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Contents
1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Executive summary 3

Introduction

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Why is this research being undertaken?

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What is required of the research?

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Who is involved?

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When does this start and finish?

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Where will the research be carried out?

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How?

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The potential of second life - defined

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9.1 9.2 9.3 10.0

The advantages for business

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The Costs

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The disadvantages for businesses

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Conclusion + recommendations

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11.0 12.0

Decision Matrix Figures + References

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1.0 Executive Summary
dDeveloping is a digital media company wishing to expand its borders, from a tangible reality, into a virtual world: Second Life. With a reputation for unparalleled marketing opportunities, international renown, business opportunities for those who take it, and a world at your fingertips – Second Life, is paving the way for medium and small businesses to tap into a market, previously undiscovered. This report seeks to define if the potential of second life is applicable to dDeveloping, and if second life in general is truly advantageous.

2.0 Introduction

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Marketers are using Second Life to interact with their audiences, spending millions of Dollars doing so. But is this profitable to small businesses like dDeveloping? Second Life is a 3D online environment created by Linden Lab It is a 3D social space, There are virtually no limits to what you could buy or wear or create, and now companies and individuals are using Second life as a platform for mass, international marketing and business, and some, are making a fortune.

3.0 Why is this research being undertaken?

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dDeveloping wishes to expand its operations globally and offer its products and services to other countries. Will a virtual international office in Second Life enable the company to achieve its aim ?

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What is required of the research?

To evaluate the potential of Second Life as a platform for marketing Digital Media services internationally, specifically dDeveloping.

5.0

Who is involved?

This research was done by Daniel Dalal, a TAFE Randwick student in the Digital Media Diploma.

6.0 When does this start and finish?
The project will commence on Tuesday 11th March 2008 and end on Friday 4th April.

7.0

Where will the research be carried out?

The project will be carried out at Randwick Campus and at d.Developing headquarters in Bondi.

8.0 How ?
The project will adopt desk top research methods using a range of information sources identified using a decision matrix. Lots of online information and research as well.

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9.0 The potential of Second Life – defined.
Second life, is a virtual world where users contribute considerable labor in exchange for things they value, and interestingly, are creating real economies, which display inflation, fraud, and some surprising in-game innovations. With more than ten million active players worldwide—and with Microsoft and Sony pouring hundreds of millions of dollars into video game development— online games have become too big to ignore. The potential is enormous.

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9.1 The advantages of Second life for Business
More than 65 companies have already launched their Second Life presence, turning out to be more interested into Second Life than actual users. Many have learned from previous bad marketing experiences of reaching out into new terriorities without adequate experience and are now hiring people from within Second Life to support their activities. There are countless Second Life businesses, doing great things in a virtual world, and having a domino effect in the real world. A great example of this is Nissan. Nissan offers Second Life residents free test drives of the virtual copies of their real life models. Free items that duplicate the real products are allowing the residents to have a full demo of a product before buying it in the real world, and in Second Life, going one step further by enriching the user experience, adding new functionality and interactivity. Another example is The iPhone, with Apple making a fully functional virtual copy available to every user, - with the ability to listen to iTunes music, watch videos and communicate with their friends. Nike is another – giving users running shoes that increase games peed. Sears 7

– offering free interior decorators to furnish virtual houses with their furniture, hoping that the user would perhaps then want to do the same in real life. Aside the obvious potential of ‘linden’ dollars translating into real dollars, and the domino effect of second life, on real time business – the experience of second life is what has business doing so well. Take, for example, The Coca-Cola Company, which, announced a revolutionary campaign (run by a marketing company called Crayon), called, Virtual Thirst which invited users to participate in the Coke experience by coming up with ideas for creating their own vending machines that can do absolutely anything. The winner would see their creation become reality in Second Life. This creative campaign, connects with the user and will create a loyal customer. This is what second life is able to do, - to allow businesses to grant their customers every wish – no matter how absurd, to please them, and woo them, and ultimately win them (and their lindens) The opportunities seem quite endless. Second life provides an open ended platform: it’s limitless. This is an idea that played nicely into ‘The Power of us’ cover story in ‘Business Week’, about Second Life. (below) (www.businessweek.com)

For business, it isn’t just virtual.

