The notion of a metaverse has long fascinated geeks. The idea of "avatars" — three-dimensional representations of the self rendered in pixels, often fantastical or surreal in nature — wandering through a computer-generated environment has been explored in the science-fiction novels of Neal Stephenson, William Gibson, and Bruce Sterling, among others. The Matrix trilogy introduced the idea at multiplexes from coast to coast.

And yet unreal worlds have never taken off in actual reality. Philip Rosedale, the creator of Second Life, once showed me screens at the headquarters of his company, Linden Lab, which monitored in real time the number of people logging in. They peaked at 50,000, the maximum simultaneous capacity of its servers. That's not a virtual world; that's a midsized town.

Anecdotally, many of Second Life's users are there for virtual sex. (The company has banned gambling, so there's little other reason to go there.) The PG-rated Lively, censored by Google, did not even have that; its only draw was innocuous chat, with the occasional subversive attempt by users at raciness.

No wonder that news organizations, drawn by the visual appeal of the service's 3D graphics, aren't writing stories about Second Life anymore. Reuters, at the height of the frenzy, opened up a bureau; its Second Life correspondent stopped filing copy since September, having left to write for a blog, and the wire service has not replaced him.

The most recent noise to come out of Second Life has been an uproar over price hikes. Second Life users periodically hold colorful protests in the virtual world — probably the most entertaining thing that ever happens there — over this new rule or that new rule. They are likely to become more frequent, as Linden Lab, to survive, focuses on squeezing more revenue out of its existing customers, who pay the company "taxes" on their virtual real estate and convert real money into the company's imaginary currency, Linden dollars.

Online 3D environments are not a fad; millions inhabit them for hours, sometimes days at a time. But they do so in networked videogames like World of Warcraft, where there's a clear purpose to being there — even if it's just having fun and wasting time. Second Life, Lively, and virtual worlds like them amount to glorified chat rooms, and while chatting is a fundamental human activity, it's hard for anyoen to make money on it.

A quick check of Alexa shows that traffic to the secondlife.com — where new users sign up and download the software — is flat if not down, and still well behind worldofwarcraft.com, which is nearly as old and far more popular. While Second Life allows you the freedom to do anything, and I mean anything, you want, consumers have made their choice when it comes to virtual worlds, and they've chosen manicured gardens and not libertarian free-for-alls populated by flying penises.

Sure, my avatar's screwed around in the virtual world once or twice, but that's generally about all any of Linden Lab's reported 10 million users have done. I'm sure for those suffering from autism it's a magical experience, not to mention those suffering from a lack of PhD thesis ideas and technology journalists looking for something to playfully mock. In the end, it's that latter that I'll miss about Second Life most as it slides into the dustbin of history. People just don't laugh at punchlines about Goreans like they used to.

What doomed the virtual world? The lack of graphics development, for starters. The engine has improved little since it started, and it certainly won't attract any new users used to the finely rendered worlds in today's high-end console and PC games. Crappy American broadband didn't help, since every change of viewing angle required a whole new batch of data to be downloaded. And trying to attract business from advertisers in order to shill to the occasional transhuman passerby, as opposed to support robust development of things to actually do beyond gambling and ponzi schemes, didn't help make it a sticky experience.

I don't blame most of the folks at Linden Lab, who seemed to suffer a shared delusion inspired by one too many readings of Snowcrash, possibly too much MDMA and certainly the cultishness founder Phillip Rosedale fostered. I do, however, blame the boosters from without who took every usage statistic and brave new world vision that came out of the company's Barbary Coast offices seriously. Sorry, but Valleywag told ya so. (Image by Torley)

1. The big empty. Linden Lab makes money from land sales, a business model which all but guaranteed vast tracts without users. That, in turn, worked against Rosedale's dreams of attracting advertisers. Far too late, he realized that Second Life needed a search feature, so users could migrate to popular spots, where advertisers could target them. Most people logged off bored. As it is, only 600,000 of 13 million registered users visit regularly.
2. Refusal to fix what's broken. Second Life doesn't work well. Nothing about the experience is intuitive nor "fun." Instead of addressing obvious bugs, Rosedale evangelized Second Life as a grid-computing platform.
3. Calling in the Feds. Gambling was tolerated in Second Life — until Rosedale brought on a government crackdown. He invited the FBI to tour the world on multiple occasions in some misguided effort to prove his virtual world was clean=cut. The result? Stings which banished the second-most popular activity after sex.
4. Publicizing misleading stats. Rosedale always had impressive numbers at the ready. 830 residents earn $1,000 a month? Most reporters ate it up, forgetting that Rosedale was saying only 1 in 1,000 residents manage to earn a five-figure annual income from his world.
5. Regulation. After a few bank runs and underage orgies, Rosedale backed away from his anti-regulation stance. Second Life banks now need real-world charters and users must give up anonymity so Linden Lab can police Second Life's sex parlors. The rules are draining what little fun there was.

Philip, we'll miss you.

(Photo by Lane Hartwell)

A surfeit of self-expression: San Francisco may not have furries actively roaming its streets, but you'd be hard pressed to find another community so accepting of trannies, facial piercings, fauxhawks, and assless chaps. Oh wait — this June, San Francisco will have furries actively roaming its streets. See? Just like Second Life.

Toleration for public sex: Second Life has always been plagued by a seedy, fornicating underbelly. San Franciscans simply need visit SoMa.

City of lost souls: Anyone who visits San Francisco's Civic Center has witnessed the crazies, drug addicts, alcoholics and other afflicted. On Second Life, they just don't stink.

Statistical self-delusion: San Franciscans believe they're the center of the universe, though the city they live in isn't even the largest in the Bay Area. The same can be said of Second Lifers, who can't believe that the other 99.7 percent of the world doesn't want to join their party.

