Management And Accounting Web

Kaplan, A. M. and M. Haenlein. 2009. The fairyland of Second Life: About virtual social worlds and how to use them. Business Horizons 52(6): 563-572.

Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Second Life Main Page

The purpose of this article is to explain how virtual social worlds evolved, how they fit into the current postmodern paradigm, how they differ from other social worlds, and how firms can use them in the areas of advertising/communication, virtual product sales (v-commerce), marketing research, human resources, and internal process management. The authors also highlight the things companies should pay close attention to in their virtual world activities. Finally, they discuss the 5cs of success for a presence in virtual social worlds.

A Snow Crash in the Metaverse

The article begins with a discussion of Neal Stephenson's 1992 book Snow Crash where a man spends most of his time in a three-dimensional virtual world called the Metaverse. In the Metaverse everyone appears in the form of an avatar, or audiovisual body that can have any appearance the user desires except for height limitations. Although the Metaverse was considered pure fiction in 1992, programmers soon began to develop virtual worlds such as Ron Britvich's Alpha World in 1995 (later renamed Active Worlds), the Finnish Habbo in 2000, and multiplayer online games such as the World of Warcraft. In 2008 Google introduced Google Lively a web-based virtual environment that runs on Microsoft's Internet Explorer.

Postmodernism and the Concept of Hyperrealities

According to Kaplan and Haenlien the success of virtual worlds is related to how well they fit into the postmodern paradigm that is characterized by hostility toward the generalizations of the rationalist view, or modernism. Postmodernism is reflected in developments such as chaos theory, fractal geometry, flexible work practices, matrix organizations, and hyperrealities, i.e., alternative realities that allow users to perform activities that they would not, or could not, perform in the real life.

A Brief Story of Second Life

Second Life was founded by Linden Research Inc. and is probably the most well known three-dimensional virtual world. Users, or residents enter in the form of personalized avatars, i.e., an alternative identify that can be a replication of their real life self, or a completely different self. Avatars can appear in any possible form and communicate through written-chat, instant messaging, or voice-chat. They can walk, fly, teleport, or ride in vehicles such as cars, submarines, or hot air balloons. They can also buy real estate from small lots to private islands, build houses, buy furniture and appliances, and go to shopping malls and night clubs. Residents hold the copyright to the content they create and may sell their creations to other users in exchange for Linden Dollars L$. The exchange rate is approximately L$260 per U.S.$1. Money earned can be kept in a Second Life bank or re-exchanged for U.S. dollars. The amount of money exchanged reflects the popularity and economic importance of Second Life. For example, in April 2008 $8.7 million U.S.$ were exchanged into 2.3 billion L$.

Virtual Social Worlds compared to Other Social Media

There are three characteristics that differentiate virtual worlds from other social media:

1. Users can interact with other uses in real time,
2. Users can customize their self-presentation or avatars, and
3. Virtual social worlds are three dimensional.

These differences do not apply to virtual game worlds where strict rules typically govern user behavior. Virtual worlds such as Second Life do not include restrictions on how avatars can behave or interact. This flexibility provides a considerable number of opportunities for corporate use.

Corporate Opportunities within Virtual Social Worlds

There are five ways companies can use virtual social worlds:

1. Advertising/communication - Companies can set up virtual flagship stores to present digital equivalents of their products. They can buy advertising space in virtual malls or radio stations, or rent virtual billboards. Companies can sponsor events in virtual worlds, and their activities can generate real life press coverage.

2. Virtual product sales (v-commerce) - Companies can sell digital versions of existing real life products or provide services that bridge the virtual world and the real world. For example, one company offers virtual cards to Second Life residents that are delivered as real postcards. Using the virtual world for v-commerce requires a premium membership ($70 U.S.), an island ($1,000 U.S. + $295 U.S. per month), and a flagship store. This can cost as little as several hundred U.S. dollars or as much $200,000 U.S. for a highly professional interactive island.

3. Marketing research - Companies can conduct in-world quantitative surveys at half the cost of a comparable real life survey project. Test marketing within virtual social worlds is also less expensive than real world marketing analysis. Companies can also include virtual world residents in the design and customization process in new product development projects.

4. Human resource management and recruiting - Recruiting events can be organized and conducted in Second Life or simply promoted to create awareness of real world recruiting events.

5. Internal process management - Virtual social worlds can be used as a platform for internal meetings and knowledge exchange. For example, Cisco has two corporate islands for internal use, and IBM (one of the largest land owners within Second Life) maintains 24 islands used extensively for internal purposes. The authors suggest that physical meetings might soon become obsolete.

The 5Cs of Success in Virtual Social Worlds

A series of in-depth interviews with Second Life residents1 indicated that there are four key motivations for participation in virtual social worlds: 1. The desire to build personal relationships, 2. the desire to earn money, 3. the search for diversion, and 4. the need to learn. In addition, respondents indicated that companies should recognize that Second Life is an extension of their real life. These results translate into five points, or perhaps requirements (presented as Cs) for a successful presence in virtual social worlds.

1. Catch traffic - Companies must generate a sufficient amount of traffic on their islands to avoid the perception that they are empty and deserted. There are several ways to do this including offering free virtual products or services, and organizing games and contests.

2. Compensate presence - Companies can pay Second Life residents to camp on your island, or compensate residents for participation in marketing research projects such as surveys.

3. Consider innovativeness - A key motive for involvement in Second Life is to have fun. A company with a boring, uneventful presence will be punished. Avatars expect to find interesting things to do that go beyond reality. Perceived interactivity drives traffic toward a site.

4. Create a learning environment - The possibilities for developing learning environments are endless. For example, Dell created a giant computer on its island where avatars can enter to discover how a computer works, and business schools such as Harvard and Stanford use Second Life to enhance interactivity in distance learning programs.

5. Care about avatars - Companies should consider Second Life as an integrated communication channel, not as merely a new temporal advertising outlet.

Future Evolutions on the Horizon

Highly dynamic virtual worlds are likely to evolve in the various ways. A transition is expected toward open source standardization, and a connection between individual virtual worlds will provide one large Metaverse. Improvements in software usability will make it easier to navigate, customize avatars, and interact with others. In addition, there is likely to be a continued blurring of the boundaries between virtual and real worlds where, for example, Google earth may be blended within the virtual world. Establishment of legal rules and ethical norms to regulate activities in the virtual world are expected to evolve, and enterprise programmers may be allowed to connect their own virtual world servers to Second Life. Finally, the World Wide Web is likely to radically change where two dimensional web sites are replaced with three dimensional virtual world islands.

Energy use and legal problems may slow this evolution, but strategically, it would be wise to develop sufficient expertise in your company to avoid the same fate as the newspaper industry faces today. The worst-case scenario is that virtual social worlds are just another form of useful media that can be used to reach a highly creative and technologically advanced group of users. However, virtual social worlds may represent the beginning of a whole new approach to economic activity and competitiveness.


1 Kaplan, A. M. and M. Haenlein. 2009. Consumer, companies, and virtual social worlds: A qualitative analysis of Second Life. Advances in Consumer Research (36): 873.

Related summary:

Johnson, R. A. and J. M. Middleton. 2008. Accounting for second life. Journal of Accountancy (June): 54-58. (Summary).