• by Shankar Gupta , December 1, 2006

I have to confess myself a bit of a Second Life skeptic, which would appear to put me in the minority in the media world. Companies that have made their entrée into the virtual world include Edelmen, Reuters, Pontiac, and a handful of ad agencies.

But what is it that Second Life, produced by Linden Labs, offers giants like Edelmen and Pontiac? Adweek in October reported that Pontiac is hoping to encourage a "car culture" on its own SL homestead, Moterati Island. Edelmen partnered with the Electric Sheep Company, an SL-dedicated marketing agency, and is looking to sponsor an in-game company's business model.

But if Pontiac succeeds in creating a "car culture," it'll be reaching, at the high end, 700,000 people, the number of residents who've logged on in the past 60 days. Not a small number in the scope of virtual worlds, but not the tops, either; "World of Warcraft" dwarfs it with its subscriber base of 7.5 million. There's business to be done in Second Life, but again, the numbers are relatively small when compared with the money these companies make in the "real" world. Firms in the virtual market make $500,000 and $1 million in transactions total each day for the whole of this online world.

Because of its relatively small population, SL doesn't offer the broad reach that big online buys offer, and it also doesn't offer one of the major attractions of the Internet--targeting. SL is a relatively new and unstudied phenomenon, and only very basic demographic analyses have been done. A good summary can be found here, which gives a general picture of the populace.

Another hurdle for marketers is Linden Lab's rigorous privacy policy, which means that any sort of polling or profiling of the Second Life market has to be done only through voluntary surveys. The metrics for which online is prized are basically impossible in SL's virtual world.

But even a skeptic has to admit that marketing and business in SL has a certain gee-wiz factor that makes it worth the effort, even if all the business questions aren't answered yet. And a key benefit of the SL virtual world is that it allows marketers to test out potential campaigns and content in a low-cost, relatively low-risk environment. But even though Second Life has produced its first millionaire, it's going to take a few more of those before we're talking about real money.