• BusinessWeek, Tuesday, October 17, 2006 11:30 AM

Media companies are setting up shop in Second Life, the virtual online world developed by Linden Lab and created by its users. Over the past month, Wired magazine, CNET Networks and Reuters have set up virtual offices in the online world, where many real people earn a living.

That major businesses are entering Second Life is testament to its surging popularity. Linden Lab says Second Life is growing at about 38 percent month over month, and expects to add between 200,000 and 250,000 new players this month--an accelerated pace that MySpace would be proud of.

"Second Life is almost a phenomenon like [video site] YouTube; it's reached critical mass," says Chris Baker, senior associate editor at Wired.

The three news organizations can be considered early adopters, and don't expect them to be the only ones as the virtual online world grows up in the next 12 months. "Everyone's been searching for the killer broadband offering, and this is it," says Justin Bovington, CEO of Rivers Run Red, a company that creates events and designs buildings inside the game.

Advertisers are moving in, too. Wander around and you'll find companies like Adidas, Sun Microsystems, Toyota and American Apparel promoting their products through ads and, in some cases, virtual stores for their game netizens.

The media companies are taking this seriously. Reuters has devoted part of its staff full-time to covering Second Life, naming longtime tech reporter Adam Pasick as the corporation's Second Life bureau chief. His avatar even sports a press badge (two of his first Second Life stories appear today). From its virtual HQ, Reuters also provides market information for the virtual world, including the exchange rate between the Linden dollar and the U.S. dollar, as well as how much real-world money was spent on the game in the last 24 hours.

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