Second Life’s Real-World Problems

Reality is catching up with Second Life, the much hyped 3-D website that lets users create alter egos called avatars who can walk, chat, fly, have sex and buy and sell virtual stuff for real money. The ballyhoo surrounding this online community has led multinational brands from Reebok to Toyota to establish beachheads on Second Life to interact with consumers and be a part of the next wave in social networking. In April market-research firm Gartner predicted that by the end of 2011, 80% of active Internet users will have some sort of presence in a virtual world, with Second Life currently one of the most populous. Business Week last fall put on the cover a real estate agent whose virtual land deals made her the first person to earn $1 million through the site, and TIME included Second Life creator Philip Rosedale in this year’s list of the world’s 100 most influential people. Even NBA commissioner David Stern now has a Second Life avatar, although he told TIME, “I don’t think it captures the essence of my personality or good looks.” He was kidding, but the site’s failure to live up to expectations is serious business.The overall traffic has been disappointing: the site has nearly 8.7 million registered members, but the number of active users is closer to 600,000.

Every business has its growing pains. But as companies explore why their expensive virtual outposts remain largely empty, Second Life has other, potentially more serious, issues. Governments are scrutinizing the four-year-old site as a possible haven for tax-free commerce, child-porn distribution and other unsavory activity. The dilemma for Linden Lab, the company running Second Life, is how to rein in its creation without alienating hard-core users. Fans love the site as a way to meet people and experiment in self-expression. And companies are drawn to these techno-savvy trendsetters who spent 22 million hours on the site last month. But some devotees are so upset by increasing commercialization that a group called the Second Life Liberation Army last year gunned down virtual shoppers at American Apparel. So-called griefing, or on-site harassment, is on the rise. Says Gartner research chief Steve Prentice: “Second Life is moving into a phase of disillusionment.”

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