Credit in the Metaverse

Now comes a credit card for Second Life. A credit card for the Metaverse, it is called the MetaCard and comes from First Meta. There are even different versions: Basic, Gold and Corporate. While the MetaCard appears to be the first of its kind, its presence is somewhat limited. First, only participating merchants will accept the card as payment. Second, there are limits on the amount that can be charged to the card: L$5,000 for Basic, L$10,000 for Gold and L$25,000 for Corporate per month. That amounts to less than US$20, US$40 and US$100, respectively. The interest for balances is 0.13%, compounding daily. While there is a 2.5% transaction fee charged to merchants for each transactions, merchants get the benefit of a MetaSavings account that yields interest of 0.09%, compounding daily.

More on Virtual Terrorists

There is a revealing article in today's The Australian about jihadists' use of virtual worlds.

“Terrorist organisations al-Qa'ida and Jemaah Islamiah traditionally sent potential jihadists to train in military camps in Pakistan, Afghanistan and Southeast Asia. But due to increased surveillance and intelligence gathering, they are swapping some military training to online camps to evade detection and avoid prosecution.”

“[Head of the Australian High Tech Crime Centre in Canberra Kevin] Zuccato told an Australian Security Industry Association conference in Sydney that people intent on evil no longer had to travel to the target they wanted to attack to carry out reconnaissance. He said they could use virtual worlds to create an exact replica and rehearse an entire attack online, including monitoring the response and ramifications.”

The article also mentions the threat posed by money laundering through virtual worlds:

“One of the most useful tools available is the ability to transfer SL money between avatars, funds that can then be translated into real currency. The SL currency of Lindens (about $L270 to $US1) can be bought using a credit card in one country and credited to one avatar (account) and can be given to a co-conspirator avatar in another country," [Intelligence analyst Roderick] Jones says.”

The use of virtual worlds by terrorists should be a concern for everyone eager to see these worlds develop and expand. If counter-terrorist legislation or rules were enacted that crack down on virtual worlds generally, there would obviously be a negative impact on their long term growth.

Ironically, it would seem that the harder governments try to squeeze virtual worlds, the more difficult it could become to track terrorist use of virtual worlds. Terrorist, one might expect, would simply shift to virtual worlds beyond the reach of western nations' laws. For example, worlds like Second Life, World of Warcraft and Entropia are likely to comply with any laws/regulations on this matter. However, rather than prevent terrorists' exploitation of virtual worlds, they might simply move their efforts to virtual worlds that are located offshore in places/countries unwilling to comply with U.S./E.U. laws. This is a problem that merits additional thought.

Tunneling between the Web and Second Life

James Wagner Au picked up in his New World Notes a very interesting development worth highlighting. Heretofore, Second Life existed as a self-contained environment. That is, once someone enters Second Life, he cannot access websites or other Internet content outside of Second Life. Similarly, someone surfing the 'net cannot access Second Life content.

Well, all that is about to change. A British teenager named Katharine Berry has created AjaxLife, an open-source viewer of Second Life content. What that means is that someone can access Second Life from within a browser like Firefox. Absent AjaxLife, one could enter Second Life only by using a separate application provided by Linden Lab. Although AjaxLife's capabilities are pretty limited right now (NWN: "you can use the SL map, teleport, chat and IM, and check your friend/L$ status, and that's pretty much it"), Katharine has released the code under a BSD license. The coding community can now think of all sorts of improvements and applications for AjaxLife.

The linking of the Internet and Second Life is potentially very significant. The most obvious benefit is that more people may start using Second Life, and current users could increase their SL activity. Bypassing a stand-alone SL application puts fewer demands on a computer's resources, thus enabling (theoretically) less powerful computers to access Second Life. Moreover, if someone wants to chat with a friend or attend a meeting in SL, all they would need to do is open a new tab in their browser.

Be sure to also check out Katharine's AjaxLife blog, as well as Adam Reuters's interview with her.

Capitol Hill Interns

Every summer, thousands of college interns descend on Washington, with most landing on Capitol Hill. There is inevitably some embarrassing incident involving an intern and an inappropriate relationship, a misplaced confidential memo, a sensitive document left on a copier, or the like. Well, now it seems DC just narrowly escaped the first intern/metaverse fiasco. As reported on the Second Life News Network, an intern for a U.S. senator apparently left his computer unattended, with his Second Life id and password on a sticky note.

While the intern was away from his computer (in route to DC in fact), a house guest logged in to Second Life using the intern's information, and proceeded to deface a store near the senator's Second Life consulting office. The defacement consisted of swastikas, a Hitler portrait and the phrase "Kirby Hates our Troops" (the store was the new Kirby Avatar Emporium).

