Taking stock of virtual economies
Thursday January 11, 2007
On the opening day of Congress last week, Republican George Miller (California) held a press conference in Second Life (SL), the 3-D internet world that has been getting a lot of publicity. He rightly referred to SL as “the next frontier” and urged others to use it to expand public participation. Endorsement from Congress marks another milestone in the development of virtual worlds, which are the most interesting web invention since search engines.
I have immersed myself of late in SL and it is mightily impressive, despite some outages. If 2007 is the year of user-generated content, then content doesn’t come more user-generated than in SL where everything is created by its citizens. The only constraint is the limits of imagination. When it started it was just (virtual) acres of barren land on which residents have been building houses, shops, casinos and lap dancing clubs with lots of educational opportunities en route. It could, of course, be a nine-month wonder as people gawp and move on. The upside is that such worlds could evolve into major economies in their own right providing employment for thousands, if not millions, of people.
When I wrote about it in July it had 333,000 “residents” (people who have acquired one or more of their own 3D avatars) but now it has over 2.4m, and counting, even though there are rarely more than 20,000 active online at any one moment (that’s over five times more than a year ago). About $1m (£517,000) is being traded each day in SL.
Last week I put my money where my mouth was by moving £100 from a (real life) savings account to buy SL’s virtual currency, Linden Dollars, to purchase more land. This was either a sensible portfolio diversification or an act of craziness. I should have done the deed a month earlier because – wait for it – property prices increased by 24% in December, partly because of what may be a temporary, artificial shortage of land. This could turn out to be cyberspace’s South Sea Bubble. Friends look at me askance when I tell them I paid 995 Linden Dollars (about £19) for each 512 sq metres of land, which only exists in computer code. But someone has got to play the guinea pig.
We are midwives at the birth of virtual economies in which people trade land, sell products, pay to have sassily attired avatars or just do their own creative thing. One of my SL neighbours (from Australia) sells her own paintings and those of others in a virtual gallery and is planning an interactive sculpture park backing on to my garden. Another neighbour who has built a club and who doesn’t speak English gesticulated to me that one of my walls was protruding into his living room. His avatar was bigger than mine – so we settled out of court.
I have been creating an art garden partly by using SL’s inventory of trees and grasses and by uploading photographs of my own garden to merge with the undergrowth. Like so much of the internet, it would be quite simple to do if only you didn’t have to waste hours finding the right instruction.
Second Life is one of many virtual worlds such as Cyworld of South Korea (said to make $1m profit a day), there.com and the Gothenburg-based MindArk, whose members can withdraw virtual money from a real-life ATM. SL’s killer app is that unlike others such as the stunning World of Warcraft, you keep legal ownership of what you create or buy. That is why I would back it – it has already produced its first dollar millionaire – or something similar to pull down the boundaries between a virtual economy and a real one. There is of course a danger that the company behind SL (or the others) could crash, causing hundreds of thousands to lose money and thereby generating a political furore. But I’m sure Gordon Brown has a contingency plan for that.
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