Second Life loves virtual business but nobody’s getting rich

Stan Beer
Sunday, 29 July 2007 15:13

Opinion and Analysis

One look at the home page of Linden Lab's Web 2.0 virtual world Second Life reveals that the central theme of the site is about making money. After all, what other web site gives a running tally of their daily dollar turnover right up front? So why has Linden Labs banned potentially the biggest money spinner, gambling?

Quite simply, gambling online is illegal in the US and Linden Labs is a US company. Never mind that a goodly portion of the 8 million or so Second Life residents - perhaps the majority - are not from the US. As far as Linden Lab is concerned games of chance are a no-no.

Gambling on buying and selling fictitious blocks of virtual real estate, that's a different matter. With all the virtual entrepreneurs building virtual businesses selling games, avatars and virtual clothing online, we may even see a Second Life stock exchange emerge. No doubt buying and selling shares in listed virtual companies would be OK too.

The question is though, is whether the lure of participating in a virtual business world with the aim of making real money is sufficient incentive for most would be entrepreneurs to get involved. Not really, if we are to believe Linden Lab's own figures.

The fact is, according to Linden Lab's stats, nobody appears to be getting rich yet doing virtual business. Just 132 Second Life residents are reported to be making more than US$5000 a month and just over 800 residents are making more than US$1000 a month.

In fact, of the 42,597 residents reported to have made money doing business on Second life in June, more than 80% made less than US$50 and nearly 97% made less than US$500. Then of course, there's no mention of all the residents who haven't made a cracker - or have spent their hard earned real dollars trying to make a virtual buck.

Although Second Life is a reasonably well trafficked site, compared to popular Web 2.0 sites like MySpace, YouTube and even news aggregators like Digg, it is a relative minnow. Given the amount of media it has received, Second Life traffic is surprisingly modest. It currently averages well under one million log-ins a month, although it boasts tens of thousands logged in at any moment in time.

This suggests that Second Life probably has a tight coterie of followers avidly living their online fantasies in their alternate virtual universe but the appeal of buying and selling virtual real estate and designing avatars is limited. Far more enticing are real world activities taking place in an online setting that Second Life shuns, such as dating and gambling.

Linden Labs may claim that its users are far more likely to create content for Second Life than YouTube users are for that site. However, does it really matter when YouTube gets 50 times the traffic?

There's no doubt that Second Life is an innovative Web 2.0 application. However, reading a range of views about it in the blogosphere, one gets the sense that many one-time Second Life residents simply found the place boring and moved on to something more mentally stimulating. It's a pity because if Linden Lab gave them a reason, the residents would probably come and stay.