Scratch that last one: Even the winged-phallus contingent has given up on Second Life and moved its penile protestations back into the real world. Internet politics has yet to prove it can reliably turn up voters willing to put on pants and leave the house to vote — the Second Lifer group on Barack Obama's social network has made all of 6,652 calls and raised $19,355.66.

In our user research, we’ve been amazed at how much more poignant it is to receive an animated hug than seeing the text “[[hug]]”.

In the promotional video, the characters looke a bit like the anime-styled Yahoo Avatars. I can only hope Google's thought to include leather-daddy apparel, having released the product during Pride month.

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)

An outside estimate of how much a Second Life brothel owner may make is slightly less than $50K per year — in actual currency. One strip-club owner netted a quarter of a million dollars from her initial $4,000 investment. She's probably the anti-trafficking type's worst enemy, too: a single mom. Good thing she's conducting business Stateside.

Compared to online escort directories, that's chump change. Eros-Guide, for example, has been in business since 1997, and currently collects between $50 and $400 per month from approximately 5,000 escorts advertising, for an annual take of $500,000 even by the most conservative of estimates (not to mention the porn and sex toy ads they run). Review boards like TER and Redbook have a different business model, soliciting membership fees ranging from $100 to $180 per year from hundreds if not thousands of escort-seeking clients. With so many businesses profiting from just the lead-up to prostitution — from domain registrars to hosting providers — lawmakers may be left asking, who isn't a pimp here? The only crime Second Life is committing is not making more money off the business.

(Screenshot via YesButNoButYes)

I'll be the first to count such outbursts as a sign of growing democracy — Putin and new president Dmitry Medvedev could have just jailed Kasparov like former Yukos owner Mikhail Khodorkovsky. In the opening of the video featuring Kasparov, his bodyguards jump at first, presumably expecting something more menacing before swatting it out of the air. I asked Terdiman how he thought the situation was handled, as he was one of the first people to confront the flying penis menace, but he declined to offer an opinion.

Kasparov, for his part, was unperturbed and said (approximately translated) "we should be grateful that we've been shown one more time that we need to raise the level of political discourse" to applause from the audience.

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.

1. Facebook stays independent and private, strikes a meaningful deal that legitimizes its business plan, and buys a startup.
2. Born out of the writers' strike, at least one "Funny or Die" style site gets big buzz and maybe even gets bought, but it fails to produce any videos near the quality of FoD or Super Deluxe.
3. Google releases some limited version of voice search beyond GOOG 411. During the year, the company's stock tops $800.
4. Digg sells to a major media company for at least $200 million, and founder Kevin Rose starts a non-web-based company.
5. YouTube announces it's adding HD video, but the feature doesn't arrive until 2009.
6. Gawker Media, publisher of this site, starts a men's site and a Web show.
7. Yahoo suffers major layoffs, leading the press to dub it the next AOL.
8. Yet AOL is spun off and reframes itself. At the end of 2008, the company's future is still uncertain.
9. Apple releases a second-generation iPhone, and at least one New York Times article tries to draw a "middle class/rich" line between those who upgrade and those who stick with the first generation.
10. A new videoblogger emerges as the go-to example for slick independent daily vlogging, following Amanda Congdon and Ze Frank.
11. Tumblr, the pared down blogging service, enjoys the popularity that 2007 brought Twitter.
12. Twitter remains independent and spins off a new service.
13. The Internet again fails to drive one presidential candidate to success. So does Chuck Norris.
14. Jason Calacanis, still running his online directory Mahalo, starts another project.
15. A new meme started in a geeky part of the web infiltrates the "normal" population even more deeply than LOLcats.
16. Yet another e-book reader comes out and no one cares.
17. Blog search engine Technorati collapses after failing to get enough funding to stay afloat.
18. The Wall Street Journal announces it will soon be free online.
19. Blog platform maker Six Apart, having spun off LiveJournal and rearranged its exec staff, gets bought.
20. Dell screws up the good will it won in 2007 with another customer-service or bad-parts scandal.
21. Net Neutrality takes another hit from a telco-friendly Congressional bill.
22. Second Life plods along.
23. The TechCrunch blog network lands a regular TV appearance, if not a show.
24. The country tires of the last round of famous-for-being-famous celebs, and gossip blogger Perez Hilton's TV show gets cancelled.
25. A minor medical incident renews the "can Apple survive without Steve Jobs" argument.

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.