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Not So Funny Money

Inside the growing—and very lucrative—world of virtual currency
Illustrations: Chris Gash

Illustrations: Chris Gash

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While hosting friends at his Montreal home, Sri Lankan-born Duleepa “Dups” Wijayawardhana struck upon a novel idea for a website. Similar to the grand epiphany that inspired Facebook, the revelation came several six-packs into what would become a very boozy night. But unlike Mark Zuckerberg, who reportedly created his social network in retaliation against an ex-girlfriend, it was Karl Marx’s treatise on capitalism that fueled their imaginations while scrolling, yes, their friends’ Facebook pages, and gave birth to their idea.

“We were just sitting there going, you know, there’s got to be some sort of value to all of this,” says Wijayawardhana. “Oddly enough, we started talking about a passage from Das Kapital, where [Marx] says everything that you do—any good you produce—has economic value. And if it has economic value, then it can be tradable. To us, he may as well have been talking about virtual currency.”

What spawned from such a high-minded idea is Empire Avenue, an online game-cum-social experiment in which players buy and sell shares of their friends based on their standings on social networks like Facebook and Twitter. The more wall posts a friend writes, be it a pithy one-liner or a quickie review of the new Lady Gaga album, the more his or her stock rises in value. And when stocks rise, investors reap dividends.

But the profits these players gain aren’t payable in cold hard cash, at least not in the classic sense. Rather, to play, and so to buy and earn dividends, they first have to purchase the game’s official currency, Eaves. (Eaves can also be used to buy ads—sent out on players’ social networks—to get more investors.) Also, in a deal being hatched with Ford, players will soon be able to purchase an array of branded goods, like a virtual Mustang. The 10-month old startup is in the market to raise $1 million in funding, and about a half-million shares are traded in a given week, says Wijayawardhana. “We have our own self-contained economy, but we want to fuel the real-life economy.”

Way south of Empire Avenue’s office, in Franklin, Tenn., Roy Riggs runs his virtual goods company, Malevay Studios, on Second Life. The company, which opened for business just two weeks ago, creates and sells breedable mutt-like creatures called “meeroos.” It has already made some $8,000 (that’s roughly some 2 million Lindens, at an exchange rate of $1 = 253 Lindens), from the sale of some 20,000 of these digital pets.

Lovers of meeroos, or any of Second Life’s goodies, need only to log their credit card numbers on its official marketplace website, where Lindens are bought in bulk, and, voila, a bacchanal of digital goods jolts onto the screen. But unlike Empire Avenue, which doesn’t allow players to cash out for real money, Second Life residents like Riggs can exchange their virtual Lindens for dollars.

“Other than spending about $500 on [a bank of] servers . . . it’s just pure profit,” says Riggs, who, outside of the virtual world of Second Life, has never met either of his two business partners.

What these entrepreneurs have in common—besides, apparently, free time—is a willingness to dive headlong into the unregulated waters of the virtual marketplace. Whether through Eaves, Credits, Lindens, WoW Gold, Karma Points, Project Entropia Dollars, or hundreds of other currencies now being sold on mainstream sites like Facebook and kiosks at Best Buy—as well as on independent online currency exchanges—millions of consumers are growing more comfortable spending real money on virtual goods.

For anyone who’s purchased a gift card from Best Buy or Barnes & Noble, the idea is simple enough: pay cash, get in-store credit. More recently, the strategy has been reinvented by tech entrepreneurs. Their idea: create free entry to games, and then, after people are hooked, charge them for virtual goods that supposedly enhance—and sometimes move forward—play. The goods are bought with virtual currencies sold in bulk. So unlike, say, the dime you oh-so-long-ago slid into the coin slot each time you needed a pay phone, you would have had to buy a pre-paid phone card, which meant making more calls—or talking for far longer—than you would have if left to your own, less expensive, devices.

Virtual good markets are already so sophisticated that some social games reportedly have offered misleading lead-generation tactics—e.g., the offering of virtual cash in exchange for marketing offers—sticking players with charges or services they didn’t want.

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