Make-believe money maker

If you dream of owning a desert island, then Anshe Chung may have just the thing for you. The catch is that you can only reach your private island through the gateway of your personal computer, and the plot of land is composed entirely of pixels.

For Ms Chung is a virtual property developer who sells and rents land and buildings in Second Life, an online simulation game that is creating a wave of opportunities for businesses to make real money online.

She is a pioneer of the Second Life economy, which is today worth more than $60m and growing at 15 per cent a month. Her business now produces $2.5m in real-world annual revenues.

The Second Life phenomenon is not just attracting computer enthusiasts and hard-core gamers: international brands such as Toyota, Vodafone and IBM have launched virtual outlets in the game to advertise their products to its 1m users.

Standing in a Chinese-style house set in an idyllic landscape, the computer-
generated Ms Chung makes an unusual interviewee. The flesh-and-blood person who created and controls this “avatar”, or visual persona, is Ailin Gräf, a Chinese-born teacher who lives in a quiet suburb of Frankfurt.

A connoisseur of online simulation games, Ms Gräf spent many years mastering the rules of virtual worlds before spotting her opportunity. “Before I started ‘playing’ Second Life I played other online role-play games, but the money was virtual,” she recalls. “In those games, money was not convertible [to real money] and there were clear rules which separated the virtual life from the real life.”

This changed in 2003 when Linden Lab, a San Francisco-based game developer, launched Second Life and gave players ownership rights over the items they created or bought and the right to sell them for a profit in real dollars.

Second Life gives its users a weekly “stipend” allowing them to invest, trade and offer services for worldly bucks. “My initial investment in this world was $9.95,” Ms Gräf says.

As a teacher in her “first life”, she started earning extra cash by offering lessons on game play to novice Second Life ‘residents’. Ms Gräf also used her computer programming skills to create and sell programmes that give movement to avatars, so that the characters can dance, kick or stand on their heads.

To sell her animation services, Ms Gräf bought land from Linden Lab and opened a shop from which her character, Anshe Chung, could market them.

It was then that the larger entrepreneurial opportunity struck her – Ms Gräf realised that few players in the game had her ability to transform bare pixels into a functional virtual building.

“People who were looking for land often did not find the type of land they wanted on the market or they simply did not have the programming skills to develop it,” she says.

In June 2004, Ms Gräf and her husband decided to put their knowledge of virtual reality into action by starting a Second Life real estate business. They opened an outlet called Anshe Chung Studio and bought more land from Linden Lab using the virtual money Ms Gräf had made from selling animations.

She then developed the bare pixels of land in “Dreamland”, as she named her territory, that could be sold to other players for a reasonable profit.

Using three-dimensional computer modelling tools, Ms Gräf created land and landscapes, including vegetation and infrastructure such as roads and public buildings. “We added value to the land we bought [from Linden Lab],” she says.

In the early stages, she marketed the business through local campaigns in the Second Life community, placing advertisements in the Second Life Magazine, and designing eye-catching “On Sale” or “For Rent” placards on her land.

By August 2004, Ms Gräf says, her business had become so profitable she was the richest person in Second Life. However, she chose not to convert her profits, which were in Linden dollars, Second Life’s synthetic currency, into real dollars. Instead she continued reinvesting in new virtual land and development.

Only in 2005, with the business expanding quickly, did Ms Gräf take money
out of Second Life. However, her first real-world investment was entirely focused on expanding her online business.

In January this year she outsourced part of her workload to China, hiring 10 local computer programmers and launching a virtual real estate trading and development company.

“I decided to move to China because of its affordable labour and because the [Chinese] government welcomed us with a red carpet,” she says. “They were very appreciative of our plans
to train people and create real value from a virtual business.”

The choice was also determined by the sophistication of the Chinese market. “China is far ahead of Germany when it comes to understanding virtual world economies, as more than half a million people already make a living playing online games in China,” she says.

Ms Gräf has assembled eight teams of programmers to assist with her expansion plans. They are also helping to fight growing competition from others eager to exploit the game’s emerging opportunities.

Each team has between four and 15 members. Five are based in Wuhan and concentrate on creating new landscapes, basic infrastructure, houses and furniture, as well as offering round-the-clock customer assistance for real estate services. Others handle marketing and future projects.

One of the most important tasks for the business is to secure it from potential hackers. This prompts Ms Gräf to reveal her greatest concern – the lack of a
governing body in Second Life that can protect her business and the legal rights of residents.

Although Ms Gräf’s business has never been penalised by the “governor” of Second Life – Philip Rosedale, the 28-year-old founder of Linden Lab –
she worries that the risks her business faces “are
comparable to a business operating in any non-
democratic country”.

Yet while the entrepreneur says that Linden Lab, which represents the only agent of law enforcement in the virtual world, could harm her business if it wished to do so, she also acknowledges that this is unlikely; it is not in the interest of Linden Labs to destabilise Second Life’s commercial sector, she
says, as Mr Rosedale “has
to be accountable to his investors”.

Ms Gräf also offers a warning for those who might think it easy to emulate the development of her virtual property empire. “People who come from the real world and invest real money here, in almost all cases that I have seen, failed badly,” she says.

“Those who come here with a stock market investor mindset and think they can easily take a slice of this booming economy are wrong.”