Thursday, October 11, 2007

How To Become A Successful Second Life Entrepreneur

In the simulated world of Second Life, in which 9.6 million "residents" or registered users create the world around them, standing out is paramount.

"I have 500 different skins," says Arikinui Adria, a virtual fashion designer who is referring to various looks that can be worn by her "avatar," a character that she and anyone who registers for Second Life can create. "Just like real people change their lipstick to match their outfits, I change my hair style, my hair color and my skins to match mine."

Armed with a graphic-design tool and image-editing software, Adria creates fashions for herself and for sale in her virtual store, Nuclear Boutique, from which she earns between $1,500 and $3,500 each month. Granted, the real life 39-year-old Cocoa, Fla., resident who asked that her real name not be used, says, "I'm not making the millions Ralph Lauren is making." But the fact that a population of avatars admires her design skills is rewarding, she says.

In Second Life, "you can do anything you want, create anything you want and be whoever you want to be," says Daniel Terdiman, author of "The Entrepreneur's Guide to Second Life," which is due out in November. Since the fantasy word's inception in 2003 people have gotten married, taken classes, thrown parties, watched movies, gone shopping, built homes — and now, they're testing their entrepreneurial mettle. What makes Second Life so unusual compared to many other interactive 3D games (such as those played on Microsoft's Xbox) is that the virtual society uses a currency and thus an economy has begun to take shape.

Second Life poses a big opportunity for entrepreneurs, says Terdiman. "It is a virtual world in which personal expression is important," he says. Since there is no limit to what people can create, he estimates that "several hundred thousand consumers" will likely want to spend money on the latest designs for anything from vehicles that fly to enhanced body parts.

Entering the "metaverse" — a term used to describe immersive 3D virtual spaces such as Second Life — may not make much business sense for every would-be digital entrepreneur as it takes the same amount of hard work and stamina as owning a real-world business. But for those with an eye for design and technological acumen to boot, taking a second look at virtual worlds might, in fact, be worth the effort.

A Primer on Second Life

In 2006, according to demographers from Linden Lab, the San Francisco-based creator of Second Life, more than $93 million worth of transactions took place in Second Life. Additionally, in the last 12 months 2,082 entrepreneurs selling anything from cars and fashion accessories to parcels of their own private island made $20,000 or more. And just last month, 1,615 resident-business owners earned $1,000 to $2,000 and another 1,058 earned between $2,000 and $5,000.

Getting a Second Life is free. However, a computer, Second Life software, and a high-speed Internet connection are generally necessary for optimal use. A premium membership in which users can buy land and receive a weekly stipend is also available for $9.95 a month. The currency, known as "Linden" dollars, may be purchased using a credit card and earned during the game. Lindens can then be converted into real dollars via online currency exchanges.

Virtual worlds including Second Life and "World of Warcraft," an online role-playing game, are receiving massive inflows of money. According to a recent report about technology trends in small businesses from Intuit, it's estimated that more than $200 million real-world dollars are funneled through virtual worlds each month.

And entrepreneurs like Elizabeth Foshion, are capitalizing on the trend. Four years ago, Foshion, or "Surreal Farber" as she's known in Second Life, and her business partner entered the virtual community as content creators. "We started making stuff for ourselves and people liked it," she says. From there, the two invested in their own island, which today might cost $1,675, plus a $295 monthly maintenance fee.

Inspired by various works of science fiction, they named their island "Chaos" and turned it into a sci-fi fun land complete with underground tunnels and a similarly themed store, "Phobos 3D Design," where residents can buy wardrobe essentials such as a pair of metallic cyber-punk boots and textured T-shirts. At Chaos, Foshion says, "we have alien eggs that are willing to abduct you." Sales from the store, she says, take place in Lindens and range anywhere from five cents to $15 U.S. Every three months, the store brings in about $8,000 to $10,000.

The potential that virtual worlds hold for entrepreneurs is unmistakable, says Edward Castronova, an associate professor of telecommunications at Indiana University in Bloomington, Ind. Entrepreneurs "may not make money, but they would certainly have their eyes open to a new technology" that may play a key role in future forms of commerce and the way humans interact for years to come, he says.

Virtual Merchandising 101

And it's not just about selling virtual goods and services. Both large and small firms are looking at virtual worlds as one more venue to pitch real-world merchandise to consumers. 1-800-Flowers, for example, is considering selling real-world floral arrangements through its virtual store. (Currently, flower shoppers have to exit Second Life to order bouquets.) And Sears Holdings offers Second Life residents the opportunity to purchase real merchandise via a link to its web site within its virtual store on IBM Island.

According to the Intuit report, more than 100 small businesses offer e-commerce options within Second Life. One of them is I Want One Of Those Ltd., a U.K.-based site that sells items from multiple retailers, which offers an e-commerce option within its store in Second Life on IWOOT Island.

Some real-world businesses, however, have found the efforts haven't paid off. American Apparel shuttered its virtual doors in May 2007, after about a year of operation. "Linden Lab has left the door wide open to creativity, but it's not without limitations," says Raz Schionning, director of American Apparel's web services. In Second Life, there's a "limit on the number of avatars (visitors) who could be in the store at the same time," he says. "We sold more virtual products than we expected, but it clearly wasn't going to compare to the channels we already use, such as retail stores or online stores."

Some companies are looking at Second Life — and other virtual worlds such as "There" and "Gaia Online" — as a place to build brand awareness rather than sell products. Millions Of Us, a San Francisco consulting firm, often advises companies on marketing techniques in virtual worlds. "We are not necessarily creating stuff," says Reuben Steiger, chief executive of Millions Of Us. "It is much more about creating experiences on Second Life."

For example, Millions of Us recently helped Warner Bros. Entertainment and the CW Television Network launch a "Virtual Upper East Side" in Second Life to gain publicity and create enthusiasm for the television show "Gossip Girl." The idea, says Steiger, was to mimic New York's Upper East Side neighborhood where "viewers of the show can hang out with the avatars of the cast members and ask them questions."

Even for small businesses the virtual marketing strategy is simple, says Steiger. Consider your customers and their respective needs. People in Second Life, who are essentially living in a fantasy world, respond to experiences rather than repurposed everyday advertisements. To gain their attention, and consequently their business, Steiger recommends providing experiences instead. And like any business, he added: "The key to success is to make something really great."

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