After spending a few hours roaming aimlessly around a virtual landscape, full of beautiful islands and luxurious homes, I realized that Linden Lab was on to something here.
In the Thursday issue of the Investors Business Daily, Patrick Cain wrote a very interesting and eye opening piece on big business and Second Life.
Second Life was created by Linden Lab, which is a unit of privately held Linden Research. The company has so far attracted almost $20 million in capital funding from big time investors including Amazon.com (AMZN) founder Jeff Bezos and eBay (EBAY) founder Pierre Omidyar, just to name a few.
What is the buzz? Virtual gaming on the internet has exploded over the last decade. Popular online games, including World of Warcraft and EverQuest, have not only attracted millions of players from all over the world, but have also proven that online economies can be created and maintained. Virtual items, such as weapons, are being sold in online auctions, giving many players a tidy second income.
Linden Lab went a step further. Instead of taking the form of a knight or dwarf, and leaving on missions to cast spells and slay dragons, the company created Second Life as a free for all world where you can look like, act like, and be like anyone, or anything, you want!
Second Life is an open source enterprise where programmers can develop anything they want, such as houses, clothing, cars. The programmers keep the intellectual rights to their creations, thus setting up the stepping stone to a free democratic virtual world.
The official currency of Second Life is the Linden Dollar. Players can trade in their real U.S. dollars to buy Linden dollars at a dynamic exchange rate depending on supply and demand.
How much does an average island at Second Life cost? A 16 virtual acre island will cost you $1,675 with monthly maintenance charges of $295. Second Life has attracted over 4 million 'residents' so far, with more than $1.5 million U.S. a day being spent by players on virtual currency!
This flurry of financial activity has attracted big business. IBM (IBM) is the biggest spender at Second Life so far, having invested more than $10 million to acquire virtual real estate and advertising. IBM now owns 24 islands and has built many office and business buildings on each. One building has been developed to showcase personalized electronics items from Circuit City (CC) that players use to decorate a virtual room.
Cisco Systems (CSCO) has also purchased its own real estate, and built a house to showcase its latest tech gadgets and products. Dell (DELL) built a giant virtual version of its SP700 model on its island, and players can fly through it, peeking at its inner workings.
American Apparel and Toyota (TM) are selling virtual products, including jeans and cars. American Apparel has sold 12,000 pairs of virtual jeans, for about $2 each.
It is not only the virtual commodity business that is taking hold. Reuters (RTRSY) announced in 2006 that it had set up a news bureau on its own island, and will provide news & information to residents at Second Life.
Other companies with presence in Second Life include General Motors (GM) and Sun MicroSystems (SUNW), while Wal-Mart (WMT), Intel (INTC), and American Express (AXP) attended a seminar last year aimed at teaching companies to take advantage of the increasing popularity of virtual worlds to add to their real life profits.
Some individual programmers have built full time virtual businesses at Second Life. The big players buy and sell real estate, and build houses, with rumors that a few are making well into the six figures. Others are developing and selling anything from t-shirts to hats, bicycles to cars, and tattoos to make-up, all in virtual pixels.
While the flurry of activity and monetary spending can attract the attention of businesses, it can also attract the government. The Joint Economic Committee of the U.S. Congress is taking a hard look at the possibility of taxing income derived from virtual online worlds. But the general consensus is against any taxation at this time. The blogging community immediately condemned the committee's announcement last year, and Dan Miller, senior economist on the committee, agrees.
He believes that a realistic attempt at taxing virtual transactions could prove very difficult. It would place too much pressure on virtual administrators, such as Linden Lab, to keep tabs on the millions of transactions and player activities that occur every day. This, Miller believes, could slow down the impressive innovation taking place. It is not surprising to learn that the 64 year-old Miller is an avid World of Warcraft fan, and player!
After roaming at Second Life for a few more hours, taking in the surprisingly realistic look of the greenish neighborhoods, and visiting various large homes, I signed off, and never visited that world again.
In the future, when I have more time on my hands, I could possibly find myself buying a house on Second Life, and living a virtual life. For the time being, I would rather buy my first 'real' house.
I have enough things to do in this life, that the thought of a second life gives me a headache.