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Doing Business in Second Life

For a March 18, 2008 presentation on doing business in Second Life for the Charlottesville Business Innovation Council, I developed a white paper covering the background, economics, dos and donts, and notions to consider when starting a business in Second Life. The white paper is published under the Creative Commons Attribution-Noncommercial-Share Alike 3.0 United States license in a PDF version here and in a HTML version here.

For those who do not have the time to read the entire paper, I have copied the executive summary into this post. Appropriate citations are made in the full versions. I also added a citation list at the end of the post.

Executive Summary

“Every human being is interested in two kinds of worlds: the Primary, everyday world which he knows through his senses, and a Secondary world or worlds which he not only can create in his imagination, but which he cannot stop himself creating.”

€”W.H. Auden

Second Life is a 3D €œvirtual world€ that allows people to interact with others in the same environment through the use of avatars. An avatar is €œan Internet users representation of himself or herself, whether in the form of a three-dimensional model used in computer games, a two-dimensional icon used on Internet forums and other communities.€ Since its inception in 2003, membership in Second Life has grown exponentially, now boasting nearly 13 million residents, with nearly 500,000 residents visiting Second Life in rolling 7 days periods.

Due to this growth and participation in the community, businesses have sprouted up all over Second Life, with nearly 55,000 businesses appearing in Second Life as of the end of February, 2008. Furthermore, over 328,000 of the residents in Second Life spend money.

With this growth story, the allure of Second Life seems to be irresistible, and the promise of quick profits draws in companies both large and small to establish a presence in Second Life. Many companies underestimate the cost of establishing a vibrant presence in Second Life, and those who understand the costs do not get the short-term ROI that investments in the tech bubble of the early 2000 time period did.

Still, the trend in moving towards virtual worlds is clear and nearly inevitable. As personal computers gain processing power and the ability to rapidly generate the complex graphics inherent in virtual worlds such as Second Life, more users, particularly those who regularly utilize the Internet, will begin to inhabit those worlds. As Gartner reported, by the end of 2011, €œ80% of active Internet users (and Fortune 500 enterprises) will have a €˜second life€™, [although] not necessarily in Second Life.€

Therefore, a company that wishes to either establish or grow its online presence in selling goods and services to consumers will be wise to consider the implications that Second Life and other virtual worlds have on the future of consumer interaction with the Internet. Furthermore, doing business in Second Life is not as simple as setting up a website, nor does it have all of the same parallels of opening up a brick and mortar retail store. The paper discusses the implications of doing business in Second Life and what businesses not currently in Second Life should consider when deciding if and when to establish a presence.

