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.

As for Kingdon, moving from Organic, a respected agency, to a much-derided startup, would seem a step down. "I'm interested in the whole notion of social computing in three dimensions," he told the Wall Street Journal. Nonsense; Kingdon is surely interested in money. Linden Lab may not be his meal ticket, but it is backed by Benchmark Capital, the powerful venture firm behind eBay. Kingdon's assignment will surely be to get Linden Lab sold, at which point Benchmark will likely reward him with a more promising CEO job. For that task, and that task alone, a silver-tongued marketer actually may fit the bill.

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)

Since so many of the virtual world's lending institutions are private enterprises, they've gotten away with breaking shady promises, like 200 percent interest rates. (Honestly, who would think that deal was legit?) Linden Lab, the maker of Second Life, has finally decided to clean up this problem, like its gambling infestation, by simply banning all Second Life banks, hoping to avoid runs like that on Ginko Financial last August. Anyone looking to run a virtual financial institution will now need to possess a real-world charter — another bit of regulation Philip Rosedale pledged to avoid. If only this were enough to pop Second Life's bubbly fictional economy. Sadly, there are more than enough clever virtual shysters entrepreneurs to keep the farce going.

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)

Mentions climbed steadily from December 2006 through March 2007, fueled by tales of avatar sex. The climax in May and June was due to the hubbub about businesses entering Second Life. At this point, Second Life mentions seem set to snowball. Whether or not Second Life maker Linden Lab ends up being a business success, it's managed to make its creation a shorthand for virtual-world hype.

The plot, such as it is:14-year-old avatar Vixy Platinum is so popular in her Another Youniverse underage-vixen sex club that a fellow Youniverser can't resist meeting her in real life. She is, of course, actually in her 20s, and he is in his 60s. They don't hit it off, to say the least.

"Law & Order" isn't the only one trying to score viewers with virtual-world forays. "CSI: New York" is sending Gary Sinise on a rather hellish mission — to catch a killer residing in Second Life — on October 24's "Down the Rabbit Hole." CBS's attempt is more of a publicity stunt than public service announcement, though. It's participating in the fantasy by building a crime-lab funhouse in Second Life.

It makes sense, though, that the networks' crime dramas are now discovering virtual worlds. We've always maintained that Second Life was a killer app. Just not in the way its creator, Linden Lab, might have intended.

For instance, American Apparel might want to create a sweatshop-free ball gag for this guy and IBM might try marketing a furry-friendly keyboard for customers with larger than average paws. Photos by Caroline McCarthy/CNET News.com

CFO fails to actually answer the question it poses, which is how to regulate Second Life. Sure, there are a few comments from Second Life creator Linden Lab; a spokesman says the company has no desire to police Second Life. An SEC spokesman makes some noncommittal remarks. Before concluding that Second Life regulation is up to Linden Lab, the CFO article briefly touches on the formation of the Second Life Exchange Commission, a supposedly grassroots movement charged by some observers with conflicts of interest.

Whatever the outcome, the kerfluffle over regulation exposes the reality of Second Life: It's all about the money. And once corporations wake up to the reality that there's no real money to be made, these arguments about regulation will be moot. As will Second Life itself.

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.

We already spend too much time on the Internet. Transforming the convenience of one-click shopping into a time-consuming, computer-crashing trek through a virtual mall is an idea that only someone with a bunch of servers to sell could love.

The scheme to merge real worlds and virtual ones, of course, solves Second Life's virtual-ghost-town problem: Real-life stores could reflect actual crowds in their virtual counterparts, which would mask the fact that no one actually wants to log on to shop. If this comes to pass, we could say that Second Life's stores are so popular, no one goes there anymore — and mean it.

Another part of the plan: Let people take avatars from one world to another. As hilarious as the notion of lame Second Life characters getting mowed down by an army of trolls in World of Warcraft is, it's unlikely to happen. There's quite a technological barrier to open world access. First, a whole bunch of standards need to be established on stitching the worlds together. Linden Lab thinks it's going to take two years just to release its software code so other people can build on top of it.

Hopefully, by that time, people will come to their sense and realize that the best thing about the Internet is that it lets you get things done faster. So you can tend to your first life, not live a second one.