Second life

A second economy

By Nathalie Brafman, Le Monde, 22/23 July 2007

Naomi Kraft has the body of a Pamela Anderson. For a few cents per minute, you can screw her. For a few dollars, she accepts sodomy. Naomi Kraft is not like other women; in fact she might be a man. Officially she does not exist. She is not paid with real money either.

Welcome to Second Life! A universe of paradise islands, pink and blue mountains, turquoise sea, super trendy apartment buildings, shops and restaurants, casinos… A world peopled mostly by bimbos and muscled males.

Second Life (SL) is a “persistent world” where life never stops, a 3D simulation of real life in which the visitor leads a second life with his “avatar”, his virtual person. In mid-July, they were 8.1 millions to have an avatar residing in Second Life, a firm created by Linden Lab in 2003 – itself a California firm founded by Philip Rosedal, who training was as an economist. The enthusiasm is such that SL registers 800 000 new visitors every month. In the list of the most represented countries, France comes just after the United States.

SL is not like other games: no need to kill as many monsters as possible in the minimum amount of time, no Holy Grail to find, no mission to fulfil. Everything is possible: to stroll, practice sports, shop, make love, sell goods and services, get married, work, or found one’s firm.

Everybody is the owner of his/her own creations and can even earn money. Real money. Second Life has its own money: the “linden dollar”. But it is possible to exchange it for real dollars and credit one’s credit card account for a transaction fee (0.23 euro per transaction). Early in July, 1 dollar was worth 270.80 linden dollars (a little more than 320 linden dollars for one euro). On the “Lindex”, a virtual stock market place, 2 million dollars change hands daily. This transnational money escapes control by central banks. In mid-July, a total of 330 000 US dollars was injected to maintain the exchange rate. During the last Davos forum, Jean-Claude Trichet, the president of the European Central Bank (ECB), who was discovering the phenomenon, said privately: “If this continues to grow, we’ll have to look into the matter, it’s creation of money!”

Alain Della Negra and Kaori Kinoshita, two young artists who are preparing a documentary on the subject, admit that “to earn money is one of the main concerns of the new residents”. Sex is no doubt one the principal activities on SL. It enabled some to make a lot of money. Because, when one has created one’s avatar, it is neither a man nor a woman yet. You must buy attributes for it and… positions. “There are two or three suppliers of sexual positions and sexy accessories who earn good money, explains a resident, several thousand dollars per month.”

Kevin Alderman, alias Strocker Serpentine, today is the head of mini X-rated virtual empire. This ex-plumber in the United-States defines himself as a “Mogul of pornography”. He made his grandest coup with the replica of the city of Amsterdam which he sold on eBay for $50 000. For residents tempted by a sexual experience, the site sl-escort.com has a catalogue of “escort girls”. “It is more an innocent game than a real activity!” declares a French young woman who prefers anonymity.

“Second Life is a territory of extreme offshoring. In emerging countries, to have an activity there can be a complement to one’s income”, says Gregory Kapustin, the young creator of the web radio radiodelameduse.org.

At present, those who struck fortune are only a handful. They are graphic or architecture designers, real estate agents. Anshe Chung, a Chinese-born German woman, whose real name is Ailin Graef, has achieved many a resident’s dream. Her recipe? She bought parcels of land, had buildings built on them, and sold them back at a time when speculation was going full swing. From an initial investment of $9.95 per month, her yearly turnover is said to exceed $2.5 million today. Her digital creation studio – this one quite real –, Anshe Chung Studios, employs several dozen people.

Another way to earn money is to manufacture virtual objects. But this requires being “skilful with the mouse”. In the real life, Jennifer Grinnell, alias Janis Marlowe, was working for a furniture delivery company. On Second Life, she created a line of apparel and appearances for avatars. She ended up quitting her real job. The new one yields four times as much.

In France, it is thought that only a dozen people or so are really make a living on SL. Stéphane Zugzwang (his resident name), in his forties, ex middle manager in the computer department of a large corporation, decided to jump. A pioneer on Second Life – he entered it in 2004 “for the fun” –, he just quit his job. “I began with setting up a chess club. Then I sold the chess boards I was creating. At the beginning, I was probably making $20 a semester”, he says. Sometimes later, he offered “Virtual reality rooms”, closed rooms simulating large real spaces with the help of photographs. The avatar can then build his own house in New York, Paris… Stéphane subsequently set up a store on a tract of land from Linden Lab. There, residents can buy the virtual package of his “Virtual reality rooms” for a price ranging from 500 linden dollars ($1.85) to 5000 linden dollars ($18.50). “Today, says Stéphane, I earn between $1000 and $2000 a month.” True, it is still far behind the $6000 net salary he was making in his previous job, which he knows he won’t be able to earn directly from his site. However, he bets on the firm he created to help other firms settle on Second Life.

To ensure a presence on SL, big firms are ready to spend large amounts of money. The BNP Paribas group is said to have spent several hundred thousand euros to set up subsidiaries of Cortal Consor and Cetelem. IBM invested no less than $10 million to be present virtually. Nike and Adidas sell shoes there, Pontiac and Toyota cars. In June, six French firms (Areva, Alstom, L’Oreal, Cap Gemini, Unilog and Accenture) organised on SL the first job forum: they conducted recruiting interviews for the real life via avatars. Thanks to his new job as a consultant, Stéphane expects a turnover of around $100 000 in the next twelve months.

“At the moment, the balance of payments of Second Life is very favourable since there is much more money flowing in than out”, says researcher Serge Soudoplatoff. “A large majority keeps its linden dollars, they feed the dream for all the others”, confirms Xavier Antoviaque, a consultant specialised in virtual communities.

Second Life, a machine to launder money? In April, Linden Lab, who above all wants not to be accused of money laundering, invited the FBI to make a visit and check on its virtual casinos. The firm on its own decided to ban any advertisement for games of money on SL. Prior to that, it had signed an agreement with Paypal; 95% of monetary exchanges go through this securitised payment system owned by eBay. “I received an email from Paypal asking me to identify myself by sending them a copy of my ID card and an invoice, for instance from the electric utility, proving where I live because my revenues for the year had exceeded 6500 euros”, claims Stéphane. Yet nothing prevents one to create several Paypal accounts and invest one’s gains in acquisitions and, later on, sales of goods on Internet.

Should one declare revenues from Internet activities? [And what about revenues staying in virtual money?] Despite several attempts to contact them, the Direction générale des impôts (the French tax authority) remains mute on the subject. In other countries, the local IRS began to take steps. In Sweden, it is seriously considering taxing players’gains. Some members of the American Congress deem it impossible to convert earnings from virtual activities into real dollars without reporting them to the tax authorities. In Australia, they confirmed that monetary revenues were subjected to the same rules as any transaction carried out in real life. Stéphane anticipated that. He declared his earnings to the Internal Revenue as non-commercial profit.

Making a living from activities on Second Life is no sinecure. In June, worldwide, only 132 “residents” had a positive balance higher than $5000 – they were 90 in December 2006. On Second Life too, we find precarious jobs: avatars carrying advertising boards on their back, escort girls, security agents, disco club dancers, charwomen…

These tiny jobs will never enable one to make a fortune, only to earn a few hundred linden dollars a day. If work regulations don’t exist yet in this virtual world, tacit rules are already prevailing though: a dancing girl in a night club gives in 20% of her earnings to the boss. On Second Life exploitation is also part of the game.

Translation André Cabannes