Virtual Economy Grows as Real Economy Shrinks

Second Life has reported financial results of the third quarter describing it as “a very strong quarter in Second Life with significant growth in land, user hours and the inworld economy”. What’s more, Linden Labs even mentioned that this September was unusually good for the Second Life virtual economy performance - despite the financial crisis in the real world.

In fact, growth was everywhere in the virtual reality: users spent 45% more time inworld compared to the same period last year (actually breaking the 100 million quarterly hours mark), residents owned 2 billion square meters of land which is 124% year-over-year increase.

Also during this quarter SecondLife has finally recovered from the gambling ban of mid-2007 when the revenues significantly dropped: in the third quarter the resident-to-resident transactions volume reached $102 million and broke $100 million mark for the first time since Q2 2007.

Even LindeX, the Second Life virtual currency exchange, grew 4% over Q2 and the amount of all Linden dollars in circulation grew 4.5% over quarter 2 to 5.5 billion (which is over $20 million).

And while there are skeptics thinking that virtual economy will soon reach some sort of conformity with the real-life economy as Second Life residents notice the economic turmoil here and behave accordingly when they are inworld, I tend to think otherwise. To me SecondLife looks very much like a distraction from the raging world here where people will try to hide from their daily problems trying to forget about them.

In a certain sense I can compare Second Life to alcohol. Frankly, if there is one thing I can expect people will resort to looking for relief from their daily problems, looming unemployment and uncertainty everywhere, it will be alcohol. But what if Second Life could be a similar vent hole for them as well? Yes, Second Life takes people spending money in-world for its economy to be healthy (and for people to actually enjoy the virtual reality) but Linden Labs announced unusually good financial results in September with users spending only $0.96 per hour in-world - so this looks cheaper than alcohol in addition to not causing damages to your health the way alcohol does. This is why I believe that Second Life may very well be another internet business to survive the recession staying healthy by helping people to relax at hard times?