The Second Life 'economy'

This week, people in the online virtual world, Second Life, will exchange over 10 million dollars buying land, building houses, shopping and conducting business.

It is a significant sum of money, but the virtual world as represented in massively multiplayer online games (MMOGs) is likely to remain an emerging art form rather than an emerging market.

Virtual worlds have yet to reach the tipping point of critical mass. Just 132 people currently have bank balances of more than 5,000 dollars on Second Life. At the start of 2007, Second Life had only 1.5 million users.

It now has eight million residents, although fewer than two million are active. Even at peak times, only about 30,000 to 40,000 users are logged on, a much smaller audience than advertisers are used to reaching.

Big business has still not worked out how to make money on Second Life and other MMOGs. Dell, Cisco, IBM and Reuters all have a presence on Second Life, but the Web site's commercial life is dominated by small business owners.

Get a real life

For some advertisers, the problem is that Second Life remains a Neverland, and those who play in it do not have human needs. Many Second Life denizens seem to see the virtual world as a refuge from the real world and do not want to be reached by big corporations.

Entertainment is still king in virtual worlds and shopping for real products is not a main activity.

If product marketing can be successfully dovetailed with the entertainment, it can be profit enhancing. The problem of user-content worlds such as Second Life is that not many users are capable of crafting a good story to accompany their products.

Second Life is therefore unlikely to complement the real world as an alternative medium in which to do real business.

Instead, companies will regard the medium as a novel way to build brand awareness, host virtual conferences, recruitment events and as a tool for its clients to simulate new product and service offerings.