Linden Lab no longer releasing economic metrics

In recent news, Linden Lab has announced that they will no longer provide their customary annual or quarterly economic reports.  Blogger Tateru Nino reports that Peter Gray, a spokesperson for Linden Lab, has stated that, “We don’t plan to publish a Q4 2011 economic summary. We are discontinuing regular reporting of aggregate economy-level data, because landowners and merchants have told us that the information is of limited value to them. Moving forward, we will instead focus on improved reporting tools that help individuals better manage their businesses in SL.”

Since their inception, the quarterly reports have been gradually limited, with certain statistics and measures eliminated over time.   However, even after a number of revisions that have reduced the available economic data, not releasing economic reports at all still removed a fair amount of information from circulation.   Recent reports, for instance, included general information such as daily completed registrations, average monthly users, user hours, and world size.  On the economic side, they also offered details around average monthly economic participants, average exchange rate, Linden supply, Lindex volume, and web merchandise sale volume.  These reports were analysed on well-known and well-read blogs such as Dwell On It, Gwyn’s Home, New World Notes, and The Alphaville Herald.  They were also recoded in databases like the Economic Metrics Repository to ensure easy accessibility and analysis.  In short, they were widely read and used by everyone from Second Life business owners through to interested residents.

The complete eradication of these reports has some Second Life insiders worried.  New World Notes has termed the revelation a “bad sign” and speculated that Second Life’s health may not be as robust as Linden Lab would like residents to believe.  Similarly, Tateru Nino notes that Linden Lab has removed figures for metrics that appeared to be in decline.  Given that Linden Lab has been largely silent apart from announcing the end of their reports, the reasons for this change and what it could indicate regarding the future of Second Life are still very much up in the air.  While a recent interview with Linden Lab CEO Rod Humble suggests a more positive picture – one that is focused on improving the world and expanding Linden Lab’s offerings into new areas – many residents are skeptical, especially given the loss of economic measures with which to conduct their own analysis of the state of the virtual world.

 

Gold and guardian cubs: tradable pets and RMT in world of warcraft

With the opening of an online pet store in 2009, Blizzard Entertainment started allowing players to spend offline money for virtual goods in the game World of Warcraft. Now, a new pet option that can be sold to other players has potential implications for the in-game economy and real-money trading.

In November 2009, Blizzard opened an online “pet store”, selling virtual items for real money. In order to not affect player abilities, available items are limited to $10 vanity pets and $25 mounts. Buyers are given a code that they link to their game account, or that can be give to another player. Codes can only be used by a single account. Once used, items are automatically bound to the account to which the code was applied and are not tradeable within the game.

In a new option for virtual good purchases, Blizzard has now announced a pet that functions differently. The Guardian Cub companion is not automatically tied to the account that uses the code, meaning that it can be given or traded to another player either directly in world or through the game’s auction house system. The economic implications of this development are interesting. In addition to serving as a gift, this pet makes possible a form of real-money trading (RMT), and has the potential to affect the in-game economy.

Blizzard has positioned the pet as a gift. The company points out that, “The Guardian Cub is also the Pet Store’s first tradable pet, meaning it can be swapped between characters in-game or given as a gift to guildmates, friends, family, or that special someone”. Along with gifts, Blizzard also acknowledges the possibility of residents selling the pets to other players for in-game currency, potentially allowing players who do not want to spend real money on a virtual pet a way to obtain one. In the release, Blizzard notes that, “Since the introduction of the Pet Store, many players have been asking for ways to get the companions we offer there without having to spend real-world cash. By making the Guardian Cub tradable… players interested in the new pet will have fun, alternative in-game ways to get one.”

Although the earlier pets and mounts available through the store could also be given as gifts, this is the first time pets purchased with real money have been tradable directly within the game world. These new tradeable pets appear to be at least partially motivated by an attempt to reduce real-money trading (RMT) through third parties, which can be unsecure and present issues for players. Although RMT has been banned by Blizzard, players still buy gold from sellers to facilitate their game experience. Because the pet can be traded or sold within the game, the Guardian Cub can take the place of some RMT transactions and doesn’t require a third party or any interaction between players outside of the game world. By buying a $10 pet, sellers have the opportunity to trade that pet for in-game gold for relatively little effort, essentially indirectly buying up game currency for real money.

