Why are companies like Toyota (NYSE:TM) and Dell (NASDAQ:DELL) and Starwood Hotels (NYSE:HOT) getting immersed in this pixilated fairyland? Why did IBM (NYSE:IBM) announce it was going to spend $10 million developing a presence in Second Life and other virtual worlds? One word: research.

Entrepreneurs can do research, too. In fact, American Apparel was the first major real-world company to formally enter Second Life when it opened a virtual store in June 2006. Now denizens of Second Life can buy American Apparel clothing there for their avatars (and pick up free virtual tacos and Tecate beer).

Raz Schionning, Web director at American Apparel, says the company's investment in Second Life has been inexpensive. For one thing, American Apparel doesn't need to employ salespeople in the virtual world--to buy something, customers just click on the items they want and agree to transfer money. He says the company's presence in Second Life has cost it about what it typically pays for a Web banner ad campaign. For its investment, it's received plenty of buzz in the press (and some attacks from Second Life residents), sales of some virtual T-shirts ($300 in Linden currency, about $1.10 in real money), and perhaps a banner ad's worth of visitors who've made the leap from Second Life to American Apparel's real-world website.

"There's definitely something there," Schionning says. "But I know we haven't really figured it out yet. The only thing we know right now is that we need to leverage the platform better."

American Apparel is still feeling its way along in this world, but Second Life has been great for Wes Keltner's business. Keltner is president and CEO of the Ad Option, a year-old Lexington, Kentucky, agency. It was Keltner's idea to get American Apparel into Second Life, and the buzz from that has meant a swarm of clients and prospects. He says he has another five or six clients ready to launch Second Life presences. Keltner is even developing what he calls Second Life's equivalent of Times Square and has a commitment from Lego for advertising.

Vivox, a start-up based in Framingham, Massachusetts, sells VoIP telephone services to online games and social networking sites so people don't have to type at one another while they're in those worlds. (For all the buzz about people talking with one another in virtual worlds, what they're doing is instant messaging.) One of its customers in Second Life is Languagelab.com, which is building out property in Second Life as a way to immerse language students in the language they're learning. Vivox also has placed 3-D phone booths in various parts of the virtual world.

Rob Seaver, Vivox's CEO, says he has every intention of making real money in Second Life. But mostly, he thinks Second Life lets him explore the future of the Internet and think about what that might mean for his business. "A lot of what Second Life portrays is the future," Seaver says. "This 3-D virtual realm is a significant part of the evolution of the Internet and more and more activities will be presented in the virtual world."

Published on: Feb 1, 2007