Fortunately for the senator involved, SLNN did not publish his name, as a campaign manager for the senator asked SLNN "not to associate the 'intolerant acts' with the senator or his campaign" since no one associated with the senator was directly involved in the defacement.

What, you may justifiably ask, does any of this have to do the economics of virtual worlds? Well, not a thing. However, as a Congressional staffer who witnesses the swarm of summer interns arrive in DC wide-eyed each year, and as someone who himself was an intern on Capitol Hill while in college, I can relate and appreciate the problems posed by these short-timers.

Real Companies in the Metaverse

Second Life resident Tateru Nino has compiled a list of real world companies operating (to one degree or another) in Second Life, and has posted the list to New World Notes. By her count, there are 139 "mixed-reality" sites (mixed-reality = virtual world + real world). The list includes corporations and companies, as well as non-profits and governmental organizations. She acknowledges the list is not exhaustive, noting in particular the omission of "perhaps hundreds of university/college sites."

Commoditization of Virtual Currencies

An entry on Daniel Terdiman's CNET News blog reports that Brock Pierce, the head of IGE, the leading marketer of virtual goods and currency, feels that virtual currencies are increasingly a commodity product. As a result, profit margins are shrinking as gamers discriminate among suppliers by price alone. It sounds like much of the commoditization push comes from China:

In fact, [Pierce] said, as Chinese competitors get more and more sophisticated, they are also willing to accept less and less profit margin. And that means, "they're perfectly happy to accept $20,000 in profit on $2 million of revenue."

Perhaps because of this economic shift, Pierce himself is planning to leave IGE.

From a purely economic point of view, there is no reason to find this development surprising. A quantity of Everquest platinum sold by IGE is identical in all respects to the same quantity sold by another vendor. The only difference, perhaps, is the reputation of the vendor: a small no-name outfit is more likely to be scam rip-off than a large well-established business.

The real question moving forward (as Terdiman notes) is how the game operators react to the increasingly off-shore nature of the secondary markets. It's much harder to threaten a firm in China with legal action than a firm in the U.S. So how do they respond to users of their virtual worlds, when such ventures are willing to accept 1% gross profit margins? Do game operators prefer the U.S.-/European-based gold farmer to the Chinese/Vietnamese/etc gold farmer? More generally, at what point does a game operator decide demand for currency is too pervasive and they are letting the gold farmer take money out of their pocket? At which point does it make sense, either from a profit or a control perspective, to simply create their own regulated market, much like SOE did with Station.com?

The Courts Weigh In

In what could have very significant implications for virtual worlds, there was an important ruling last week on the enforceability of the contracts governing virtual world usage. Last year, Second Life user Mark Bragg sued Linden Lab over the cancellation of his Second Life account. Linden Lab argued that Bragg had violated the terms of service (TOS) agreement for Second Life. Linden Lab charged that Bragg had found a way to buy land in Second Life at below market prices and so terminated his account. Unfortunately for Bragg, he lost the thousands of dollars of land he had purchased.

The Pennsylvania court entertaining Bragg's lawsuit ruled on May 30 that Linden Lab's TOS was not enforceable, according to a Reuters story. The 46-page ruling is available as a PDF here. Specifically, the court found the requirement of arbitration for dispute resolution to be unreasonable:

In effect, the TOS provide Linden with a variety of one-sided remedies to resolve disputes, while forcing its customers to arbitrate any disputes with Linden. This is precisely what occurred here. When a dispute arose, Linden exercised its option to use self-help by freezing Bragg’s account, retaining funds that Linden alone determined were subject to dispute, and then telling Bragg that he could resolve the dispute by initiating a costly arbitration process. The TOS expressly authorized Linden to engage in such unilateral conduct. [p.34]

The court summarized its opinion thusly:

Taken together, the lack of mutuality, the costs of arbitration, the forum selection clause, and the confidentiality provision that Linden unilaterally imposes through the TOS demonstrate that the arbitration clause is not designed to provide Second Life participants an effective means of resolving disputes with Linden. Rather, it is a one-sided means which tilts unfairly, in almost all situations, in Linden’s favor. [p.41]

And concluded:

Finding that the arbitration clause is procedurally and substantively unconscionable, the Court will refuse to enforce it. [p.42]

I expect this ruling has enormous implications for virtual worlds. As the first judicial ruling on the enforceability of TOSs (or alternatively, EULAs), all future suits will likely turn to this one for precedence.