The question now is whether there will be enough in-game demand for these pets to be profitable. If there is a large supply, or not enough interest from people who will not buy the pets directly from the pet store, selling pets may not be a viable option for obtaining game currency. These conditions will drive the in-world cost of the pets, and will determine how expensive or inexpensive they are. Consequently, they will also affect the conversion rate of real money to in-world currency.

In addition, this process requires that players who want to sell the Guardian Cubs bear some risk. If a potential seller buys the pet, there is no guarantee that it will sell, a fact that Blizzard mentions as a warning. What they do not explicitly mention is that if the demand is not enough, or the supply is too great, the $10 cost of the pet may not be worth the return in gold. Although the option to use a pet as a form of RMT may be far safer than relying on third-party gold sellers, if the return on investment is not high enough, players will be less likely to use this option.

New Year, New Numbers

Broken down in terms of some interesting numbers, Ted Sorom has laid out a year in review summary of the virtual goods industry at TechCrunch. Perhaps most interesting figure is that $7,300,000,000 is the expected global revenue for virtual good sales from 2010, although the number of virtual hotdogs eaten by NPCs in Ravenwood Fair is a close second.

The full article is available at TechCrunch.

This is, of course, a somewhat diverse and limited set of measures. It is also one that includes everything from the sale of digital game software to the sale of goods within the games and other environments themselves. However, it offers a glimpse not only into the size of the virtual goods industry, but some of the many features, goods, and values that are currently available for considering these economies.

Sharing in Second Life: Charity in the Virtual Economy

Relay for LifeRelay for Life

Many virtual worlds have a large, overarching economy, based on market economy principles. However, these economies can also contain smaller economies that function somewhat differently from the overarching economic features of the world. While Second Life is based largely on a market economy, there are other economic elements such as charity that also come into effect in ways that can be both interesting and potentially useful for understanding both online and offline giving.

Charitable works within Second Life can be remarkably effective. While there are many smaller charitable causes supported throughout the world, there are also examples of significant and highly successful charitable drives. For instance, Second Life’s 2010 Relay for Life raised US $222,804 for cancer research while the 2009 event raised US $ $274,000.

The success of these endeavours raises the question of what makes charitable efforts so successful within the virtual world, and centres on three main features of the world and its economic system: resident generosity, small but frequent donations, and the ability to offer virtual goods in order to benefit charitable causes.

First, although there are also elements of Second Life and its economy that may facilitate charitable donations, a great many Second Life residents are inclined to be generous in a multitude of ways, as seen in the significant amounts raised for Relay for Life and other charitable causes.

There are, however, elements of the virtual world that can help to redefine and increase charitable giving. In the case of donations, it can be easy to give relatively small amounts in Second Life. Donations of 20, 50, 100, or even 250 Lindens are common, but with the exchange rate of around 250 Lindens to one U.S. dollar, 20 Lindens equals about $0.08 and 100 equals about $0.40. Although the amounts may be relatively small when converted to USD, many small donations can add up quickly. At these levels, most residents can afford to donate. As a result, it is appears that more residents are donating than otherwise would if donations were expected to be higher. Consequently, the frequency of donations can drastically increase the total amounts donated even when the amount of each donation is relatively small.

While many residents give generously on their own and without expectations, there are also charitable efforts in Second Life that are based around more reciprocal arrangements where virtual goods also come into play. Because virtual goods do not usually have many associated material costs, it also very common to find items donated for charitable causes and then either given away to donors or sold so that profits can be donated.

Offering goods is an established technique for generating charitable income in three interrelated ways. First, the act of giving something away – a flower, perhaps, or return stickers for addressing envelopes – generates a sense of expected reciprocity. This tactic can make the recipient more likely to feel that they owe something in return for the small gift they have been given. Second, getting something in return for a donation is rewarding for those who are giving. This is the model frequently adopted in fundraising drives of public television stations as well as by charities who based their fundraising efforts on reciprocal arrangements. Receiving a tote bag, CD, or pin as recognition for making a donation is an attractive way to encourage giving by allowing the giver to receive something in return. Finally, releasing specially created items for purchase with proceeds going to charity is an effective way to generate funds. With goods available for purchase, residents can go about their normal consumption activities while still supporting charitable works.

