A licence to print money?

Second Life is gaining a life of its own. The virtual reality website allows users to create an online existence for their alter ego and brands are already beginning to exploit this new “market”. Adidas, Reebok and Toyota have set up shop, BBC Radio 1 and Sony BMG are organising concerts, and Vodafone has recently moved in (MW last week).

The mobile phone giant joins advertising agencies Bartle Bogle Hegarty (BBH) and Leo Burnett, and media outlet Reuters – which will “report” from the virtual world – in cyberspace. But with an audience of less than 1 million “avatars”, or residents, are brands simply piggybacking the latest fad rather than adding long-term value? Not at all, says Justin Bovington, founder of Rivers Run Red, a design company specialising in the development of virtual world marketing and design. Bovington believes the three-year-old site – created by Linden Labs – is not a fad. He says Second Life membership is edging towards a “tipping point”, with brands seeing it as another platform in an increasingly fragmented media mix. A year ago, there were just 80,000 members, but the figure may reach 6 million, he says. “Clients are asking agencies what their Second Life strategy is,” he adds.

However, Inferno head of digital content, Pete Grenfell, warns: “With a range of brands stealing the headlines in Second Life, those who follow suit run the risk of following, as opposed to setting, the trend.”

Second Life has approximately 900,000 total user accounts, with 358,000 users active over the previous 60 days – relatively few compared with other virtual worlds, such as World of Warcraft’s 7 million subscribers.

Second generation But Second Life’s devotion to “user-generated content” places it at the centre of a trend called Web 2.0, where users create and share blogs and photos. “It is like the jump from radio to television for the internet,” Bovington says. “This is what many people thought the internet was going to be ten years ago.”

While other services, such as MySpace, try to build audiences around user-generated content in order to sell advertising, Linden Lab does not sell ads. Instead, it makes money when residents lease virtual property and through subscriptions – although basic accounts are free.

Around $3.2m (£1.7m) of real money exists within the game and about $70,000 (£37,500) is traded daily on its currency exchange, known as the Lindex. The top ten entrepreneurs on the site each make more than $100,000 (£53,600) annually, selling clothing, speculating on property and offering services to other residents.

Grenfell says: “Real or virtual, it still comes down to bucks, albeit Linden dollars in the case of Second Life. Individuals and brands alike are making big money.”

Adidas, which launched a virtual shop last month, has already sold 15,000 pairs of trainers, with the proceeds ploughed back into its Second Life activities. It has also hired a number of shop assistants. Bovington says the brand can interact with consumers who are hard to reach through conventional advertising.

Small wonder that major brands are joining the virtual “metaverse” to converse with residents. BBH showcased its latest Audi campaign and the film X-Men premiered on Second Life.

A free rein Paul Kingsley, chief executive of digital communications agency SIXandCO, says it is no surprise that virtual reality is generating interest among marketers keen to expose an increasing number of users to advertising. “Its very nature allows you to be more playful with your marketing strategy. It’s not a real world environment and hence doesn’t have the same constraints as traditional advertising,” he adds.

Detractors say publicity may tempt mainstream consumers to turn to Second Life, but they could soon become disenchanted by the time needed to play, a seeming lack of activity, and graphics unwieldy for slower processor and broadband speeds.

But BBH director of content Mark Boyd believes advertisers should get involved, if only to “learn through doing”. He states: “Second Life is not the future – but this kind of [consumer and brand] behaviour is.”