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Book excerpt: 'The Entrepreneur's Guide to Second Life'

With the right approach and commitment to a plan, entrepreneurs can find plenty of opportunity for profitable businesses in the virtual world. Images: Turning a profit in 'Second Life'

Editor's note: The following is an excerpt from The Entrepreneur's Guide to Second Life: Making Money in the Metaverse, written by CNET News.com reporter Daniel Terdiman and just published by Wiley. The text below combines information from the book's introduction and a chapter on fashion.

When I've talked to people deeply involved in the Second Life community in recent months, especially those who are out speaking in public about it, they tell me that one of the first things that everybody asks them is, "How do I make money in Second Life?"

One person, who runs one of the most famous companies building big projects in Second Life for outside clients, told me that after giving a talk at a conference in Germany, he was besieged by a flood of attendees asking that question, and he ended up spending more than an hour responding.

So the goal of this book was to provide the answer to the question, and to anyone who wants to know, not just those who have the opportunity to ask it personally of someone in the know. If you read this book, my hope is that you will come away knowing (a) that you can make money in Second Life, (b) what opportunities exist for those who want to do so, (c) what you have to do to avail yourself of those opportunities, and (d) what the roadblocks are to potential success.

There are a few things you should know, though, before you set out on your grand Second Life entrepreneurial adventure.

First, despite some breathless press reports that suggest that making money in Second Life is as easy as shooting fish in a barrel, that really isn't true, and it would be irresponsible of me to suggest it was. The reality is that conceiving of and running a Second Life business is, in many ways, very much like doing so with any kind of business. Those who do well are the ones who come up with a plan, commit to it, put in the time required, and are willing to be flexible as conditions demand.

But for those who do those things, success can follow, whether your goal is to make enough money to pay for your Second Life fashion needs or to live on. There are people at every point along that spectrum, and it's vital that you understand that the ones at the more lucrative end of that scale are the ones who have put the most into their businesses, and who have treated them with the most respect.

The Second Life community, while an ever-evolving and multifaceted population, universally demands that you take them seriously, and that you offer something new and interesting. Otherwise, why should they patronize your shop? There is another one just around the way.

The point here is just to make sure you understand that you can't simply show up and expect the dollars to roll in. It takes work, and a lot of it. But if you are willing to put in that work, the rewards are there for the taking.

I hope this book will make it easier for you to find your niche, and to make the kind of money you'd like to be making in Second Life. Here's what you'll find:

The first three chapters focus on the concept and history of a virtual world economy like that of Second Life, as well as on Second Life business and marketing basics. Included are sample business plans for the most popular segments of the economy.

Chapters 4 through 9 cover the basics of, respectively, the fashion industry; the real estate industry; building and construction; the adult-oriented industry; gadgets and toys; and interactive opportunities. Each chapter gives an overview of the specific business segment, as well as a section on required skills and some marketing advice.

Chapter 10 discusses Teen Second Life, the version of the virtual world for those aged 13 through 17, and covers much of the same ground as the previous chapters.

And Chapter 11 looks at the future of business in Second Life, including interviews with key figures in the community, and a look at how new technologies will shape the future.

There are also three appendices covering additional reading, a sampling of prices of Second Life goods and a survey of how much you can expect to make in each segment of business in the virtual world.

Second Life is an exciting and vibrant place that is growing quickly and energetically. And it is a land of unending opportunity. I hope that after reading this book you will be ready to embark on your quest to leverage this virtual world to your financial advantage, all while having a great time. Good luck.

Fashion: The biggest business of all
If there's one common experience that just about everyone in Second Life has shared, it's customizing the appearance of our avatars. It's no wonder--the stock avatars, skins, and clothes we get when we sign up are, to be nice about it, boring. Useful, sure, because we have to have something when we go in-world for the first few times, but remember: the defaults tend to make people assume you're a newbie.

The nice thing about Second Life is that we can do just about anything we want and express ourselves any way we want. It's so easy, and relatively cheap, to change our avatar's looks, that each element of that look becomes a significant expression of individuality. And customers are clearly having a lot of fun with the Second Life fashion industry offerings, which are well priced for a little guilt-free retail therapy.

