Interesting Investments: What I Learned Today About Video Game Real Estate

Avery-Taylor Phillips |

Image via Kevin Lim/Flickr CC

Last time on Interesting Investments, we explored video game gold and how it is currently worth more than the Venezuelan Bolivar. In keeping with the video game theme, we’ll look at another unlikely video game investment: Real estate.

Jon Jacobs and Project Entropia

English actor Jon Jacobs was a legendary figure in the game then known as Project Entropia, now Entropia Universe. Unlike most games, Entropia allowed its users to convert real money to in-game money, and more importantly, back again.

Jacobs, known in-game as Neverdie, paid $100,000 — real, US dollars — for a virtual asteroid in 2005. Let that sink in for a moment. While pondering the investment, know that Jacobs also conducted his wedding both in real life, in his living room, and online, concurrently. And to pay for the asteroid, he mortgaged his Miami home. At the time, it was the most expensive virtual item ever sold.

While waiting for the asteroid to accrue value, he paid $90,000 (again, real money) in order to control one of the game’s five in-game banks, making loans and earning interest to the tune of about $10,000 each month. On his virtual asteroid, he opened a nightclub, and offered rare monsters for players to hunt for valuable items. He took a cut of gold earned on his asteroid, as well. In his best month, his cut was $20,000 gross profit.

It takes work, he said, mixing virtual DNA to make the monsters, bidding on items, and even simply showing up to his nightclub for appearances.

While Jacobs estimated in 2007 that his virtual asteroid and services were worth about $2.5 million, he ended up selling off the asteroid in 2010 for a cool $635,000. Not a bad ROI for a piece of virtual rock hurtling through virtual space in a video game.



Ailin Graef: The First Virtual Millionaire

Like Entropia, Linden Labs’ Second Life allows for money to be transferred in and out of the game. Ailin Graef, known in-game as Anshe Chung, had a different approach than Jacobs. Instead of plopping down a pile of money, Graef, a Chinese-born language teacher living in Germany, spent $9.95 for a Second Life account in March 2004. Drawn to the game for the amount of freedom afforded to players, she first earned money as an in-game entertainer before designing her own in-game fashion and selling clothing for in-game money.

By June 2004, she was making enough money to buy virtual real estate in Second Life, represented as game servers of about 16 in-game acres each. Instead of holding on to the land, she bought and sold, becoming a full real estate agent for virtual property. In 2005, she was looking to clear about $150,000. The key was that she would parcel out her land, for both an upfront cost as well as a set land tax (at least you won’t have to pay outrageous property taxes like in the real world). She likened herself to Wal-Mart, with low profit margins but high volume.

The next year, she had a real office in China, staffed by 25 employees, plus freelancers. Her holdings were worth about $250,000. In early 2007, her holdings were worth more than $1 million. By 2011, her company had 80 employees. Her company remains open today, still dealing in real estate in Second life, as well as other games. While competition breeds innovation and credibility, Graef is doing just fine. With a near-monopoly and a name recognized by nearly all Second Life players, and striving to have the best-designed land to sell, Graef will likely continue to hold her place as the top virtual real estate agent, and is still making money today.

Not a bad return on a $9.95 investment.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Comments

Emerging Growth

Beleave Inc.

Beleave Inc is a biotech company. The Company is engaged in the production of medical marijuana under the Marihuana for Medical Purposes Regulations outlined by Health Canada.

Private Markets

Quants Inc

Quants, Inc, a California Corporation, develops, markets and operates financial technology platforms and alternative investment products offering sophisticated risk management since 2010. The Company has primarily sharpened its focus with…

iPRO Network, LLC

We provide the platform, tools, and resources to empower individuals and professionals to market desirable goods and services to the public, taking the place of traditional methods of commerce.