Generally speaking, it is the latter two models that seem to arise most frequently in Second Life, especially with regards to some of the larger fundraising events. Given the extremely high quality and established generosity of many Second Life designers, there is no shortage of donated goods available on which to base charitable efforts. Furthermore, because they are virtual, there are few, if any, costs required to create a large number of whatever goods are offered for sale. At the same time, by offering goods to individuals in exchange for their Lindens, those who support charities with their purchases also get something of their own choice in return.

Despite the fact that funds are spread out over a huge number of charities and causes, the potential effects of such efforts are not lost in Second Life. Although there are hundreds (if not thousands) of in-world charitable causes and efforts, Relay for Life is one of the largest examples of charitable giving in Second Life with their US $222 804 contribution in 2010. This amount was raised using a combination of sponsorship, stand-alone donations and the sale and auction of a huge variety of virtual goods.

While virtual worlds are certainly worthy of consideration in their own right, perhaps there are lessons that we can take from instances of charitable giving to apply in other situations. Offline we are perhaps not as free of the costs of offering goods in exchange for donations. However, the combination of many small donations and the offering of virtual goods as a form of donor recognition is a powerful way of generating contributions that can raise significant funds for charitable causes that have very definite and positive effects.

Cosmetic Real Money Trading in World of Warcraft

Despite a staunch position against non-company-sanctioned real-money trading (RMT), or the exchange of “real” money for virtual goods and services, Blizzard Entertainment has recently introduced new features of World of Warcraft that have opened the door to the sale of the company’s own virtual goods. While currently focused on cosmetic elements of the game in a controlled and limited way, the development of Blizzard-sanctioned and governed RMT raises some questions and concerns about such practices as well as opening the door for further such activities in the future.

Recent developments in RMT in World of Warcraft are focused on primarily cosmetic items. New items that add to the game in primarily aesthetic ways are available for player purchase within the Blizzard store. To date, offerings are focused on pets and mounts. In-game non-combat pets include a panda, robotic mini- deconstructor, and mini-monster. These pets serve no practical function within the game, and retail for $10.00 USD. The store also features additional in-game pets such as a wind rider cub and a gryphon hatchling that sell for $25.00, but that also include a stuffed animal. While it will not enhance play in a way that otherwise be unattainable within the game, another recent item available in the Blizzard store includes a purchasable mount. The star-outlined celestial steed allows for quick in-world transit and sells for $25.00.

To a degree, cosmetic RMT has been around in World of Warcraft longer than might initially be apparent, especially with the hyped advent of the Blizzard store and its merchandise. In truth, special rare items such as spectral tiger and saltwater snapjaw mounts became available through the purchase of card packs for the associated trading card game (TCG). However, the shift to Blizzard-enabled purchases through a dedicated store marks a potentially significant shift in RMT practices and their effects on video game play in virtual worlds.

While Blizzard has not announced all of their future RMT intentions for the site, there are a few possible repercussions that are worth considering. First, with the shift to special store-only in-game items comes the ability to read another player in terms of how much money they have spent on the game. Generally speaking, in-game items have been largely indicative of the amount of work a player had put into their character – they represent the completion of particular tasks, success in specific dungeons or other arenas, the accumulation of wealth or other currencies, or a combination.

In contrast, allowing players to purchase items – and making such items only available for purchase, and therefore distinctive within the world – makes it clear which players have bought their goods. While such knowledge is not necessarily an issue on its own, it does raise questions surrounding whether such purchases constitute cheating, and whether making apparent how much individuals spend on the game could be an issue in a game that, theoretically, offers an even playing field within the world.

Second, the progression of different items released within store could, if they continue at their present rate, gradually lead to the sale of goods that could significantly affect gameplay. Items introduced within the Blizzard store have begun, with the introduction of the celestial steed mount, to shift from being purely cosmetic – as with non-combat pets – to moderately functional. While the mount does not increase the speed increases available to players who buy it, it does function within the world as any other mount, rather than being a purely cosmetic addition such as with a companion pet. While it will not significantly affect gameplay, beginning to introduce functional items that could alter the play experience by gradually leading to a play style where players are able to purchase their in-game items.

These issues are not necessarily fully upon us, yet the development of RMT within Warcraft raises some interesting questions about the potential effects of such developments. While RMT is not a new element of virtual worlds, the development of such features in a world that has fairly consistent moved away from and even worked against these practices offers a useful case study. Many virtual worlds have only consistently omitted or offered RMT. With World of Warcraft, the gradual shift from one state to the other offers an opportunity to explore not only its effects on worlds, but how these worlds changes as RMT becomes a sanctioned element of the world.

