(Originally published at SLNN.COM.)

While Second Life was not a major topic of discussion at the New York Games Conferences, many of the discussions related to the future of Second Life.

New York - Games, developers, investors, reporters and others gathered last week for the New York Games Conference, ‘an executive media conference focused on the future of gaming in New York City’. Second Life was mentioned from time to time, but was not a key focus of the conference. However, many of the issues discussed have great bearing on the future of Second Life.

With the focus on investors and executives, much of the discussion focused on how to monetize massively multiplayer online role-playing games (MMORPGs), virtual worlds, casual games, and many other types of online games. A key focus was what role do currencies play in games, how can they be used to fund games as gamers pull back on subscription based games.

The Terms of Service for Second Life states that "Second Life ‘currency’ is a limited license right available for purchase or free distribution at Linden Lab's discretion, and is not redeemable for monetary value from Linden Lab." Many have questioned if this approach to currency is the best way hand in world currency.

One company hoping to give Second Life a run for the money is Next Island. Their new virtual world will be opening soon based on the next generation of MindArk’s Entropia Universe. A spokesperson for Next Island spoke about having a real cash economy as their top priority and that major work has gone into addressing legal issues around this cash economy. Of course, a better three dimensional graphics system is also expected to help. Beyond this, like Second Life, Next Island recognizes the importance of user-generated content.

Javien was also on hand to promote their digital payment solutions. While much of their product focuses on payment gateways for subscriptions, pay-per-view and downloads, they talk about the importance of their E-Wallet and Micropayment aggregation. Payment One, which handles transactions for IMVU and Habbo was also on hand.

As noted by the folks from Next Island, and as any person who tries to do business in Second Life knows, there are plenty of legal issues around micrpayments in virtual worlds. So, it was not surprising to see Sean Kane of Drakeford and Kane as a panelist. Mr. Kane is very involved in issues around videogames, interactive entertainment, and e-commerce, and has frequently spoken about issues around Second Life and beyond. In addition, the Interactive Entertainment Group of Fish and Richardson was well represented at the conference.

Virtual goods is estimated to be a $1.8 billion market world wide. In Europe much of this comes through cellphone payments, although the U.S. phone companies’ policies make such payments in the United States much more difficult. Issues of contracts were discussed as well. In the United States, people under eighteen cannot directly enter into a valid legal contract which raises important questions about the validity of end user licensing agreements and other such contracts.

Another area of monetizing games and virtual worlds is through advertising. Jeff Freedman, Director of Strategy and Business Development maintained that Second Live has not become a viable advertising mechanism. Yet the Matt Palmer, executive vice president and general manager of Stardoll, and Craig Sherman, chief executive officer of Gaia Online spoke about their successes with product integration. Gaia turned down advertisements that could not be integrated into the Gaia experience. It was suggested that some of the problem that people have run into advertising in Second Life has been because of a focus on old style advertising of looking for another place to put up a billboard, instead of focusing on product integration. The billboards in Second Life, taken to the extreme end up being the much despised ad-farms.

One of the issues that product integration based marketing in virtual worlds raises is how do you price and properly measure the effect of product integration in virtual worlds. Representatives of the NPD group which provided fascinating background information about the gaming industry, acknowledge the ongoing difficulty of provide informative metrics around product integration in virtual worlds.

There were many other topics discussed at the conference that bore at least some relevance to Second Life, such as the future of game console development as well as the development of games for mobile devices such as the iPhone and Google’s Android. All of these provide interesting potential new platforms for Second Life.

Yet in these days of economic turbulence, the key focus remained how to monetize games. Stronger microtransaction oriented currencies, better product integration and a remaining focus on user-generated content were important to the gamers, developers, investors and reporters, and should be important to those interested in the future of Second Life.