9.2 The Costs
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The Second Life world has a fully-integrated economy architected to reward risk, innovation, and craftsmanship. Residents create their own virtual goods and services. Because residents retain the IP rights of their creations, they are able to sell them at various in-world venues. Businesses succeed by the ingenuity, artistic ability, entrepreneurial acumen, and good reputation of their owners. Residents who have amassed lots of Linden™ dollars are matched with residents who want to buy Linden dollars at the LindeX™ exchange (our official Linden dollar exchange), or at other unaffiliated third-party exchanges. The Second Life real estate market provides opportunities for Residents to establish their own communities and business locations. Under Linden Lab's Terms of Service, Residents retain intellectual property rights in the original content they create in the Second Life world, including avatar characters, clothing, scripts, textures, objects and designs. The result is a vibrant marketplace of Second Life content. If you create it, you can sell it, trade it, and even give it away for free, subject to Terms of Service. A Premium Second Life account, starts at $9.95 a month, allows a user to get land on which they can build, display, entertain and live. They also receive extended support options. The Land Use Fee (also known as a Tier Fee) is a monthly charge in addition to membership fees (i.e., US$9.95/month Premium Membership). Land use fees are billed based on the peak amount of land held during the previous 30 day billing cycle. This includes land parcels held and land tiers donated to groups. The fee is tiered and discounted as a user acquires more land. Peak usage is measured by the maximum amount of land one held -- for any length of time -during a billing cycle. An interesting survey was conducted on the SecondLife Community at http://slsurvey.wordpress.com from March 26 to July 26 2007. 657 answers were recorded. The survey was conducted in a number of different categories. Section II – Money, is shown below:

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How much RLinden money have invested in the SecondLife to date ?
Answers $0 to $50 $51 to $200 $201 to $350 Over $350 Total 365 143 50 99 657 % 55,6% 21,8% 7,6% 15,1% 100,0%

you

Approximately how many Lindens have you earned in SL?
Answers None L$300 to L$7000 ($1 USD to $26 USD) L$7001 to L$25000 ($26 USD to $95 USD) Over L$25000 ($95 USD) Total 233 258 77 89 657 % 35,5% 39,3% 11,7% 13,5% 100,0%

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SecondLife.com: Linden to Dollar exchange:
Linden™ Dollars
Total L$ Supply (L$):

4,759,641,459

Estimated In World Business Owners Unique Users with Positive Monthly Linden™ Dollar Flow (PMLF) 2 Octob USD Equivalent Septemb Novemb Decemb Januar er PMLF er 2007 er 2007 er 2007 y 2008 2007 24,13 28,71 < $10 USD 23,336 25,591 26,922 2 1 15,21 16,41 $10 to $50 USD 12,811 14,156 14,618 3 7 $50 to $100 3,001 3,528 3,145 3,156 3,740 USD $100 to $200 2,131 2,477 2,210 2,237 2,436 USD $200 to $500 1,814 1,984 1,848 1,971 2,115 USD $500 to $1,000 683 872 820 830 863 USD $1,000 to 432 473 484 462 464 $2,000 USD $2,000 to 285 320 297 324 333 $5,000 USD > $5,000 USD 138 157 154 158 156 Monthly Spending by Amount (2008 February) Resident Transaction Size s 1 - 500 L$ 111,754 501 - 2,000 L$ 61,143 2001 - 5,000 L$ 46,500 5,001 - 10,000 L$ 32,860 10,001 - 50,000 L$ 55,056 50,001 - 100,000 L$ 11,606 100,001 - 500,000 L$ 8,108 500,001 - 1,000,000 L$ 674 Over 1,000,000 L$ 421 Total Customers Spending Money In328,122 World

