The Evolution of Business In Second Life, by Nobody Fugazi (Taran Rampersad)
The early stages of Linden Lab’s Second Life saw much in the ability of people to make money; this culminated in the Businessweek article My Virtual Life where Anshe Chung was featured as someone making real money from virtual worlds. Anshe Chung was later to be hailed as Second Life’s first millionaire, an occasion of interest at international levels – while Linden Lab is in California, Anshe Chung was in Germany at the time of the writing of the Businessweek article. The money she made, collected from virtual land transactions in Second Life, was collected from people all over the world. While most people focused on the money she made, not many people focused on where that money came from – or where she was. A new form of telecommuting quietly entered the fray; Anshe Chung was by no means alone. She simply gained the spotlight.
Second Life is full of aspiring businesses, many having started after the Businessweek article. In it there is a hope of connecting, of being able to do something, and to have a profitable hobby or make a living. And imagination continues to run rampant in products and services.
Who would have thought that there would be money in virtual weddings? Kande Knox did; she started off by making things for the weddings and rose to the occasion when people asked her to handle the events. This is an example of what can be done by adapting and evolving within a virtual world; wants and needs may be the same in the rest of people’s lives that exist outside of the looking glass – but the demand is there for products and services. Others like Kande are out there, running similar businesses and competing. Still more create and sell items such as clothing, apparel, vehicles and even games.
With time, some things change. Since the Businessweek article featuring Anshe Chung, some things have changed mainly because more and more people flocked to Second Life with the thought of their own virtual businesses – and many fail; the failures of Second Life businesses are not as known in the media as the successes. People reinvented businesses, adapted, or even bought out failures to reinvent them.
Creative businesses saw that there was potential in selling things on the internet, outside of Second Life. Services such as SLExchange appeared during the formative years of SecondLife, defining a space which had not been defined as well before. With the added users of SecondLife, SLExchange and other sites were well in place for the rush – and because they were, the amount of items which they made available increased significantly.
With all of this happening, it was hard to hide the success of what were, in reality, small enterprises. Large corporations that did not see the potential or could not develop it themselves paid people real money to develop real world presences for them. This saw some backlash from people who were happy with the smaller business domination of SecondLife; guised as a cultural defense for the most part, the small entrepeneur worried to compete with the inevitable.
Real World Corporations
Large corporations entered Second Life, maybe misunderstanding what Second Life is. The media hailed triumphant entries of companies, but there is little glory in the scattered graveyards of most of the projects. Even marketers have begun to balk; where once they thought there was a large amount of people who they could peddle products to came to realize what many of us know intuitively: no one particularly likes advertisements, and an interest in a product is limited to the context of the product. That this period of at least a year can be summarized in one paragraph is in itself a wonder.
But even the large companies who have been serious about Second Life presences adapt. While IBM’s presence is largely shrouded in mystery, Reuters remains a constant and has become a well respected part of Second Life culture. Media companies saw a platform for movies which they continue toward making more interesting. “Transformers” avatars can still be seen floating around from the events in SecondLife; other companies stall as they try to find their way into a world where the large corporation and the small entrepeneur are on more even footing.
As such, it seems that the success of one of the businesses was to become more needed. The virtual bank was well on its way as people looked for places to maintain the profits from their businesses. If you have money, after all, you want it to work for you.
The Financial Sector
Seeing the ‘success’ of Ginko Financial, more banks arrived – daily interest rates of 0.01-0.023% seemed to be just about everywhere one could look. A virtual form of banking had arrived, and while eyed suspiciously by some, these banks seemed to somehow flourish. Stock exchanges showed up so that small businesses within Second Life could enjoy a form of capital raising, small virtual companies had IPOs and collected respectable amounts of money based on trust. Again, reality set in.
The best known stock exchange became more visible with misappropriation of funds. With the recent failure of Ginko Financial, things changed. Where there was once a trust in banking institutions, phrases such as ‘ponzi scheme’ litter the pool of trust that the community had for ‘banking’. Business evolves.
Two Italian gentlemen formed The Rock Insurance Co., anticipating the need to develop trust through transparency before Ginko Financial failed. Eliale Morigi (CEO) is working with existing and future banks within the Virtual World with one of the goals being an index of trustworthiness. The business model is simple, though it requires capital: Insure deposits at these banks with 30 day certificates. When Ginko Financial failed, they paid certificates that had issued the bonds. Paci Barbarossa (CTO) looks to the role of technology in such areas as well with the experience of his real life company (Prosa). In time, they may consider insuring businesses within the SecondLife stock exchanges.
Open forums on banking within Second Life have begun informally and formally; while the first annual Second Life Banking Open Forum was mostly about Ginko Financial’s failure, it allowed some of the right people to meet – and provided a platform for future discussion.
Stock exchanges themselves are not as transparent, and this is a concern for the financial sector of Second Life. Yet in time, this too shall be addressed – or they will go the way of Ginko Financial.
While business in Second Life adapts, new businesses will continue to fail and succeed on their merits – and one of those merits is how real they seem:
For a dream to become reality, make it real enough to believe in. — Peter Jones
Business in Second Life was, is and shall continue to be about Trust; it is the belief of people which makes business in Second Life possible. Any business which loses that belief, that trust of the client base within the world… they too shall find themselves in the virtual tar pit.