A plague of wantrepreneurs: When Anshe Chung became the first Second Life millionaire, she started a gold rush, though one mostly without the gold. People have flocked to the virtual world in the hopes of striking it rich, just as countless misguided startuppers race to South Park in hopes of running into a venture capitalist.

A ghost town much of the time: With a population of 744,000, it's hard to argue that San Francisco is a big empty, but if you've tried to find a restaurant open after 10 p.m., you might start to believe it. Much like Second Life, whose residents are all too fleeting in their visits.

A sense of impending doom: There's no escaping it. Some day all those Second Lifers will wake up from their bad dream and realize the whole experience is just some terrible pyramid scheme. It will crumble into ruin — just like San Francisco after the Big One strikes.

Of course, Kirkpatrick is easily hypnotized. The Fortune scribe eagerly regurgitates statistics fed to him by Rosedale. Why has the hubbub in the U.S. died down? "75 percent of users are international." It has nothing to do with Second Life's unappealing ghost town appearance to marketers and new users alike. Even dedicated Second Life marketing agency Electric Sheep is slashing staff and focusing on other virtual worlds.

Numbers meant to impress fall flat when you realize that usage numbers show only a small, dedicated core of users that's far from critical mass: "A year ago, the service hosted about 26,000 at the busiest times. Today, as many as 58,000 people can." Rosedale boasts that Second Life is comprised of 98 terabytes of data whereas the infinitely more popular World of Warcraft is only a few gigabytes. But I bet Linden Lab would trade its terabytes for 9 million paying subscribers.

Rosedale "vows" to make Second Life a "stable public utility," Kirkpatrick simperingly writes. A utility? Wouldn't that imply, well, use? (Photo by Lane Hartwell)

Rosedale's first order of business with the BBC is to dispel rumors that Ondrejka was fired because of a shift in the company's direction. Then he blathers on, unstopped, about the untapped potential of virtual worlds, "how we're at the early stages of something very big." (Right. Because we all want to be able to turn to our neighboring virtual Amazon.com browser and ask for purchasing advice.) Thanks to the Beeb. Without your bully pulpit, Rosedale would be left talking to tens, if not dozens of users in a Second Life amphitheater. (Photo by Lane Hartwell)

Dell is hardly a stealthy assassin. She telegraphs her strikes. We already know that Second Life's user base is highly inflated (8.7 million registered users, but only 600,000 are considered active). We know that Second Life has been hyped to hell and back and hasn't lived up to advertisers' expectations (American Apparel and Starwood Hotels have pulled out entirely). And we know it's facing a slew of legal troubles (FBI crackdown on gambling, the German police are investigating a child pornography ring, and there's continued talk of levying taxes on virtual sales).

But the deadliest mine buried in the Time article is the fact that Linden Lab, itself, is trying to find some way to instill control over its world. "The dilemma for Linden Lab," writes Dell, "is how to rein in its creation without alienating hard-core users." The griefers — people who smeared John Edward's campaign headquarters with feces or launched a flying penis assault on virtual land baron Anshe Chung — are making the environment inhospitable to new users, who provide a valuable audience, and advertisers, who rent space in Second Life to reach them. (Linden Lab makes its money by charging as much as $1,675 a month for a plot of land.) But any effort to thrust laws and regulations upon the populace defeats the entire premise that Second Life is built upon — it's a world where you can be anyone and do anything, or vice versa.

Time's writer ultimately disappoints. Dell ends playing with her prey, like cat with mouse, but she doesn't go in for the kill. We're glad, however, to assist. There's no way for Second Life to meet its promises to both users and advertisers. Linden Lab CEO Rosedale's campaign to win back the press has stalled and failed.

The proof? Look no further than the nonsense Rosedale successfully peddled to Business 2.0's Jon Fortt. Playing to the magazine's love for entrepreneurs, Rosedale pointed out that there are 830 Second Life residents earning more than $1,000 a month, and there are more than $1.3 million worth of interpersonal transactions a day.

Of course, those statistics almost certainly don't include the devastating effects of Second Life's recent ban on gambling. And they certainly don't seem to have anything to do with Second Life's lucrative land sales to big U.S. corporations hoping to advertise int he virtual world.

And to that, Rosedale says, never mind the U.S. We're big in Japan! That may be true, but it's likely just due to the temporary wave of attention surrounding Second Life's launch of a Japanese-language version.
Japanese newspaper Yomiuri Shimbun has uncritically reprinted Linden Lab's estimate of 27,000 "heavy" Japanese users.

Despite the Japanese influx, the number of "heavy" Second Life users — about 490,000 — fell by 2.5 percent from May to July. That's not a fact that Rosedale highlighted. But it's one that, if he were building a business on anything but hype, he might want to explain.

Second Life is really much closer to how we're talking right now, but where we're both on truth serum basically. It's like Burning Man, it's like taking a drug. Both of us are here, but we're much more comfortable with each other. ... Second Life is a mirror of the real world, only in many ways better. It's more global, it's faster, has a faster growing economy, it's a lot easier to do a lot of things — and you could fly.

• Wagner James Au (not mentioned in the article), who as the writer of Second Life news outlet New World Notes is presumably the "fake" reporter to Reuters' "real" one
• Congress, whose possible plan to tax users of worlds like Second Life was scooped by the Reuters reporter
• Second Life prez Philip Rosedale, who has to exercise his question-dodging muscle — for example, to avoid telling CNet how far his company is from adding voice chat
• Second Life, butt of a thousand breakfast-table jokes: "How can it be a second life when the users don't have a first one?"

The Reporter Is Real, but the World He Covers Isn't [NY Times]