Monday, November 27, 2006

A Second Look At Second Life (Part II)

This is the second in a five-part series.

Yesterday, we talked about what Second Life (SL) is. Today we'll talk more about the Second Life economy. On Tuesday, we'll discuss the issues SL is experiencing, and how these might impact gamers in RL (real life). On Wednesday, we'll look at how those issues in virtual reality might impact non-gamers in real life, especially in the area of copyright. On Thursday, we'll look at the U.S. Congress' interest in SL and other virtual worlds.

In my description of Second Life, I pointed out that this virtual world has a thriving economy, which splashes over into the real world where gamers buy and sell goods and exchange Linden Dollars on the Internet. CNET News talked about this in an article on February 8, 2005:

[M]ost such offline trade is part of an underground economy discouraged by game publishers such as Sony Online Entertainment, which has blocked auctions of items for "EverQuest" and other popular games, claiming such trade infringes its intellectual property.

A few online game publishers, however, have decided to embrace the intersection of virtual and real-world economies, providing approved outlets in which players can convert in-game assets into real-world wealth. The result has been an intriguing blend of typical game dynamics and the free market.

Second Life is one of the latter types, which has encouraged the development of a free-wheeling economy. Eligible residents (those who pay for the service or who were early members of SL) receive small amounts of Linden Dollars from Linden Lab once a week. Other residents (those who join for free) must seek alternate ways to accumulate Linden Dollars in the virtual world or in real life.

Some residents have discovered that their online skills can be used for real world dollars, while others have found that their real world skills can be used to earn virtual dollars.

Occasional gamers who only drop into Second Life and other MMOGs once in a while don't have the time/skill to earn either dollars or rewards. For these persons, the answer is to buy the necessary rewards or dollars from online players who spend more time in-world. A vibrant market has developed for sale and purchase of game rewards and/or game dollars.

On the flip side, artists, designers and real estate investors have found whole new careers inside Second Life. From a Wired News story dated February 8, 2006:

Jennifer Grinnell, Michigan furniture delivery dispatcher turned fashion designer in cyber space, never imagined that she could make a living in a video game.

Grinnell's shop, Mischief, is in Second Life, a virtual world whose users are responsible for creating all content. Grinnell's digital clothing and "skins" allow users to change the appearance of their avatars -- their online representations -- beyond their wildest Barbie dress-up dreams.

Within a month, Grinnell was making more in Second Life than in her real-world job as a dispatcher. And after three months she realized she could quit her day job altogether. Now Second Life is her primary source of income, and Grinnell . . . claims she earns more than four times her previous salary.

And this isn't all. The May 1, 2006 edition of BusinessWeek Online talked about real world people and companies that are using Second Life:

as any flight simulator fan knows, an imaginary world can make a boffo training ground. Tim Allen, head of technology at Crompco Corp., an underground gas tank testing firm, discovered that as the pseudonymous "FlipperPA Peregrine" inside Second Life. There, he built a virtual gas station, graphically showing all the tanks and gas lines under the asphalt. He says it's much easier to grasp the station's workings this way than it is on paper. "It's great for training new hires and showing changing regulations to existing employees," says Allen.

Large corporations recently began to realize that they, too, could advertise and sell products inside the virtual world. In late June, American Apparel announced the opening of a virtual store in Second Life. BusinessWeek Online reported:

American Apparel is the first major retailer to set up shop in Second Life, and since the store's debut the company has sold "about 2,000 items" for $1 or less, says Raz Schionning, the company's director of Web services.

Other companies are rushing to jump on the bandwagon. Dell Computers issued a press release earlier this month, saying that Dell would be participating in Second Life. On November 14, Ro Parra, Dell senior VP, and Philip Rosedale, Linden Lab CEO, gave "an exclusive preview of Dell Island in Second Life. Following this invitation-only event, the island was open for the public to visit."

In another example of a corporation using Second Life, an article in BusinessWeek Online on August 23 said:

You won't be able to check into Aloft, Starwood's new line of moderately priced, loft-style hotels, until the first quarter of 2008. But in September, you can wander into the lobby of its digital Doppelganger inside the popular online world of Second Life.

Starwood, owner of the chic W brand as well as the Westin and Sheraton chains, is the first real-world hospitality company to open in Second Life, and joins a growing list of other companies who are using the online world to build their brand name, test products, or simply sell merchandise—albeit digital merchandise . . .

FISHING FOR FEEDBACK. For Starwood, opening Aloft in Second Life is a way to test-market the hotel's design and rapidly prototype the evolving concept. For instance, staffers will observe how people move through the space, what areas and types of furniture they gravitate towards, and what they ignore.

You begin to see the impact Second Life and other social networking sites (like MySpace) might have on the real world. We'll talk more about this in upcoming posts.

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