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E-COMMERCE

Are Real Profits to Be Made in Virtual Worlds?
 

Businesses that have bought into such cyber sensations such as Second Life get help marketing and branding products, but can money be made using virtual currencies?
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Upscale furniture maker Herman Miller opened its virtual doors for business in the online world Second Life, which has a population of millions of virtual residents, in October. The company's storefront was put up by Rivers Run Red, a global consulting firm that helps companies establish a presence and launch products in virtual worlds.

 “We’ve had a terrific response,” says Mark Schurman, communications director for Herman Miller, which is based in Zeeland, Mich. “Especially with our ‘Get Real’ campaign, which lets you replace your Herman Miller knock-offs bought in Second Life with genuine Herman Miller furniture -- the real thing.”

Herman Miller offers nearly 15 pieces to date on Second Life. Customers can purchase these furniture items, such as a coffee table, using "Linden dollars" – the currency of Second Life. The furniture, which then shows up in the customer's digital inventory, can later be placed in the customer's Second Life home.

It's an increasingly common scenario for businesses on Second Life, the incredibly popular online hangout. Created by San Francisco start-up Linden Labs, Second Life is a persistent world, meaning all the events that take place here in cyberspace carries on whether you're logged in or not. It's free to join, which first requires you to create a unique-looking "avatar" -- a visual representation of yourself or perhaps your alter ego -- but building a permanent home to hang your (virtual) hat will cost you roughly US $10 a month.

But does this cyber world offer opportunities for small-to-mid-sized businesses?

Good for branding but not yet for profits

Virtual worlds definitely carry business potential, says Daniel Terdiman, author of The Entrepreneur's Guide to Second Life: Making Money in the Metaverse (Sybex, 2007), but you need to do your homework. “Second Life is a great for brand building and advertising real-world products, but you’re not necessarily going to make a lot of money -- at least not right now,” advises Terdiman. “It’s worth the minimal cost for a presence in Second Life but you have to think clearly about what you’re trying to achieve and how you go about it -- the community is extremely sensitive to companies that come in and try to exploit them.”

Many companies have set up a storefront in Second Life, which residents can visit and purchase products inside using Linden dollars. Companies, however, must pay for real estate (for as low as $20) and a monthly maintenance fee (between $5 to $15 a month). You also need to “staff” the store, such as when a query from a potential customer is then e-mailed to someone in your real world organization.

On how to attract people to your store, Terdiman, whose book has an entire chapter on this topic, says it’s not as easy as you think: “In order to attract interest you need to advertize in Second Life classifieds, post to forums, talk to people, offer an incentive to come there and do research on where you want your store located,” Terdiman adds.

Testing out products

Another benefit to a virtual presence in this world is great for testing out products or ideas. “This is a good environment to test out what products will look like, such as toys, by letting people see or use them, before you make the investment in real life” explains Terdiman. Some computer game makers use Second Life residents to test out game concepts and provide feedback on how the experience can be improved.

Terdiman says he likes what businesses such as Herman Miller have done by designing and selling items that Second Life residents can purchase and place in their virtual home or office.

Schurman says “thousands” of pieces of the company's furniture have been sold to date, but the company isn’t making a lot of money at this point. “For us, it’s not about revenue off the sale of these virtual designs -- its more about extension and recognition of our brand, and extending relationships with consumers in the virtual world.” Schurman says that -- just as in real life -- they also have its furniture available for hotels in Second Life, such as the Crown Plaza.

“This technology is also very interesting for communications, training and collaboration,” adds Schurman. “I believe Second Life can one day serve as a useful business tool for people to be able to meet virtually and have conversations or shared learning.”

Last updated: Jan 1, 2008




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