Virtual Economy Booms; Real Economy Busts


The future world reserve currency?

Second Life may know something we don't, if this morning's report from the disconcertingly-titled Manolith is any indication.

It appears the economy of Second Life has surpassed that of the real world by a large margin, as the real-world recession fails to penetrate the confines of the Metaverse. Investors wiped out by the subprime mortgage scandals may want to pay attention.

The mad scientists at Linden Lab report stunning growth in the virtual world, with Linden – and real – Dollars flying out of wallets to the tune of $50 million per month.

That makes the locked-up credit markets of developed nations seem flimsy by comparison, with high interest rates choking real-world borrowing. Read on to learn how virtual economies are evading the real-world financial fallout.

As we mentioned previously, virtual worlds have a revenue stream equivalent to nations like Mozambique and Ghana. Now it appears this revenue stream, expected to hit over $4.5 billion by next year, is immune to the vagaries of the real-world economy. This may seem hard to believe: Don't virtual world users play with real money earned in the real economy?

Well, this may not be true.

There aren't many avatars that draw a sufficient in-world income to support their real lives, but there are some. Stroker Serpentine, for example, heads a virtual sex shop with real-world proceeds over $1 million USD. All of this is earned outside the traditional economy, and a fair chunk is likely rolled back into the game.

Still, Serpentine's lifetime earnings from Second Life probably equal less than 1/20th of Second Life's monthly revenue. So why is it that players seem willing to buy Linden Dollars even as real dollars become harder to come by? It may be microtransactions.

Microtransactions, as we covered in a previous article, are big business. These transactions, anywhere from $1 to $10, often used for game coins or Linden Dollars, seem relatively small to the user. However, when added up, they account for tens of millions of dollars in quarterly revenue for microtransaction-based games companies like Zynga and Evony.

Gamers are likely to write off a $4 investment in Second Life as "Latté Money," the equivalent of buying a cup of coffee on your lunch break. But with 600,000 active Second Life users spending only $4 per month, that adds up to $2.4 million in revenue. If Second Life is drawing in $50 million a month, you do the math.

Gamers are also drawn to immersion. In hard times like the current recession, gamers are willing to spend a little pocket change to immerse themselves in an experience that removes them from reality. Consider it a $4 ticket to a place where your job isn't in jeopardy, politicians aren't assaulting each other, and you can fly.

Who wouldn't want that, even if only for a while?

3 thoughts on “Virtual Economy Booms; Real Economy Busts”

  1. You also have to consider the larger economic indicators, such as the demographics most likely to play Second Life, which I would peg as young professionals with mediocre to poor social lives and a reasonable amount of disposable income. A demographic group may succeed in spite of the larger economy’s downward momentum.

  2. I don’t know about that, Alex. Second Life has a pretty fair spread of
    players, and the “poor social life” comment seems more like an old
    stereotype of gamers than a real situation. But I see what you’re saying
    about subsets outperforming the whole.

  3. The more active external social lives a player has, the less time they have to spend in the game and thus less incentive to upgrade their experience in said game. It’s just a function of time spent vs. money invested in my view. People who play Everquest II a lot are more likely to buy gold or whatever it is than people who play it rarely.

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