Uncovering the Economics and Possibilities of Virtual Worlds

Published in Knowledge@Emory

“From the moment you enter the World you’ll discover a vast digital continent, teeming with people, entertainment, experiences and opportunity. Once you’ve explored a bit, perhaps you’ll find a perfect parcel of land to build your house or business…We look forward to seeing you inworld.”

Sound enticing? You are not alone in your desire for otherworldly exploration—occurring here in the “beyond” of cyberspace, rather than outer space. This excerpt from the homepage of Second Life, a 3-D virtual world created by its residents (a.k.a. “avatars”), is meant to appeal to the daring digital character in us all—and has been doing just that for millions of Internet adventurers. This time last year, Second Life boasted more than 9.1 million registered participants, up from 1.7 million about nine months earlier. The Gartner Group estimates that 80% of active Internet users will have experienced at least one virtual world by the end of 2011.

Thus, the sprint toward virtual worlds—Second Life, Entropia Universe and Cyworld among the most frequented—is a trend worth studying, particularly from an academic perspective. David A. Bray, who holds a PhD in business from Emory University’s Goizueta Business School, and Benn R. Konsynski, a chaired professor of information systems and operations management at Goizueta, review both the past and present of virtual worlds and explore their potential influence on the future of electronic commerce and governance issues in their paper, “Virtual Worlds, Virtual Economies, Virtual Institutions.” “Virtual worlds are not some sci-fi pipe dream or virtual fad,” they write. “Virtual worlds are now a reality.”

To embrace that reality is to first understand the virtual-world essentials. Virtual worlds allow everyone to create a digital character representing themselves and to interact with other computer-generated individuals, landscapes, and virtually run global businesses in real-time.

According to Bray and Konsynski’s research, virtual worlds first emerged in the early 1990s, taking on such forms through the years as ImagiNation Network, The Palace, Active Worlds, There, and even NeoPets, an online virtual pet game for children. The authors offer descriptions and unique aspects of each of these sites, illustrating the evolution of virtual-world technology and, in some cases, the eventual launch of new, improved versions of these specific sites. Second Life, Entropia, Cyworld, DotSoul and MTV’s Virtual Laguna Beach have emerged in the past six years, taking the virtual world trend to a more sophisticated level. These online worlds are creating their own economies and social orders, rendering them ripe for research and observation. “Researchers rarely have the opportunity to watch systems emerge endogenously with the potential to succeed or fail,” write the authors, adding, “Investigating the intersection of real world and virtual world phenomena should prove exciting.”

A key intersection involves the world of business, both real and virtual. Virtual worlds operate with virtual currencies—like Second Life’s Linden dollar—that allow participants to buy and sell goods and services. Participants have launched virtual world businesses that offer both real-world and virtual-world activities, namely a company that designs and sells virtual products at locations in Second Life for real-world businesses that want to use Second Life for marketing and education.

Bray and Konsynski also detail the example of Anshe Chung, the Second Life virtual avatar of real-world Ailin Graef, who in November 2006 became the first virtual millionaire by spending more than two years in Second Life developing virtual islands, crafting landscapes and providing virtual housing for paying participants. Her virtual company is registered in the real world and has more than 10 real-world employee designers. Companies like IBM have established so-called islands in virtual worlds to hold employee meetings and virtual events—and to likewise gain valuable exposure in the vast universe of virtual worlds. Write the authors: “An increasing number of real-world businesses and non-profit organizations recognize that virtual worlds provide unique opportunities to interact with participants.”

Bray and Konsynski point out that academic researchers and interested practitioners in the phenomena associated with virtual worlds are pondering what the future of virtual worlds will mean for business, social and political institutions. At the heart of the virtual world trend is the young Millennial generation’s passion for technology as a means to a more fulfilling life. With this in mind, the growing fascination with the virtual world experience could predict that “future web browsers may rely less on two-dimensional textual navigation and more on three-dimensional, interactive, embodied experiences akin to virtual worlds,” the authors write, citing Winograd and Flores, 1987. Virtual worlds challenge the notion that Internet users welcome the sense of freedom they get from a disembodied, non-bricks-and-mortar experience by returning a focus on the importance of body—even one that is computer-generated.

This merely mouses over the virtual-world surface of what the future may hold. Avatars are establishing their own rules and social institutions within virtual worlds, thus blurring the lines between virtual and reality. “Several intriguing questions can inform both existing theory and generate wholly new theories with regard to business, information systems, and governance in virtual worlds,” suggest Bray and Konsynski, citing Gregor, 2006. The authors ask: Will we see the rise of endogenously formed virtual governments? How will real-world governments respond to virtual worlds, virtual businesses, and virtual governments? Will real-world and virtual laws and law enforcement intersect and (quite possibly) collide? As virtual worlds grow, will they present social forces that challenge the dominant power of national governments? Do virtual worlds exist within or do they transcend national boundaries? Could individuals even begin to have multiple citizenships, with both a real-world national and several virtual worlds of their own choice?

For the most part, the authors conclude, “any conclusive answer to questions regarding the nature and overlap of real worlds with virtual worlds remain unanswered.” What’s more, theories to inform these questions and test hypotheses are not yet developed, “making the phenomena of virtual worlds worth investigating,” they suggest. How best to launch that research? To understand it, is to live it, virtually.

We look forward to seeing you inworld…

Photo: Chaired Professor Benn R. Konsynski



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