Virtual Worlds Invested $594 Million in 2008

63 virtual world companies benefitted, but spending is down drastically from the $1.4 billion invested in 2007. Where did the money go?
A report released earlier this week from Virtual Worlds Management estimates that roughly $594 Million was invested in various virtual world companies throughout 2008. That's an impressive sum given the oppressive economic climate in the latter half of the year, but the numbers are way down from 2007's spending binge, where investors poured $1.4 billion into this space.
Where is this money going? Interestingly, only a fraction is going toward funding for large, triple-A worlds aimed at mature gamers. If you look at the complete breakdown at the bottom of the report, the majority of investments are aimed at smaller companies producing web-based games for kids and tweens. Investors are obviously hoping to see a lot of upside from a small company, as we've seen in the past with Club Penguin or Webkinz.
That's not to say that some of this money isn't going toward companies aimed at the core gamer. In Q2, Realtime worlds (creator of GameSpy favorite Crackdown) brought in $50 million to help fund its upcoming online game. That same quarter, Turbine (the developer behind The Lord of the Rings Online) finished up a round of financing with $40 million in order to fuel company growth.If you enjoy fan-made game movies, you'd be pleased to see that Machinima.com got a $3.85 million investment in Q4 of 2008, even as the economy was going haywire. Another interesting company to get financing in the turbulent Q4 was Metaplace, Raph Koster's experimental MMO platform where anyone can create their own virtual world.Digging down into where the money went, some unusual projects are uncovered. For instance, Trion Worlds received a $70 million investment in the third quarter. The company is working on a fantasy MMO as well as an unannounced project with the Sci-Fi Channel to simultaneously launch a new TV series and an associated virtual world. Could this be a game based off of the Battlestar Galactica prequel, Caprica, coming out in early 2010? We can only guess.Looking at the numbers, it's interesting to note that in 2007, a single property (Club Penguin) was purchased by Disney for $350 million, with another $350 million promised if the game hit projected growth targets. That single $700 million investment was more than the total of every virtual world investment in 2008!Times may be difficult for virtual world developers (employees of Cheyenne Mountain, developers of the Stargate Worlds game, haven't been paid for 69 days), but some investors still see potential in the marketplace even as the economic climate makes it harder and harder to fund new development.