How the Second Half Lives Marketers are setting up brands in Second Life. Now what?

By Allison Enright Staff Writer

Considering the attention Second Life has received of late, marketers would be justified in thinking this the rivers there flow with molten gold and the streets are studded with diamonds. The content creators in Second Life could easily design them to look that way, but monetarily speaking, this digital parallel universe is not made of treasure- not for the high-profile real-life marketers who have raced in there over the last year like pioneers on a land-grab. "It may be more interesting as a concept than a reality at this time," says Raz Schionning, Web director at American Apparel Inc. He says Los Angeles-based American Apparel became the first real-world clothing retailer to set up shop in Second Life when it opened its doors in June 2006. "We haven't quite figured out how to make good use of it and I'm not sure anybody has." The message from real-world companies striking out in Second Life is that they consider their efforts to be largely an experiment, and few believe their ventures there will turn a profit. Instead, marketers are looking to Second Life as a new forum to connect with and engage their customers' Second Life personas, known as avatars.

"A couple of companies came in thinking about ROI," says Glenn Fisher, director of marketing programs at San Francisco based Linden Lab. Linden Lab is the technology company that created Second Life and maintains its existence. "I think it is early to be thinking about ROI. It is (more about) expanding marketing brand presences, from generating PR to exploring (Second Life) to establishing a presence of some kind," he says.

Los Angeles-based American Apparel is just one of many real-world companies that have gone in-world. Starwood Hotels built a huge model of its new Aloft hotel on an island, replete with a deluxe pool and ubermodern lounge IBM bought up a large space it uses for company and industry meetings of IBMers' avatars; Dell has its own island, too, and athletic brands Reebok, Adidas, and Nike also hang in Second Life. Toyota and Pontiac have added some glitzy hot spots- this despite the fact that avatars don't drive cars but fly and teleport themselves around in Second Life. The Sun Microsystems, Sony, and Sears brand logos aren't hard to find there, either. Reuters probably made the largest PR splash (and likely added some Fourth Estate validation) when it announced it was setting up a virtual news bureau in Second Life to report on in-world happenings.

"At this point you can make a big splash because there are not a lot of people in the pool right now. You can get a lot of mileage out of it," says Brian Haven, a senior analyst studying virtual worlds and social technology at Cambridge, Mas.. based Forrester Research Inc. American Apparel's Schionning agrees: "We had a very positive response both from consumers and the press- a little disproportionate to the real value of what we put together, but that's OK. Not everything has to be about direct sales; it's allowed to be about branding, as well." Second Life boasted only 100,000 residents, as registered users are called when American Apparel opened its doors in June. (As of January 2007 that number had grown to more than 2.7 million.) The store, designed to look much like a real-world store hosted opening parties that were so well attended that some avatars had to be turned away due to limits on how many residents can be in one place at one time because of technical restraints. The store sells, in Linden currency, virtual T-shirts for avatars to dress themselves but has sold few. And traffic has dropped off dramatically since the events because, Schionning says, American Apparel's attention was focused on its real-world store performance for the holiday season, instead of on maintaining its presence and events in Second Life. This reporter's avatar made repeated visits to the site in recent weeks and found herself as the only character in the store, and the experience was not much different at sites for Reebok, Starwood, or Reuters.

"It's about maintaining it and keeping it up," Schionning says. "For people fir whom Second Life is their main venture, they are sure to be more dialed in and making changes every day. If we really wanted to be ultraserious about it we would have to do it, too. You've seen Adidas, Starwood and others jump into this and realize after the fact that, 'Boy, we can't just open and island think they will come,'" he says.

