Second Life: What Is It? (And Why Should Manufacturers Care?)

July 23, 2007
This "virtual fantasy world" computer game has no dragons or damsels in distress, and yet is growing exponentially worldwide among the consumer marketplace's most lucrative demographics. Join IndustryWeek's IT editor Brad Kenney as he does some reconnai

Imagine if you will that by some freak of undersea volcanic activity, a brand-new continent suddenly appeared in the middle of the ocean, and within a two-year period, 8 million people from 105 countries worldwide decided to make it a vacation destination, some of them on a daily basis.

Then imagine $1.6 million dollars as a per-day average being transacted on that new continent (putting its GDP in line with that of the Caribbean paradise of St. Lucia) and a population weighted towards the male with an average age of 32 placing the typical inhabitant right in the juiciest of marketing sweet spots.

These are the kind of numbers that accompany the Second Life phenomenon. Viewed by some as a game, as others as an unhealthy obsession bordering on computer-assisted psychopathology, it has grown exponentially in the last few years as a "virtual economy" has flourished "in-world" (editor's note: you're going to see a lot of quote marks in this story).

Such dynamic growth is giving rise to companies like Cranial Tap, a goods/services provider that exists solely within the Second Life world. I spoke with the CEO of this full-service virtual community development company, Dave Levinson, about the commercial and cultural potential of this computer game for consumer-facing manufacturers at a talk he gave recently in Washington, D.C.

Virtual World, Real Money -- And Sex (Of Course)

According to Levinson, the company that founded Second Life -- Linden Lab, based in San Francisco -- has created a virtual currency that actually has an exchange rate, albeit a depressed one, with the U.S. dollar (at the time of this writing, the rate was 270 of these "Linden dollars" to one U.S. dollar) that has incentivized development of this world far beyond anything seen before. SLers can buy any type or size of real estate -- for reference, an entire island in SL costs $1,700, with a $300 monthly "maintenance fee" (you too can have a "virtual mortgage"!). As of the time of this writing, SL has 3 continents (with IBM basically taking up its own) and another on its way, as well as 9,000 islands' worth of luxury-class inhabitants.

Take A Tour

Get a deeper look into Second Life with our virtual slideshow.

However, owning property isn't a prerequisite to "playing" SL -- most of the population spends its presumably hard-earned, real-world dollars on virtual clothing and accessories, as well as "virtual services". Before you ask, most of these services are not sexual in nature, instead involving such mundane things as real estate design/build projects and customization of "avatars" -- the in-world representation the gamer chooses for him/herself (although sometimes that does involve sex).

So, just to get it out of the way, there is sexual activity in Second Life -- this is the internet, after all -- and Levinson is quick to point out that just because this virtual world is a "mature-only" (read: 18 and over) environment doesn't speak to the maturity level of its inhabitants.

"There ARE community standards in Second Life," he assures me. "It's just really hard to break them. Pretty much everything you can think of to do, has already been done."

A guy like Levinson isn't likely to be the one to try -- he's followed an institutional-grade career path that has included Time Warner and AOL, and so knew all about the insularity of a big communal operation before he ever set foot in the virtual world of SL. Appropriately enough, he and his main business partner live in different states and have only physically met a few times, but have a sprawling, stylishly-appointed office suite on their own island inside SL. Together, they employ four full-time developers and have a string of contractors, college-age and otherwise, and use the capabilities of their particular context to enable a level of virtual teaming the likes of which management consultants have been dreaming about for decades.

According to Levinson, there is even a "beta" (trial version) of voice-enabled Second Life happening as we speak, and when the bugs get worked out of that system, Levinson says the world should experience an even steeper rise in popularity, as well as increased business use.

Branding And Recruitment Go 2.0

So before this virtual world's population curve gets even steeper, how do you stake your company's claim? And is virtual acreage worth having in the first place? After all, with no clickthroughs, no impressions and no page views etc. SL breaks all the known internet advertising paradigms. Plus, there is no actual "manufacturing" happening in SL, at least in any commonly understood sense of the word.

So what is it that brings American Apparel, Adidas, Coca Cola, Pontiac, Mercedes, BMW, Philips, Mazda, IBM and so many others to the game?

