The
Potential of
Second Life
for a Digital
Media
Company’s
 
Global
Operations
Report
18 March 2008
 
John Klyza 
 Executive Summary 
 
S
econd Life is an Internet-based virtual world developed by
Linden Research Inc (commonly referred to as Linden
Lab) and launched in 2003. Big businesses such as Big
Pond, Autodesk, Coke-Cola, and Toyota, just to mention a few, have established a
presence in the virtual world of Second Life. It is estimated that there are currently
some 10 million registered users, with a growth rate of 10, 000 new members per
day. Membership is expected to grow to 25 million by March 2008.

The report canvasses a number of pathways for obtaining information on Second

Life. The research draws on participation in ‘on line’ polls and surveys with some of
Australia’s leading companies researching the resources of the Web, publications,
and library resources.

The finding herein suggests that although Second Life offers a unique range of
creative, experimental and commercial possibilities, the cost structure of setting up,
and the as yet non mature commercial environment of Second Life suggest that
small to medium companies, at this point of time not invest. One of the biggest
problem for potential investors is that Second Life doesn't have enough active

 
residents. Even at peak times, only about 30,000 to 40,000 users are logged on.
Which, in terms of conventual advertising is minute?
 Table of Contents 
 
Front piece        Executive Summary 
1.0 Introduction 1 
1.1          Purpose                1 
2.0          Methods                1 
2.1          Personnel & Timeline            2 
3.0           Results                3 
4.0          Negatives & Positives            4 
5.0          Recommendations            5 
References                          6   
Appendix 1        Poll & Survey Questions            i 
Appendix 2        Costs                  iii 
 
 
 

List of Figures 
 
Figure 1a  Criteria used in the decision matrix        2 
Figure 1b Rating scale used in the Decision Matrix      2 
Figure 2        A decision matrix to rank the effectiveness  
of research methods for companies considering  
establishing a business presence in the 
 "Second Life" virtual world.          3 
Figure 3:         The allocated timetable for completion of the project.  3 
 
 
 
1.0 Introduction

S
econd Life is an Internet-based virtual world developed by
Linden Research Inc (commonly referred to as Linden
Lab) and launched in 2003. A downloadable client
program called the 'Second Life Viewer' enables its users ('residents')
to interact with each other through avatars, providing an advanced
level of social networking in the setting of a virtual world. Residents can
explore, meet other residents, socialise, participate in individual and
group activities, and create and trade items (virtual property) and
services. As the Second Life’s mantra goes, ‘your world, your
imagination’ [1]

Big businesses such as Big Pond, Autodesk, Coke-Cola, and Toyota

[2], just to mention a few, have established a presence in the virtual
world of Second Life. It is estimated that there are currently some 10
million registered users, with a growth rate of 10, 000 new members
per day [3]. Membership is expected to grow to 25 million by March
2008. According to Steve Prentice [4], vice president of the technology
research group Gartner Inc’s, “by the end of 2011, 80 percent of active
Internet users (including Fortune 500 companies) will have a “second
life,” but not necessarily in Second Life” [alluding to the anticipated
proliferation of virtual worlds in general], he goes on to say “The
collaborative and community related aspects of these environments will
dominate in the future” and that “the majority of active Internet users
and major enterprises will find value in participating in this area in the
coming years”.

1.1 Purpose

T
he project is undertaken in order to evaluate as to whether
or not a virtual international office in Second Life would be
effective in terms of achieving the aim of global expansion
for goods and services of small to medium companies.

2.0 Methods

T
his report canvasses a number of pathways for obtaining
information on Second Life. The research draws on
participation in ‘on line’ polls and surveys with some of
Australia’s leading companies (see appendix 1 for list of questions),
researching the resources of the Web, publications, and library
resources. In order to effectively evaluate the data in terms of the
above objectives, a decision matrix was drawn up. The criteria

Page 1 of 1 
 
 governing the matrix are shown in Figure 1a and 1b. The completed
decision matrix is shown in Figure 2

2.1 Personnel & Time Line

T
he project was undertaken by the author who is a student
in the Digital Media Diploma course at Tafe Randwick.
The project will commence on Tuesday 11th March 2008,
and the research report is required on Tuesday 18th March (see Figure
3). The project will be carried out at Randwick Campus and at the
author’s own facilities.
 

