A Different World
With online alternate realities, flourishing businesses are
discovering a parallel (retail) universe.
Earlier this year, the hip clothier American Apparel - well known
for its risqué ads and sweatshop-free T-shirts - opened its newest
store on the island of Lerappa. As with its other store openings,
American Apparel turned the event into a party, complete with
festive music and refreshments as well as prizes and giveaways for
shoppers who stopped by. There were, and are, a number of unique
quirks to the Lerappa store, however. For one thing, T-shirts and
other clothes are mind-numbingly cheap at $1. The clientele is also
somewhat unusual. It's not uncommon to see well-dressed animals -
as in foxes or birds - saunter into the shop, and a fair number of
customers enjoy flying from rack to rack.
Before you make plans to visit, though, keep one thing in mind:
American Apparel's Lerappa shop isn't real - at least
physically.
See, Lerappa (apparel spelled backward) is actually an island in an
online virtual world called Second Life. As its name implies,
Second Life is a sort of alternate reality in which people, by
downloading software to their computers and logging in, can create
and participate in an entirely new existence for themselves on
their computer screens. Just about anything that can be done on
terra firma - and quite a bit that can't - is possible in Second
Life, including starting a business and making money from it (this
world's currency, the Linden dollar, is convertible to U.S.
greenbacks), buying land, joining clubs, attending concerts and
events, and on and on.
When it comes to virtual worlds, Second Life, which was created by
San Francisco-based Linden Lab, is hardly the only option. In
fact, in what are loosely termed multiplayer online games - thus
named because so many people, located in different places, can
participate simultaneously - Second Life is fairly small. By
contrast, World of Warcraft, a medieval-themed game in which
players battle for power and treasures, boasts more than five
million players worldwide. Other virtual worlds include Habbo
Hotel, There, and Entropia Universe. What distinguishes Second Life
from some of the other virtual worlds, though, is that players have
access to
3-D modeling tools and scripting technology, which allows
them to create homes, clothes, dances, and walks for their online
graphic characters, called avatars, rather than being confined to a
premade universe designed by a game company's programmers. In
addition, residents own the content they create, enabling them to
participate in Second Life's robust economy, in which $1 million is
traded each month.
The possibilities are endless: You could design an avatar to
represent you as a tall, fashion-savvy hipster (with a taste for
American Apparel clothes) or as a long-haired hippie; pounds can
disappear with the click of a mouse; and nothing requires people to
stick to their real-life gender - you don't even have to be human.
After establishing an on-screen persona, which users maneuver
through the virtual world with a keyboard and mouse, Second Lifers
join more than 940,000 other residents from all around the globe in
the game of, well, living.
At any given time, there are potentially
millions of people checking out of the physical world and pursuing
relationships, careers, and entertainment in one of the many
virtual worlds. While it might all sound bizarre (and, to some,
like a colossal waste of time), there's a fairly persuasive case to
be made that these virtual worlds, growing as they are in
popularity, are poised to have a profound impact on the way people
interact as well as on how companies operate, market to their
customers, and train their employees.
"I think that it's almost indisputable that a significant fraction
of humans' time will be [spent] in these worlds. At a minimum, you
want to get somebody's attention, whether it's because you want to
teach them something, impress them with a brand image, or help them
understand that some option is available," says Edward Castronova,
author of Synthetic Worlds: The Business and Culture of Online
Games and an associate professor at
Indiana University. "Your
company, your organization, or the government is going to have to
be in there."
He may be right. Second Life is growing at a rate of almost 20
percent per month, and it's not just businesses that want to have
access to a growing virtual population. Seeing it as a promising
venue to get in front of potential voters,
Mark Warner, the former
governor of
Virginia and a potential 2008 presidential candidate,
was interviewed - through his avatar - in Second Life this past
September.
Clearly, something socially, culturally,
and economically significant is happening in these virtual worlds.
