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  1.8. There.com and IMVU on the Process Trap - Part I (3 min.)

Although virtual worlds such as Second Life, Sims Online, and World of Warcraft are a multi-billion dollar business today, few people have heard of the first virtual world, There.com. Early in its history, There.com seemed to be doing everything "right" according to conventional wisdom. The company had a gifted team of entrepreneurial founders who handed over the leadership reins to an experienced CEO. The CEO crafted a strategy, with the blessing of the board, to raise venture funding and “go big" quick. To that end, There.com executives raised over $40 million from venture capitalists to develop the product and then launch a massive public relations and advertising campaign that would drive users to join in large numbers.

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With the money in hand, the team turned to perfecting the product, carefully developing a list of “required” features based on what the team believed was an intimate intuition about customer desires. In the end, developing the first virtual world proved more challenging than expected, and leadership felt that releasing a faulty online world with bugs and glitches would turn away important early customers. The management team did what seemed reasonable—they delayed launch until the product was perfect. Finally, after several years in secret development, There.com launched with a flashy public relations campaign and publicity features in theThe Wall Street Journal and The New York Times. What was the result of their flawless execution and "perfected" product? In the first month a few thousand users signed up for the service, but the resulting revenues of $20,000 were far below expectations. The following months showed little growth, and over the rest of the year the plateau continued. In the end, There.com’s launch was a massive disappointment. They had spent millions of dollars building a product customers just didn’t want. By the time they discovered this fact, it was too hard and too late to change. At the time, Eric Ries, one of the lead developers, wondered why they failed when they had done everything "right" according to conventional wisdom.