Last week, I reported in my IS Strategy class on IBM’s plan to invest $10MM in Second Life. I explained the concept of Second Life to the class because a large number of students had never heard of SecondLife. This spurred an excellent discussion on the implications of virtual worlds on IS strategy, and what companies like IBM would have to gain from investing in virtual world technologies. Many people were blown away by the fact that people actually make money in Second Life. I was asked, “How do people make money in Second Life?” Unfortunately I didn’t know at the time, so I decided to do some more research on the topic. After looking into it, there are endless possibilities for Making Money in Second Life or in other virtual worlds.
How is it possible to make money in a virtual world when nothing is “real”?
One way that people are making money in Second Life is by creating virtual objects and by selling them in a virtual shop. For example, someone with clever design and marketing skills can create their own virtual brand of clothing and sell their clothing in Second Life. How are Second Life items created? I’ve been asked if you must buy raw materials in Second Life. The answer is, you can, but you don’t have to. Items are created by using Second Life 3D modeling tools and the Second Life scripting language. You can upload images that become the textures on your new objects. It costs money to upload these images to Second Life, so it might be better to buy pre-fabricated building blocks to assemble your new creations. Check out the Suzanne’s Guitar video for a demonstration of creating a virtual item.
Building and selling objects is not the only way of making money on Second Life. There is a large service and entertainment market inside Second Life. Second Life entrepreneurs can buy land and build amusement parks, dance clubs, theaters, etc. and charge for admission. Businesses can build facilities to host meetings and other events. Sun Microsystems recently hosted a Q&A session on an upcoming Java release in their Second Life amphitheater. Dell Computers has also purchased an island that will feature a Dell history museum. Reuters now employs a reporter to report on activity inside of Second Life.
How many times have you heard someone say while playing Monopoly, “If this money were real, I’d be rich!” Second Life is like playing Monopoly with real money. It features a lot more complexity, and it is built on a real economy.
SecondLife lays the groundwork for a real economy.
When I first heard of Second Life, I thought it was ridiculous and nothing more than a networked Sims game. However, the more I research, the more I realize that the coming about of virtual worlds and economies is almost as significant as Columbus’ discovery of The New World. Second Life has its own economy with a real exchange rate. Over $500,000 USD changes hands inside of Second Life every day.
Linden Labs publishes daily statistics on the economy and other market data. People can invest in Linden dollars, Linden real estate, or Linden-based businesses.
Dangers still lurk for SecondLife entrepreneurs.
Recently, in-world business owners have been frustrated by Intellectual Property theft. A well-meaning open source software application that was meant to aid in creating Second Life items, has been altered to copy existing items inside the virtual world. The software, named CopyBot, is causing quite a stir in-world. With this software, anyone can copy any item, and reproduce it just like pirating real software applications.
Linden Labs has issued a warning that anyone found using this CopyBot utility will be banished and lose any property that they owned inside of Second Life. I’m guessing that better security measures will need to be put in place to protect business owners’ Intellectual Property.
Will SecondLife stay around?
My bet is that SecondLife will remain a lively community for years to come. Why? Because people have real money invested in this world. New versions of the software will continue to be built with better utilities, graphics, and options. New worlds will come into creation, and software will be built that will connect the virtual worlds into a virtual universe. IBM wants to work closely with other emerging virtual worlds and technologies. Virtual worlds are here to stay and shouldn’t be treated as just a game. They will make an impact on our lives and our children’s lives.