Whether for male or female avatars, furry or Goth, hugely tall or amazingly tiny, there's fashion for just about every taste, budget, and desire. But as with nearly everything else in Second Life, this is an industry created by the community, not by Linden Lab. All that haute couture--ball gowns straight from the court of French kings, shoes that Manolo Blahnik would envy, delicately freckled skins for redheads, and so much more--was created because the Second Life community wants to look sharp and is willing to pay good Lindens to do so.

"In Second Life, anyone can have their ideal body type, and everything fits," says Starley Thereian, a famous designer of skins. "People can wear whatever they want, wherever they want. And it's a lot cheaper to buy a designer dress (in Second Life) than in real life."

More to the point, Second Life fashion is a huge business opportunity. It's the biggest volume business--and the most profitable. Well-known designer Munchflower Zaius offers a reason: "The first thing you see when you come into Second Life? Other people wearing hot skins, hot clothes. It's instant peer pressure. You want to look as good as everyone else.

In a world where everyone can be a sex god or goddess, why wouldn't you want to? I'm just catering to it."

Fashion in Second Life is a wondrous world where everyone can wear what they want, assuming they can find someone selling it or can design it themselves.

And it's not just clothes.

It's skins, as well, enabling any avatar to enjoy a Superman-fast change from an everyday boy or girl next door to the fashion model's gala night out look, to the exotic fairy tale shimmer of scales in a mermaid's skin.

With millions of registered Second Life users, it's no wonder that nearly everywhere you look in-world, there is a boutique. Popular stores develop a unique style, catering to specific tastes and to loyal customers who return again and again to buy whatever is new.

Designing women's or men's fashion--Which way to go?
When going into the Second Life fashion business, the first question to ask yourself is whether to go after the women's market, the men's, or both.

It's worth noting that designing fashion items for males in Second Life is very different from designing ones for females, and because of that most people choose one or the other. Some designers cater to both markets, but they are definitely exceptions. So, how to choose?

One way to look at the question is from an economic standpoint: there's simply more business for women's fashion in Second Life. Even though about 60 percent of registered users are men, among active users, about 60 percent are women or use female avatars. And where image-conscious women go, so goes the fashion business.

Men's clothing on the rise
That said, men's fashion is clearly in a growth period. It's not entirely clear why, but Fallingwater Cellardoor, whose Second Life shoe designs are some of the most sought-after, thinks the men's fashion industry is blooming because it reflects the population coming into Second Life these days.

"I suspect more of the men joining now are more fashion-conscious, social, and less geeky," said Fallingwater. "I happen to like geeks--and am one--so that's not an insult, but the stereotypical guy (in Second Life) wears the same outfit for six months and just doesn't care."

Second Life fashion blogs are also writing more about men's fashion, which could lead to increased sales. Additionally, the blossoming Second Life population means there are simply more male avatars wandering around, looking for better clothes, skins, hair, shoes, and the like.

Focusing on a subcommunity
One way to carve out a niche in the fashion business is to cater to a specific subcommunity.

Although Second Life has many residents who don't consider themselves part of any one group, significant numbers do.

One identifying factor of those groups is that they have certain styles of dress. For example, there's a sizable Japanese-themed community whose members dress in various forms of Japanese fashion. Goreans dress in styles set forth in the Gor science fiction books by John Norman. Their role-playing wear includes full dresses for "free" women and silks and scanty outfits for "slave" girls.

Other stores offer stylish business clothing to the growing numbers doing business in Second Life, while others offer fashion tailored to Goths, to the very small avatars known as "Tinies," or to the Victorian Era denizens of the quasi-historical region known as Caledonia.

There are many others, too. If there's a subcommunity in the real world, it probably has a presence--and a fashion--in Second Life. If you're inclined to cater to them, these subcommunities can offer substantial markets, steady clientele, and the opportunity to become known within that niche--even aspire to be the big fish in the pond.

Of course, to successfully design for one of these groups, you'll need a really good feel for their style or at least the commitment to learn it. It helps if you are a member of the community and can follow trends within the group.

If you succeed in creating a line of fashion that appeals to a specific community, you may find you have a steady source of sales as you build your repertoire.

Skills and planning: What you need to know
As you've no doubt noticed in your meanderings through Second Life, there are hundreds of people selling fashion. The thing is, the quality of their products ranges from the barely worth mentioning to the transcendent.

Although not everyone can do transcendent work, my hope is that as you seek to leverage the Second Life fashion business as a way to bring in some money, you will make your products of the highest quality.

