Second Life (SL) is an online "metaverse" developed by Philip Rosedale of Linden Research in 2003. But this is no computer game. For some of its two million inhabitants, it has eclipsed real life as the place to work, shop, socialise and create. It is also emerging as an alternative capitalist society, regulated by utopian ethics and the laws of supply and demand, and increasingly it is making the headlines on the other side of the computer screen in a surprisingly postmodern example of life imitating art. In the last year events in SL have moved at such a pace that Reuters has assigned reporter Adam Pasick to cover it full-time.
He has been busy: avatars of musicians Suzanne Vega and Duran Duran have played virtual gigs; the BBC has staged festivals on its own island; the World Economic Forum at Davos staged interviews in SL; and European Young Professionals (EYP) staged a SL launch alongside the real one in London in January. Companies such as Toyota, Cisco, IBM, Adidas, Sony BMG, General Motors, ad agency BBH-even French political party, the right wing Front National-have established a presence "in world". New subscriptions hit the tipping point late in 2006, and the number of residents is expected to reach three million this year.
Unlike other networked online games, users don't so much "play" SL as inhabit and experience it. They create an "avatar" personality from a range of off-the-peg options and then set off to explore the huge, expanding SL terrain-usually by flying-which resembles a stylised version of the Hollywood Hills. For a premium subscription fee, they can opt for a monthly allowance of Linden dollars-SL's native currency-which can be spent on real estate, shopping or attractions, traded on LindeX and which can also be exchanged into real-world currency. One US dollar is currently worth around $270 Linden.
Users can chat and interact with other characters, they can go clubbing, play games or build things because SL's coding architecture permits users to create pretty much whatever they want, from pianos, castles and flowers to add-on genitalia, hotels and aerodromes (they also retain copyright on their creations). For many users, SL has become a speculator's paradise. Each month, around six million (real) dollars are spent inside SL, and the metaverse has an estimated GDP of around $70m-which makes it richer than Bulgaria.
There is the risk of a backlash-some brands go in for the sake of being there rather than to add value and create content
SL may be the first glimpse of the new virtual world hinted at for years by authors such as JG Ballard, or the Wachowski brothers in The Matrix. Scientists who speculate that the next stage in human evolution will be some form of digitised life may also be excited the possibilities offered by SL. But for the moment, what SL really offers is a pure, free-market society of a kind economists can only dream about: a capitalist meritocracy unfettered by regulatory red tape, government taxes or costly overheads where the market, rather than government, rules. "We can and should view these synthetic worlds as essentially unregulated playgrounds for economic organization," Edward Castronova, associate professor in telecommunications at Indiana University, recently told Business Week.
Wagner James Au, author of the official SL blog New World Notes (nwn.blogs.com) and upcoming book on SL from HarperCollins, has chronicled the day-to-virtual-day of the metaverse since its genesis. He segments online entrepreneurs into two principal categories. Firstly "Donna Karans", who create clothing (40 per cent of Second Lifers are women), tattoos and wearable, photorealistic "skins" that can make avatars look like Angelina Jolie or Brad Pitt. And secondly, "Donald Trumps" who trade in real estate, nightclubs and casinos. "The most hardcore SL users are content creators and they are commercial about it," Au says. "With the items they make or services they provide, it's a business."
The initial SL goldrush was in real estate. Land prices vary, but US$1,675 will get you a 16-acre island, assuming you are on the waiting list. Residents are then free to design, build, sell or sub-let property in "parcels". Around 600 islands are bought every month and SL property tycoons are already emerging. Trading as Anshe Chung, Ailin Graef built up her $1m property and liquid asset portfolio in 30 months from that $10 investment. Beginning with small-scale architectural builds for resale or rental, Graef's avatar then moved onto larger developments for big firms seeking a foothold in SL. In the real world she employs 25 people in a studio in Wuhan, China, in virtual construction and marketing.
There are 13,787 other entrepreneurs making money "in world" and then converting their wins into real cash, and increasing numbers are quitting real-life jobs to dedicate themselves to SL businesses. Firms at the top of the pile are turning over in excess of $200,000 per year.
Many entrepreneurs, like Kimberly Rufer-Bach, a former editor who now trades online as Kim Anubis, are self-styled artisans creating commodities from "prims"-basic building tools-which can then be sold through the proliferating malls and outlets in SL or traded on the SL Exchange, the metaverse's own eBay for virtual commodities that range from baccarat tables to latex BDSM suits. Others engage in property speculation-trading the Linden against the greenback and vice versa. It's also characteristic of the collaborative social environment of SL that many of those who make money do so through imagination and collaboration. Profit in SL is often a product of creating a better lifestyle.
As a business model, SL is close to genius. Unlike many Web startups, it doesn't rely on advertising sales and instead generates revenues from subscriptions and virtual land rentals and sales. Linden Labs reports the venture is close to profit and its future potential, like its potential for expanding virtual land mass, appears unlimited. The support of a number of large, global brands shows how seriously real-world capital is taking Linden's project.
