Alternate Universe

Today his avatar—a woman, incidentally—earns nearly $300 a day selling clothing he designs for users to drag and drop onto their avatars—twice what Lokke earned at the supermarket. As for the clothes, he can make "infinite copies of anything." Once he's designed a T shirt, he can make millions of replicas at no additional cost. "My supply is limitless," he says. "There's no bottom line. The costs are only what I pay Linden Lab."

Linden Lab's "no control" policy allows for any income made inside Second Life (the virtual world's currency is the Linden dollar) to be cashed out through the company into U.S. dollars—even deposited directly into your checking account (at an exchange that has remained fairly stable at about 270 Linden dollars per U.S. dollar). A product created in Second Life can also be sold outside it—on eBay, for example, a private island was recently listed for $1,395.

And unlike, say, Sony, which owns the rights to anything created in EverQuest, Linden Lab has relinquished all intellectual-property rights to creations in its world, spurring entrepreneurship. Roughly 90 percent of Second Life's content is created by the users themselves—Linden Lab built the basic architecture, like "Orientation Island," where users first create their avatar and learn about Second Life. Indeed, the barriers to entry and to commerce are so low, it is hard to imagine a more ideal business environment for entrepreneurs, which may prove to be the biggest driver of Second Life's growth. Lokke is so hooked, he says, "I'd rather panhandle on the street than leave Second Life."

A kind of alternate global economy is emerging in Second Life. Linden Lab keeps information on transactions within the virtual world to itself, but economists who study it closely forecast that by the end of the year users will have spent 125 billion Linden dollars in Second Life (about $460 million). About 5 billion Linden dollars were changed (through the official currency exchange, the LindeX) into $19 million in 2006. So far this year, they've converted $37 million, much of it earned in virtual-world transactions.

The multinational companies are using Second Life in a different way: some are holding staff meetings where avatars representing employees can discuss ideas via instant message, e-mail or Skype, in a souped-up virtual office. Others are using it to connect to customers. For instance, IBM is working with clients like Sears and Circuit City to enhance the shopping experience: adviser avatars can walk customers through models of, say, televisions, and actually show them how the product might fit in the living room. The 3-D, real-time experience also allows multiple customers, who might not be together in the real world, to communicate while shopping. A husband and wife on separate business trips can pick out a new couch "together," discussing the dimensions, color and material in real time. "Second Life allows you to strike up a natural conversation that you can't do on a two-dimensional Web site," says IBM's Rowe.

With face-to-face interaction on the decline in offices—where it's easier to e-mail or videoconference than schedule a live meeting—and companies increasingly use the Web for everything from distribution to customer service, a virtual world offers the potential to form relationships that are far more personal than online forms or e-mail. Nissan, for instance, lets customers talk to salespeople and even "test-drive" its new Sentra on a virtual driving track in Second Life. The Dutch bank ABN AMRO has financial advisers available as avatars.