Criteria.  Cost
  High = 1 to
Time Cost
Low=5
Reliability
Time Easy = 5 to
Access Difficult=1

Reliability High = 5 to
Options.  Library Search
Low=1
 
Publications
Access Easy = 5 to
Web Search Difficult=1

Poll & Survey

Figure 1b. Rating scale used in the Decision  

Weights.  Cost = 2         Matrix 
 
Time = 3

Reliability = 4

Access = 4

Rating  Refer to the Rating Scale

  in Figure 1b

Figure 1a. Criteria used in the decision matrix 

Page 2 of 2 
 
  OPTIONS
  Library Search Publication Web Search Poll & Survey

   

CRITERIA WEIGHT Rate Score Rate Score Rate Score  Rate Score

Cost 2  5  10  1  2  5  10  5  10 

Time 3  1  3  3  9  5  15  5  15 

Reliability 4  3  12  3  12  3  12  5  20 

Access 4  2  8  2  8  5  20  5  20 

TOTAL SCORES  32    31              57    65 

Figure 2: A decision matrix to rank the effectiveness of research methods for companies 
considering establishing a business presence in the "Second Life" virtual world. 

9 Day 1: Conduct a preliminary Internet search for relevant data.

9 Day 2 – 4: Writing-up survey questions. Polldaddy.com was chosen for the online
survey.

9 Day 5: checking out publications, and libraries.

9 Day 6 - 7: Results collated and a recommendation report written.

Figure 3: The allocated timetable for completion of the project. 

3.0 Results

I
t can be seen clearly seen from the decision matrix in Figure
3 that the poll and survey outcome, in terms of research
effectiveness, gave the best results in cost, time, reliability
and access. Some 85% responded to the poll and survey
questionnaire. In this preliminary report the results were not crunched
at the time of writing.

Second Life offers a unique range of creative, experimental and

commercial possibilities. An analysis of the cost structure for
companies who may want to set up a business in ‘Second Life’ (see
appendix 2) is as follows: Buying a presence in Second Life is like

Page 3 of 3 
 
 registering a Web domain. It buys ‘permanence’ on the Grid, allowing
the user to set up a house or business and have storage facilities, a
work space etc. A waterfront house and land parcel of modest size
rents for approximately L$1500 per week and sells for between
L$35,000 and L$50,000 depending on location (note: US$1 = L$268.
Where L = Linden).

An island is the representation of a ‘sim’ a dedicated named region

which itself equates a server. Each sim is the equivalent to 16 acres
(6.47 hectares). Linden conducts an auction system. Owning an island
comes with the benefit of setting access restrictions if desired.
US$1,675 for initial set up and creation & US$295 per month for
maintenance. A discount rate for ‘verified real world educators and
academic institutions’: US$980 and US$150 a month for maintenance.
An order, once placed through the Land Store, takes around 14 days to
become available. Payment is made via credit card or PayPal.

‘Terraforming’ a sim with commercial developer such as Electric Sheep

Company (ESC) costs upward of US$10,000. The New Media
Consortium paid ELS US$13,000. PR firm Text100 paid US$20,000 for
their centre. Complex sites with large degree of interactivity, such as
SonyBMG may cost as much as US$200,000. However companies
could start with a modest outlay, using the expertise of the local
scripting community or their in-house resources.

4.0 Negatives & Positives

N
ot all is rosy for many companies [6]. The sites of many of
the companies remaining in Second Life are empty.
During a recent in-world visit, Best Buy Co.'s Geek Squad
Island was devoid of visitors and the virtual staff that was supposed to
be online. The schedule of events on Sun Microsystems Inc.'s site was
blank, and the green landscape of Dell Island was deserted. Signs
posted on the window of the empty American Apparel store said it had
closed up shop.

Other negatives for considerations are best summarised by Mandy

Salomon [5]:
• Corporations can be viewed suspiciously,
particularly if their programs are heavy handed.
• A 10% retention rate after initial log in reflects steep learning curve
required to actively participate.
• Second Life’s Content creation tools are not for everybody. Many
users find building complex and not to their interest.
• Bandwidth and lag time issues hamper enjoyment and seamless use.

Page 4 of 4 
 
 • Infrastructure limitations when doing business include:
™ Limit to the number of avatars able to gather in one space
(server constraints limit numbers to around 40-60).
™ Unexpected grid closures or upgrades can interfere with
scheduled events.
™ Audio failure or visual lag times are common.
™ Variations in users’ computing systems (specifications).
™ Variation in broadband speed.
™ Potential for disruption to events by ‘griefers’ (known to flood
events with replicating objects which also hogs bandwidth).
™ Ongoing costs relate to investment in property, design and
maintenance fees.

However; there are some opportunities for businesses, according to

Mandy Salomon [5] these are:
• An expanding, increasingly complex, hyper-networked,
technologically articulate virtual society consisting of communities with
both shared and divergent interests.
• Increased linkages with other web services.
• Enhanced communication and personalisation of web experiences via
3D interfaces.
• Evidence that Second Life is forerunner to a multitude of multi-user
virtual environments, with interoperable capabilities. These include
‘mirror’ and ‘overlay’ worlds growing out of digitised real world Google
Earth and Microsoft’s Virtual Earth and add-ons such as Geo-Spatial
Positioning.

