In the first quarter of 2009, the virtual world of Second Life saw $120 million USD exchanged through user-to-user transactions, with a record monthly $45 million USD in transactions in March. In August alone, users completed 28 830 768 transactions in with the greatest number of these happening around items that are valued at one Linden dollar, or about $0.004 USD .
Based on regular economic reports from Second Life developers Linden Lab and raw data files made available on their website, it’s possible to get a basic overview of the economic facts and figures associated with the virtual world. However, one of the questions that is asked on a fairly regular basis – especially by those who are somewhat unfamiliar with virtual world economic systems – is why people pay money for things that exist only virtually.
Confusion around Second Life consumption
This question has been asked here before by Vili Lehdonvirta , is considered in other venues , and is something that I’ve been working through in my PhD research as well, specific to the world of Second Life.
This confusion is understandable. Avatars in virtual social worlds generally do not necessarily need much – if anything – to survive. Although this is not the case with all avatars or all virtual worlds in general, virtual bodies in Second Life do not have the capacity to starve, dehydrate, freeze, or meet other untimely ends as a result of want or need. As a result, they have no requirement for virtual food, drink, clothing, or shelter to prevent harm or death, making consumption unnecessary from the standpoint of survival.
So, given their relative uselessness to the avatar’s immediate virtual existence, why do people pay money for virtual goods?
A lot of what drives consumption in Second Life appears to be a combination of its personal and social elements , such as customizing the body and joining groups, respectively. Perhaps one of the defining features of virtual goods is that while they may not be useful to the avatar or the user in a physical sense, they can provide significant meaning for those who buy them and for other residents within the world. From identity creation through to group membership, the hedonic benefits and social values of virtual goods are significant enough to sustain Second Life’s virtual economy.
However, in addition to these benefits, consumption in Second Life has another element in play. While purchases may be driven by the resident’s desires, they can also be driven by social pressure. Residents may appreciate goods for their aesthetics or functionality, yet this appreciation can exist in tandem with broader social encouragement or even pressure to develop an individual identity or appearance, or to establish membership within particular group.
Pressure to consume
As with offline goods, virtual goods are associated with establishing identity. In a virtual world with approximately one million unique residents logging in monthly, individuality becomes an important reason for purchasing virtual goods with which to define the avatar. However, as much as the resident may wish to establish their appearance and identity within the world for their own reasons, there is also continuing pressure for them to do so beyond their initial avatar creation and modifications.
Although residents are not commonly told outright to change their looks, it is clear that appearances do matter throughout the world and for the avatar’s tenure within it. Although avatar customization is not the only activity in Second Life, it is a common element of virtual life, especially since appearances can be altered – either slightly or drastically – at any time. With this concern in mind, using a variety of forums residents regularly discuss the need for generalized differentiation, customization, improving the self and, perhaps of greatest concern, not looking like a new user (noob) so that they will not be judged .
Incentives can also come from in-world interactions, especially in terms of signals that demonstrate that residents notice how others look. Despite how frequently and drastically residents can and do change their appearance, positive comments, while not exceedingly rare, are not given extravagantly. This relative infrequency suggests that residents are somewhat selective about what they acknowledge. Rather than remarking on every noticeable change, compliments are likely to be reserved for unusual, creative, or high quality items, or for markedly well put together avatars. At the same time, the fact that compliments are given make clear that appearance is still watched and noted by other residents, creating implicit pressure to look good, interesting, or unique enough to gain notice.
Conversely, consumption can also be driven by the desire to not receive negative attention. Popular blogs What the Fug?  and SL Fashion Police  regularly highlight crimes against fashion in Second Life, posting photos and critiques of what they and their contributors consider to be badly sized, shaped, dressed, and put together avatars. In these cases, public negative pressure can be a means to keep residents consuming outfits, accessories, and other items that will allow them to avoid criticism from others.
Beyond individual appearance, consumption can also be associated with group membership and belonging. Through their visibility, items of virtual clothing, accessories, and full avatar skins serve as marks of membership within particular groups. A long Victorian dress can indicate affiliations with steampunk groups, while a bear avatar may represent membership in a furry community.
Although residents’ desires are likely to remain in play around these purchases, social pressure also becomes a factor in consumption associated with particular groups. Commodities may serve as ways to gain access to groups both in terms of appearance and other possessions. Many Second Life communities ranging from Western reenactors to Elven role-players and from Gorean groups to steampunk sims require avatars to maintain their appearance in particular ways in order to participate. While residents are not usually required to purchase specific items, they are obligated to maintain a particular style that, in turn, necessitates consumption.
Beyond avatar style, group membership may also be linked to items that are owned and used by the resident. Dog appreciation groups are likely to require a virtual dog to join, and actively participating in dune buggy races generally requires actually owning a dune buggy. Through purchasing these items, residents are able to join particular groups that they might not have had access to otherwise. In these cases, social belonging is largely contingent on consumption.
Finally, in some cases purchases are explicitly required to participate with a group. While consumption around appearance and possessions produces pressure to own particular styles and types of items, there are also instances in which specific items are necessary. For instance, in numerous role-playing sims residents must purchase a heads-up display (HUD). Without this item – which is a specialized set of controls only visible to the avatar – residents will not be able to interact properly with the environment or each other. While HUDs are not necessarily expensive, their purchase is required in order to interact with certain groups or in certain spaces.
Given the many thousands of items available in Second Life (including free and low cost items), residents should be able to consume in a way that addresses social pressure while still meeting their own desires. However, pressure to consume adds an interesting element the question of why it is that people consume virtual goods. While it is impossible to say at this point how much of Second Life’s economy is driven by individual preference versus social pressure, the latter factor suggests an avenue of inquiry worthy of further study and discussion.
 Boostrom, R. (2008) ‘The Social Construction of Virtual Reality and the
Stigmatized Identity of the Newbie’ Journal of Virtual Worlds Research, 1, 2.
 Landay, L. (2008) ‘Having But Not Holding: Consumerism & Commodification in Second Life’ Journal of Virtual Worlds Research, 1, 2.
 Lehdonvirta, V. (2009) ‘Why Do People Buy Virtual Goods’ Virtual Economy Research Network, http://virtual-economy.org/blog/why_do_people_buy_virtual_good.
 Linden Lab. (2009) ‘Second Life Economic Statistics (Raw Data Files)’ Second Life, http://secondlife.com/statistics/economy-data.php.
 SL Fashion Police. (2009) http://www.slfashionpolice.com/.
 What the Fug? (2009) http://wehatewhatyourewearing.blogspot.com/.