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A Virtual Land Bubble

Even in Second Life, location matters. Most (real) money is going to property.

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In the last day, more than a half-million U.S. dollars moved through Second Life's economy. It should come as no surprise that a majority of this spending is tied up in virtual real estate, and it seems it will be only a matter of time before a flood of businesses entering SL drive land prices higher.

For those uninitiated, Second Life is a massive, multiplayer, online world, akin to Electronic Arts' (ERTS) The Sims. Players explore an endless, sprawling 3-D virtual world where their Internet avatars live, interact, purchase land, set up shop and even (possibly) make money.

Property is the one resource that is controlled by San Francisco-based Linden Labs, the creator of SL. While businesses are earning revenue by selling fabricated goods or advertising in the virtual world, Linden's only source of income in SL is from the sale of land.

Transactions related to land have boosted the virtual economy in the SL world, which Linden Labs oversees with its LindeX tracker. As of 9:30 a.m. EST Tuesday, a total of 1.11 million users were registered in SL while $581,145 changed hands in the virtual world over the last 24 hours.

SL users and businesses can acquire land in several ways. First, residents or business owners who want to set up a homestead in SL are required to pay $9.95 a month for a premium membership. First-time virtual land owners are allowed their first parcel of land below the current market value. Buyers are granted 512 virtual square meters (1/128 of a region) of "First Land" space for the price of 1 linden (about $0.0036) per meter. After this one-time charge, land fees are applied and are tiered depending on the amount of square meters purchased.

Those more ambitious can purchase and develop their own virtual private island. Small islands are currently priced at $1,250 for 65,536 virtual square meters. Owners also are assessed a monthly land fee of $195. Meanwhile, large islands cost a one-time charge of $5,000 for a total of 262,144 square meters. Monthly land fees for the large island are $780.

While some early adapting businesses have already swooped in and acquired their own private islands, many operations that appear to be a perfect match for the SL world have been laggards in joining the metaverse.

Any company that allows users to shop on its Web site seems well-suited for SL.

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could potentially purchase a private island and set up virtual shops.

For instance, it doesn't seem hard to envision

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purchasing a private island and constructing a virtual replica of one of its aesthetic Apple Stores. Store visitors could browse and purchase a virtual iPod for their avatar, or could hypothetically purchase a real iPod through SL and have it shipped to their home.

Companies need to move fast, however, as some users have been buying up space rapidly. These purchasers quickly turn around and resell the land or rent space. Some entrepreneurs have already founded realty companies that specialize in the buying and selling of land in SL for a gain, turning them into the most profitable business in the fabricated space.

Virtual Window-Shopping
Buyers need to move fast

Linden Labs offers land auctions through its Web site for regions in the SL world. Among recently closed auctions, mature-rated areas fetched upward of $1,700. Teen-agers are restricted to PG-rated islands, which are closely monitored by Linden's staff. Final auction prices for these islands were significantly less. In all, land auctions that closed Monday totaled roughly $2,250.

Meanwhile, on SL's home page, there is a classified section that members can peruse. Aside from a plethora of risque, adult-related content, a majority of the ads placed were for existing islands or property that's already built.

Of course, there is much more to be done once land has been purchased, including the construction of a virtual storefront or dwelling. Naturally, there are SL design vendors that are more than happy take on the task, for a price.

For now, though, it is a bit puzzling as to why corporations are reluctant to purchase a plot of virtual land in SL while the prices are still considered generally cheap. With more than $3 million being spent in the virtual world over the course of a week, time and location are starting to become factors for these companies.

Robert Holden is staff reporter Robert Holmes. He reports often from Second Life.