Living in a virtual world may lead to innovation in the physical world.

Innovation is the lifeblood of business. Failure to innovate is a common problem among businesses and even more common among big corporations where it is hard to turn on a dime and internal politics tends to slow down rapid thinking and change. This means that smaller marketers, boutiques and niche marketers have an advantage – a market opportunity. One of the later and perhaps the most innovative of Internet transformations is the rise of a parallel, post-human experience via digital worlds. This can be experienced in all its beauty in Second Life, a partly user-created and partly subscription- based 3-D virtual world. Linden Lab, created by Philip Rosedale flung, the doors of Second Life open to the public in 2003. Linden Lab has’s founder and CEO, Jeff Bezos, as a second-round investor.

The Second Life “world” is not a real one. It resides, like most virtual worlds, on a series of servers commonly called “The Grid.” The Second Life client program provides its users (called residents) technological tools to view and modify the Second Life world and participate in its growing economy. The built-in object editor allows residents to create complex objects like wigs, skins and even giant buildings out of a set of basic building blocks known as “prims,” shorthand for primitives.

The economy is perhaps the most notable feature of Second Life. Unlike most other digital worlds, Second Life boasts its own economy based on the Linden currency, which exchanges with U.S. dollars. According to its website, the Linden-based economy is circulating several millions of dollars’ worth of U.S. currency each month. This is not a trivial amount, and startling, considering, for now, Second Life residents are a somewhat limited group. At press time Linden Lab reports almost 370,000 members and growing.

This virtual economy has created a warm petri dish for innovation where residents own their own businesses and more importantly, they own the digital content they create. Since the residents own the intellectual property rights to their content, it has created a wildly different atmosphere, not unlike the dotcom boom in terms of raw creativity and innovation. Residents are creating clothing and skin shops for avatars, building construction, creating games and experiences, and due to the interactive nature of the world, they can even construct their own systems.

Examples of digital businesses include a bustling “hair shop” where residents can buy wigs for their avatar, stock exchanges, groups that will erect buildings for residents and the creation of interactive games. One of these creations is now in a game for Nintendo’s Game Boy Advance system and soon to be released on cell phones. I do not think it’s far off before we will see alternate Second Life currencies emerging in this purely virtual environment.

Big business is starting to take note of this phenomenon too. Intel, Wal-Mart and American Express are among many powerhouse companies starting to experiment in Second Life. Not to mention a wide array of universities and learning institutions are setting up shop in the digital landscape to explore digital construction and instruction.

Some companies are straddling offers across the dirt world and the digital. For example, when you make a purchase in the in-world American Apparel store, you will get a note card in your inventory with a promotional code offering a real-life discount at their online store. Web-enabled sale boxes also allow Second Life users to purchase a virtual item to wear on their Second Life avatars. There’s, an option to go directly to the American Apparel website where they can purchase the item in real life.

I was searching for a metaphor on how best to describe the application of the Second Life experience for performance marketers. Stephanie Agresta, vice president of Affiliate Marketing at Commerce360, put it this way in a recent blog entry:

“For example, I participated in one-off discussions about meme engineering, virtual world creation, emerging digital economies and goods, instant messaging service bots and the imminent post-human experience. I would call that innovation – I would call that very forward thinking. The best-of-breed affiliates move like digital cheetahs hunting on the vast plains of cyberspace. As an agency, we have to keep the same pace. Affiliate marketing is much like a safari – you see some incredible diversity and creative adaptation – but to make it work you cannot view it from the safety of a jeep – you have to be able to navigate the complex jungle and avoid the potential pitfalls.”

Calling best-of-breed affiliates digital cheetahs is an adept metaphor. In performance marketing, one often sees wild and creative uses of technology to drive ecommerce. Some of these uses are questionable and some uses and adaptations are actually quite novel. The trick is finding the novel, and restricting or staying away from the negative aspects. It is important for marketers not become so wrapped up in daily execution that they become myopic. To ward off myopia it is essential to build in time for research and development, exploration and purely imaginative research. This exploration should be the catalyst for innovation and in a world that changes so rapidly, ideas are the loftiest of currency.

What is going on in the purely digital world is intriguing. Business owners can learn more about the importance of digital worlds by reading, exploration and most importantly, participation. There are many books useful for learning how to navigate that virtual landscape. I have found three entertaining reads that highlight the experience and have sage business gems buried inside:

Ender’s Game by Orson Scott Card (Tor Books): Ender Wiggin battles it out with the Formics in this Hugo-Award-winning novel that is perhaps the quintessential guide for the new blogging metaphor. Pay special attention to Peter and Valentine as they control the nets through alternate personas. Make special note of the protagonist’s psychological development and monitoring by the “Mind Fantasy Game.”

Snow Crash by Neal Stephenson (Bantam Spectra Book): Snow Crash is a fast-paced romp through cyberspace laced with satire and dark humor. The novel weaves everything from Sumerian mythos to visions of a postmodern civilization ready to fall. Readers should pay close attention to the Sumerian elements and how the culture of Sumer used a primordial language for control. In addition, the novel explores themes of reality, imagination and thought, all in the context of a virtual world experiencing a state of rapid decay. This has useful applications when studying the groups and behavior of citizens in a purely digital world like Second Life.

Pattern Recognition by William Gibson (Putnam Adult): The science of pattern recognition aims to classify data based on previous experience and through statistical mining of patterns. In this contemporary novel, the readers explore the concept of “cool spotting,” which has been in use in marketing for many years, through the eyes of Cayce Pollard. Pollard is an incredibly intuitive market-research consultant. Marketers should get an idea for new metrics and perhaps new ways to measure the efficacy of campaigns as well as the importance of looking ahead for future trends.

Naturally, reading will not take the place of participating. Active participation in the experience and communication with digital life residents is the best way to get up to speed and to see what imaginative worlds like Second Life offer. This is merely the beginning of a shift as the Internet continues to make life, business and our world more complex and completely different.

Those who innovate will reap the rewards. Don’t sit on the sidelines – grab a Second Life and explore. The good news is that you can have several.

WAYNE PORTER is the co-founder of Revenews. com, a Microsoft Security MVP, and served as the CEO and fo
under of XBlock Systems, a specialized greynets and malware research firm . He is now the Sr. Director of Greynet Research at Facetime Security Labs, which acquired XBlock Systems in 2005.