February 2008 28,896 16,212 3,465 2,357 1,981 861 513 307 155

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9.3 T h e

disadvantages.
Second life is not without controversy. Recently Time magazine named Second Life fifth on its list of the five worst Web sites. Wired has an article in the August 2007 issue that argues Madison Avenue is wasting millions of dollars getting clients to create virtual stores that rarely get a visitor. Time called Fortune 500 forays into the virtual world “a case of some CEOs trying too hard to be hip.” Earlier this month, Forbes catalogued examples of the vandalism and pranks that have beset real-world brands in Second Life. So, while the virtual world seems to offer endless marketing opportunities, some data would suggest that Second Life isn’t as great as it seems. The virtual world currently has a total of 2,965,539 residents, but only 1,037,804 of these logged-in in a survey conducted of 60 days. With the kind of money going into Second Life right now, sources predict that a disaster may be waiting to happen.The biggest problem is placing traditional models into virtual worlds, for example clothing stores in Second Life. For Branding, it works, but for e-commerce, it does not work so effectively. What is its advantage, is also its 12

disadvantage- usability – although it can be anything a user dreams of, Second Life cannot mimic reality, and thus cannot have users spending - for example, what they might in reality.

10.0 Conclusion + recommendation
Second Life is a highly imaginative, creative environment. www.virtualworldsreview.com likes to call visiting it ‘stepping into a Dali or Magritte painting in 3D.’ With fully textured customizable, highresolution avatars, and dozens of sliders to change every pixel of an avatar's shape, size, and color, second life is a place where dreams are built, re-enacted and live. While some Second Life citizens do their best to create miniature versions of their offline bodies as avatars (thus retaining some semblance of reality), most use the opportunity to make themselves look as strange as possible. Enter any digital media company into an environment thriving on ideas and creativity and digital media – and you have a market waiting to be tapped into. The potential of Second life is limitless. Especially its marketing arm and reach. Second Life's often bizarre "waking dream" atmosphere allows users to indulge in their fantasies and to become very open to new ideas. They can become loyal with a good campaign, and spend hours traversing an interactive idea/business. The name says it all- “Second Life", - an experience, not a game. A personal experience– 13

Which is only growing more popular. This report has found that Second Life unlocks unseen potential for professional networking, intellectual exchange, and even project recruitment. It should, however, be looked at as a marketing tool, which is extremely beneficial to a digital media company. Thus its recommendation for dDeveloping is to arrive with direction, passion, and the knowledge that Second Life, when used with creativity, is filled with potential.

11.0 Decision Matrix
Rating scale Time Access Reliability Cost 5 Easy - 1 difficult 5 Easy - 1 difficult 1 High - 5 low 1 High - 5 low

Weight Factor Time Access Reliability Cost 5 3 5 5

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Magazines Criteria Time Access Reliability Cost Weight Rate score 5 3 5 5 5 5 2 3 25 15 10 15 65

Surveys Rate score 4 4 3 5 20 12 15 25 72

Web Research Rate score 5 5 2 5 25 15 10 25 75

Library search Rate score 1 4 4 3 5 12 20 15 52

TOTAL SCORE

12.0 Figures + References
Internet:
http://secondlife.com/ http://www.virtualworldsreview.com/secondlife/ http://slsurvey.wordpress.com/survey-result/ http://www.amazon.com/gp/product/0226096262/ qid=1119896656/sr=2-1/ref=pd_bbs_b_2_1/102-1296256-9771314?n=283155 http://www.businessweek.com/innovate/content/jun2006/id20060627_217800.htm http://www.businessweek.com/the_thread/techbeat/archives/2006/04/my_second_life.html http://rssdiary.marketingstudies.net/content/second_life_2_how_can_marketers_take_advantage.php http://www.baselinemag.com/c/a/Projects-Management/Second-Life-Is-Business-Ready-For-Virtual-Worlds/ http://www.devx.com/ibm/Article/35110

Figures:

http://www.flickr.com/photos/tags/secondlife/ http://www.businessweek.com/the_thread/techbeat/archives/2006/04/my_second_life.html

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