Sources Cited

  • Wikipedia definition of avatar, found at http://en.wikipedia.org/wiki/Avatar_%28icon%29 on March 10, 2008.
  • Second Life | Economic Statistics, found at http://secondlife.com/whatis/economy_stats.php on March 10, 2008.
  • Riley, Duncan. €œWill the Last Corporation Leaving Second Life Please Turn Off the Light.€ TechCrunch, available at http://www.techcrunch.com/2007/07/14/will-the-last-corporation-leaving-second-life-please-turn-off-the-light/ on March 10, 2008.
  • €œGartner Says 80 Percent of Active Internet Users Will Have A “Second Life” in the Virtual World by the End of 2011.€ http://www.gartner.com/it/page.jsp?id=503861 on March 10, 2008.
  • €œSecond Life | What Is Second Life?€http://secondlife.com/whatis/ on March 10, 2008.
  • Taken from Second Life website, available at http://s3.amazonaws.com/static-secondlife-com/screenshots/web/exp_driving.jpg on March 10, 2008.
  • €œSecond Life | Economic Statistics.€ http://secondlife.com/whatis/economy_stats.php on March 10, 2008.
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  • €œGartner Says 80 Percent of Active Internet Users Will Have A “Second Life” in the Virtual World by the End of 2011.€ http://www.gartner.com/it/page.jsp?id=503861 on March 10, 2008.
  • €œSecond Life Virtual Economy Key Metrics (BETA) Through January 2008€ http://s3.amazonaws.com/static-secondlife-com/economy/stats_200801.xls on March 3, 2008.
  • €œSecond Life | Economic Statistics.€ http://secondlife.com/whatis/economy_stats.php on March 10, 2008.
  • €œSecond Life | Economic Statistics.€ http://secondlife.com/whatis/economy_stats.php on March 10, 2008.
  • Second Life provides the source code as an open source platform, available at http://secondlifegrid.net/programs/open_source.
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  • http://www.fabjectory.com/index.php/gallery/secondlife-gallery/.
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  • Wagner, Mitch. €œ€™Die Hard€™ 4 Opening Teaches An Important Lesson In Second Life Marketing. Yippee-Ki-Yay.€ the Information Week Blog. June 4, 2007. http://www.informationweek.com/blog/main/archives/2007/06/die_hard_4_open.html;jsessionid=B2IGY50DIZOSQQSNDLPCKH0CJUNN2JVN
  • Kintz, Eric. €œTop 10 Reasons As To Why I Still Need To Be Convinced About Marketing in Second Life.€ The Digital Mindset Blog, Hewlett Packard. http://h20325.www2.hp.com/blogs/kintz/archive/2007/04/02/2964.html
  • €œInteresting Results: Virtual Product Experiences.€ http://www.markettruths.com/information/results/20070219.asp, citing Schlosser, Ann E. (2006), €œLearning Through Virtual Product Experience: The Role of Imagery on True versus False Memories.€ Journal of Consumer Research, 33(3), 377-383.
  • Wagner, Mitch. €œWhat Can Real World Businesses Do To Succeed In Second Life?€ the Information Week Blog. June 20, 2007. http://www.informationweek.com/blog/main/archives/2007/06/what_can_realwo.html;jsessionid=B2IGY50DIZOSQQSNDLPCKH0CJUNN2JVN. See comment by €œDirjha.€
  • €œReuters, Adam.€ €œIBM Accelerates Push Into 3D Worlds.€ Reuters: Second Life News Center. November 9, 2006. http://secondlife.reuters.com/stories/2006/11/09/ibm-accelerates-push-into-3d-virtual-worlds/.
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  • http://www.jbouteiller.net/photo/774347-947690.jpg.
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  • A full list of participating schools who have registered with Linden is available at http://simteach.com/wiki/index.php?title=Institutions_and_Organizations_in_SL.
  • http://www.secondlifeinsider.com/2006/09/12/harvard-law-in-sl/
  • See http://slshakespeare.com/ for details.
  • Au, Wagner James. €œHBO Buys U.S. TV Rights To Second Life Machinima Series, Promotes It As Oscar Nominee Contender.€ New World Notes. September 4, 2007. http://nwn.blogs.com/nwn/2007/09/second-life-mac.html.
  • http://nwn.blogs.com/photos/uncategorized/2007/09/04/with_orhalla.jpg.
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  • Riley, Duncan. €œWill the Last Corporation Leaving Second Life Please Turn Off the Light.€ TechCrunch. July 14, 2007. http://www.techcrunch.com/2007/07/14/will-the-last-corporation-leaving-second-life-please-turn-off-the-light/.
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  • See http://en.wikipedia.org/wiki/Bling.
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  • http://secondthoughts.typepad.com/photos/uncategorized/adbrands.jpg.
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  • €œSecond Life Tip Sheet.€ BusinessWeek. November 27, 2006. http://www.businessweek.com/magazine/content/06_48/b4011417.htm.
  • Winters, Catherine. €œSeven Reasons Your Organization Should Consider Second Life in 2007.€ January 2, 2007. http://www.socialsignal.com/blog/catherine/seven-reasons-your-organization-should-consider-second-life-in-2007.
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  • Wallace, Mark. €œAnshe Chung Draws Venture Capital Investment.€ September 12, 2007. http://www.3pointd.com/20070912/anshe-chung-draws-venture-capital-investment/.