Forrester's Haven agrees. "One of the interesting things is that companies think about getting into the virtual world, and they think the only way it works is if they an sell a product they can make money from, (but) Second Life is more a branding exercise than monetary exercise," he says. And to make that branding exercise work, just as it does in real life, the type of marketing done in-world needs to be designed to appeal and to engage the target audience. For example, Nike designed athletic shoes that could be purchased that did more than look good- they made the avatar run faster. Adidas has a shoe for sale at its Second Life location that can be repeatedly customized for your avatar, which brings what might have been a one-time visor back again and again. "There's no point going in as a brand if you aren't offering something to the community," says Benjamin James strategy director at Rivers Run Red, a London-based brand consultancy that is behind several high-profile brand ventures in Second Life and that an avatar spends an average of 20 minutes in its store.

Second Life's motley group of resident men, women, and beasts (because you can explore your second life as a raccoon or alien if you are so inclined) are not insignificant. About 900,000 of the 2.7 million registrants actively use the system (defined as having logged on in the last 60 days), and the number continues to grow. Benjamin James estimates that the Second Life community should hit 9 million registrants by mid-2007.

"The GDP of Second Life will take over that of most developing African countries this year," he says. "People are spending a million U.S. dollars a day (on Second Life); that's money people are spending on pixels...it's a healthy community." Second Life has other positives going for it as well. Unlike a lot of virtual gaming properties, the gender skew for players isn't male-dominated but closer to a 50-50 split, says Linden's Fisher. Second Life also is different because it supports its own Linden economy. In Second Life products are bought and sold using Linden Dollars, which can be exchanged at the site's LindeX currency exchange for real currency; the current exchange rate is about $267 Lindens to $1 US. And unlike other virtual property games like The Sims, Second Life users retain all intellectual property rights for items created or sold on Second Life. "Our model s much more like the Internet in that we are trying to create a platform. Uses can create any opportunity they want so long as it doesn't violate our terms of service. Once you purchase the land, it's your to use. We give you all ownership and rights," he says. Additionally, because of the one-time payment structure of Second Life, buying into the world is pretty inexpensive for a real-world marketer used to working with budgets in the millions. "At this point the barrier to entry is almost nothing, and if the thing takes off it is nothing but upside to almost everyone," says Roger Wu, vice president of New York-based Digital Power and Light, a 30-person consultancy that helps fill the gap between new technologies and marketing strategies for companies.

One gap of growing concern to marketers about Second Life, as the exuberance of the honey-moon quiets down, is the relative lack of data available to them about Second Life's users. At registration, Linden collects only basic information, and everything is self-reported. And part of the attraction of Second Life for users is that you can be whoever you want to be and live however you want to live. A biq question marketers will try to answer as they explore their options in Second Life is, does Second Life behavior translate into real-world behavior? "Some people go on there as Rambo just because they can be. They do things on Second Life that they never would do in real life," Wu says. Says Haven, "All this new technology is coming now, but the vendors of the technologies that monitor the performance and analyze the audiences aren't there yet. We've got decades of Nielsen consumer studies to rely on (for other media), and it takes a while to put these things in place. In these new spaces, it's a problem across the board." And Wu adds, "The numbers (at this time) are not as compelling for real-world brands to invest in the infrastructure of Second Life. The projections say that if everything goes to plan and it (Shows) 25% to 30% user growth, companies will still say, 'What is 2 million (Second Life participants) compared (to) if we invest in an infrastructure on our Web site.?' Those numbers are dwarfed by the Web presence. There is definitely real money there, its just a measure of what the scale is." Benjamin James, at Rivers Run Red, says his group will tackle this problem soon to establish qualitative and quantitative research methods to better prove the validity of marketing investment in the space. He says the research will be more contextual in nature- more about the behavior of avatars in the space and the real-world people behind them. Meanwhile, real-world companies continue to consider their investments and goals in Second Life. Schionning says American Apparel will revise and relaunch its Second Life store this spring in the hopes of being more appealing to residents. Although he can't give details, Schionning says that the new store will look less like a real-world location dropped into the virtual world, and might also offer clothing options that are more attuned to what avatars are apt to like. "A T-shirt is our staple in our real-life stores, but in Second Life a T-shirt couldn't possibly be more boring," he says.