Is Corporate Mania for 'Second Life' Just a Lot of Hype?

On December 1, Ross Mayfield held a press conference inside "World of Warcraft."

In real life, Mayfield is the CEO of SocialText, a Palo Alto start-up offering online collaboration software for enterprise-scale businesses.

In "World of Warcraft," a 3D game that serves as a kind of alternate online universe, he's a sword-wielding knight named Kalevipoeg.

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More than 30 bloggers and reporters attended the press conference, using their own sword-wielding avatars, and no one was allowed to ask Mayfield a question without challenging his virtual knight to a virtual duel.

When Mayfield first announced this online Q&A session, via his personal blog, it was no more than a joke.

He was poking fun at companies like Dell and Sun, which had recently held press conferences inside "Second Life," the online virtual world that has an awful lot in common with "World of Warcraft."

Much to his surprise, readers took him seriously, and more than a few asked if they could join in.

So he went ahead with his "World of Warcraft" press conference, and the press actually came, including a mainstream business reporter who soon published a story in the Austin American-Statesman.

To the surprise of many, the business world — that's the real business world — has fallen head over heels for "Second Life" and other virtual worlds.

Last May, BusinessWeek ran a "Second Life" cover story. In October, Reuters opened a virtual news bureau inside the service that had veteran tech journalist Adam Pasick trolling for stories with help from a digital alter ego.

Shortly thereafter, as some were beginning to wonder whether the service was overhyped, Fortune senior editor David Kirkpatrick ran a story called "No, Second Life Is Not Overhyped."

Companies like Dell and Sun aren't just holding press conferences inside this alternative universe. They're building virtual "campuses," 3D Web sites where they can advertise their products — or even sell them.

Cisco holds interactive seminars inside "Second Life," complete with video feeds of featured speakers, while IBM uses the service for internal communication, with far-flung employees chatting away via digital avatars.

The company claims that more than 3,000 IBMers have participated in these virtual-world chats, including everyone from marketing types to software developers.

"We're at the beginning of the next evolution of the Internet — the 3D Internet, as we like to call it," says IBM's Michael Rowe, whose official title is senior manager, 3D Internet and Virtual Worlds. "If Web 2.0 is a place where everyone becomes a producer, everyone becomes a content creator, the 3D Internet gives us a whole new level of social interaction in this collaborative space."

But the question remains: Is "Second Life" overhyped?

If you talk to companies that have set up shop in this virtual world — or if you read about "Second Life" in the press — you're inevitably told how popular it is.

"It's hugely popular," says Rowe. "The growth curve is enormous."

More often than not, you'll hear that "Second Life" boasts millions of users. But the truth of the matter is that no one knows how many people are using the service — other than Linden Lab, the company that hosts "Second Life."

According to Clay Shirky, a faculty member in the Interactive Telecommunications Program at New York University who's made a four-month study of "Second Life"'s audience, the number of regular users is well under 200,000.

Virtual worlds may indeed play a big role in the future of the Internet. But for the moment, the talk far exceeds the actual worth of these services — at least in business terms.

If fewer than 200,000 people are regularly using "Second Life," it's not the best marketing tool. And though virtual worlds are certainly a means of long-distance communication, it's yet to be seen whether this makes sense — in the long term — for anything other than fun and games.

So many companies are entering "Second Life" because it's the thing to do, because the press gives virtual worlds so much attention.

"The biggest benefit of 'Second Life' — for companies — is the media attention," says Heather McConnell, an account executive with the international PR firm Hill & Knowlton, who's become the in-house virtual worlds expert, educating clients on these new-age services. "The media is generating so many stories about companies entering 'Second Life,' and that's a real advantage."

But this sort of press coverage lasts for only so long. In the end, virtual worlds aren't viable business tools unless they offer something more, and whatever the claims of Cisco, IBM or Fortune, it's hard to tell if they actually will.

The Massively Multiplayer Online Commerce Engine

There's a reason Ross Mayfield equates "Second Life" with "World of Warcraft." It looks and feels very much like an online 3D game.

