First you must understand the difference between Augmentation vs. Immersion in Second Life. Basically, “Immersionists” go to Second Life to create a new reality for themselves, while “Augmentationists” go to Second Life to aid some RL activity. An example of a typical immersionist would be a club-goer or perhaps someone who builds/buys themselves a castle, unaffordable by them in RL. An augmentationist example would be someone who uses Second Life as a means to collaborate with others to support a RL charity group.
The immersionist tries to create an environment they cannot easily achieve in RL. Perhaps it is a big house, a circle of friends, kinky activities, blingy clothes, role playing or something else. Slavers, Star Trekkers and Steampunkers are all types of role playing immersionists. They are immersing themselves in their own particular fantasy world. That's why they are there.
Sometimes individuals exhibit a bit of both characteristics, but in my limited experience avatars tend to be mostly one or the other. What type am I? After some consideration, I realized I am primarily immersionist. No, I'm not into role-playing or bling – but I am into creating and running a standalone business that makes things for people to enjoy. That's something I'd like to do in RL sometime. That's my fantasy world.
There are debates whether Second Life residents can truly be classified in this way, but I believe that such a classification is useful in understanding why businesses fail in Second Life.
So what does this have to do with RL businesses? I alluded to this in my previous article but here it is in more words: I believe the simple answer is that there are more immersionists than augmentationists. Of course, augmentationists exist (and some immersionists even become augmentationists from time to time) but augmentationists seem to be fewer in number. Or at least the number of people "augmenting" seems to be lower at any given moment.
So let's see what happens:
A RL business sets up shop in SL, perhaps selling RL-analogous products, trying brand-recognition schemes like offering games of some sort. But they receive little traffic, and conclude that Second Life just doesn't work. Worse, they spent $100K's to do so, and presumably expected to gain their investment back somehow.
Meanwhile, these RL businesses are often out-trafficked by in-world businesses. My own particle shop sometimes beats major RL players on certain days. Why is this so?
It's because the in-world businesses are implicitly addressing the actual needs of the most numerous avatars: Immersionists. Immersionists need virtual artifacts to enhance their secondary reality. They typically do not need analogs of commercial RL products. They need products that fit into their secondary reality. They especially do not appreciate brand recognition schemes (er, advertising), since its presence greatly disrupts their immersion experience. Indeed, branding that interrupts an RPG experience would obviously be viewed quite negatively.
In other words, in a mostly-immersive virtual world, the RL companies often have little to offer. What should they do? I have some interesting ideas, but let's save them for another post.