first life business in second life

You know, I think that this is the sort of thing that will be waffled about...

...until someone with a lot of guts and vision just grabs it, runs with it, and shows everyone else how it's done.





I've personally thought this through in great detail. I have a series of 'real life' items ready to go for West Trade Imports, and also in fact, my themed sim.

Why have I not released them?

One reason only: accounting for the income.

I haven't cashed anything out of Second Life yet. When I do, I can easily keep track of the $L-converted income from the Company in nice, controllable blocks. Maybe 12 a year. Contrast that to a flurry of "real life" small payments.

I pay my taxes; I'll have to have a proper accounting of each and every one. I'm not ready for that kind of headache yet.

My accountant has already recommended using a corporation for my Second Life business - and once I showed it to him he was thinking of signing up himself! While not difficult to do, managing the details of first life sales properly *is* a bit of filing and forms.

Actually, I totally disagree with that. There are many of us who are SMEs with UK or EU businesses, forced by market demand to sell in US$ because that's where most of our customers live. We live with currency fluctuation risk without the beneifit of hedging that risk all the time. Its just not a stumbling block for me.

The stumbling block for me is instead a mechanism for completing the entire transaction, in Lindens, in game. If you buy a virtual t-shirt in game for 6000L, I will need to send you your RL t-shirt. I need to know what country you're in to calculate postage. I need to know your RL details so I can then ship the product to you. If its a gift, I need to be able to get the RL information of the SL username to whom you're gifting.

That info can only come from the giftee; I effectively become a trusted purveyor with no existant mehanism for verifying my trustworthiness with your RL details.

The big bonus for merchants would be a way to complete online transactions without a cut to a creditcard processor, merchant account fees, or PayPal barriers. The cost savings would likely more than make up for the exchange rate risk, barring a major LindenX nosedive. (Or, you know, a war in Iraq...)

An entire machnism for doing this would have to be developed, but how fabulous (and what a money spinner) it would be to be able to send RL goods to your SL friends, without lifting the veil of SL.

hi sabrina, I don't disagree that many businesses live with currency risk without the benefit of hedging, but I look at the L$ as a totally different category of risk from, say, the dollar versus the pound or euro.

that said, you are right that there are emerging markets in some countries where the currency risk is quite high, and it doesn't stop people from trying to do business there if there is money to be made.

if the market opportunity in SL is great enough, people will go for it regardless of currency risk.... although small companies might be more accepting of this than large.

There is a way around the 'international delivery' problem, for some.

Let's say you use cafepress.com. Maybe not the best example but it will do.

Let's take the example of a UK merchant dealing with a US customer.


Two methods:

1) The customer can go straight to the USA cafepress.com site with their CC. Not very Second Life related once you get past the marketing.

2) the customer can pay in $L, you can paypal your own cafepress store and ship to the customer's address. The item is made and delivered in the United States, never crossing an international border.


There may be some abstruse taxation and currency issues that I am unaware of - but as for physical delivery, depending upon the item there is little need to cross an ocean.

And the US Dollar has no value either.. The issue is about value
derived from what somebody is willing to pay for it. Right now its
about $3.60 for L$1000. 18 months ago is was nearly US$6.00 for
the same amount...

How old are you? Did you not experence and/or study what happen
in the late 90s with the crash of the Thai Bot or the Mexican Peso?

Let me refresh your memory so you can revise your statement.


Commanding Heights
Chapter 12: Contagion Engulfs Asia [7:13]
http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/tr_show03.html#11

LAURA TYSON: Thailand is a very small economy. It didn't have a lot of links, and it's not exactly in your backyard. So in any event, the U.S. chose not to intervene in Thailand, thinking it was not going to spill over. Why would it? The contagion effects were not apparent to anybody, not just the administration.

LEE HSIEN LOONG: I think they misjudged the situation. They misjudged the situation, probably because it was seen too much as a financial issue rather than an overall strategic issue.

NARRATOR: Global markets worried that other Asian countries might have similar hidden flaws. Like a classic run on the bank, money began to pull out of the entire region. They called it contagion.


Onscreen caption: $116 billion flowed out of Southeast Asian markets.

