Hangout Lets It All Hang Out, Wants to Become a 3-D, Interactive MySpace

9/8/08Follow @wroush

A Boston startup transposing MySpace-style teen social networking into a 3-D virtual environment is one of the companies making its public debut at this week’s TechCrunch50 conference in San Francisco. Executives from Hangout Industries, which has raised $6 million in venture funding from Polaris Ventures and Highland Capital Partners, went onstage at the conference today to demonstrate their service, Hangout.net, where each user receives a free, private virtual room that can be outfitted with virtual objects bearing real-world brands, such as Skullcandy headphones and Monster Energy drinks.

Hangout is currently in private beta testing, and expects to open to the general public later this fall, according to CEO Pano Anthos. As the name of the service suggests, the rooms are intended to function as impromptu meeting places for young people in the 16-24 age group. Members buy decorations for their spaces using a virtual currency, and designate friends not by linking to their profiles but by handing out the “keys” to their rooms (i.e., permission to enter).

These hangouts aren’t just static spaces—they’re virtual media rooms, with embedded players that link to content from the Web, such as Facebook photo albums, YouTube videos, and songs from music search engine SeeqPod. “On Hangout, teens interact with their friends as they do in the offline world—whether it be watching favorite videos on YouTube, listening to music, sharing Facebook photos, engaging with popular brands and products that they love, playing games or making music, or just chatting ‘in person’,” in the words of a company announcement released today.

Hangout Screen ShotWhile Hangout.net might sound similar on the surface to other online virtual worlds such as Second Life, There, and Google’s widely panned Lively, Anthos argues that it’s very different in scope and intent. “The model is not a world where you go out and explore,” he told Xconomy last week. “It’s about creating your space, expressing who you are physically through the kinds of objects and activities that surround your room, and engaging with your friends.”

It’s also about advertising through branded merchandise. And in that respect as well, Hangout.net is much more similar to MySpace—which offers members a range of brand-driven materials, including badges, background images, songs, videos, with which to personalize their profiles—than it is to other virtual worlds, which typically generate revenue through subscription fees. “Kids hate banner ads—they ignore them,” says Anthos. “Cool brands really love this idea of ‘emergent exposure’….Advertisers can’t wait to put their products in. But at the same time we’re careful to let the kids be the shoppers. This is entirely about an opt-in model where you decide what products, services, and media you want in your space.” For example, members can decorate their walls with a selection of posters from Art.com and Allposters.com, and dress their avatars in T-shirts based on designs from Threadless, a hip online clothes store.

But while all the marketing and branding going on inside Hangout may be reminiscent of MySpace, the new service has one big advantage over its 2-D predecessor: virtual presence. Interactivity on social networking sites like MySpace and Facebook is limited to the comments members leave for one another on their profile pages, or perhaps the occasional instant-messaging session (Facebook launched an instant messaging client earlier this year). But at Hangout, members can see one another’s avatars and communicate via cartoon-style speech bubbles.

And while Second Life and other 3-D programs require dedicated viewer software, the environment in Hangout is accessed via a small plugin that runs inside a Web browser, which means it works across all operating systems. A Hangout window can even be embedded into a member’s Facebook or MySpace profiles. (That can lead to a dizzying recursiveness, since Facebook photos and other materials can also be browsed from inside Hangout.)

Hangout Industries Team PhotoThe 22-person team at Hangout Industries—all but four of whom are under age 25, according to Anthos—has been working on its virtual environment since raising a small initial funding round in March, 2007. While the company is licensing a commercial game engine to drive certain parts of the experience—Anthos wouldn’t give more details—it’s building most of the system from scratch.

The idea for Hangout sprang from co-founder David Brock, a research scientist at MIT and former director of the Auto-ID Center whose work included extensive studies of 3-D simulation for the Defense Department. Brock had won seed funding to explore the idea of creating advertising-sponsored virtual conference rooms for business users, and Anthos was brought in to examine the project. It turned out that “for enterprises, there was no business model,” says Anthos. “Enterprises aren’t going to want Coke cans floating around the conference room, and they are certainly not going to want advertising on the walls.” But Anthos, the father of three teenagers, said it wasn’t hard to envision another application for the conference-room technology—as the backdrop for “casual, immersive, customizable, personal, immediately gratifying experiences” for teens.

A Customized Room in Hangout.netAnthos says he isn’t sure of the exact date when Hangout.net will be available for public signups, “but it’s not going to be long.” He says the company is still working on making the user experience inside Hangout “drop dead clean, simple, and easily understandable.” There won’t be a manual—”if you have to explain what you’re doing in a manual, it’s too complicated,” he says—but the company is working on a series of video tutorials. (I would have appreciated a tutorial myself; I visited Hangout several times last week, and I found the environment easy to navigate, but strangely desolate—probably because I couldn’t figure out where the other people were.)

Does the market need another online virtual world? Clearly not, especially with existing virtual worlds like Second Life struggling to find profitable niches. But will 16-to-24-year-olds be interested in a more immersive and customizable channel/experience for online socializing? That’s an entirely different question.

Bob Davis, a general partner at Hangout backer Highland Capital Partners and the former CEO of Lycos, said in a statement that Hangout addresses “a huge untapped opportunity for online experiences and activity.” As with most social-networking ventures, Hangout’s success will probably hinge less on the exact set of features it includes than on how quickly it can reach a critical mass of members, so that when users log on, there’s a decent chance that several of their friends will already be there. That, in turn, will depend on whether new members think the system is cool enough to invite their friends—and whether those friends can tear themselves away from MySpace.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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