How a cyber world is making real money

Is Second Life a role-playing game?

Not quite it's a virtual community whose members assume the guise of characters in a fictional world. Massive multiplayer online role-playing games (MMPORPGs), such as World of Warcraft, let players compete online against thousands of other people around the world. Some of them, Entropia Universe for instance, are similar to Second Life in that they let players buy and sell virtual land and goods using an in-game currency that's convertible into real money. However, Second Life is different from other games in that there is no quest or ultimate goal involved, such as rescuing a heroine or becoming the most powerful knight in the kingdom. Second Life's goal is simply to let users immerse themselves in an imaginary alternative world and lifestyle with the added bonus of glorious 3-D graphics and special effects. As the Chicago Tribune put it recently: think MySpace.com meets The Matrix.

How does it work?

Players create alternative reality versions of themselves, represented by their avatar', an animated alter ego that they control within the world of Second Life. Communicating using on-screen speech bubbles, they live out their new, in-world' life online in 26,000 acres of virtual islands and towns, complete with shops, bars, casinos and libraries. Players can create anything or build anything they like, in conjunction with other players. Indeed, it's their responsibility to do so. They are free to make friends, have sex with each other, and start clubs or businesses.

How much does it cost?

Joining is free, once you've downloaded the company's software from Secondlife.com. But it costs $9.95 to upgrade, which gives you the ability to build objects and buy property or fancy clothes for your avatar. After that, the prices of goods in-world varies widely. (The Second Life currency, the Linden dollar, is convertible into real money with an exchange rate that floats against the US dollar.) If you want to build a shack in an undesirable part of town, it might only cost you a few dollars. But if you fancy the idea of becoming a property developer, a small, 16-acre island will set you back $1,250, plus a monthly fee of $195. Big islands can cost $5,000.

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Is anyone making money from all this?

Yes but so far it's the individual players, rather than the Linden Lab, the company running the site. The value of user-user transactions has been booming in recent months from around $200,000 a day in September

to as much as three times that today.

It's estimated that 17,000 of the 1.4 million members of Second Life are landlords and that the most successful 3,000 residents earn an average of $20,000 a year from the game. The wealthiest of all is super-landlord Anshe Chung, the avatar name of Ailin Graf, a Chinese-born IT teacher living in Frankfurt. Ms Graf employs programmers in China to help her develop' the land she owns in Second Life, and earns at least $100,000 from her holdings. Meanwhile, Ireland's first Second Life property speculator, John Mahon, has just finished building a virtual Dublin, and says he currently earns e800 a month on an investment of e3,600.

What about big business?

The company behind Second Life San Francisco-based Linden Lab, a privately held firm whose backers include eBay co-founder Pierre Omidyar and Amazon's Jeff Bezos is a long way from cashing in its chips on the scale of MySpace or YouTube. Second Life has burst into the public consciousness in recent months and is growing exponentially, but to date it has just 1.4 million members (a tenth of them in the UK), compared to MySpace's 100 million plus. That said, Second Life's residents tend to be educated professionals with a median age of 32 an attractive market for business and global companies have been quick to spot its potential.

Which is what, exactly?

At this stage, Second Life is very much seen as a marketing channel, rather than a revenue stream. A large number of global brand names and high-profile organisations Adidas, Coca-Cola, Microsoft, Toyota, General Motors, Warner Brothers, PA Consulting and BBC Radio 1 are currently experimenting with an SL presence. The principal attraction for business is that Second Life in effect offers a huge, low-cost focus group a ready-made test-bed to gauge customer reaction to new products and marketing ideas. General Motors, for example, has built its presence around a new island called Motorati, aimed at developing car culture within SL. The company is running a contest that gives SL residents free land, which they can then develop into garages, racetracks, or other car-related facilities. It has also opened a dealership selling (digital) customisable Pontiacs.

Are SL residents wary of big brands?

Some are, yes. American Apparel has had to deal with virtual pickets at its SL stores, from residents upset at its (highly sexualised) real-world advertising. But most businesses have been clever at understanding how to add value to the community. Dell, for example, has created a virtual workshop' on Dell Island, where visitors can sit down and customise their computers for delivery in the real world. General Motors (GM) seems to have learned a valuable lesson from a mistake by a rival. Toyota, thinking it was doing everyone a good turn by giving away (virtual) cars to residents, instead caught flack for unfair competition against indigenous' car-dealers. As a result, GM will charge the going rate for a new set of SL wheels.