Credit crunch hits Second Life

"Virtual realty" investors have been hit hard by the real-life financial crisis.

Visitors to five of the most prominent virtual worlds - Habbo Hotel, IMVU, Stardoll, Neopets and Second Life - have risen by one-third overall in the past year.

But property prices have crashed 84 per cent in Second Life, the pioneering site where users interact via software-generated identities known as "avatars".

Second Life has an internal currency, Linden dollars (named after operators Linden Lab), which is bought and sold with real money.

The average price of cyber land has dropped from 12.06 Linden dollars (seven cents) a square metre at its peak in January 2007 to 1.98 Linden dollars (1 cent) last month. While The Sun-Herald obtained price comparisons from net archives, Linden Lab chief Mark Kingdon boasted last week of a record currency trade, saying, "There's no credit crunch in Second Life."

Associate Professor Matthew Allen, head of internet studies at Curtin University of Technology, said: "Like many parts of the internet, Second Life's economic viability depends on people buying into the hype and buzz, then committing to developing the system."

Reuters news agency journalist Eric Krangel wrote on his blog: "The very things that most appeal to Second Life's hard-core enthusiasts are either boring or creepy for most people: spending hundreds of hours of effort to make insignificant amounts of money selling virtual clothes, experimenting with changing your gender or species, getting into random conversations with strangers from around the world, or having pseudononymous sex."

Habbo Hotel had a 267 per cent growth in Australian visitors this year, according to web measurement firm comScore World Metrix. About 335,000 Australians, mainly youngsters, used the site to chat and play games last month (with Habbo claiming 10.4million global visitors this month - 90 per cent aged 13 to 18 - with sessions lasting an average of 43 minutes).

Two other worlds aimed at children, Neopets and Stardoll, shrank last month with 137,000 and 164,000 Australian users respectively, while adult visitors to IMVU were up 43 per cent, to 232,000 Australian visitors last month. Metrix reported a 38 per cent growth in Second Life visitors, but that still equated to just 41,000 Australians last month.

Premium Second Life accounts, where members pay for extra services, were down globally 16 per cent, from a peak of 94,607 in June 2007 to 79,721 last month.

"Some people join and only ever visit the virtual world once, some are infrequent users while others have purchased land and spend a considerable portion of their days in virtual worlds," said Dr Denise Wood, media arts program director at the University of South Australia.

Second Life started with a bang in 2003 and soon produced stories of developers becoming virtual millionaires and big corporations opening cyber operations.

But the Second Life headquarters of 20 international brands were reduced to "ghost towns" this year, says PhD student Kim MacKenzie.

- © Fairfax NZ News