Economy of Virtual Worlds

Second Life is a virtual world and has its own economy and a currency referred to as Linden Dollars (L$). This economy is independent of the Pricing, where users pay Linden Lab. In the SL economy, residents buy from and sell to one another directly, using the Linden, which is exchangeable for US dollars or other currencies on market-based currency exchanges. Linden Lab reports that the Second Life economy generated US$3,596,674 in economic activity during the month of September 2005, and as of September 2006 Second Life was reported to have a GDP of $64 Million.

The basis of this economy is that residents (that is, users, as opposed to Linden Lab) can buy and sell services and virtual goods to one another in an open free market. Services include building help, businesses management, entertainment, and other personal services. Virtual goods include buildings, vehicles, devices of all kinds, animations, and works of art. To make money in SL, one must find customers who are willing to pay for the services or products that one can supply.

Because of the existence of virtual land, there is an active virtual real estate market. Originally all land comes from Linden Lab (which is part of the pricing and a revenue stream for them), but after that it is bought and sold much like real-life real estate.

In addition to the main economy, some residents receive a small weekly stipend, depending on the kind of account they have, and when they joined Second Life. There are also the virtual equivalent of minimum wage jobs and charitable organizations that try to introduce new residents to the consumer economy.

Residents may purchase L$ directly through the client, or convert between Linden currency and U.S. currency through either Linden Lab's currency brokerage, the LindeX Currency Exchange, or other third-party currency exchanges. The ratio of USD to L$ fluctuates daily as Residents set the buy and sell price of L$ offered on the exchange, and fluctuated between L$240/USD and L$350/USD between October 2005 and September 2006.

Second Life publishes updated economic stats of its vritual world at http://secondlife.com/whatis/economy_stats.php

Network-based marketing

Network-based marketing refers to a collection of marketing techniques that take advantage of links between consumers to increase sales.

A study, co-authored by Shawndra Hill, Wharton professor of operations and information management, found that consumers are far more apt to buy a company's product if they are "network neighbors" with existing customers. Mining data from "social networks" -- who talks to whom or who emails whom -- could allow companies to pinpoint likely customers who otherwise would be overlooked.

The full paper, "Network-Based Marketing: Identifying Likely Adopters via Consumer Networks" can be found at http://arxiv.org/PS_cache/math/pdf/0606/0606278.pdf

This explains why social networking sites like myspace, youtube...etc attract huge valuations.
eBay recently purchased Internet-telephony upstart Skype for $2.6 billion; they now also will have large-scale, explicit data on who talks to whom.

Vertical Marketing System

A vertical marketing system (VMS) is one in which the main members of a distribution channel—producer, wholesaler, and retailer—work together as a unified group in order to meet consumer needs. In conventional marketing systems, producers, wholesalers, and retailers are separate businesses that are all trying to maximize their profits.

When the effort of one channel member to maximize profits comes at the expense of other members, conflicts can arise that reduce profits for the entire channel. To address this problem, more and more companies are forming vertical marketing systems.

http://business.enotes.com/small-business-encyclopedia/vertical-marketing-system has more on this.

Anyone heard of any indian company employing this kind of marketing?

Consumer mind at time of buying

"A consumer has a rational or emotional motive at the back of his mind while buying any product or service therefore when a marketer sells a Drill, the buyer buys a perfect hole"

Most of the times the consumer is on his mental journey while making a purchase. It is the duty of marketer to understand the state in which the consumer is while making a buying decision. The most critical factor in all this exercise is that pain and joy exist very close to each other in customer’s heart .

Read the full article at http://www.kuldeeponline.com/mentaljourney.asp
How far is this true? Have you'll also had similar experiences?

Welcome!!

Welcome all,
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If you'd like to make a post on this blog, please send me an e-mail at royrajan78@yahoo.com, I'll be glad to add you as a co-author.

cheers,
Roy.