Second Life v Facebook: Which Makes More Money?

Second Life business modelWhile most consumers tightened their real-world purse strings in 2009, but that did not seem to hurt sales of virtual goods. Users of virtual world Second Life spent $567 million buying virtual goods in 2009. 65% year-over-year increase in spending on user-generated virtual items for avatars. It’s marketplace saw virtual goods sales of $6.1 million. The economy is based on the Linden™ dollar (L$), Second Life’s virtual currency. You can buy and sell L$ on the LindeX™ the official virtual currency exchange of Second Life. In 2008 more than USD $100 million worth of L$ were bought and sold on the LindeX. While Facebook gets the media hype, Second Life generates real money – even though it starts as virtual money. Let’s look at the figures.

Second Life: Virtual Economies Continue To Rise

Second Life’s worldwide user base increased by 15% to 769 million, while the amount of time spent in the virtual world climbed even faster, by more than 21%, indicating increased engagement.

Second Life User-to-User Transaction Value, 2007-2009 (millions)

In 2009, Piper Jaffray predicted more than $2.2 billion in virtual goods revenues worldwide, including $621 million in the US. By 2013, more than $6 billion will be spent worldwide on virtual items.

Number of Unique Second Life Users Worldwide, 2007-2009 (thousands)

It predicted that virtual worlds such as Second Life would fall behind in the virtual-goods economy while social network players like Facebook become more involved in the space.

Second Life Highlights of Q4 2009

  • US$153 million in User-to-User Transactions, 53% growth over the same quarter last year
  • All-time high and continuing rapid growth for the Xstreet SL online marketplace
  • All-time high in Monthly Repeat Logins, at 769,000 in December 2009
  • 3.1 billion Voice minutes, up 15% from the same quarter last year

Total user hours continued to trend downward in Q4 while peak concurrency remained flat. This decline stems from a decrease in user hours contributed by heavy usage accounts (300+ hours per months).second life marketplace

Second Life Economy – Financial Highlights

  • User-to-User transactions in 2009 totaled US$567 million in 2009, growth of 65% over 2008.
  • Virtual currency in circulation reached L$6.95 billion, growth of 23% over December 2008
  • US Dollar value of L$ in circulation totaled US$26.5 million in December 2009
  • Sales of User Generated virtual items on Xstreet SL, reached L$1.6 billion or US$6.1 million, growth of 74% over 2008
  • Total US dollar value of all Linden dollars traded on the LindeX™ currency exchange in 2009 reached US$115 million in value,  7% growth over 2008
  • Total US dollar value of all Linden dollars traded on the Xstreet SL™ currency exchange in 2009 reached US$1.5 million in value, 169% growth over 2008

Cary Rosenzweig, CEO of IMVU, another virtual world with extensive user-to-user virtual item offerings, described that service as “more like an e-commerce company … in the sense that we get our money from the purchase of these virtual credits that people use to buy virtual items.

“Virtual goods have value to people,” Mr. Rosenzweig told eMarketer. “People buy virtual goods usually for one of three reasons: to express themselves—so they’re buying virtual goods to make their avatar look terrific—or to build relationships with other people in the form of gifts. And [the] third reason, especially in gaming environments, is that virtual goods enhance your power to effect change, to win, to do what you would like to do in that area.”

Do you buy Virtual Goods?

Have you ever bought any Virtual Goods for your avatar? How much would you pay to bling your avatar or online user experience? What do you think are the main barriers for Second Life? Do people think it’s too weird? Do you use it?