Entrepreneurs Find New Markets With Second Life

The rumor is that hundreds of people are making piles of money in the Internet-based world known as Second Life. Is it as easy as it sounds?

The store is the Dominus Motor Company. The place is MotorCity. On a crisp Monday morning, I walk through the open-air showroom, eager to view the company’s famed line of vintage automobiles. Soon the Dominus Shadow catches my eye—a sleek, black convertible modeled after the muscle cars of the 1960s, complete with hover capabilities. Impressed, I sit behind the wheel, and soon I’m ready to drive it off the lot. But I stop: This masterpiece costs 2368L$—not terribly expensive, but much more than I have in my frayed blue jeans. After one last look at the car, I walk away, confident that I don’t really need a vehicle, anyway. I bend my knees, look to the sky, and with no more effort than it takes to jump, I fly away.

Welcome to Second Life, the best-known virtual world currently available on the Internet. Since its launch in 2003 by San Francisco-based Linden Research, Inc., Second Life has made headlines in numerous newspapers and magazines, and by last October its popularity was such that episodes of The Office and CSI:NY were set within its borders. Objects in Second Life exist only in a virtual Internet-based world popularly known as the metaverse, which shares some qualities of the real world but lacks many of its limitations, such as physical barriers to human flight. Linden offers two types of accounts for users to enter its world: the basic, which is free but restricts the user from owning property; and the premium, which costs $9.95 per month and entitles the players to 512 square meters of virtual land.

Probably the biggest attraction of Second Life for business owners is that the currency used in the platform, the Linden dollar, can be exchanged for real-world currencies at online credit card exchanges. Some residents have made considerable fortunes by participating in the Second Life economy. Ailin Graef made headlines in 2006 when her Second Life real estate holdings totaled over $1 million. That’s in real, hard American money. Her initial land investment in 2004 was a mere $10. In light of successes such as Graef’s, many believe that virtual worlds may be a hint of the way business will be conducted in the future, and the good news is that small businesses currently have the edge.

NOT PLAYING AROUND


One believer is Daniel Terdiman, an award-winning reporter for CNET News, Wired magazine, and the New York Times. Last October, he published The Entrepreneur’s Guide to Second Life to provide potential entrepreneurs with the most up-to-date information needed to make their fortune in Second Life’s metaverse. Terdiman has been studying Second Life since its release, and while he has never really attempted to make money from the virtual world himself, he has spent much time in the confidence of those who have.

“The main point that I’ve been trying to make to people,” Terdiman says, “is that Second Life’s not a game, it’s a business.” There are no goals or points to be obtained, and one of the primary objects of Second Life is to be sociable, which he says may account for the fact that the majority of Second Life’s entrepreneurs appear to be female.

Also, virtual worlds like Second Life, free as they are from interference from the platform’s owners, are vastly different from those encountered in games such as Blizzard Entertainment’s massively popular World of Warcraft. Blizzard requires a monthly subscription fee and controls the creation of characters and items, and any attempts by players to sell their virtual items in the real world usually result in account cancellations or lawsuits.

In Second Life, making money from one’s virtual holdings is the lifeblood of Linden’s creation, and one of the best ways to make money is by designing one’s own brand of virtual clothing for residents of Second Life to wear. Some Second Life companies, such as Musashi-Do and Indigo, have made small fortunes in the virtual fashion industry. Other users have made a name for themselves with popular dance clubs such as The Edge. But it’s not easy: Enthusiastic entrepreneurs shouldn’t expect to sit down at their computers and start making a fortune by this evening.

“You have to be very skilled,” Terdiman says, emphasizing the need for programming skills and facility with programs like Adobe Photoshop and Illustrator. And even then, Linden dollars don’t just start accumulating. “Once you start, you really need to keep going,” Terdiman says. “You really need to spend about 20 hours a week tending to your business.”

NO PLACE FOR BIG BUSINESS


In recent months, the attraction of making money from Second Life has lured some of our world’s largest companies into its world. Surprisingly, they are not as popular as businesses started by ordinary users. “Big businesses really need to figure out how to engage with the community,” Terdiman says, and a brief tour of some of the biggest chains is enough to prove him right. For instance, Daniel directed me toward Armani’s Second Life store, which opened in October to much fanfare. After a brief burst of enthusiasm, the store’s traffic dwindled to nothing, and by the time I arrived, every inch of the store’s expansive floors were empty. One reason for its decline is that the store was modeled after Armani’s real-life stores, complete with garments hanging from racks and shirts neatly tucked on shelves. But most of them were merely for show, and only 12 uninspired items were available for virtual purchase.

Terdiman points out that companies like Armani simply don’t understand that what works in the real world does not always work in the metaverse. “That’s why I think the opportunity is so good for individual entrepreneurs—it’s just so much easier for someone to build a business from the ground up that caters to people’s in-world needs,” Terdiman says. “But that said, I do foresee a lot of real-life service businesses in S.L. and other virtual worlds in the future. But it will take some time to get the model right.”

Some businesses use Second Life to promote their real-life businesses. H&R Block created an elaborate complex to market their Tango tax preparation software, offering it for the low price of 100L$ (roughly the equivalent of one American dollar) if purchased through their Second Life store. The software retails for around $70 outside of Second Life. Jason Pettus, founder of the Chicago Center for Literature and Photography, uses Second Life to promote the photographers he features in his galleries. “It’s a gimmicky thing, I will grant you that,” Pettus says. “But it’s also kind of a cool thing as well; a way to interact with the show in three dimensions, a place to hold ‘virtual opening-night parties’ that others around the planet can attend in real time together, even a way to sell 3-D ‘framed’ JPEGs of their work to other Second Life residents for a dime or quarter apiece to be hung in their own virtual homes.”

Though a powerful tool, Second Life is not without its problems. The user interface is notoriously difficult to learn how to use, and even with a powerful computer, loading times are a problem. The number of people who actually use Second Life is also a topic of much debate: While there are over 9.8 million accounts, it’s possible that only a small percentage of those are actual active returning users. And finally, many potential users simply find Second Life boring. “I never accomplish anything except wasting time and money on fictional property in Second Life,” says Jesse Engelkins of the Engelkins Corporation, a small landscaping company in Dubuque, Iowa. “At least when I waste time in World of Warcraft, I’m having fun doing it.”

Regardless, Second Life has provided a successful model of a working metaverse. “Whether or not Second Life will be the main platform in the future is up for debate,” says Terdiman, “but virtual worlds are definitely here to stay.” In many ways, virtual worlds are in much the same state as the Internet was in the mid-1990s: rough in appearance and giving little hint of its future dominance. Even now, companies such as Microsoft are using Second Life in new ways, such as scouting for recruits and conducting interviews. Entrepreneurial uses point to a future in which business trips may consist of booting up the computer and walking one’s character into a digitally created office.

Some of this is unsettling, to be sure. Virtual interviews lack the insight into body language and unprepared responses that personal interviews provide. International laws of commerce within virtual worlds such as Second Life—not to mention taxation—remain unclear. But it is clear that Second Life might be the beginning of something big. In the past, a mother would turn off her son’s Xbox 360, telling him that he’s never going to learn how to make money by playing video games all day. Hovering above the shops on Luminosity Island and seeing the bustle of commerce as hundreds of Linden dollars change virtual hands right before my eyes, it suddenly occurs to me that this classic mother’s complaint is not so true anymore.

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