Levinson's shortest answer is simple brand extension -- SL allows for a simple way to build a loyal community around a brand in an interactive way. For instance, GM's Pontiac brand has a large patch of real estate in-world, and has erected a concert stage that serves as a social meeting place for the avatar community. Does Pontiac make any revenue in either the traditional or virtual sense? No, but then again do they make measurable revenue from sponsoring concert tours and extreme athletic events? What Pontiac does get for its money is gamer goodwill and in-world exposure that they are betting will pay off when the real people behind those avatars pull out the real-world pocketbooks.

However, considering the question, the longer answer might lie in something even more practical down the road. Consider that staffing provider Kelly Services has a presence in SL. Then consider that not only could they be looking to attract tech employers and talent to their services, but also that they must recognize, as Levinson does, that the video game generation is going to expect a certain level of rich media experience out of technology -- whether at home or in the workplace. It's a fact that generation Y and younger -- your future workforce -- are going to gravitate towards those companies that are well-versed in designing at-work tech experiences to meet these expectations.

Design software vendor Autodesk has an entire island all to its lonesome, which makes a lot of sense considering the fact that there is already a 3D modeling application built into the SL user interface. Just as in the real world, it pays to keep a close eye on the competition, and no doubt Autodesk is looking to recruit the brightest 3D designers to its ranks,just as Pontiac recently gave the most talented "virtual car designer" in SL free real estate to set up shop on its Motorati Island.

Scenario-based 3D training software, already used successfully for military and law enforcement training, is beginning to take hold in training forklift drivers and warehouse workers. Even your everyday office tasks are gaining extra dimensions -- a company called SpaceTime is kicking the Internet browsing experience up a notch with a 3D browser, a beta version of which is available here.

Whether in teaching vital skills or teaming of information workers, a virtual platform designed and built like a video game is already like a second home to the workforce of this digital age. By adapting processes and applications that take advantage of this familiarity, smart companies can build recruitment and human capital development strategies that will reach and teach the next generation of employees.

So the long and short of it is that "virtual worlds" already provide something beyond entertainment -- it's up to your company to decide whether to get with the program and reach out to your potential customers, employees, or both.

When Worlds Collide

Even though Cranial Tap does most of its work there, Levinson points out that Second Life is not the only game in town. Other sites, such as and are competitors, as is World Of Warcraft (WoW), a more typical videogame-style virtual world that has a comparably-sized user base (over 8 million) at present. Along similar competitive lines, there are rumors that Google will be integrating its ubiquitous mapping software to create a Second Life-style game, but modeled on (and mapped to) real life. If anyone can pull it off, it'd have to be Google, with its hundreds of applications, tens of thousands of developers, millions of loyal users and billions in available capital.

Regardless of anything that might emerge from the Googleplex, Levinson believes that the fact that SL is all user-designed and owned, combined with the strong element of fantasy, will keep Second Life a viable platform in the years to come. Second Life is the first world to offer property rights -- everything you create, you own -- and Linden Labs has also "open-sourced" the code behind the game, which Levinson believes is a smart move towards becoming the de-facto standard of virtual worlds. "Open source brings a sense of ownership," he says.

Finally, companies who experiment in SL early will gain valuable experience and a competitive edge as virtual worlds become a more ubiquitous part of the cultural and business landscape. Flying for four hours in a 747, versus flying via avatar (by hitting the PageUp key) for 30 seconds to the virtual conference room? That's the choice of the future.

As far as role-playing fantasy worlds like EverQuest and World Of Warcraft, Levinson says that the experience they provide -- in his words, "killing dragons and 'leveling up'" -- just can't compete with the economic potential of Second Life community of millions of men and women with different vertical interests.

Do their vertical interests coincide with your brand? There's only one way to find out -- go to and download the application, choose an avatar and take a walk in-world. Or fly, if you feel so inclined.

Or ask around -- chances are, with 8 million residents and counting, someone on your staff already has a virtual avatar and can serve as your company's native guide to Second Life, the newest world under the virtual sun.

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About the Author

Brad Kenney | Chief Marketing Officer

Brad Kenney is the former Technology Editor of IndustryWeek and now serves as director of the mobile/social platforms practice at R/GA, a global marketing/advertising firm in New York City.

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