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Linden Lab buys two commerce start-ups

The two will be combined into Xstreet SL, a Web-based marketplace for the buying and selling of goods for the virtual world Second Life.

Linden Lab, the parent company of virtual world Second Life, has quietly snapped up two companies that had built e-commerce marketplaces on its platform. The two start-ups, Xstreet SL and OnRez, will be combined into the "Xstreet SL platform," a sort of Craigslist-eBay hybrid for the trade of Second Life virtual goods.

Financial terms of the deals were not disclosed.

It's a revenue stream for Linden Lab, which will take a cut of each sale. And, the company says, virtual goods are a $1.5 billion industry. Though a vicious marketing hype-backlash cycle has painted Second Life as an also-ran, $360 million in Second Life goods were bought and sold in 2008, believe it or not, and there are currently 680,000 items up for sale on Xstreet SL.

Based on the Web rather than in-world, the newly acquired marketplace is part of an ongoing strategy at Linden Lab to recapture mass interest by giving members and prospective members an opportunity to "shop" outside of the Second Life environment.

"Having a Web marketplace to browse and search is a great way to find new designers, keep up with the latest creations, or just find that perfect gift/texture/dress/home/weapon/couch," a post on the Linden Lab blog explained. "Our goal is to make the Web marketplace a wonderful complement to in-world shopping and a great benefit for all residents."

Perhaps part of the thinking is that by giving Second Life more of an official Web-based presence, the marketing will take care of itself. That's possible. But reversals in fortune are rare on the Web, where even a successful product can't stay stagnant for too long before an enterprising rival eclipses it.

Worth noting: virtual goods have been banned from auction giant eBay for nearly two years now, but Second Life goods were exempted because of Linden Lab's argument that the virtual world does not count as a game (and the ban specifically targeted gaming items).

Second Life also has reason to take some of its financial activity out of the virtual world: resident-created banks were effectively banned after a series of scams and scandals last year.