DANIEL YERGIN: And at each stage, the crisis turned out to have a virulence that became known as contagion, much greater than anticipated. And what that really reflected was indeed globalization, was the way these economies had become locked together and investors looked at emerging markets. They said there was a problem in Thailand; well, then there's a problem in these other countries. And so each step of the crisis created these shock waves that carried on into the next.


Onscreen caption: Kuala Lumpur, Malaysia, July 1997

NARRATOR: Contagion spread to Thailand's neighbors. Malaysia's economy had seemed stable. Suddenly, it, too, was facing relentless pressure from global markets.

MAHATHIR BIN MOHAMAD: We have the currency going down and down and down, and we have the stock market doing the same. The index kept on going down, no matter what we do. And we felt totally helpless. We felt that there was no way we could recover. So, I mean, the feeling was very bad, very frightening.

which statement? you mean my saying that, yes, some less developed countries have high-risk currencies but that doesn't stop people from trying to do business there anyway... no I won't revise that statement, thank you.

If you track back you'll see I wrote that the currency risk was a problem, sabrina took exception, and I said she had a point. She does have a point. There are always some people willing to take on the risk, and the greater the opportunity, the more there will be.

And when the gov does, or some other problem causes the flip of the switch, based on the insane prices of new SL land up for auction today, there is going to be at least one crazed landbaron out of an ungodly amount of Lindens, or is that dollars?

And then the situation is back to square one when there was no pizza company and the people had the L$ and no pizza to buy with them: it makes no difference in L$ value.

Reading back, this statement leapt out to me. A very valid point, and question.

Interesting Desmond

I have more or less followed the same route (I am UK based) insomuch as I am self employed and account for the money leaving my account to Linden each month as tax deductible trading expenses that are a type of lease rental payment being wholly tax deductible.

As for money coming back in, well I will account for it on an accrual basis, that is it will become potentially liable to tax when it accrues in real US dollars.

In SL I keep detailed records relating to land purchase and sales but I do not currently keep track of the more minor expenses, the biggest of which is texture purchases.

Finally my main business venture in SL is going to be Prefab House construction. So I think that in RL terms I can define this venture as a type of web site design with server rental. But of course all must do their own research.

Anyone else have any views on taxation?

Taxes . . . argh.

I accepted payment in L$ from a client for a small project. Later, my client asked me for an invoice for his accounting department. I scratched my head, said okay, and used my usual invoice form . . . with all the figures stated in L$.

Client came back to me and said that the accounting department wouldn't know what to do with that, and could I give it to him with the figures in USD?

That's where it all went to hell. His accountant would be telling the IRS their org had paid me a certain number of USD. But, on the other end, the IRS wouldn't be getting a matching number from me. Because, before I had USD out of the deal . . . I had already paid my contractor in L$. Then I cashed out the remaining L$, but of course there are fees involved and, as well, the exchange rate meant that the L$ were not worth the same amount as they were when the client bought them. Plus, I'd be reporting I got USD from LL, not from the client's organization.

Ended up I explained all this to my client (and he could explain it to his accountant) and gave him the invoice in USD. Decided to keep a good client happy and eat the cost of paying the tax on that figure AND on the cashed-out L$. 'Cause I am not clear on how their accountant puzzled it out, and I sure don't want to be the lucky pioneer who has to explain L$ to the IRS during an audit.

Now I only do business with RL organizations (and pay my contractors) in USD.

I suppose, really, being paid in L$ is like being paid in commodities. I have no idea how the tax on that works out.

I disagree. The US Dollar has value. As does the Linden. We assign our own values.

However, neither has significant inherent value. If I'm stuck on a desert island, a US $100 bill has the same value to me as a US $1. At that point of course a matchstick, which normally has effectiively no value due to it's general ubiquity, might become invaluable because of its inherent value.

I myself would look for any glass along the beach
to create a magnify glass. Then I'd have more value
than a match.

don't tap the fish tank

I'm not taking sides, but I saw a post a while back that made a good point. They said something like 'If I pay you $100 for a tissue, does that make it have value?'. I think this mostly all depends on your definition of value and there's a big area here where all of your opinions are. I guess if you want to find out, don't include SL in your taxes, and if you get in trouble, then we'll know.

