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Media company Virtual Worlds Management, which is hosting the Virtual World Conference next week in San Jose, boasts that $1 billion was invested in virtual worlds over the past year. Well, as Leigh Alexander of Worlds in Motion points out, this figure results from skilled sleight of hand. Here's how the market really breaks down.

  • Disney acquires Club Penguin for $700 million. Actually, it was half that. The other $350 million is dependent on meeting earnings goals by 2009.
  • Intel acquires Havok for $110 million. Second Life may use the Havok physics engine, but its engines are most commonly used in videogames, not virtual worlds.
  • Double Fusion raises $26 million; Double Fusion Japan secures undisclosed capital investment. Double Fusion is an in-game advertising firm. It no doubt is inherently interested in product placement and ad sales in virtual worlds, but its in-game ad engine is widely marketed to console and PC videogame publishers. Again, counted properly, this is a videogame investment.
  • Emergent Game Technologies snags $12 million in funding. Emergent creates game engines that are used in massively multiplayer online games and casual titles, but its biggest clients are, yes, traditional videogames.
  • Greystripe gets $8.9 million from Steamboat Ventures. Greystripe distributes ad-supported mobile games. It's like Double Fusion for cellphones.
  • Weblo cons manages to obtain $3.2 million in venture capital from VantagePoint Venture Partners. Really? Have you seen Weblo? It might bill itself as a virtual recreation of the world, but it's little more than glorified MySpace pages.
  • GarageGames acquired by IAC for an undisclosed amount. GarageGames is a jack-of-all trades developer, publisher and Torque engine creator for independent games.

Setting the bar extremely low for what qualifies as a virtual world investment — businesses that apparently derive most of their incomes from running or providing support to virtual worlds, and thereby including content creation tools, virtual-world-specific in-game advertising firms, and, grudgingly, Weblo — the grand total investment for the year is shy of $500 million, half of Virtual Worlds Management's claims.

You know what this reeks of? Someone throwing together a little hocus-pocus to stir up some virtual hysteria for an investment conference that you can conveniently learn all about for $1,000 a head. Now that sounds like where the real money in virutal worlds is. (Photo by Christian Kadluba)