Tuesday, February 5, 2008

Businesses find real opportunity in the virtual world of Second Life

L.A. Lorek

Wandering through virtual streets in Second Life, Nappy Bread has met all kinds of people, from beggars to business moguls, at open houses, parties and public relations events.
Nappy Bread is an avatar, a computerized image, belonging to Dean McCall, 36, chief executive of Salsa.net, a technology company in San Antonio.

"Second Life is really like life," he said. "There's a whole culture and economy going on."

The virtual and the real worlds intersect in Second Life, a 3-D digital world "imagined, created and owned by its residents," says Linden Lab, the site's creator. The online virtual gaming community has more than 940,000 members, ranging from 18 to 85, from more than 80 countries.

Every day, residents of Second Life spend more than $400,000 in real money on everything from T-shirts to real estate, San Francisco-based Linden says.

That kind of economy has attracted the notice of businesses. This week, Reuters announced it was opening a virtual news bureau with a reporter, "Adam Reuters."

The game has created a $70 million economy, said Guhan Selvaretnam, Reuters' vice president of media strategies.

"It's the only virtual world community that has a self-sustaining economy," he said. "We think of it as covering a growing city in the world. This world just happens to be virtual."

Residents start out with a small amount of Linden Dollars, Second Life's official currency. People earn more money by making and selling items, by holding events or by using talents such as singing or playing a musical instrument.

The average resident of Second Life has an annual income of $1,000 U.S., but the highest earners make as much as $250,000, Selvaretnam said. Basic accounts are free, but landowners pay a monthly lease fee starting at $9.95. Fees go up from there.

A 16-acre island sells for $1,250, with a monthly maintenance fee of $195. A 64-acre island costs $5,000, with a monthly maintenance fee of $780.

Reuters would not say how much it's spending to be part of Second Life, but Selvaretnam said it was a small investment. The company bought an island and paid for a customized name for business reporter Adam Pasick, aka Adam Reuters.

He will cover events, interview residents and uncover interesting stories within Second Life. So far, he has filed stories that interweave the virtual with the real. The first dealt with Congress investigating the virtual economies of Second Life and World of Warcraft.

Another story concerns Ginko Financial, which is offering 40 percent interest on deposits. Adam Reuters questions whether the bank is a "pioneer or pyramid." He also reports the bank has $220,000 in deposits.

The virtual world is a bit like the Wild West, said Linda Zimmer, chief executive of MarCom:Interactive, based in Anaheim, Calif. She writes a blog, "Business Communicators of Second Life," on business interests in the community.

"We will eventually see similar kinds of regulations come into Second Life related to banking," Zimmer said. "We are going to have to address similar issues in this virtual world that we do in the real world."

In addition to Reuters, American Apparel, a Los Angeles-based maker of trendy T-shirts, and Starwood Hotels, based in White Plains, N.Y., have opened in the virtual game.

Second Life has become a new way for businesses to reach consumers, said Zimmer, who goes by the avatar ZnetLady Isbell.

Starwood's W Hotels created a replica of a real hotel it plans to build in two years, she said. Intel, IBM, Nike, Toyota, Amazon.com, and countless public relations agencies and marketing firms sponsor events.

"There is a really interesting gold rush going on there," said Kami Watson-Huyse, a San Antonio public relations expert and blogger. Her avatar is KamiChat Watson.

Artists, entertainers and other creative people have found it to be a good gathering place, she said. Next month, Duran Duran will play a live concert in Second Life. Countless other musicians earn real money playing in the virtual world.

The danger for businesses is commercializing a virtual world that was created, in part, to escape commercialization, Zimmer said.

"I think what businesses are going to have to do is invest time to see the value in what they do and how it affects people in the virtual world."

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