Despite bank collapses, Ponzi schemes, bans on gambling, and cries for more financial oversight and regulation, Daniel Terdiman still thinks Second Life is a great place to do business. In his new book, The Entrepreneur's Guide to Second Life: Making Money in the Metaverse, Terdiman not only makes a case for why SL is a good bet for budding virtual entrepreneurs, but also chronicles the intricacies of actually coming up with your own successful business plan. His ultimate message? Making money (even good money) is possible in SL. But it's not easy.
Wired News recently spoke to Terdiman, who is currently a senior writer for CNet, about some of the more obvious dangers inherent to Second Life entrepreneurism, and why running a successful business in the metaverse isn't all that different from running a successful one in the real world.
Disclosure: Daniel Terdiman is a former writer for Wired News. During his 2003-2005 tenure, he wrote extensively about Second Life and other virtual worlds.
Wired News: You talk about the genesis of your book being based in large part on everyone's interest in making money in Second Life. I guess my first question for you would be: Is Second Life really the best place to make money -- compared to other massively multiplayer online games (MMOs)?
Daniel Terdiman: Well, the gold farmers who make a mint in World of Warcraft and other MMOs might disagree, but I think Second Life offers the most raw opportunity for someone interested in getting a virtual world business going.
Being an open-ended virtual world, in which you can do (almost) anything you want, it seems to me that SL offers almost unlimited opportunity. And as long as you have a plan, some real talent, and are committed to your plan, I think that there are a lot of ways to make money there.
WN: I ask because it's been my impression that, like in other MMOs, there are only a select few who really make decent money in Second Life -- Anshe Chung and a few others. Those people, of course, tend to get the most press, so a lot of other people (who are maybe unfamiliar with the SL economy) get a somewhat skewed impression of what it takes. Would you agree?
DT: I think you're right that a select few do get all the press. But I talked to at least a couple dozen people, probably more, for the book who are earning full-time livings with their Second Life businesses. Still, the truth is that only the cream of the crop is going to make that kind of money. Most people who do this successfully are going to find that it's not quite that lucrative. But, there is still money to be made.
So ... just to expand, since I don't think I fully answered your question: I want the overriding message of my book to be that it's not easy. It's hard. It has to be treated like you would treat starting a business in the real world. You have to work hard at it. And be committed. And that may well not be the message that is spread in the media.
WN: Definitely. And you do express those caveats throughout the book it seems. One thing that struck me was how comprehensive your book was in giving an overview of all the possible trades in SL: the fashion industry, real estate, the sex industry and many others. In talking to various people, did you find that one group fared better than others, financially? Or is success in SL spread through all trades?
DT: I think that there are probably more successful entrepreneurs in the fashion business than others, just because there are so many businesses in that genre. And there are some truly great designers. I would say that the best designers are the real rock stars in Second Life.
The biggest overall earners may well be in the real estate business -- like Anshe Chung -- but there aren't as many who are making big bucks, mostly because of how much you have to invest to get started in the Second Life real estate business.
WN: The investing aspect brings up another concern I think some people have. In Second Life, as in the real world, you often have to wait for investments to pay off. Of course Linden Lab is a company, and like any other company, it may face financial problems of its own. Do you think the fact that Second Life may cease to exist some day makes people hesitant to invest money in the world?
DT: It's possible. I tried to address some of that in the first chapter of the book, in which I explain -- to the uninitiated -- how Second Life's virtual economy works, and how they keep it stable.
As for whether people are worried about it ceasing to exist, I haven't heard too many being concerned about that. I think Linden Lab has the revenue and the funding to stay in business for quite some time.
What I say to people who ask me if Second Life will stay open and on top (of open-ended 3-D social virtual worlds) is that for someone to de-throne it, it would take not just coming up with a technologically superior virtual world, but also at least two years' worth of user-created content. So, SL will be here for quite some time, I think.
WN: Let's take it in the opposite direction then. Is there a chance Linden Lab could be purchased by a larger company?
DT: It's certainly something people talk about a lot. The question is who? Google is often mentioned. The problem I see with that is that Second Life, being open-ended, has a great deal of content that is probably a little scary for a public company. But Second Life couldn't exist, I think, if its users were told they couldn't do what they want, or be who they want to be. The community's lifeblood comes from the kind of freedom that is possible because Linden Lab, a private company, made the decision to allow it, and because Linden Lab doesn't have to answer to public shareholders.
That said, Linden Lab does restrict some kinds of behavior. But it's the kind of behavior that the Second Life community has made clear it doesn't want. That, and gambling.
WN: Your point about Linden Lab being really hands-off from the beginning is what's fascinating to me. SL residents love the fact the company doesn't meddle. But then again, when a virtual bank like Ginko Financial goes under and ends up pissing a lot of people off, they cry for more oversight. Do you think Linden Lab is balancing the two effectively when it comes to the SL economy?
DT: I think they do a good job for the most part. The Linden dollar stays stable, the amount of money exchanged between residents stays fairly stable day to day (it is lower since the casinos got kicked out), and the amount of people earning money seems to be rising again. And part of this is that the economy is big enough that I think it can absorb some discontent over things like Ginko Financial and Copybot and the many other problems that have creeped up with Second Life.
They're also fairly transparent. They put up economic statistics on a daily basis. There certainly could be more transparency, and they could provide a better statistic than "positive monthly Linden dollar flow," which is the best measure of how many profitable residents there are. But on the whole, I think they do a good job.
WN: What was the most creative entrepreneurial endeavor you came across during your research? Did one person (or idea) stand out?
DT: I love Wynx Whiplash and her tiny avatars. They're just plain funny and fun. You can't look at an image of a little tiny bunny wearing an old-style diving mask and not laugh. But she's making a lot of money with that business because she innovated. She took the concept of the custom avatar and ran with it and created something entirely new. And the community responded.
The tinies, by the way, are just avatars that are, well, tiny. They come up to about the knee of a regular-sized avatar. And they come in all kinds: cats, bunnies, dragons, etc., and they have been copied far and wide by other designers.
WN: You seem to emphasize that, in the end, a lot of what makes someone a successful businessman or entrepreneur in real life also applies to Second Life -- innovation, of course, being one of them. What, if anything, do you think is the main difference between making money in the metaverse and making money in the real world?
DT: Good question. Truthfully, I'm not sure there really is that much difference. It may be a virtual world, but it's really the real world, right. I mean, I don't consider running a web business something other than a business. So by the same token, running a Second Life business is just a choice of venue.
I'm not trying to be flip, by the way. I really believe that. It's easy to think that it's very different because many people consider Second Life to be a "game." But it's not a game, and running a business there that is successful really does depend on the same kind of sound business tactics that one needs for any kind of entrepreneurial enterprise.
