Virtual world attracts "residents" who meet, learn and even spend real money

SAN FRANCISCO — If the virtual world of Second Life has a Mount Olympus, the place where gods flex their power and influence, it's here at parent company Linden Lab.

That makes Linden Lab Chief Executive Officer Philip Rosedale a Zeus-like figure. From an open, cubicle-free office near Telegraph Hill, Rosedale oversees 1.4 million "residents" of Second Life's 3-D, online world of commerce, information and social networking.

And Second Life could be headed for next-big-thing status.

Think of it as MySpace meets "The Matrix," where players create alternative-reality versions of themselves and then live out their new, digital lives online. They make and visit friends, have sex and get married. They can build a house, test-drive a car or buy virtual goods for actual money.

Residents of Second Life craft elaborate "avatars" — or animated alter egos — and spend Linden dollars (L$257 equals $1 U.S.) to outfit themselves with wings, designer outfits and associated bling.

Hundreds of thousands of real dollars are spent every day among 26,000 virtual acres of islands, casinos, shopping districts, libraries, universities — even sex clubs. Entrepreneurs with virtual shops earn real money designing software, clothes and buildings for Second Life clients.

Joining Second Life is free, though the cost of building objects and buying land varies. A small, 16-acre island will set entrepreneurs back $1,250 in U.S. dollars, plus a monthly maintenance fee of $195. Large islands run $5,000, plus $780 monthly, though more affordable plans exist for inland lots.

The population of registered residents is growing by 30 percent a month.

"Second Life looks like the statistical average of all our dreams," says Rosedale, 38, an intense but soft-speaking San Diego native.

"In-world," as they say here, he's "Philip Linden," an urban cowboy punk. In real life, he's an entrepreneur who has attracted some of the biggest names in the online world as investors.

"But the thing that's so compelling about Second Life: There are no gods," he says.

In the past few months, companies such as Sony BMG, Nissan and Adidas/Reebok have rushed to establish corporate beachheads on Second Life, founded in 2003. This fall, Harvard Law School offered a class taught partially on its virtual campus in Second Life (called Berkman Island), and Reuters news service assigned a full-time reporter to cover Second Life.

Wes Keltner, president and chief executive of The Ad Option, helped American Apparel set up its own island and is designing a virtual version of New York's Times Square.

"Linden Lab gave people a sandbox to play in and said, 'Make something cool,' " Keltner says. "Science fiction is now."

The implications of interactive worlds such as Second Life reach beyond the Internet. Residents can make money and retain intellectual-property rights to their creations, as long as they adhere to user agreements.

"For us, it's a whole new medium," says Jeff Yapp, executive vice president of MTV Networks' Music Group.

In September, MTV launched its own Virtual Laguna Beach, a sandy 3-D space akin to Second Life and Sims Online, based on its popular "Laguna Beach" TV series.

But Second Life isn't TV, nor is it a video game, says Rosedale. Unlike video games, there is no singular objective, no princesses in distress, no alien bad guys to slaughter wholesale.

Lori Bell, 45, a librarian in East Peoria, Ill., works at the in-world Alliance Second Life Library on Info Island. She calls it "an opportunity to see things like Dublin, an ancient Egyptian area, a 19th-century simulation, museums, and things you would never get to see in your real life. [It's] a place for boundless creativity and learning."

Tracy Hughes, 38, a pharmacist's assistant living near Birmingham, England, discovered Second Life through a friend on MySpace six weeks ago. She's a frequent visitor to Duran Duran's virtual mansion, where the British band hosts a scavenger hunt.

"I've made so many friends, and just like in real life, I love to see and chat with them. In fact, they are as important as the friends I have outside of Second Life," Hughes says. "We go dancing and to art galleries, to parks and to each others' houses."

And she says her money goes further.

"In fact, I'm saving so much money in real life because I get the satisfaction of spending in Second Life and it costs almost nothing," she says.

As landlord and currency exchange, Linden Lab gets a small part of that "almost nothing," multiplied exponentially.

Second Life is taking up ever-expanding server space, housed at 365 Main Inc., a little more than a mile south of Linden. Rosedale calls it "the big mountain."

Behind bullet-resistant glass, on an earthquake-proof foundation, Linden's servers spit out hot air and whir a low musical hum — the sound of Second Life growing.

"It sounds like money," says Kevin Shanahan, vice president of sales for 365 Main.

Because Linden Lab is a privately held company — investors include eBay co-founder Pierre Omidyar and Amazon founder Jeffrey Bezos — it does not release profit figures. But, Rosedale will say this much: "We're very close to profitable. The business itself, on an operating basis, is very profitable. We're doing fine. We're not going to need different revenue streams to grow and be a very big company."

With its huge monthly population boom, Second Life could reach the tipping point of a full-blown cultural phenomenon, though skeptics offer caution.

"It's an online space that's relatively easy to understand and use, and that has a richness to it that has been lacking in other similar attempts before it," says Steve Jones, professor of communication at the University of Illinois at Chicago. "On the other hand, I suspect ... that there will be a Third Life at some point, if you will, that will build on what Second Life has done. It may be that Second Life's creators will see to that evolution themselves."

Rosedale remains philosophical about his company's future.

"If we're remembered someday as the company that started this all, I think the thing that would be cool, that would feel rewarding, was just to feel that we made it happen a few years earlier than it otherwise would have," he says.

"The idea of simulating the world has always, to me, just been completely inevitable."