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Second Life’s economy slows down, too

Janet Babin Jan 22, 2008

Second Life’s economy slows down, too

Janet Babin Jan 22, 2008


KAI RYSSDAL: Try though you might, it Is tough to escape a slowing economy. There’s even a downturn in the virtual world. As of today, banks in Second Life are going to be strictly regulated. Linden Lab, the very real company that created Second Life, is stepping in after some big virtual bank defaults.

But maybe you’ve been too busy with your first life to have even heard about a second one. It’s a place where real people craft computer versions of themselves. They make stuff and buy stuff and sell stuff and trade stuff. Or, they just hang out there. Second Life was supposed to be the next, great Internet space. But the virtual universe has been shrinking.

Janet Babin reports now from the Marketplace Innovations Desk at North Carolina Public Radio.

JANET BABIN: I’m shocked by how many of my real-life friends have never visited Second Life. So before I tell you who’s leaving this space, I’m going to give you the 50-cent tour.

Lisa will be our guide. She really knows how to click her way around the metaverse. She runs an art gallery there. We head in through her laptop:

The scenery on the login page looks cartoon-y and pretty empty. Second Life residents — not its owner Linden Lab — create most of the things you see in-world.

Lisa: Online right now there’s 53,872 people worldwide…”

But all we see is Lisa’s avatar, J-Diva-Ophelia. Barbie body, tight blue jeans. Let’s just say J-Diva is a bit of a departure from Lisa’s real self.

Lisa: J-Diva is much more popular than I ever was. Much more flirtatious, much more creative in what she’s willing to wear.

That’s part of the appeal of Second Life. Your alter-ego can dare to be whoever you want to be. There are troglodytes, butterflies, even some naked avatars complete with eye-popping attachments.

Second Life’s endless possibilities attracted broad media attention in 2006. It was suddenly the virtual frontier, the Wild Wild West. The online population grew to 10 million.

Companies soon followed. They wanted their brands in front of these early adopters. Toyota and Apple among others, created stores to sell virtual products. But for some the payoff hasn’t materialized.

In November, active user hours in Second Life were down 5 percent for only the second time in history. Brian Haven with Forrester Research says avatars and marketers are checking out.

Brian Haven: I just logged in a few days ago. I usually go and visit all these different brand sites, and most of them are either closed up, or if they’re still open, it’s a ghost town. It’s a little creepy wandering around in the virtual space and there’s just nobody else there.

Trendy clothing company American Apparel led the in-world exodus last spring. Starwood Hotels, AOL and Wells Fargo followed.

Raz Schionning: We didn’t really see a tremendous ongoing value.

That’s Raz Schionning. He’s American Apparel’s Web director. He says the store in Second Life didn’t generate enough revenue. Too many 7-foot-tall winged creatures flying around with no need for American Apparel’s cotton T-shirts.

Schionning: Second Life is a world in which you can fly just as easily as you can walk. Maybe the idea of building a store doesn’t make much sense.

Setting up shop in-world is relatively cheap: $1,700 to get started, $300 a month rent for a parcel that’s about two-and-a-half acres. But companies often have to spend millions in technology assistance to effectively market themselves.

Marketing expert Mark Hughes says it’s not usually worth the trouble.

Mark Hughes: The people in Second Life, they aren’t worth reaching. It’s just a weird place. It’s never gonna catch on. It’s a fad, not a fashion at all.

Yankee Group Research found that less than 2 percent of people it surveyed had ever even been in a virtual world. Compare that with 32 percent who’d visited online video-sharing sites like YouTube.
Christopher Collins with Yankee Group says the problem with Second Life is it’s a tethered experience.

Christopher Collins: You need to be sitting at your computer to use it. Our research shows that mainstream audiences increasingly want to be able to access all of their information through mobile devices.

But Second Life has been listening to its critics since it came online in 2003. Glenn Fisher with Linden Lab says the virtual world is where the Web was in the early 90’s. He says back then …

Glenn Fisher: A lot of people would come up to you and say, “So what’s this Web thing? I don’t get it. Why should I spend any time here? It’s all websites created by a bunch of people who have way too much time on their hands.”

And we all know how that story turned out.

I’m Janet Babin for Marketplace.

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