Thousands of users navigate the same sprawling digital universe using cartoon-like avatars. BusinessWeek's seminal "Second Life" cover story, "My Virtual Life," actually calls it a "massively multiplayer online game," comparing it directly with "World of Warcraft."

But unlike 3D games, "Second Life" isn't about winning. There are no goals or levels. It's a place where you live, yes, a second life.

You don't sword-fight or blow things up — unless you want to. You walk around. You chat with people. You go dancing, skiing, scuba diving or shopping.

"Second Life" has its own economy, based on virtual "Linden dollars," letting you buy and sell virtual goods — from shirts, shoes and trinkets to cars, houses and real estate.

There's an open market where you can trade real American money for Linden dollars, but as you buy and sell goods "in-world," you can also find ways of generating virtual currency from scratch.

The trick is that, in "Second Life," you're free to create your own virtual objects. There's a limited amount of virtual land, but with Linden Lab supplying the modeling tools, you can build almost anything else.

Whatever you create, you own — even in the real world. Intellectual property rights belong to the builder.

Once you build an object, you can keep it for yourself or sell it to someone else. That means you have free rein to personalize your digital avatar or your own digital home, but you can also open your own digital boutique, selling anything from handbags to hairdos.

"Second Life" gives users a certain amount of control they may not have in the real world. You can be someone you're not. And if you're shrewd enough, you might even make some serious money.

A woman named Ailin Graef, whose avatar appeared on the cover of BusinessWeek, claims that her virtual bank account and virtual real estate holdings make her a real-world millionaire.

At the same time, this create-buy-and-sell dynamic gives entrée to real-world businesses. Adidas, for instance, can promote its shoe brand by building a virtual store where it sells virtual shoes.

Think of this as a kind of 3D Web site, a cartoon-like retail outlet where avatars can come and shop.

Meanwhile, Dell can open an in-world island where it sells real PCs, as it does at Dell.com. Cisco and IBM can fashion digital campuses where distant employees, clients, partners and even customers can communicate.

All of this is happening today. But you have to wonder if any of it actually makes sense.

My Virtual Business Is Virtually Empty

In December, Greg Verdino, the vice president of emerging channels at the tech-savvy marketing firm Digitas, took a tour of "Second Life"'s big-name business campuses, including Starwood's virtual hotel, the Aloft, and virtual stores from American Apparel, Toyota and Reebok. None of them contained even a single customer.

Certainly, some people are visiting these in-world business campuses. But without reliable, third-party traffic-monitoring software, it's hard to tell exactly how many.

Cisco monitors its traffic with tools from a site called SLStats.com, but these aren't widely used. Because Second Lifers can so easily create dummy avatars, even Linden Lab concedes that such tools are less than reliable.

"It's easy to create an object that sits on a virtual parcel and looks for avatars," says Daniel Huebner, "Second Life"'s community director. "But we're beginning to see 'bots' in Second Life. It's possible that there are avatars in the world that are not backed by human beings."

There may come a time when virtual worlds are a legitimate means of marketing and selling products. The 3D imagery could give people a better idea of what real products actually look like.

Some even argue that virtual worlds will bring a certain social element to online stores, letting you discuss products with the people shopping beside you.

This sort of retail chat doesn't happen much in the real world, but if anything, the past 15 years have shown that many people are more comfortable chatting with strangers over the Web than they are in the flesh.

Of course, you can always augment a 2D Web site with 3D imagery, and at this point, you can't be sure that people actually enjoy browsing products with a digital avatar.

A site like Amazon.com is successful because it makes shopping so easy, and in many ways, virtual worlds make shopping more complicated.

Virtual marketing may seem like a much simpler animal — all you have to do is get your company name in front of that wandering avatar — but its effectiveness is even harder to judge, at least until these technologies mature.

"Can you, as a business, look at the 'Second Life' of today and say it's a viable marketing channel? Can you draw direct lines between what people do in 'Second Life' and what they do in real life?" Verdino asks. "No, you can't. Certainly, 'Second Life' is innovative, but it's far too early to start calculating ROI, or expect any real-world deliverables to come of it."

