Making money in Second Life – some facts and figures

Aug 062008

My quest for further information about how to make money on Second Life continues.

This is a whole new area to me so I am threading very carefully as I don’t want to get my facts and figures wrong or indeed make some Second Life newbie mistake.

So here’s what I’ve learnt so far.

You can make a million real US dollars on Second life.

One user who goes by the avatar name of Anshe Chung has made a million real USD from her activities on Second Life. I found an interview with her from a few years back when her Second Life activities were worth a real 250,000 USD. This interview is very interesting as it comes from a person who is actually making serious money on Second Life. You can read the full interview here – Virtual Land, Real money.

There are two things I want to point out that I noticed in the interview.

The first is that back in 2006 when this interview happened, Anshe Chung had a whole team of people working for her. So my advice is not to think that she is making serious money on her own. In the interview she says that at that time she had a team of about seven freelancers working for her but that she had also just created a team of ten full time people in China to manage billing, accounting and development. This is a serious operation and not a one person show.

So straightaway it gives some idea of the effort involved in generating serious income in Second life. That said our aim is create a decent second income in Second Life and not to build an empire.

The second thing that struck me was that she gave an incredibly valuable piece of advice to anyone thinking of joining Second Life to generate an income. Here is the quote directly from the Business week piece.

“To what do you attribute your success?

One reason for my success here, I strongly believe, is that I am not only here for business. I am very deeply rooted in this world, like a real native person. Most people who just come here for money fail miserably. They are foreigners, act like foreigners, and lack deep understanding of this virtual country. Many of them are also lazybones who think you just need money to make more money. The truly successful people I know here all are deeply involved in life and society here too.”

The key thing to take away from her answer is “Most people who just come here for money fail miserably”.

To me this simple sentence speaks volumes. Unless you are prepared to make the effort to fully integrate and become part of the Second Life community and experience, it appears that your chances of successfully generating an income are limited.

The figures speak for themselves.

You can check the earnings statistics on the Second Life website here.

The statistic that we are interested in is about half way down the page with the header ‘Linden™ Dollars’ and the sub header ‘Unique Users with Positive Monthly Linden™ Dollars Flow’.

From what I can gather this statistic basically shows us the number of people who are making positive income in the Second Life and how much they are making.

I’m going to use a well worn cliché – but the figures really do speak for themselves. Of the 57,821 people that generated a positive income on Second Life in June of 2008 – the vast majority earned less than $500 – 55,732 users to be exact. Most of these people earned less than $50 – 47,546 users. That’s $50 for the whole month. Not exactly a decent second income.

This makes for slightly discouraging reading. If you thought that Second Life was a quick route to riches or even a quick route to a decent second income then you need to think again.

If you examine the figures closely they seem to be representative of nearly all businesses and markets – where the top five percent make the most money. This to me illustrates nicely that Second Life is acting just like any other competitive market where there is real money involved. The winners win big while everyone else struggles on.

But Second Life is different.

Er no not really. When it comes down to it the people who succeed are those who put in the effort or as Anshe Chung puts it ‘are deeply involved in life and society’. The same with any other business venture really.

So I’m still not convinced about generating a second income from Second Life. I’m sure it can be done – Anshe Chung as well as the other 2089 users who made over $500 in June have proved that its possible.

The question is what will it cost to get to the level of income that you are happy with? How long and how deeply integrate in Second Life do you have to become in order to start generating a second income?

That’s my next bit of research…

Online Second Income success stories – not many

Aug 042008

I’m scratching my head as I search on the internet for success stories of people who have made a good second income online. Most of the stories I have come across are very fake and unbelievable. Most of these ‘success stories’ are on websites that are trying to sell something. Usually it is a miraculous new income generating profit system. Geez thanks for getting my hopes up. Again it’s that cheezy sales pitch that keeps putting me off.

So far I have had no success in locating a good and believable story about generating a second income online.

The reason I’m focusing on generating a second online is because it ticks all the boxes in terms of flexibility and start up costs for someone who is currently in a job. In previous articles I’ve discussed the factors that need to be considered before trying a method of generating a second income. You can read that post here: Debt elimination –the next leg. Generating a second income.

In that post I focused on getting a second job as a way of generating a second income. The reason for this was because it was determined that getting a second job was the quickest and most effective way of generating a second income. I wrote about the need for the logistics to make sense. Can you realistically do a second job all the while maintaining your current job?

Now for many people getting a second job simply isn’t an option. People with children may not be able to afford the additional childcare costs. Or there simply may not be any second jobs available in the surrounding area. As a viable alternative to this, generating a second income online offers the flexibility to allow someone to work from home in their spare time all the while meeting their current job and family commitments.

So far so good, working online from home in your spare time seems the ideal solution. Unfortunately the reality of trying to generate a second income is not so easy and straightforward. Given the low barriers to entry the competition on the internet can be intense. That said there are ways of generating a second income if you have the time and patience to do it.

