is to attend events. There’s a calendar of everything happening in Second Life built into their software.

I’m planning to be holding one such event, a get-together for entrepreneurs in a Second Life cafe, to talk about business issues – both real and virtual. Then after the meeting, we might go and tour some part of Second Life. There are space stations in there, aquariums, zoos, amusement parts, dance clubs and shopping malls, office buildings and rolling landscapes. There are castles full of dragons, and a hobbit village, and virtual copies of some of the world’s cities. Every minute, someone is building a new virtual destination in Second Life. And someone else is figuring out a way to make a profit from it.

Or email me if you want to know more about my group, at maria@tromblyltd.com.