What's surprising about the presence of multinationals in SL is their use of new ways to integrate their brand into the fabric of the SL metaverse. In the past, computer game marketing has been limited to uninspiring billboard ads, but, says Au, "architecturally, Second Life isn't the same as real life: you can point-to-point teleport, meaning you don't have to pass billboards if you don't want to."
Instead, brands are using imaginative ways to market to difficult-to-reach audiences-Second Lifers tend to be tech-savvy thirtysomethings-who congregate in virtual communities. At the same time they are using it to leverage brand awareness back into the real world. The sportswear brand Reebok, for example, created an installation in which residents can customise and buy shoes for their avatars; if their designs prove satisfactory, users they can then buy real-world versions. Rivers Run Red, the London-based consultancy that organised the execution, also launched a new sneaker model in SL for Adidas, and sold 21,000 pairs-more units than were shifted in the real world. Ideas like this, says Rivers Run Red CEO Justin Bovington, add value to a product and allow people to be immersed in it before they buy.
"In the last two or three years ad spend has been cut and planners have been told to be more creative," Bovington says. "It's all about brand immersion and activation now-Second Lifers want an authentic brand experience, and what Second Life allows us to do is have a one-to-one dialogue with consumers. Many Second Lifers are also influencers and opinion formers-they're feeding the 'blogosphere' and can drive awareness of a brand's activities beyond the parameters of Second Life." Bovington says that brands should approach SL with careful planning, and argues that some fail to understand the world. Toyota, for example, ran an initiative allowing users to virtually drive their new Scion model last year. "Toyota don't understand the community,"
Bovington argues. "You can fly in Second Life, so why drive a car? Plus, there is the risk of a backlash-some brands go in for the sake of being there rather than to add value and create content." Pleasing all SL users all the time is tricky. In response to the growing commercialisation of the metaverse, the guerrilla Second Life Liberation Army recently staged an attack on the Reebok sportswear store, despite the company's efforts to create original content.
A brand can realistically gain a foothold for between £5-£10,000, which is enough to buy an island and set up a store, although some, like IBM, are known to be spending much more. A modest investment can pay off handsomely, because successful brand activities in Second Life will often spread virally to other key online portals: they can be videoed, then posted to YouTube, MySpace and Flickr, for example. "Second Life has become a media channel in itself," Bovington says.
Marketing may only be the beginning of what Second Life can do for business. An IBM executive recently addressed 8,000 Chinese workers in a virtual conference, and the London ad agency BBH has set up an office in world, often showcasing new work to clients and conducting company meetings in the virtual space.
"There's no simple, single solution for brands who want a presence in SL," says Pete Rogers, a digital consultant at BBH. "Just sticking a billboard up won't work. Equally, distributing loads of free content might also cause problems. Ultimately the Second Life community will decide. If they don't use or visit your work, you've failed." Au has noticed traces of arrogance in the approach taken by some brands. Channel 4 claims to be first in setting up an in-world radio station but was quickly disabused of the notion by users. "Residents get really angry when people suggest they're bringing in something new in when, in fact, they're not."
Second Life may be a captive and growing audience, but a glance at the variety of avatar personalities users can create-a 20ft-high gorilla, say, or a floating ball of orange fuzz-suggest that they are far from homogenous. Equally, they are fiercely protective of their world. "Users are anonymous, so they feel free to behave in any way they choose," Rogers says. "To get involved with the community, you have to try to understand what makes them tick and be sensitive to their world."
That may be a complex task in itself, but some brands have succeeded in understanding that regardless of how their avatar appears, users are as prone to as many obsessions and idiosyncracies in Second life as they are in real life. Pontiac, the US car manufacturer, ran a promotion giving away land to car "modding" enthusiasts, resulting in designs that may go on to influence its real-life car production.
"I've met so many content creators who've built amazing cars, weapons and fashion," says W. James Au. "These people are from nowhere and they would never normally have the chance to present their ideas to a big company. That's the tremendous power of Second Life: collaborative, dynamic, user-generated content." And the bigger it grows, the greater the network of content creators. Second Life could prove to be the smart company's unlimited workforce.
The virtual economy
The key to the economic prosperity of Second Life (SL) lies in users' ability to exchange their in-game Linden dollars for real-world, hard currency. Without it, there would be no sustained demand for in-world products and services. The early success of exchange sites, such as AnsheChung.com and GamerzFix.com prompted Linden to set up its own currency exchange, the LindeX, in October 2005. LindeX charges 3.5 per cent commission on all currency sales, but the exchange only makes up 10 per cent of the company's total revenue. Keeping up with the growth of the SL economy is one of the biggest challenges for the Linden team. Unmanaged, rapid expansion brings constant pressure on the Linden to appreciate against the dollar. To keep the currency stable, Linden acts like a central bank, selling Linden dollars onto the exchange. It also charges for in-game activities, such as uploading an image or file and varies price depending on whether it needs to increase or decrease the money supply. Despite the currency being labelled unstable, Linden CFO John Zdanowski maintains that it will have an intrinsic value as long as SL continues to innovate. "Demand is based on the fact that Linden dollars represent a limited license right to use certain features of Second Life," he says. "In as much as the features people use in Second Life are valuable, then the Linden is valuable as a virtual currency."