Here is a very useful article from the The Times newspaper. This article is simply called ‘10 ways to make money online’ and offers valuable ideas and information on how to generate a second income online. I recommend that you take the time to have a read through this article as it will serve as food for thought.

In the meantime I will continue to look for believable online success stories. I know they are out there it’s just a case of finding them!

Passive income? Look at your passive expenses first

Jun 092008

Do a search for the term ‘second income online’ and you will be hit with a hundred and one articles and stories about how someone makes $1000 a day in their spare time. More interestingly you will notice that the buzzword that is thrown around a lot is ‘Passive income’. Passive income has become the holy grail of the second income prophets. They talk about it in hushed tones. It almost has a reverential quality. Create a passive income and become financially free is their tagline.

If only it was as simple as some of these articles make out. Many times the authors of these articles are trying to sell you something. Some piece of software that will automate your selling or investing. Either way they are trying to make their ‘Passive Income’ by selling the idea of ‘Passive Income’ to you. In the end it resembles something like a pyramid. Person one at the top sells the idea of passive income to two people those two people sell the idea of passive income to another four people. This continues until eventually you have a couple of thousand of people all trying to create passive income by selling passive income tools.

I know about this because I’ve tried to create passive income in the past but with limited success. Generally I end up working very hard for the so called ‘passive income’ that I do generate. Passive income in itself is supposed to be self perpetuating by its very nature. Once you set up a passive income system it is suppose to carry on by itself using its own momentum.

So where does that leave you? You’re in debt or maybe not but either way you want a piece of this ‘Passive Income’. Well to begin with if you are truly going to go after passive income you are going to need a lot of time. Time is the one of the key elements.

Lets be honest most of us don’t have the time or energy to create a second income. I know I hadn’t. I was so busy doing nothing (well nothing important) that I made excuses and couldn’t get anything done. The few times I did get start passive income projects they invariably died a quiet death never to be mentioned again.

So what’s the alternative? It’s a lot closer to home than you think.

Passive expenses – the mirror image of passive income

No one ever really talks about passive expenses. Or certainly no one talks about them in the context of your personal finances. To illustrate what I mean about passive expenses take the example of gym membership. Say you have membership of the local gym that costs you $80 a month and is paid by direct debt. This $80 will be taken from your account every single month regardless of whether you are in the gym every day or whether you haven’t seen the inside of the gym since January 2nd.The point is that the expense is passive you don’t have to physically go out and buy anything for it to occur. You signed up once and now you pay via direct debt every month.

Now as an alternative to generating a passive income a simple solution would be to eliminate as much of you passive expenses as possible. The net result is the same. If you manage to eliminate $100 worth of passive expenses each month then that is still $100 staying in your account and not going anywhere. It means that you don’t have to invest time and energy into generating a passive income of $100.

Here is a list of some of the typical passive expenses.

Phone bill

Have a look around for a cheaper provider. There are always better deals to be had.

Electricity bill

Look for ways that you can permanently reduce your electricity bills. For example use energy saving bulbs. They may cost more initially but they will save you money in the long and there are more environmentally friendly. You’ll need to get creative while at the same time trying not compromise your standard of living.

Magazine subscriptions

Do you really need these subscriptions? Can’t you just check the magazine out in the store, see if there is anything interesting in it and then buy it if there is but don’t buy it if there is nothing that interests you in it.

Gym memberships

Be honest, how many times have you gone to the gym in the last three months? Is there anything that you do in the gym that you cannot do outside the gym? Things like going for a run, cycling etc.

Insurance

Shop around for the best offer. Usually if you go with one company for your home and car insurance then they will give you a discount. Keep looking!

Website memberships

As with magazine subscriptions – do you really need the membership? Most of the information contained in the website is probably available for free on the web somewhere else. It just takes a bit of searching.

Cable TV

Do really need those 200 TV channels? When was the last time you really watched anything on channels 50 to 200?

Rent/mortgage

If you have a mortgage, then shop around for a better deal. There are some good deals still on offer but it will depend on your individual situation. With rent maybe it is possible to rent a place for $100 cheaper a little further away from your current place? It might be worth a look. That extra $100 would go a long way.

Banking fees/credit card fees

Again shop around. Change banks if you have to. A lot of these fees can be reduced or eliminated.

The list above is only a sample of the passive expenses that people incur every month. There are other things that you could probably identify in your own situation that could be classified as a passive expense.

If you are determined to generate a second income then may I suggest that before you start that you tackle your passive expenses first. You are better off, initially at least, spending time and energy reducing your passive expenses. That way you can be sure that any additional income you earn will be adding to your bottom line and not to go to pay passive expenses.

It could be the case that in some situations if you reduce your passive expenses enough that the need for a second income could be eliminated. You may not need to take a second job or start a side business in your spare time.

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