Second Life - Unreality bytes

Does a virtual world offer real business opportunities? Lesley Meall pays a visit to Second Life.

Dreams sell. That's why industries promising to make us more attractive, powerful or wealthy are such money-spinners. So it should come as no surprise that Second Life, a virtual world where the inhabitants get to be whoever and whatever they like, should be a popular place to hang out.

The population has more than doubled in the past year. Around 1.5m people have started new lives there, creating alter-egos (or avatars), meeting people, building homes, buying cars, clothes, helicopters and land. They go dancing, entertain guests, have sex, and even set-up businesses.

Although the inhabitants of this virtual world use its own currency, the Linden dollar, it can be bought with or exchanged for US dollars, so hard cash is changing hands - and some businesses are turning a profit. According to Second Life, about 456 people make over $500 (£256) a month, 29 residents are making over $5,000 a month, and two of those are making over $25,000 a month.

One of these is Anshe Chung, a Chinese-born language teacher living in Germany. She has built a virtual property business, and recently became the first business person to achieve a net worth exceeding US$1m from profits entirely earned inside this virtual world.

Chung has come a long way since she made her initial investment of just $9.95, two and a half years ago. Since then she has been buying and developing virtual real-estate, and her holdings now include several million Linden dollars, plus virtual property worth more than $250,000 in the real world. Chung has also established a number of virtual brands in Second Life, and has significant virtual stock market investments in Second Life companies. This virtual success has also crossed over into real life (or RL, as it is called in the virtual world).

Chung's creator Ailin Graef, has established an RL spin-off, Anshe Chung Studios, which develops 3D environments for applications ranging from education to business conferencing and product prototyping. She runs the business with her husband Guntram Graef, who serves as CEO of Anshe Chung Studios, an enterprise which has, notably, been wholly financed from virtual world profits.

Other Second Life business success stories include The Magicians and the Electric Sheep Company, companies that also specialise in helping other organisations to exploit the virtual world. Kim Rufer-Bach and her team at The Magicians have created Second Life simulations to help clients train medical staff, help young people interact with each other, learn languages and even debate the timbre of democracy; while Sibley Verbeck and his electric sheep have helped Nissan, Reuters and Sony BMG to establish a Second Life presence.

Big business involvement

Over the past year, big business has started to explore the possibilities of Second Life, and corporate inhabitants also include Adidas Reebok, Dell, General Motors and Penguin - and some Second Life residents are less than pleased. It already has its own terrorist group. The SLLA, or Second Life Liberation Army, wants voting rights for avatars, and believes that all residents should be entitled to stocks in Linden Labs, the virtual world's creators.

Their ire is such that they have staged a number of attacks on commercial areas and targeted the virtual outlets of some of the more well-known retailers. SLLA concerns that its more established residents cannot match the bargaining and buying power of some of its newer inhabitants mirror the RL concerns many individuals have about multinational corporations that can wield more clout than an entire country. But some of those making their living from Second Life are more pragmatic.

'Our company is seen as one that is bringing big businesses into Second Life,' says Verbeck, 'but this is good and bad.' Different businesses bring different expectations. 'A lot of our early projects were for businesses trying to get public relations or get their brand associated with something new, edgy and experimental,' he explains.

Exaggerating brand values

The UK branding agency Rivers Run Red has set up a retail outlet for Adidas, selling footwear for avatars; something that gives the company an unrivalled opportunity to exaggerate their brand values and strengths in a way that just wouldn't be possible in RL. In Second Life, avatars wearing Adidas a3Microride shoes can actually bounce around a lot more than they would be able to without them: they're like pogo sticks for your feet, apparently.

Some organisations, such as Reuters, want to experiment and learn. 'Innovation doesn't just happen in a garage,' says CEO Tom Glocer, and the company has established an in-world bureau to report on developments in Second Life. But everyone has a different take on it. IBM has used it to host international conferences; the singers Ben Folds and Suzanne Vega have performed concerts there; and the TV giant Endemol is planning a version of Big Brother in which the participants will be represented by avatars.

Accountants' leap of faith

Even accountants have made the leap of faith: Arlene Ciroula, and her 100-strong Baltimore accounting firm KAWG&F recently started to ply their wares. 'No one is serving this community with accounting, business consulting, strategic planning or budget forecasting services,' she says. Many of those with Second Life start-ups are first-time entrepreneurs, so she and her in-world alter-ego Chili Carson could be on to a winner. 'I expect the number of businesses to grow along with the population,' she adds.

Any accountants toying with the notion of following in her footsteps will face an interesting set of challenges. There are very few rules governing business, and Linden Lab, the creator of Second Life, has very little insight into what goes on between the parties involved in any transaction. Ciroula is hoping a Second Life Chamber of Commerce will help. She wants to provide a 'dialogue' for businesses, and a directory of members. 'Then customers will know they are doing business with certified companies,' she adds, 'and businesses can learn some best practices to follow as they try to grow.'

The rampant capitalism that seems increasingly likely to characterise this virtual world is ironic, given its origins. Second Life's San Francisco-based creator originally launched it as a virtual world where people could explore their creativity. 'We wanted to create a better place for your mind to live,' explains Philip Rosedale, the founder and CEO. Most of the buildings, clothes, objects, vehicles, environments and entertainments in the Second Life universe have been created by its residents. But because they own everything they build, trade was always on the cards.

Even Rosedale is not averse to making money from his pixel-perfect paradise. Although a basic Second Life account is free, Linden Labs makes money from leasing land to inhabitants at about $20 per month, per acre, and taking a small cut on each sale or exchange of Linden dollars. Rosedale made his first fortune back in 1996 when he sold his videoconferencing firm FreeVue to RealNetworks, best known for its RealPlayer technology, so he knows what he's doing.

At the moment, Second Life is about 70,000 acres and is expanding at around 8% each month. Its annual GDP is an estimated $64m, and this is also growing. Linden does not share its financial details, so it's impossible to say if it is making a profit, but Rosedale expects to be able to do this from land sales alone - eventually.

Although Linden seems unlikely to take its place alongside Google and Microsoft any time soon, it does have the potential to make a lot of people more attractive, powerful and wealthy. So it doesn't hurt to dream.

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