Some interesting feedback on this thread. I think it is reasonably clear most of us see the commercial side of Second Life but have some concerns about various aspects.

I have had the time to do some basic research into earlier versions of Second Life. In particular I note that the last time a major dispute occurred within the Metaverse (Prim Taxation) there were mass protests from many people. Eventually Linden Lab people meeting with groups resolved this, and out of those discussions the present system of both land ownership and the current economic system evolved.

I think the two key issues here today are the Linden Dollar exchange rate and First Life business.

Under the circumstances I think it is fair to request a response from Linden on these two points, that is?

a) Can we run a First Life business in Second Life, and if so are there any Linden constraints on any such activity?

b) Can we have the ability to charge for any goods or services in real US dollars?

(as an aside to this second point (b) I think it is already possible to sell land via the auction process and charge real US dollars for it)

I for one look forward to clarification from Linden on these two points. As a landowner ( I own half a sim) I believe it is reasonable for me to request an answer in the public domain

robin sorta answered this

a) Other than perhaps in the case of egregious violation of laws (plotting terrorism, child pornography, that sort of thing) - why would the Company bother to stop anyone? I'm not sure 'Linden contraints' is the issue - what barrier could there be? How do you define First Life business?


b) GOM traded in US dollars, the LindeX trades in dollars, there are Second Life designers and land barons that take dollars. So I would say - we have this ability now.


Incidentally, any one of us could make shiny round prims that represent 'one dollar' coins.

Is the word of a user backing such coins really any different than the word of a small tech corporation in California backing $L? Arguably, in many cases the word of an individual may be better!

ll has some concerns about first life information being used in sl. ll tries to monitor this and control it.no guarantee that those l$ will exist tomorrow. if they accidently get deleted... ll doesn't have to restore them. the tos explicitly says so.

Exactly put.

The core issues are getting accurate information to assess the situation under the present set up.

Currently the position is that Lindens TOS can allow or disallow anything it wants to, I have been unable to gain (as most others have also experianced) a clear insight into the micro economy of Second Life, and it is unclear what can or cannot be traded.

After all although in theory I could use SL Exchange to sell goods/services and price them in real dollars they also require an active Second Life account to transact.....therefore we come around in a full circle back to Linden.

So I say again it would be helpful of Linden to publicly clarify the issue of first life business, and I believe in good faith the introduction of the use of real dollars "in game" would remove some "event risk". (with perhaps the ability of micro payments for small things)

But I am onloy one person/AV and it is not for me to become a bore on the subject

I'm struggling to understand what you want the Company to do for you.

Not trying to be difficult here; I simply don't understand. And no, this is not boring in the least, I thoroughly enjoy the topic. I have an interest possibly as great or greater than yours.

First life business can be done over email. Or Yahoo IM. Or snail mail. Technologies far less advanced, and functions that Second Life essentially has.

What is it about Second Life that would potentially cause hardship?



I see nothing but solutions.

Second Life provides expanded product demonstration and marketing opportunities, 'face to face' business contact, enhanced communications and also the possibility of providing 'in-world' goods and services.

Nobody is required to use $L, nobody is required to cease using email, wire transfers, or anything else. I suspect this is the extended functionality that you wish to have improved within Second Life itself? Perhaps the Company itself banking dollars, or mitigating liability in some way?

I think this all goes back to: what is the difference between a 'first life' and 'second life' business? My definition seems to be much looser.

that's the wrong question.

it's not that it's a hardship, it's that it could be easier and more secure.

if it were easier, and more secure, then first life businesses would probablly use sl. this would bring much in terms of sl's long term viability.

I totally agree with StoneSelf, Desmond.

Although you are entirely right about the potential of Second Life TECHNOLOGY being far more advanced than the more usual 2d sales website I believe we need better equipment to trade. The issue with using Linden dollars for purchases and sales is okay if it is only virtual objects used within the sim solely.

However for Second Life to really take off from a commercial viewpoint you would need three things, a means of delivery in real life, a real currency, and finally a TOS which clearly state what first life products can be either purchased or sold (similar to Ebay)

All of this can be easy to achieve, and more to the point it would make all of us who hold either land or creative ability a lot of money in my opinion.