(This is the second installment in a several part series about Second Life,
a fantasy web site that is attracting much attention from role players and in
the media. Click here to read part one of this series on virtual
Second Life is an interesting concept if viewed solely as entertainment. Losing
one's Avatar's ears and clothing is amusing; flying headlong into a Gothic column
is painless and pretty funny, and reading the blogs and coming to grips with
some Second Life residents' total commitment to their secondary reality is,
well it is massively creepy. But Second Life is also a living, breathing economic
system and, for that reason, it is fascinating.
Some of the figures coming out of that economy are startling and the numbers
are increasing quickly. In November, 2006 13,788 Second Life business owners
earned one dollar or more. These were U.S. dollars (USD) not the Second Life
Linden Dollar (L$). Last month that number had grown to 34,474. Granted most
had a Positive Monthly Linden Dollar Flow (PMLF) of less than $10 USD but 810
business owners had a PMLF of over $1,000 and 129 made more than $5,000.
Most transactions in Second Life are small. Of the 302,665 residents spending
money "in-world" in April, almost half spent less than 500 L$. But there were
some big spenders who dropped between 10,000 and 50,000 L$ (42,000), 100,000
to 500,000 L$ (7,660) and close to 2,000 who spent over 500,000 L$. Remember,
Linden Dollars can be converted to coin of this realm at a number of on-line
sites and the conversion rate runs around 268 L$ per $1 USD.
All economic information provided by Second Life is based solely on transactions
in Linden Dollars and does not include money paid to the many businesses that
accept PayPal or other payment methods. Nor does it include money spent to purchase
real estate. And real estate is a major focus of the Second Life Economy.
It doesn't take much to set up a business in Second Life and site administrators
exert little if any control. You must have a location on which to build your
store (although it is possible that stuff may be sold even more virtually, through
a classified ad or some such, we are not quite sure) and a product or service
We visited a few of the stores where we found a multitude of products to customize
our avator and make his world functional. One huge showroom carried everything
needed to furnish the avatar home; appliances including a refrigerator full
of food (500 L$), kitchen and bathroom cabinets, lamps, furniture, rugs (30
L$), and art. Other sites offer to design and assemble homes as well as boats
and vehicles. There are nightclubs, concert venues; if it is available in the
real world it is probably available here.
The desire to start a business drives many residents to acquire real estate
and the market is not limited to people who are playing a game. While we did
not come across any in our own travels we understand that many businesses that
operate in the real on-line world or even from bricks and mortar locations use
Second Life stores to reach new customers.
One example is H&R Block. According to WebCPA, the tax
preparation people have acquired an island in Second Life - we use the term
acquired because it seems one can either buy an island or create one from scratch
- and have opened a branch office. The company said it is part of an ongoing
effort to connect with clients in a setting they know and in which they are
comfortable. Real-life tax professionals in avatar form were available to answer
questions for free during tax preparation season and Block was offering Second
Life residents an opportunity to buy Tango its new tax software for $100 Linden
Dollars. Off line it sells for $70.
Cisco is another real world believer. Mitch Wagner, writing in Information
Week says that the many network engineers that live part-time in Second Life
are a prime target of Cisco's sales strategy. Online Cisco holds events
that combine people in the real world with avatars, gets feedback from customers
and does sales presentations. Cisco has gone so far as to acquire a location
and set up a store for their employees to dress their avatars in appropriate
business attire, a commodity that is scarce in the dozens of Second Life stores
that sell avatar apparel.
But a big part of the Second Life economy is virtual real estate
and besides entrepreneurship many factors motivate residents to purchase property.
People want privacy in their second life, they want a place to bring their friends
or gather with people of similar interests, and they want a place to use Second
Life's creative tools to build homes, castles, and fantastical structures. All
of this is driving an active and pricey real estate market.
And some surprising players in the real world of real estate are taking notice.
Like entering Second Life and learning about its terrain and economy, the concept
of buying and owning real estate there requires a certain suspension of the
need for reality. We will explore the islands and other available property in
a later article but we promise not to buy.