Second Life Sued: Intellectual Property and Virtual Economies

In September 2009, Second Life was sued for allowing individuals to sell fake virtual goods. The case has recently moved forward with the filing of a case management statement. While this lawsuit deals explicitly with intellectual property, these issues are also significant for virtual economies in terms of who makes money and which residents are willing to keep their businesses in Second Life.

The case, filed by in-world business owners, alleges that Second Life has both allowed and enabled the sale of content that was stolen by other residents. While content theft is an intellectual property issue, it is also one that is closely associated with virtual economics. It is through the development and execution of their ideas that many Second Life residents make their profits. As such, the sale of copied goods is likely to reduce the profits made by the creator, since they can be sourced from other sellers. However, it can also effect the in-world economy by reducing prices for virtual good. In order to compete with originals, imposter goods need to be sold at a discount, effectively limiting how much money is generated through their sale.

The effect of the sale of fake goods on profits is certainly a concern; however, it also has potential wider ranging effects, including the willingness of vendors who help drive the economy to remain in-world. If the threat to their goods, businesses, and income is significant enough, Second Life residents could simply remove their businesses from the virtual world.

This issue is somewhat reminiscent of an older Second Life debate. In November, 2006 Linden Lab faced controversy around the use of a program called “CopyBot”. Intended as a debugging took, CopyBot had the ability to copy and replicate code, reproducing any item it could see within the world. With no material costs associated with goods, unscrupulous users could easily copy, replicate, and sell any virtual good that they could see in the world. Although the issue was resolved quickly, many resident threatened to withdraw their businesses from Second Life unless CopyBot was removed and banned. Even on principle, the issue was significant enough to drive residents to fairly extreme measures to protect both their property and their businesses.

This is not to say that the current case will result in these particular reactions. With the lawsuit, the situation has already moved in a different direction and, arguably, gone farther than the CopyBot issue was taken by concerned residents. Furthermore, current resident opinions on the case and its merits are, at best, divided. However, if the case carries on this trajectory, it is possible that it could have a significant effect on the Second Life economy, especially if residents decide to remove themselves or their enterprises from the world because they feel their goods and businesses are not being adequately protected.

The price of eggs in World of Warcraft

In discussing the ease associated with having someone else do the work of gaming, more often than not large-scale services working to create offline profits like gold farming and power leveling operations are discussed. However, on a smaller scale the in-game economic systems of games like World of Warcraft can also provide players a way to avoid working for the things that they want, while simultaneously allowing other players the opportunity to profit from their in-world efforts. While noticeable year-round, these practices are especially visible during Warcraft’s in-world holidays, such as Winter Veil, which is currently being celebrated.

Buying in-game goods

Small eggs will set you back more than they normally would when bought through World of Warcraft’s auction house right now. Every year at Winter Veil (WoW’s thinly-disguised Christmas event), there is a drastic increase of small eggs on the auction house. Alongside this drastic increase in eggs also comes a drastic increase in price – an item that sells to vendors for 4 copper each will sell for upwards of 50 silver. Deeprock salt, also required for the holiday quests, sells on the auction house for one and a half to three gold each, but normally sells for 2 silver and 50 copper to vendors.

While small eggs are generally used for low-level cooking in Warcraft and are neither a common nor expensive item on the auction house. Winter Veil offers players a number of quests and achievements that require these materials for completion. For those willing to farm for these materials, the in-game economic system provides a quick and easy way to sell their goods. For those looking for an easy way to complete a holiday quest that may, if they’re a high-level player, have little value to them, buying eggs through this system is simpler than acquiring the materials themselves

While there are certainly profits to be made here – which may well be worthy of further consideration on their own – the practice of making easily accessible items available to other players through the auction house offers an interesting in-world example of having other players provide items and services. In this way, the economic system of the auction house – and, to a lesser extent, the trade channel – in World of Warcraft serves as a low-level, low-cost way of contracting out work to other players.

Virtual goods and services

The tendency to pay for rather than work for these items is visible in a lot of virtual goods in Warcraft, as is the potential for generating profits from items that other players cannot or will not require on their own. In some cases, doing so is a product of the fact that certain items made by players can only be made by certain in-game professions. Therefore, a leatherworker will need to pay a jewelcrafter for a particular gem, unless they wish to abandon their own profession, start a new one, and work their way through the long process of developing the skill.

