Influencing the Second Life Economy

Interactive Dressing RoomTo accompany the POV the lab released yesterday regarding the virtual world of Second Life, I figured I’d post a link to this fascinating little article about how easy it is to influence the economy within Second Life. I’m not sure how much I agree with the author that Second Life is a giant Ponzi scheme, but I do think any advertiser considering creating a commerce-generating presence within Second Life should take a close look at how a few thousand dollars in transactions could drastically influence the USD/SLL Exchange Rate.

What should have been a relatively small SLL/USD exchange trades given media claims about millions of dollars flying around per week in 2006, in reality caused the exchange markets to distort tremendously. We could not effectively move sums of more than a couple thousand dollars out of SL without the exchange market confiscating most of our returns (through rate reflectivity). Example: in July 2006, USD/SLL was 239/279.2 bid/ask on the primary open exchange. Our attempts to trade resulted in settlement bids of more than 350. Interestingly, these trades tended to net returns of right around 4%, which was the prevailing dollar deposit rate.

The article itself is pretty fascinating and well worth a read, regardless of whether you believe the “pyramid scheme assertions.” What’s also interesting is that the subtext is that using Linden Dollars as a U.S. dollar equivalent is probably a bad idea. Companies like Dell, which has created Second Life computer customization areas (and given Second Life its own country in their localization selection), are on the right track by pushing SL users out to their website, where the transactions are conducted in real-world currency.