Linden Lab Buys Second Life Marketplaces

Second Life developer Linden Lab is making a major play for the pocketbooks of virtual world residents—right in its own back yard: The company has announced deals to acquire XStreet SL and OnRez, the two largest Web-based marketplaces for virtual goods in Second Life. Financial details of the deals were not disclosed.

The two sites offer online marketplaces where in-world developers and content creators can offer their goods for sale: items range from buildings and vehicles to avatar accessories to scripts and tools. Most (if not all) the goods available on the Web-based services are also available for sale in-world, but the Web-based interfaces have proven popular with virtual world consumers tired of plodding through slow-to-render 3D environments in order to find the items they want. Like online shopping with the likes of Amazon.com, XStreet SL and OnRez let customers get what they want using their computers—without having to travel from store to store or endure traffic jams ("lag").

And the amount of money at stake might be substantial: estimates place the global market for virtual goods at abotu $1.5 billion a year, with Second Life alone accounting for about $360 million of that annual revenue.

"Content creators and merchants are pillars of the strong Second Life economy," said Linden Lab CEO Mark Kingdon, in a statement. "With these e-commerce acquisitions, we will now be able to offer content creators and merchants an opportunity to substantially improve their businesses, while enhancing the Second Life experience for all of our Residents."

Linden Lab plans to keep XStreet SL operating with only minor changes for the time being, while OnRez will be shut down within a few weeks. OnRez shoppers will have until February 11, 2009, to transfer their account balances to their Second Life accounts. The Second Life in-world currency, the Linden Dollar, is tied to the real-world economy. Linden Labs plans to expand merchant services and capabilities by integrated the XStreet SL platform into Second Life itself, possibly offering features like shared wishlists, gifting to non-residents, and scheduled deliveries. XStreet SL founder Apotheus Silverman and members of the XStreet SL team will also be joining Linden Lab to integrate the XStreet SL platform into Second Life.

The move marks Linden Labs’ first serious venture into the content marketplace in Second Life. The company has long been the de facto landlord for the world, operating a land market and setting pricing for "sims," and the company previously set up its own currency exchange for the Linden dollar (effectively bulldozing exchanges that had been created by in-world businesses). The Lindens’ entrance into the in-world commerce market is no doubt fueled by a desire to tap into the revenue stream represented by in-world virtual goods, just as the company takes a cut every time money is converted to and from Linden dollars. But the move also has some virtual world residents worried it will enable Linden Lab to act as an arbiter of content that can effectively say what items may or may not be sold in-world.

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