Virtual Worlds, Nonprofit Realities

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Nonprofits are piling into the virtual world of Second Life and similar online venues. What might seem to many as simply “role-playing games” or RPGs, Second Life and its ilk are becoming increasingly real life environments, with financial benefits and consequences, for players and nonprofits. A recent Wall Street Journal article detailed a run on the virtual banks in Second Life costing the players—or their avatars—real money. Nothing virtual about that.

Why is this financial crisis involving virtual banks patronized by idealized avatar images of the players of any importance to the world of nonprofits? Because the issues that challenge virtual banks and virtual depositors inside the world of Second life and other Internet “metaverses”—accountability, oversight, and, dare we say, even regulation—will be seen in other dimensions of these worlds. Excited by the innovation and boldness of virtual worlds, nonprofit participants will also undoubtedly encounter sooner or later their share of real-life consequences in these virtual worlds. The virtual bank run in Second Life provides a cautionary tale that should spark nonprofit sector discussion of the possible costs and challenges of blending Internet-based virtual environments and real-life charitable operations.

Last year, the MacArthur Foundation took a very unusual plunge into grant support for virtual environments like the role playing game Second Life providing venues for doing social good, for people and nonprofits to explore how to make the world a better life through instructive interactions in virtual environments. Philanthropy (usually defined as fundraising) is increasingly a common part of Second Life, reaching the point where “Doonesbury” character Jeff Redfern, a graduate of a nerd school and a master of Doom, by the way, remarked about raising money at his Second Life private foundation. Less than five years old, Second Life is no tiny pinpoint of Internet subculture, but an international societal phenomenon, with components that speak to charity and philanthropy. Any number of consultants have glommed onto the concept of “pixelanthropy,” talking up the intersection of charitable and virtual worlds. In the case of the banks and nonprofits, these Internet-based virtual worlds or “metaverses” aren’t simply fancy online games, but sort of like real life.

In June of 2007, MacArthur’s CEO, Jonathan Fanton, announced a $550,000 grant to the University of Southern California’s Center on Public Diplomacy at the Annenberg School for Communication to lead an exploration of the role of philanthropy in virtual worlds like Second Life and Shortly thereafter, Second Life’s creator, Philip Rosedale, and Fanton—or more accurately, Fanton’s avatar—held a conversation in Second Life on the role of philanthropy in role playing games (RPGs). Given how many top nonprofit and foundation honchos still have their assistants turn on and off their computers for them and print their emails and cannot grasp most of them darn new-fangled gizmos like blogs, podcasts, and Fanton’s willingness to experiment with this virtual life stuff is pretty impressive.

MacArthur has handed out other virtual environment grants, including to Global Kids to host conversations at the Second Life Community Convention this past August—$400,000 in 2007 on top of the 3-year $900,000 grant in 2006, the latter for “building [the] field of digital media and learning by engaging young people in online and multimedia activities”. One of the Global Kids products was “A Child’s War”, a film about a child soldier called to testify in an international criminal court, created by 20 kids, done as a virtual video film inside Second Life.

Nonprofits other than MacArthur have also discovered the RPG venue, with a strong flavor of partnerships with for-profits that have set up operations inside Second Life and other virtual worlds. For example, in July, Starwood Hotels announced that it would donate its island in Second Life to a Canadian-based charity, TakingITGlobal for use for its flagship program,, on online community for young people internationally “interested…in making a difference.” Also in 2007, one Anshe Chung, who apparently is “the world’s first virtual millionaire…through her Second Life real estate transactions,” donated a virtual space to Nonprofit Commons, managed by TechSoup, housing a few dozen nonprofits in SL.

Second Lifers, actually the avatars of the 5 million or so registered Second Life members, can donate Linden dollars (Linden Labs is the name of the San Francisco-based company that created Second Life, and there is a real market for them, trading at $250L for $1U.S.) to the Empty Stocking Fund that supports community centers and the Salvation Army in British Columbia. Donors and nonprofits aren’t the only ones whose avatars are trolling Second Life. The Center for Disease Control (CDC), with corporate partners such as Toyota, IBM and American Apparel, and the U.S. National Oceanic and Atmospheric have set up virtual offices in Second Life and other virtual worlds, in NOAA’s case, a virtual island. The American Cancer Society held a “relay for life” fundraiser inside Second Life, raising $38,000 in 2006. Most famously, there is a Camp Darfur on Second Life, hosted by the Genocide Intervention Network, introducing SL avatars to the “realities” of the strife in the Sudan.

It is hard to say how real this all is, but avatars got a dose of the value system behind the subprime mortgage mess and the subsequent nosedive in the financial markets. Second Life had to terminate the operations of a dozen or so banks operating on Second Life because members complained that the banks weren’t paying the returns on players’ deposits. Real? Well Second Life members were investing real money through credit card and PayPal payments converted into Linden dollars. According to the Journal, a “run” on one of the virtual banks cost depositors $750,000 in real, not virtual money lost.

Maybe the avatars should have known better. One of the Second Life banks promised an annual interest rate of 200 percent. The Linden dollar has lost some of its value, trading now at $269L for $1U.S. (at least the U.S. dollar is gaining value someplace, even if the venue is only virtual!). The virtual bank run has left some depositors disconsolate, like the one dejected female avatar described by the Journal wandering topless through one virtual bank’s lobby where a sign read “not currently accepting deposits or paying interest.” The managers of Second Life, which observers had described, like many other virtual worlds and RPGs, as “libertarian”, are now calling for chartering banks that operate in this environment. All libertarian dreams come to an end, and virtually unregulated banks eventually have to answer to some version, even if virtual, of the Comptroller of the Currency or the Federal Reserve.

Will this prompt the Senate Finance Committee to investigate the transparency and accountability of nonprofit operations in Second Life or other virtual worlds? Will the states’ attorneys general become concerned about the ubiquitous partnerships and cause-related marketing operations of for-profit firms and virtually located nonprofits? Stay tuned, there is surely more to come.