Looking to tap into what could be a much larger movement, companies
are probing what sort of presence they should have there.
"Corporations are discovering this as a place to do business," says
David Fleck, vice president of marketing for Linden Lab. "They
don't necessarily understand what Second Life is, and there's this
discovery process they're going through." In opening its Lerappa
store, American Apparel became the first real-world retailer to
actually establish a presence in Second Life.
With its clothing for avatars selling for as little as $1, American
Apparel isn't exactly going to generate a lot of revenue from sales
in Second Life. But that was never the intention, explains Raz
Schionning, the company's director of web services. Instead, it
wanted to boost the company's profile among what Schionning
believes is a promising demographic. "If you have computer
equipment and the bandwidth to run Second Life, you have to have a
way to afford that, and you can probably be a reasonable consumer
of our products," he says. "And even though Second Life has been
around for three years, it's still cutting-edge, and just to be
aware of it and to have gone so far as to get involved with it
means that you're a trendsetter, not a trend follower."
In other words, these are just the kind of tech-savvy folks with
disposable income whom lots of companies want to reach. Although it
views its presence in Second Life as primarily a marketing tool,
American Apparel obviously wouldn't be upset if avatars looked so
good in their clothes that they influenced their human creators to
go out and buy the same outfit. To help encourage that, last August
American Apparel gave everyone who bought an item in Second Life
the opportunity to buy the same piece of clothing in a real store
at 15 percent off. Schionning believes that besides providing a
locale for the marketing and incentives, virtual worlds hold
promise as a place to test consumer reaction to new products before
they're actually released. For instance, this past fall, American
Apparel came out with denim trousers. Before they hit stores, they
were on the racks in Second Life. "You could try them on before you
saw them in real life," says Schionning.
While it's certainly a pioneer,
American Apparel is far from the only company exploring the
potential of virtual worlds. When Warner Bros. Records was
getting set to release a new CD by one of its artists, Regina
Spektor, they set up a listening lounge so avatars could sit
around and hear some of her new songs. The room was designed
to look like a New York loft and had a coffee table with a
book on it that people could leaf through to learn more about
the artist. "Their goal was to create awareness and to create
a fan base and, just as importantly, to generate sales for
her music," says Linden Lab's Fleck.
There are plenty of other examples of companies trying to harness
the power of virtual worlds. Vexed Generation, a British clothing
company, tapped the opinions of the members of Entropia Universe,
which was created by the Swedish company MindArk, about new
clothing styles and inventory in its actual brick-and-mortar
stores. "Never before had they had such immediate feedback from the
end customer," says Marco Behrmann, chief information officer of
MindArk. "They were thrilled and even got a new computer in order
to more efficiently talk to the Entropia participants."
Massive Incorporated, an
advertising agency recently purchased by
Microsoft, supplies ads that appear on billboards inside Entropia.
In Second Life, Warner Bros. held a premiere for X-Men 3, complete
with avatars who represented Hugh Jackman and
Halle Berry and
walked down the red carpet.
Major League Baseball built a replica
of
Pittsburgh's PNC Park, the host of this year's All-Star Game,
and ESPN did a simulcast of the home-run derby into the virtual
world, with avatars who represented sluggers like
Boston's David
Ortiz and the eventual winner,
Philadelphia's Ryan Howard.
All of this may just be a precursor of what's to come. Reuben
Steiger, CEO and cofounder of the company Millions of Us, which
helps businesses understand virtual worlds and take advantage of
their possibilities (an indication in itself that the real and
virtual economies are becoming increasingly intertwined), envisions
auto companies actually letting users of virtual worlds design
cars. "They'll have a competition, and the one that is most popular
will be a
concept car and go into production, hypothetically," he
says. "I think it ties into the whole cultural zeitgeist of the
wisdom of crowds and the ability to use distributive systems to do
things that even the smartest individuals can't do."
