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Booming Real Estate in an Unreal World - Washington Post

Aug. 09, 2007
Reporter: Sam Diaz, Washington Post
Tags: Real Money, Fantasy World Online, Monopoly, Virtual Properties

Virtual 'Real' Estate Sale

Fantasy Properties Can Get You Actual Money on Weblo

The mayor of Washington has put a For Sale sign on the nation's capital -- and he claims one of the 2008 presidential candidates is negotiating to buy the place for a fraction of what a Georgetown rowhouse might cost.

This isn't the real Washington, of course, but a virtual version of the city on Weblo, a new Internet site that is offering online versions of every piece of property on the planet and a real-money transaction system to go with them.

It all works like an online version of Monopoly, but aims for the appeal of fantasy video games such as World of Warcraft and social networking sites such as MySpace.

In this online frontier, users are betting that a growing number of people will engage in real-estate speculation. Using real money, Weblo members purchase virtual properties -- cities, states or physical addresses -- around the globe and customize Web pages that correspond to those locations. Properties -- the White House, New York City, the state of Virginia -- are initially auctioned, and then can be resold. So far, 10 percent of the virtual globe has been sold.

There are a number of ways to make money on Weblo: Those who own the rights to cities or states collect transaction fees from members who buy virtual properties in their jurisdictions. Members can personalize Web pages associated with their properties and make money from advertising sold on those sites. Eventually, Montreal-based Weblo also plans to offer e-commerce so that people can add visual storefronts and sell real objects on their pages.

Weblo, launched last September, was the brainchild of Rocky Mirza, an Internet entrepreneur who has run online auction companies. Mirza started an international software development company to fund his new idea, and last month the site secured $3.2 million in additional funding from VantagePoint Venture Partners.

One of Weblo's 44,000 members is Mike Jameson, a Connecticut real estate agent who so far has paid more than $15,000 for 700 properties on Weblo, including Andrews Air Force Base, Walt Disney World, Newark and Arlington. His original plan: Showcase actual properties for sale in the counterpart of his virtual city and collect referral fees when the listing leads to a real sale.

But Jameson also saw Weblo's own real estate potential: Just a few months ago, he paid $95 for Washington, a transaction that earned him the title of mayor of the virtual city. "D.C. was one of the first cities I bought," he said. "That was a gold mine."

Today, his minimum asking price for Washington is $99,000, and he said someone from one of the presidential campaigns contacted him as an interested buyer.

"Only because the election is coming up does this seem like a good move," said Jameson, who wouldn't name the candidate because the deal has not been finalized.

There's nothing fancy about Weblo properties, which appear to be little more than simple two-dimensional Web pages. Jameson's Washington, for example, consists of little more than a description of the city, some pictures of the monuments and memorials around town and links to his other Weblo properties.

But if the Weblo community grows and members start to invest more time and energy into sprucing up their online properties -- just as millions of MySpace members have invested hours designing their profile pages to reflect their personalities and attract visitors -- there is potential for more traffic and greater revenue.

Mirza, who grew up playing Monopoly and collecting baseball cards, said Weblo taps into the idea that there's value in collecting things that other people can't get. In real life, the Statue of Liberty or the Bellagio Hotel on the Las Vegas Strip are unavailable or out of reach. But on Weblo, these are properties that can be bought and turned into real moneymakers.

"This is about supply and demand," Mirza said. "There's only one Washington, D.C., and every person associated with it could be interested in it." The site's investor said the idea built on the popularity of online games, but caters to mainstream interests.

"Weblo represents a more interesting play that's part fantasy and partly rooted in the real world," said Geoff Mott, managing director of VantagePoint, based in Montreal. "It gives participants the opportunity to really develop value in what they're doing online. You don't have to be a gamer. You can be just a regular person."

Weblo has yet to prove that it will attract mainstream interest. Its membership still pales in comparison to the 8 million "residents" of Second Life, a four-year-old site where people establish virtual characters that can hang out and chat online. Second Life later became popular with businesses that launched virtual offices and held virtual events in that world. But because Second Life communities are largely based on fantasy, there's no human or emotional connection to the locations.

Weblo, by contrast, is based on real locations, and because people have emotional connections to Weblo properties -- a hometown or a house where a grandparent was born, for example -- the site could generate interest, said Tim Bajarin, principal analyst with Silicon Valley research firm Creative Strategies.

"There's no question that it has potential," he said. "But it's way too early to tell if it will be successful."

Some are already reaping rewards from their Weblo investments. Las Vegas, for example, sold initially for $36 in September, resold for $430 in December and was purchased by its current owner for $2,300 in March of this year. Six states are also on the resale market, with asking prices that range from $2,800 for North Dakota to Florida's whopping $1.8 million.

The Weblo business model works using an extensive -- and somewhat complicated -- revenue-sharing formula.

The state of California, for example, sold in September for $53,000. The owner, called the governor, made money when the city of San Francisco was purchased for $52.31.

Both the governor and the San Francisco mayor stand to make money if, for example, another member buys a specific address in the Mission district of San Francisco and opens a T-shirt shop. The shop owner, in turn, makes money through sales of real T-shirts sold off his or her personalized e-commerce site, and also shares advertising revenue from the site with the mayor and the governor.

Weblo offers free and paid memberships but collects a greater percentage of advertising revenue from its nonpaying members.

Transactions in Weblo's world are largely not subject to real-world laws.

Weblo does not report members' revenue for the purposes of taxation. Copyright law -- when members attach real brand names to a virtual address, for example -- is only enforced if the copyright holder complains about violations.

Like other Web sites and social networks, Weblo and its members depend on visitors who are willing to spend time in this virtual world and interact with others.

"The experiment here is whether it can empower a lot of individuals to build Web sites," Mott said. "Is that a sustainable model? If it is, then Weblo is enabling a vast army of contributors to the Web, and that could turn it into a valuable property."