5.0 Recommendations

S
econd Life definitely in not yet a mature commercial
environment. One problem for some potential investors is
that Second Life doesn't have enough active residents.
Even at peak times, only about 30,000 to 40,000 users are logged on.
Which, in terms of conventual advertising is minute? Based on the
many problems outlined above It is recommended that small to
medium companies, at this point in time, not invest.

Page 5 of 5 
 
 References 
 
Cover Design Image  
http://secondlife.com/whatis/land.php
[1] Second Life homepage.
http://secondlife.com   
[2] Companies and organisations in Second Life – Portal.
http://www.nbhorizons.com/list.htm
 
[3]  Promoting Digital Media in Virtual Worlds. 
http://digmediaresearch.sydneyinstitute.wikispaces.net/module5
 
[4]  ‘Gartner Says 80 Percent of Active Internet Users Will Have A ``Second Life'' in
the Virtual World by the End of 2011’ April 24, 2007
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&new
sId=20070424006287 &newsLang=en
 
[5] Mandy Salomon May 2007. Business in Second Life: an introduction
www.smartinternet.com.au

[6]  Businesses Explore Alternatives to Second Life

http://secondliferesearch.blogspot.com/2007/07/businesses-explore-alternatives-to.html

Appendix 2 Costs
http://www.epic.co.uk/content/news/nov_07/Second_Life_and_Virtual_Worlds_JH.pdf

 
 

Page 6 of 6 
 
 Appendix 1
Poll question: Has your company ever considered establishing your
Business in “Second Life”

Respond: Considered
Never Considered
Never heard of them
Already a member

Survey Questions: Follow up in response to “Already a member”

1: What elements of Second Life does your company find

attractive.

Respond:
™ Prototypes are cheap to produce. The investment is small in
relation to real world development costs such as bricks and
mortar, fabric and fabrication.

™ New markets and new ideas can be tested and explored

before they are ‘Commercial
Ready’.

™ Tracking user innovators leads to real world product

development

2:  How would you rate the following?

Very Important    Important    Not Important 
ƒ Cost 
ƒ Opportunities for increasing business 
ƒ Brand Awareness 

i 
 
3:  Are you happy with your current service? Please rate the
service? 

Using a scale from 1 to 5 where 1 = very satisfied and 5 = 
Very dissatisfied  
 

4:  Would you recommend “Second Life” to other companies?

Respond: Yes/No 
 

 
 
 

ii 
 
 Appendix 2
Costs
Membership 
There is a sliding scale to the cost of becoming a resident.
o ‘Basic Membership’: free. Allows users to explore, build participate in
events and purchase goods
o ‘Premium Member’: $9.95 per month (discount applies if paid 12 months in
advance). Users have the opportunity to buy or rent land. As well, they
receive a $1000 Linden bonus and a monthly stipend which they are free
to spend on inworld items.

For a full explanation of membership fees see http://secondlife.com/whatis/plans.php

 
Land 
Buying a presence in Second Life is like registering a Web domain. It buys
‘permanence’ on the Grid, allowing the user to set up a house or business and have
storage facilities, a work space etc. Interested parties can either rent space on an
existing island or simply buy their own. Like the real world, buying or renting existing
land or land structures fluctuates according to location and the degree to which that land
has already been developed. A waterfront house and land parcel of modest size rents
for approximately L$1500 per week and sells for between L$35,000 and L$50,000
depending on location. This costs real money. Credit card or PayPal allows this
transaction.

Private Island 
An island is the representation of a ‘sim’ a dedicated named region which itself equates
a server. Each sim is the equivalent to 16 acres (6.47 hectares). Linden conducts an
auction system. Owning an island comes with the benefit of setting access restrictions if
desired. US$1,675 for initial set up and creation & US$295 per month for maintenance.
A discount rate for ‘verified real world educators and academic institutions’: US$980 and
US$150 a month for maintenance. An order, once placed through the Land Store, takes
around 14 days to become available. Payment is made via credit card or PayPal.

Developing land 
‘Terraforming’ a sim with commercial developer such as Electric Sheep Company (ESC)
costs upward of US$10,000. The New Media Consortium paid ELS US$13,000. PR firm

iii 
 
Text100 paid US$20,000 for their centre. Complex sites with large degree of
interactivity, such as SonyBMG may cost as much as US$200,000.
However companies could start with a modest outlay, using the expertise of the local
scripting community or their in-house resources.

iv