This process is also seen in the case of relatively cheap yet somewhat difficult to find or access items. While pet snakes are fairly inexpensive to purchase at 40 silver each, they are only sold be a vendor in one city and routinely show up on the auction house for up to 12 gold. While anyone of a particular faction is able to get these items, the in-game economic system makes it possible to have the work of actually obtaining the item done by another player, who then makes a profit for their efforts.

Similarly, this tendency is also seen in seasonal activities, which tend to require very low level materials in areas that established players with currency reserves cannot be bothered returning to. Therefore, items like small eggs, which are typically found in outlying starting areas and low-level zones to which higher level players rarely have cause to travel, can be easily gathered by those willing to make a profit and sold through one of the in-game economic channels.

The key here is that most of these items are easy to acquire and are available to anyone with the time and knowledge of where to find them. In this sense, these goods are easier to get than those involved in crafting professions since they are available to anyone, and not just those who have selected particular professions. This type of good exists in contrast with other auction goods that are more limited, such as high-level weapons that can only be acquired by a large group of players in difficult dungeons, crafted items that require a particular profession with a high skill level, or items that are class specific, and that perhaps the seller is unable to use.

Generating profits

In some ways, this process is similar to those associated with game services such as power leveling and gold farming. Players who do not want to spend their time gathering eggs or deeprock salt or any other manner of farmable items simply pay for them at the auction house. However, the difference here lies in the fact that the profits in these services are likely to remain within the game.

In general, these are not big-ticket items. While there are profit margins, they are so small as to likely be of little interest to gold farmers with large quotas and others looking to make an offline profit. These activities are therefore more likely to be those of players looking to make a bit of extra money by picking up items, either from vendors or killing low level mobs, that are relatively accessible to them.

At the same time, the fact that these items can be acquired by any player brings too many variables into the sales process to guarantee a profit. Other players may simply elect to gather their own materials. Or, since they are not rare, there may be dozens of sellers offering the same item. As a result, while these selling practices are not likely to appeal to those looking to make large profits, it does provide a way for players to easily gain the items that they need and, for those who do the work, to generate a tidy in-world profit.

Upcoming changes to XStreetSL

This came out awhile ago, but Linden Labs has announced changes to the way it operates its online XStreetSL marketplace, a significant player in its virtual economy and source of a wide variety of virtual goods for use in Second Life.

The major change seems to be to the way in which XStreetSL will handle free items, or “freebies”. Despite being given to other residents for free, these items will now have a monthly listing fee of L$99, or about $0.40 USD each. At the same time, other costlier items will be subject to new rates for listing and commissions on the site.

The possible economic consequences of this move are interesting, especially given the polarizing nature of the availability of free items within the virtual world. The so-called “freebie economy” of Second Life, which provides free items to residents who do not feel like paying for virtual goods, has frequently been criticized for harming the overall economy. However, the freebie economy also attracts residents who may later begin to make paid purchases that do feed into the paid economy.

Despite the standing criticism of freebies, the reaction to this news – ostensibly designed to clean up the marketplace – has been critical. Discussions around changes to XStreetSL have been largely negative, with New World Notes and its readers reporting that some content creators are starting to remove their goods in retaliation. The common theme seems to be that the new listing requirements on XStreetSL may work to limit the freebie economy which, based on the number of low-cost transactions made in any given month, is a highly compelling element of Second Life. At the same time, there is also speculation that this change will work against creators who offer high-quality niche or specialized goods that do not sell quickly. Implementing higher listing fees will likely force their removal from the marketplace simply because the fees are too expensive to be covered through sales.

The full roadmap of upcoming changes can be found here.

Transportable Avatars and Economic Concerns

The idea of developing transportable avatars – avatars that will be able to move both within and between different virtual worlds – has been raised in popular and academic forums for years. However, to date it appears that relatively little progress has been made on this front. While there are likely technical issues with developing such a large and complex project, it is also possible that some of the issues holding back this endeavor are likely to be economic in nature as companies seek not only to establish technical standards, but economic ones as well.

