A Threat to the Internet!!

I have often counseled my own children - all grown now - that you need to discipline yourself once you get into the professional world. I have passed on the same advice to many fellow professionals - mostly younger. Get to the office on time, be conscientious about your work, dress appropriately, and do not abuse sick leave.

Fail to do this and someone else will do it for you, and chances are you will not like it.

The same applies to the internet.

The Los Angeles Times recently reported (click here to read article) that virtual banks on Second Life were given a deadline to cease operations? This was part of the fallout from the hasty retreat of Ginko, a bank on Second Life that closed its doors and left town with $75,000 of investors' money.

Marketers should be concerned. The internet has proven immensely valuable to us. Anything that compromises its integrity may also compromise our ability to use it as a marketing vehicle.

For those of you saying, "What is Second Life," a quick e-education.

Second Life is a virtual environment in cyberspace. Unlike MySpace, where the communication is through the printed word and flashy graphics - but in the end a pretty static environment - Second Life is much more advanced. There are towns and villages, destinations, resorts, you name it. Reuters has a correspondent on Second Life. Most of the serious presidential campaigns have a presence. IBM, Best Buy and countless others can be found. There is even Second Life currency, called Lindens after Linden Lab, the company that created Second Life (the exchange rate is about 270 Lindens to one U.S. dollar).

Participants move about Second Life as avatars - virtual bodies you design and customize to look like anything from a normal person to someone with wings or tentacles or whatever you can imagine (my avatar is Gonzoman Plympton).

Last year a woman created and sold virtual real estate on Second Life and became the first person to make a million dollars in the virtual world. The question was whether she was able to liquidate her Lindens into real currency.

Back to Ginko.

Ginko advertised a return of 40% on investments in its Second Life bank (there was the first clue: if it is too good to be true, then it usually is). You know the rest. Initial deposits were paid interest with later deposits and at some point the banker skipped town with $75K and no forwarding address.

Linden Labs gave notice to all unregulated banks. They had to shut down operations by January 22. Virtual banks were scrambling to give depositors back their Lindens. Folks could not get their money out of virtual ATMs. According to the article in the Times, Second Life stocks plunged, as did real estate prices. Second Life is a virtual world and participants are from around the globe, so there is really no one to sue.

The most evil word in cyberspace started to surface --- regulation.

Here is my observation. Given the chaos created by this small, isolated instance, what is possible if this got really big? Could a virtual financial crisis on Second Life - one that involved real dollars - tip the real world economy into a tailspin (especially now, since we actually are teetering in a real world recession)? Let's take it a little farther. Could someone, accidentally or maliciously, trigger an international incident? Maybe Ginko was a project backed by al Queda in an effort to raise funds. There are all sorts of possibilities.

When it comes to regulating the internet, I advocate for as little as possible. But we all know that lack of regulation ultimately means that the Second Life\Ginko incident is only the beginning. Many more are coming. You cannot control the bozos and the bad people.

Few will dispute that the internet has been a boon to us marketers. One or two serious abuses, however, and pretty soon Congress will be looking into the matter. Once Congress steps in everything is up for grabs, even net neutrality.

This is my message to cyberspace: We must take care of our house. If we don't, someone will eventually take care of it for us.

And we will not like it.