Firms Seek Elusive Real Profit in Virtual Business

Companies from IBM to GM have opened stores in the three-dimensional online gaming world, but they have yet to see any virtual profits. Eli Noam, director of the Columbia Center for Tele-Information at Columbia University talks with Steve Inskeep about a recent conference hosted by the center on business opportunities in the virtual world.

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Next, let's look at making money in the virtual world.

The research group Gartner says 80 percent of Internet users will have a second life in the virtual world only four years from now. That is the online fantasy realm of sites like Second Life and The Matrix and Toontown. Bringing more companies from Wal-Mart to General Motors think this is going to mean big money for them.

Eli Noam at Columbia Business School co-hosted a conference about the business opportunities here. Welcome to the program.

Mr. ELI NOAM (Director, Columbia University Center for Tele-Information): Good morning.

INSKEEP: I guess you held this conference in Second Life. You actually didn't bring people together?

Mr. NOAM: Yes. They were physically there but they were also virtually there through their Second Life avatars.

INSKEEP: Now, we did actually play Second Life with a gentleman a few months ago on this program. And I'll just say this for people who have never done it: there's a version of you that gets created on the screen. You can look about however you want. And you move around through auditoriums, through stores, going up and down roads, driving imaginary cars. And this is all a commercial opportunity?

Mr. NOAM: Well, it provides an opportunity for people to sell you real merchandise and also virtual merchandise, so that your avatar can get some kind of fashion that stands out, that looks - makes you look attractive. Everybody, by the way, looks quite attractive on Second Life.

(Soundbite of laughter)

INSKEEP: So you can pretend to buy clothes for your virtual character or maybe buy the same real clothes and they might arrive on your doorstep?

Mr. NOAM: That's right. Or you can go to the online Web site of a merchandiser.

INSKEEP: Now, when we spoke with the creator of Second Life, or a creator of Second Life about this a few months ago, it seemed as though the commercial efforts were just beginning. Are there companies going into this in a big way at this time?

Mr. NOAM: There are, for a variety of reasons, partly because it creates a buzz and people talk about it and write about it. And secondly, because also they think that they might sell things in ways that perhaps create a multiplier. The volume is at this point not huge because the number of people who actually are visiting it at any given moment is probably around 30,000-40,000 people.

INSKEEP: Which big companies showed up, so to speak, at your conference?

Mr. NOAM: Well, for example, IBM. What IBM does is they create platforms for other companies so that they can sell on Second Life and create those electronic virtual merchandise that other people buy. And sometimes people wonder why would anybody pay money for something that doesn't really exist, that is only an electronic tool or belt buckle or so on. The answer is when there is a buyer and there is a seller, then there is a market - and Second Life brings together millions of people.

INSKEEP: I guess Sears was there. American Express was there. Some others were there.

Mr. NOAM: Yes, they are.

INSKEEP: I'm just curious. If you do a real conference in the real world, people tend to wander away from the conference - it's San Antonio or Miami or some nice place and people go off and go to the beach and shop. Did you wander away from your conference and do any shopping, on this virtual conference?

Mr. NOAM: I was too busy, but the fact is that if you can wander, in fact, you can fly, you can be teleported to locations that are quite imaginative. At this point it's I would say for the mass audience sometimes a little clunky, but on the whole you can let your imagination run quite free.

INSKEEP: Eli Noam is the director of the Institute for Tele-Information at Columbia University. Thanks very much.

Mr. NOAM: You're most welcome. Thank you.

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Second Life: Real Money in a Virtual World

Reuben Steiger and Steve Inskeep check out one of Second Life's most popular clothing stores. i i

hide captionYou can buy an entire virtual wardrobe in Second Life. Here, Reuben Steiger (left) and Steve Inskeep check out one of the virtual world's most popular clothing stores. Inskeep is wearing one of his new finds, a yellow tie.

Millions of Us
Reuben Steiger and Steve Inskeep check out one of Second Life's most popular clothing stores.

You can buy an entire virtual wardrobe in Second Life. Here, Reuben Steiger (left) and Steve Inskeep check out one of the virtual world's most popular clothing stores. Inskeep is wearing one of his new finds, a yellow tie.

Millions of Us

You can make a lot of money buying and selling things that are not real. Second Life has built a booming virtual economy around some little animated characters called avatars.

Avatars live in a computer-generated city, and participants can create their own character for free. For a few pennies here or a dollar there, you can accessorize your avatar with new clothing, a car, even a house.

All that spare change has really started to add up and Second Life has earned hundreds of millions of very real dollars.

Steve Inskeep got a tour of the simulated city from Reuben Steiger, who runs a company called Millions of Us that helps businesses do business in Second Life.

Steiger spoke with Inskeep from a studio in San Francisco as their digital counterparts met outside a theater somewhere in cybertown.



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