The Possibility of Transportable Avatars

Certainly some of the limits in developing transportable avatars are practical and technical. Given that virtual worlds are coded in different ways and based on different platforms and engines, the ability to move avatars from one world to another is currently restricted. This difficulty is further exacerbated by the fact that while some worlds are based on the world wide web, others run on their own Internet-based application programs. As a result, standards have to be created (and first of all agreed upon) that would work to universalize avatars and their paths through virtual environments.

Despite the potential issues with developing technical standards, it is also likely that some of these limits are financial, especially if there is a possibility that transportable avatars would be able to move between social worlds and game environments, and could possibly take their virtual assets with them. For companies that profit from their virtual economies, preventing the transport of avatars between virtual worlds can also mean protecting their economies and, perhaps more importantly, protecting revenue.

Virtual Economies in Social and Game Worlds

Perhaps one of the more interesting elements of transportable avatars is the fact that Linden Lab, the developers of one of the biggest virtual social worlds, was reported by Businessweek to be involved in the development of transportable avatars. Linden Lab profits from in-world land and from selling Lindens to residents, both which may prove to be an issue with respect to transportable avatars. The first issue facing the company is whether residents would necessarily want to maintain land within Second Life if their avatar could be moved around between different worlds. The second issue is that if residents were able to purchase currency in another economy (and possibly one that is subject to inflation and devaluation), such as is common within the closed worlds of video games, then move it Second Life, Linden Lab could lose money while the resident could profit.

Beyond social worlds, issues also arise around the possibility of transportable video game avatars. In order to have value to players, video games require structure in order to ensure that the game is attractively challenging. This structure also ensures that gameplay is fair, which makes challenges meaningful as well as making competition possible, since participants are provided a standardized way to judge their achievements relative to other players.

In order to ensure equality, many games close their internal economies to offline influences. While these restrictions can be broken, the intent is at least partially to ensure that players remain equal in their interactions, and are not advantaged over one another. However, the possibility of buying virtual currency for a game world in an environment where these practices are acceptable, then taking it back to the game in question stands to put players who elect to move money in this way – as well as have the money to spend on virtual currencies – in an advantageous position within the game.

Perhaps even more serious, at least from an economic perspective, is the possibility that avatars could generate virtual currency through a game and then move to a world in which these currencies could be exchanged for offline money. In many games riches are easy to obtain through the completion of quests and the sale of “loot” left behind when monsters are killed. Under this system, it could be possible for players to quickly generate a wealth of virtual currency to be moved and then traded for offline money, effective generating money for nothing.

Moving Forward

While it is possible that the development of transportable avatars will happen in ways that are, as of yet, unanticipated and even unexpected, the structures of virtual worlds, avatars, and economies as they currently exist are not necessarily amenable to these changes. Although these issues are not insurmountable, they do present a number of concerns around the development of transportable avatars that will need to be answered prior to the widespread development and availability of these virtual entities.

Given the possible issues with avatars, assets, and currencies moving within and between drastically different virtual worlds, there remains a need to consider not only the technical implications of such a project, but also the economic ramifications. Certainly some of these issues, such as the possibility of generating money for nothing, are of such great economic consequence that they would not make it past even the earliest stages of development. However, they are issues worth considering both if transportable avatars are a possibility in the future, both in terms of their development and their potential effects on virtual as well as offline economies.

Does Pressure Play Into Second Life Purchasing?

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 [4].

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 [3], is considered in other venues [2], 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 [3], 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 [1].

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? [6] and SL Fashion Police [5] 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.

[1] Boostrom, R. (2008) ‘The Social Construction of Virtual Reality and the
Stigmatized Identity of the Newbie’ Journal of Virtual Worlds Research, 1, 2.

[2] Landay, L. (2008) ‘Having But Not Holding: Consumerism & Commodification in Second Life’ Journal of Virtual Worlds Research, 1, 2.

[3] Lehdonvirta, V. (2009) ‘Why Do People Buy Virtual Goods’ Virtual Economy Research Network, http://virtual-economy.org/blog/why_do_people_buy_virtual_good.

[4] Linden Lab. (2009) ‘Second Life Economic Statistics (Raw Data Files)’ Second Life, http://secondlife.com/statistics/economy-data.php.

[5] SL Fashion Police. (2009) http://www.slfashionpolice.com/.

[6] What the Fug? (2009) http://wehatewhatyourewearing.blogspot.com/.