- The COVID-19 crisis has greatly impacted our economy, keeping people at home and away from traditional means of making money.
- But this has also caused the rise in activity of virtual worlds like Fortnite and Second Life, where users can make real world money.
- Virtual economies don’t play by real world rules, largely rendering the concept of inequality moot.
- John Egan is CEO of L’Atelier BNP Paribas, a foresight business identifying investable opportunities at the intersection of technological and social change.
- This is an opinion column. The thoughts expressed are those of the author.
- Visit Business Insider’s homepage for more stories.
The average US apartment size is about 82 meter square a quarter the size of a tennis court. Three months of shuffling around the same space, avoiding the scattered Amazon boxes and empty Pringles cans, and you probably felt a little like a whale at SeaWorld, too big for the space to contain.
But new universes lay at your fingertips, in the form of virtual worlds on platforms like Animal Crossing and Second Life. It’s little wonder that, during lockdown, the number of people in these virtual spaces skyrocketed.
Lockdowns are now easing in much of the world but, as the resulting ‘COVID-recession’ continues to deepen, many people will find themselves reliant on these same virtual worlds as a way to replace ‘real-world’ income.
Amid economic gloom, virtual worlds thrive
March and April 2020 saw dramatic increases in time and money spent on virtual platforms. Spending on digital games increased 11% to $10 billion, the highest monthly total ever. Mobile gaming jumped 15% to $5.7 billion. Linden Labs, the creator of Second Life, reported a spike in new user registrations, including a 133% increase in subscriptions in France in one week of March. Gaming stocks surged.
Growth in streaming and eSports accelerated too. Twitch saw users increase by 24% in March, the second-biggest monthly increase in 18 months, and Fortnite ‘s viewership numbers in April were the highest ever (outside of November’s Fortnite World Cup). New eSports tournaments were created to pit professional ‘real world’ sports stars against each other virtually. Gambling regulators even moved to approve bets on four different eSports.
It isn’t surprising that gaming exploded with more people at home, often without commutes or work. What was surprising were the ways people utilized virtual platforms to express themselves, socialize and reimagine the events that can no longer happen “in real life”.
In Japan, for instance, students who had been sent home from school held their graduation ceremony in Minecraft. In New York, a developer organized a conference for 8,500 people in Animal Crossing. Final Fantasy XIV players held a memorial march to mourn the passing of a fellow player. Similar examples have been a regular occurrence over the past three months as people have switched significant portions of their lives to the virtual realm.
Virtual worlds can provide real income
Now, as the economic impact of COVID-19 starts to take effect, we will increasingly see people looking to monetize their virtual activities to supplement or replace existing income.
This does not mean that everyone is suddenly going to become a professional gamer. The opportunities for earning money in these ‘virtual economies’ are plentiful and diverse, and they go well beyond gaming. For instance, on Fortnite and Roblox, musicians including Diplo and Travis Scott are performing virtual gigs to audiences of millions of people, effectively using the platforms as vast virtual entertainment venues.
But there are plenty of ways for the less well known to earn money in virtual worlds too: from collecting and selling currency in online games such as World of Warcraft or Runescape, to creating businesses on virtual platforms like Zoobies, a business in SecondLife providing virtual babies to prospective virtual parents.
At L’Atelier, we conducted an in-depth study of these “virtual economies” earlier this year and found that there are already hundreds of thousands of people earning real income from virtual platforms globally, generating over $66 billion in gross value added, higher than the GDP of Bulgaria.
The characteristics of virtual jobs vary according to the platforms they’re found on. For example, Second Life has long been a hub for virtual entrepreneurship because the on-platform currency, Linden Dollars, can be exchanged for fiat currency. Last year, entrepreneurs on Second Life withdrew $65 million in income from the platform.
More recently there have been reports that on Animal Crossing, online entrepreneurs are buying and selling virtual goods for real money. In other instances, such as the gold farmers in World of Warcraft, individuals perform in-world tasks to collect currency which they sell illicitly offline.
There are also a growing number of streamers and influencers, who leverage the reputation they have cultivated in a virtual environment, such as Animal Crossing or Pokemon Go, to generate social media revenues on platforms like Twitch, YouTube or TikTok. In each instance, the worker is finding ways to provide value and extract revenues from a virtual environment.
Another, less public, route to virtual monetisation lies in non-fungible tokens (NFTs). These cryptographic tokens establish the uniqueness and ownership history of virtual assets, making them attractive for investors. Virtual cities complete with virtual real estate and virtual designer goods have sprung up and attracted significant investment thanks to NFTs: one investor, ‘Matty’, made $60,000 speculating on virtual land. Investment in NFTs surged over lockdown, generating $2.14 millon in transaction volume and NFT sales recently surpassed $100 million for the first time.
How the virtual economy differs from the ‘real’ economy
Virtual economies are set to thrive post-lockdown because their capacity to generate revenue is largely unaffected by outside events. A second wave of the virus, for example, would do little to shake the foundation of our virtual realities.
Even as physical businesses reopen, it will take time for consumer confidence to return, and real-world mass gatherings will be unlikely for some time. This means that the virtual behaviors adopted during lockdown are set to continue, and with it the accelerated growth of virtual jobs.
And virtual jobs can be more attractive than many forms of traditional employment. The virtual economy has fewer barriers to entry than traditional jobs, and is more meritocratic and egalitarian. Anyone, young or old, rich or poor, regardless of location, heritage or social status, can succeed in the virtual world as long as they have the intellect, decisiveness and the technical capability. You don’t need to have a family connection, or a university degree to get a foot in the door, rendering some real world examples of economic inequality moot
This has never been more important in the developed world, where social mobility has stagnated. According to the OECD, it now takes five generations for a child born into a low-income family in the US, UK, France, Germany or Korea to reach an average income.
A new world with new rules
The virtual economy’s significance lies in the fact that it does not play by the same rules as the real world, where limited resources and global imbalances give way to instability.
Virtual incomes are an asymmetric hedge against real-world events, and, as millions more people find themselves out of work in the weeks and months ahead, they will become an increasingly vital and viable alternative source of income. For those with the know-how and entrepreneurial mindset, the potential is virtually limitless.
John is the CEO at L’Atelier BNP Paribas, a foresight business identifying investable opportunities at the intersection of technological and social change. Previously, John led the institutional business at London based VC firm Anthemis Group. Prior to joining Anthemis, John founded and sold two engineering companies and a capital markets startup, earning a number of entrepreneurship awards in the process.