The War on Virtual Terror

Two months after Verdino's stroll through some very empty "Second Life" campuses, a group calling itself the Second Life Liberation Army detonated two virtual bombs outside the American Apparel and Reebok stores.

Angry that businesses and other elite users are buying up the prime "Second Life" real estate and exerting an undue amount of power over the service, the group is calling for Linden Lab to cede political rights to each and every member.

This didn't "damage" the virtual stores. You can't destroy other users' property without hacking the service. But it points to a pair of problems facing any business that enters "Second Life."

For one, many die-hard users are unhappy about big brand names joining the fun. And, two, because users can do almost anything short of destruction, business operations are easily disrupted — sometimes intentionally, sometimes not.

This fall, an innocent bystander disrupted Toyota's virtual Scion unveiling when he accidentally drove his car onto the stage.

Linden Lab reserves the right to remove misbehaving users from the service, but that's the only protection businesses have against in-world disruptions — short of real-world lawsuits, and this sort of thing has yet to be tested.

"If you're going to create a virtual world, with a virtual economy and virtual people, you're going to need a virtual dispute mechanism — and there's not one," says Alan Behr, a partner in the electronic entertainment group at Alston & Bird, an East Coast law firm.

Yes, you can hold private gatherings in "Second Life." When IBM uses the service for internal communication, uninvited guests are prevented from participating by privacy tools built into the service.

But exclusion doesn't make sense with sales and marketing, and circumventing privacy tools isn't difficult. At this point, "Second Life" has no reliable security mechanism, either.

Conference Calls Reloaded

Over the next year, IBM will spend $10 million on virtual-world technologies. That's real American currency.

Big Blue is helping other businesses build virtual campuses — Circuit City and Sears stores are already open inside "Second Life" — but a big part of its push involves that notion of 3D business communication.

Rowe of IBM believes that in-world chats are more natural and more "fun" than everyday telephone conference calls.

"When a traditional conference call ends, everyone hangs up and they go back to work," Rowe says. "In 'Second Life,' even with the global reach of our company and all the different time zones and cultures, people stick around at the end and socialize. They'll strike up conversations that are natural in a physical setting but that don't really happen on a conference call. There's a real collaborative feeling to it. It's a powerful thing for a business to have."

Or a huge time sink. In some ways, virtual-world chat is just a more cumbersome and time-consuming version of instant messaging, and although Web-based video conferencing has been around for years, offering a visual experience that's in some ways superior to 3D chat, most people still prefer good old-fashioned telephone calls.

R. David Lankes, an associate professor at Syracuse University's School of Information Studies, sees virtual-world communication as no more than a novelty.

"I set up an office in 'Second Life' — and I was addicted for a whole week," he says. "I taught a class in 'Second Life,' and at one point I realized we were just chatting. We could do that over IM."

Now You See It, Now You Don't

No doubt, there's a social component to virtual worlds you won't find with other technologies. But many wonder whether this transfers to the business world.

As much as the mainstream press writes about "Second Life," few reporters point out that one of the most popular activities is sex.

HUGSaLOT, a "Second Life" escort who asks that her real-world identity be kept secret, claims that her virtual-world activities earn upward of 500 American dollars a month.

As someone who's used the service for more than two years, she concedes that some real-world businesses will thrive in "Second Life," but she's sure that most of them will flop.

"Existing businesses trying to make an extra buck in 'Second Life?' Probably won't pan out. They won't be accepted," she says. "The bottom line is that 'Second Life' is just a chat-room video game."

But the so-called 3D Internet doesn't exist. "Second Life" is just one Web service with a relatively small number of regular users.

You can point to the millions of people using "World of Warcraft" — and actually paying for the privilege — but "World of Warcraft" is by no means a business tool.

As massively multiplayer online games go, "Second Life" is just different enough to provide a virtual home for real-world businesses, but at the moment, the role of these companies is little more than a curiosity.

Then again, maybe the 3D Internet does exist. Maybe it's here because so many people believe that it's here. Maybe it's the future of the Web because no one wants to admit that it's not.

If you hold a press conference in "World of Warcraft" and the press actually comes, is it still a joke?