A second income on Second Life

"Blaze Columbia" is, by any measure, doing well with his line of designer clothing. He's on track to generate more than $100,000 in annual profits, barely a year after launching his business. And that's in addition to a first career as a professional photographer.

There's just one big difference between the clothing that this Missouri resident produces and that of any other top-of-the-line dress or business suit: His don't exist – at least not in the physical world.

"Mr. Columbia" is an in-game name for a player on Second Life (SL), a Massively Multiplayer Online Role-Playing Game (MMORPG).

Columbia, who requested that his real name not be used because he wishes to keep his "real life" and "online life" separate, sells virtual clothing to other players, part of a purely electronic economy that's redefining how some think about the nature of money.

In a traditional sense, the word "economy" tends to evoke images of huge factories churning out products that are bought by consumers, who spend the money that they've earned by their labor – perhaps working at a factory. With the advent of the virtual economy that exists within SL, however, the "product" has been so far removed from a physical entity that it's unclear what value it holds.

SL claims more than 1 million users, allowing its "citizens" to mold their avatars (online representations) into whatever form they choose – from mundanely human to exotic animal-human hybrids – and interact with other members.

The website has already generated publicity as a place for distance learning and virtual concerts – and notoriety for its "adults only" venues and instability. But there's also a powerful and thriving economic engine whirring beneath its surface.

The official SL currency used for in-game commerce is the linden. Linden Lab, the privately held company in San Francisco that operates the website, currently sells the currency for about 275 lindens to the dollar.

One of the most common first purchases involves the massive land boom engulfing this virtual world. Linden Lab offers new users virtual land priced at well below the market rate inside the site. Some savvy real estate brokers have quickly purchased land from new users, still below the going rate, and resold it at a hefty profit. Deals are made using the game's built-in real estate market. In fact, one broker from Germany, whose real name is Ailin Graef, claims to hold more than 275 million lindens in SL assets, the equivalent of $1 million.

Aside from real estate, an unknown but growing number of SL users have been making a living by delivering products or services to the more than 800,000 accounts active on the system in any two-month period.

According to Columbia, starting an SL business is much like doing so in the physical world. "There are many small differences, but it's so very like running a real-life business," he writes in a e-mail. "Marketing, branding, and good business practices are just as important as a good product. One major difference is that things move lightning-fast in SL. And the customer base is always new."

Doug Bassett (in-game name "Doug Latrell") also operates a successful SL business. As a senior technical instructor for Thomson NETg, a training company in Scottsdale, Ariz., he teaches courses that involve Cisco and Microsoft technologies. Mr. Bassett has now extended his company's presence into SL, offering its courses in the game world. Revenue from in-game sales of courses is more than $10,000 a month and growing, he says.

A major factor in opening an SL branch was the "coolness factor and a unique way of meeting people that we wouldn't normally meet," he says.

This same "coolness" has led Dell Computers, Nissan, and Pontiac to offer virtual versions of their products for in-game use by players.

For now, only virtual products are sold on SL, but Dell plans to let SL users buy real-world versions of its SL products sometime in the future, perhaps as early as this summer. At the Consumer Electronics Show, held earlier this month in Las Vegas, IBM unveiled online stores for Sears and Circuit City that it developed on SL.

But not everything is sunny in the SL economy. The question of taxes on SL income is becoming a hot topic. The US House Joint Economic Committee has recently undertaken an investigation of the entire question of virtual economies, according to Dan Miller, a senior economist working for the committee. An avid user of virtual worlds (notably the most popular MMORPG, World of Warcraft), Mr. Miller is studying how tax policies might be adjusted to account for this new digital world. He plans to issue a report this spring.

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