This section offers insights on the technical skills you'll need to proceed and suggestions for deciding on the kinds of images to use in your designs.

If there's one thing that every expert in the Second Life fashion business agrees on, it's that you need to develop some technical skills before you can do anything. This isn't surprising, given that every bit of fashion you see in-world was created using software tools that take some time to learn.

The consensus is that the one software program everyone should learn is Adobe Photoshop. Beyond that, there are many different programs, such as GIMP (the free GNU Image Manipulation Program), that can help. Be prepared to spend several hundred dollars US on software if you don't already have it.

"I use Photoshop and LightWave for texturing," says Starley Thereian. "I think it takes some natural talent or a good eye for style, as well as at least some degree of proficiency in your software."

If you don't already have that proficiency, consider taking a class--your ability to create the fine textures is what will make your fashion products stand out.

Pricing for skins can be substantially higher than for clothing. That's because, the experts say, it is substantially harder to design them and have them look good.

"I taught myself how to use Photoshop," says Starley, "but it took me at least a year or two to be really comfortable in it, (and) I'm still no expert by any means."

Jennyfur Peregrine, whose designs are well known and who specializes in Goth and Victorian fashion, among other types, says you need a high degree of understanding of layering and manipulating the templates inside the graphics program you choose. Further, she says you need to have basic Second Life photographic skills for framing and composition for all of your box images, store modeling, and the like.

"Packaging is a big part of the design process," Jennyfur explains. "I probably spend just as much time imaging my items as I do creating them, from photo shoots to careful editing in Photoshop to branding, logo design, and making advertisements."

Equally important is learning 3D texturing, which involves learning how to use the many different Second Life fashion templates. Linden Lab provides a whole series of them for free, and members of the community also offer some.

To start, you may want to use the Linden Lab templates, but to those with more experience, they are limiting.

Hyasynth Tiramisu recommends the free templates provided by Chip Midnight, saying they offer more flexibility than the ones from Linden Lab. Either way, you must import the templates into Photoshop or a similar program that can read Photoshop 7.1 PSD files.

It's also worth spending some time taking classes in Second Life that teach you how to make clothing or other fashion items. There is a wide variety of such classes, taught by many experts.

Classes are listed in the event calendar; click on the Category box and choose Education to see a list of the available classes for the current day or for whichever day you select on the calendar.

Also, learn how to import the textures you've created in your graphics program into the templates and how to manipulate them there. Acquire a good understanding of how prims--the basic Second Life building blocks--work.

Skins: The most profitable fashion business
When you think of fashion, you may well think first of clothing. But as in real life, in Second Life fashion has many elements: clothing, jewelry, shoes, hairstyles, lingerie, etc. One you may not think of, however, is the most profitable of them all: skins.

In Second Life, a skin is what covers your avatar underneath (or, sometimes, instead of) clothes. Residents can select from a few basic skins when they first sign in, and can change a skin's look using the Appearance tools.

For many residents, the path to good looks must include a designer skin. There are freebie skins available, but the best skins created by the most-talented designers, with realistic tone, shading, and detailing, can cost more than L$1,000.

And because so many people want different skins and want to have a collection of different skins to suit their mood and their clothing, a booming and highly profitable market has emerged.

Indeed, pricing for skins can be substantially higher than for clothing. That's because, the experts say, it is substantially harder to design them and have them look good.

Munchflower Zaius is well known for her skins, and she says it's no wonder that they are the most profitable fashion item.

"Most people charge more for skins than clothing, and they seem to be a higher priority than having cool clothes," Munchflower says. People "must look good naked first, I guess."

A male avatar may only own one or two skins, with variations in tan or facial hair, perhaps. However, female avatars will routinely purchase a new skin simply to get different eyebrows, freckles, or cosmetics options.

Skins are often sold in six-packs where the only variation is in the makeup, so that it's easy to keep the same base look while swapping the pale lips and light blush day-at-the-beach-in-her favorite-bikini-makeup for the bright lipstick and glitter eye shadow that goes with that new ball gown.

And, the market for them is nearly unlimited. That's because a skin is something that virtually every avatar buys at least once to replace their first default skin. But female avatars take skins very seriously, upgrading every time their favorite designers do.

With some female avatars owing upward of 100 skins, at L$1,000 or more, it's easy to see why this is such a strong market, and can add up to some serious money.