While Castronova can see plenty of ways that the virtual and
real-world economies intersect, he's far from convinced that
companies have much of a clue about how to operate in places like
Entropia and Second Life. Even advertising and raising brand
awareness, probably the most doable ventures thus far, can be done
in a way that is strongly rejected by virtual-world participants. A
hard sell is just asking for trouble because, as Castronova points
out, people in virtual worlds have complete control over
everything, including the advertising message you might be trying
to send. "I think few businesspeople understand how empowered users
feel themselves to be. They tolerate nothing - nothing - that they
don't choose themselves," he says. "Think about the era of TV. It
was possible to send an image into the living room and control it.
And what is happening with virtual worlds is the image is coming
right off the TV and the people are holding on to it, and they can
toss it around and jump up and down on it."
Because business executives are just
now discovering virtual worlds, it is perhaps not surprising
that individuals are responsible for most of the economic
activity: In the virtual world, at least, mom-and-pop outfits
trounce big corporations. Take the case of Christopher Mead,
a 36-year-old former factory worker and a stay-at-home father
from
Norwich, England. He sounds like just about the complete
opposite of a cutthroat businessman. "I came to Second Life
because I wanted to get away from conflict and people who put
greed ahead of other people's feelings," he says. "I'm no
businessman; I'm not constantly looking for ways to squeeze
more money or to cut costs."
Since gravitating to Second Life for entertainment, though, Mead
has become a successful entrepreneur, opening up four shops, all of
them called Bits and Bobs. Using an animation program, Mead creates
and sells unique dances, walks, and other activities for avatars,
particularly couples, to do together. People from all over the
world not only give Mead suggestions for new creations but are also
willing to pay good money for his offerings. And because Linden
dollars, the currency in Second Life, are convertible to U.S.
dollars, this is real income; Mead says it varies, but he makes
about $1,700 a week from his sales. In fact, both Entropia Universe
and Second Life say they have thousands of people who make a profit
from what they do in a virtual world. People who use Entropia can
even use an Entropia Universe Cash Card at any real-world
ATM in
Europe to withdraw money earned in the virtual world.
The growing popularity - and influence - of virtual worlds raises
some important questions. Castronova envisions the onset of a slew
of policy and legal issues. "You realize what is happening inside
Second Life is an economy and that real values are being exchanged.
What a disaster if the government decided to intervene, regulate,
and tax," he says. "On the other hand, if Second Life says its
currency is freely liquidated against the U.S. dollar, why should
that be tax free?"
Eventually, these topics are certain to be debated by policy
makers. But of even greater importance are the societal
implications of so many people spending so much time in a world
separate from their everyday lives. Steiger of Millions of Us
predicts the possibility of, five or six years from now, virtual
worlds becoming the "organizing principles of society," taking on
the historical role of clubs and local churches. The difference, of
course, is that few or none of these people will have actually ever
met. "It's just easier to find like-minded people and to assemble
with them," he says. "It is, depending on one's perspective, either
massively dystopian or very encouraging."
For his part, Steiger can understand why this is happening. In the
real world, individuals feel like they have very little control,
particularly over the physical world surrounding them. In places
like Second Life, though, they are in complete control. "When I
travel through
America and see the strip-mall culture and the
Wal-Martification of America, that really depresses me," he says.
"Second Life, what makes me excited about it is it's got a baseline
democracy to it and a kind of a leveling of the cultural playing
field that is really very nice."
Castronova can even see how the popularity of virtual worlds is
akin to the waves of migration of Europeans to America in the first
100-plus years of our country. What drove them, he says, was
dissatisfaction with their lives and how European society
functioned. It may be the same thing luring people to virtual
worlds. "If we want to know how important this is going to be, we
have to ask ourselves, how many people are going to find the
fantasy existence preferable to the game we're building out here?"
Perhaps, he says, people will take the things they like about their
virtual lives and apply them to the outside world. "My gut feeling
is we have to change what we're doing out here."