Dead End: Second Life

Abstract

Second Life had real companies, a working currency, real estate brokers, fashion designers, and concert events. IBM held employee meetings there. Reuters opened a virtual bureau. Politicians campaigned there. And then: nothing. Second Life teaches that a complete virtual economy is not a sufficient condition for a mass platform.

Linden Lab and the Open World

Philip Rosedale founded Linden Lab in 1999 with the vision of a user-built virtual world. This was not a game in the conventional sense: no quest, no final boss, no prescribed narrative. Second Life was a platform on which users created everything themselves.

Second Life opened to the public on June 23, 2003. The central design principle, formalized in November 2003: users own what they create. Intellectual property in objects, scripts, and textures created in-world stayed with the creator. That was radical at the time; other virtual worlds claimed ownership of everything in their database.

The technical foundation: a three-dimensional persistent world, divided into “sims” (simulations) of 256×256 meters. Users navigated as avatars. The physics engine simulated gravity, collisions, fluids. Scripts (Linden Scripting Language, LSL) enabled interactive objects: doors, vehicles, weapons, games.

The Virtual Economy

What made Second Life unique: a real, convertible currency.

Linden Dollars (L$) were not just game money. They could be traded against US dollars on the LindeX (Linden Lab’s own currency exchange). In 2006 the exchange rate stood at roughly 250–270 L$ per dollar. Second Life had a central bank and a foreign exchange market.

Real professions emerged in this economy:

Virtual real estate: Linden Lab sold “Mainland” parcels. Speculators bought, developed, and sold at a profit. Anshe Chung (Ailin Graef) became, in 2006, the first person with a fortune of over one million US dollars earned entirely in a virtual world, through land development in Second Life. Business Week put her on the cover.

Fashion and design: Thousands of users made a living selling virtual clothing, hairstyles, accessories, and buildings. For the tenth anniversary in 2013, Linden Lab named the platform’s best-selling good: women’s hairstyles.

Services: Virtual lawyers, virtual consultants, virtual clubs with entrance fees in L$.

The economic volume was real. In 2008, users traded goods and services worth around 361 million US dollars among themselves; at its peak in 2009, the Second Life economy reached a total volume of 567 million US dollars, even though Linden Lab collected only a fraction of it as platform fees. The balance sheet at the tenth birthday in 2013: 36 million registered accounts, still over a million visitors per month, a cumulative 217,266 user-years spent in the virtual world, transactions totaling 3.2 billion US dollars, and a land area of roughly 1,813 square kilometers, fourteen times the size of San Francisco.

Info

Why the economy worked, and what that says about value:

Second Life’s economy refuted intuitive-sounding assumptions. “Virtual goods have no real value”, yet people paid real money for virtual clothing, virtual land, virtual jewelry. The value was not in the material. It was in the signaling within a social context: the best avatar design, the most beautiful parcel, the most exclusive event.

The same principle explains Fortnite skins, Pokémon card gradings, and NFT marketplaces. The value of virtual goods is consensus within a community, just as the value of physical luxury goods is consensus within a society. Both are social constructions. Second Life made that unusually transparent.

The standards-based attempt at the same idea, a decade earlier and in the browser, is covered in Dead End: VRML and the First Metaverse.

The Corporate Hype of 2007

In 2006–2007, Second Life went through a hype cycle that was exemplary in retrospect.

IBM set up internal meeting rooms in Second Life. IBM employees discussed projects as avatars, and the company publicly backed the “3D internet” as a coming business platform.

Reuters opened a virtual bureau in Second Life in October 2006, with a dedicated journalist (media reporter Adam Pasick as the avatar Adam Reuters) who supplied residents with news from inside and outside the world. The bureau closed after about two years.

Adidas, Reebok, Toyota, Nissan, BMW: all opened virtual showrooms. Dell sold virtual computers. American Apparel had a virtual store.

Politicians arrived too: John Edwards opened a campaign headquarters there, and supporters built presences for Barack Obama and Hillary Clinton during the 2008 primaries. Sweden opened the first embassy in the virtual world in early 2007, and other missions followed. Frankfurt am Main moved in as the first German city, Baden-Württemberg as the first German state; the tabloid Bild was present too.

It all ended more quietly than it began. IBM closed its Second Life offices. The corporate avatars disappeared; many companies chased the next trend. What remained was more mundane: Second Life became a virtual conference room, for instance for TÜV Nord. In mid-2010, Linden Lab cut nearly a third of its jobs, though in early 2012 it still spoke of a “Third Life”.

Why Second Life Did Not Scale

Second Life reached its high point in early 2009 with around 88,200 peak concurrent users; at the end of 2007 the figure was about 58,000. That sounds small, and it was, compared to mass online games with millions of concurrent users.

The reasons it did not scale are instructive:

Hardware requirements: In 2006–2008, Second Life needed what was then a mid-range to high-end graphics card, 512 MB of RAM (1 GB recommended), and a fast internet connection. Netbooks and older PCs (the majority of the global installed base) were out of the question. Mobile: unthinkable.

Interface and usability: The Second Life interface was complex. Navigation, camera control, inventory management, communication: each had its own learning curve. Newcomers often left Second Life within minutes because they did not understand what they were supposed to do.

Content quality: Second Life was user-built, which was both strength and weakness. The best areas were impressive. But large parts of the world were abandoned, half-finished, or aesthetically incoherent. The experience was uneven in a way that publisher-curated media were not.

No killer task: Second Life did not answer the question “what am I supposed to do here?” For creative users, that was an invitation. For the mainstream, it was emptiness. World of Warcraft set clear goals: level up, raid, complete quests. Second Life had no goals except those users defined themselves.

Social criticism: Second Life had a reputation for prostitution, gambling, and other content unhelpful for mass adoption. In 2007, Linden Lab closed all gambling sims under pressure from US regulators. That removed a significant part of the economy.

The Afterlife

Second Life still exists. As of 2023, there are an estimated 600,000–900,000 monthly active users: no mass platform, but a living niche community. Linden Lab was sold in 2020 to an investor group led by Randy Waterfield and Brad Oberwager for an undisclosed amount.

The virtual economy keeps running. Anshe Chung still has a real estate empire. Musicians still hold concerts. Clubs live on.

Sansar, Linden Lab’s attempt at a next-generation successor (2017), failed and was sold to Wookey Project in 2020. High Fidelity (Philip Rosedale’s post-Second-Life venture): likewise no mass adoption.

Second Life was too early, too complex, too hardware-hungry, and too free for an era that needed guidance and simplicity. When Meta attempted the same vision in 2021 with better technology, billions in marketing budget, and billions of existing Facebook users, it ran into the same fundamental question: what am I supposed to do here?

Second Life had given the same answer twenty years earlier: nothing in particular. Anything at all. That was enough for a loyal community, and not for the world.