You may not yet have heard of Second Life, but it is already going corporate. What began life as a West Coast attempt at creating a virtual world is rapidly being colonised by brands varying from Reuters to Duran Duran.

Nor do Second Life’s creators at Linden Labs, a 100-person outfit based in San Francisco, mind. Linden wants the publicity. It helps to promote the community and build revenues — as it tries to go down the path trodden most recently by MySpace and YouTube.

David Fleck, Linden’s vice-president of marketing, said that the arrival of brands, and the publicity they generate, “create obvious viral effects”, helping to “create compelling content” that enables many new arrivals to make sense of things they find difficult to navigate around.

This month Reuters launched a Second Life news service. Vodafone is coming with its own virtual telephones, music has been supplied by Sony BMG, the record company, the BBC, and in due course Duran Duran — which believes Second Life offers the potential that MTV did 20 years ago. Bartle Bogle Hegarty, the advertising agency, uses Second Life as a collaborative work space. Justin Bovington runs Rivers Run Red, a marketing consultancy based in Shoreditch, East London, which was one of the first to discover Second Life in November 2003. Rivers Run Red paid $1,200 (£629) to buy a virtual island from Linden and this year will generate “80 per cent of turnover from Second Life”. When Rivers Run Red arrived it was greeted with placards reading “no Disney” from existing avatars (the term for digital inhabitants), but by being careful, it and its clients have been accepted. Mr Bovington says that he has turned down high-profile businesses, simply because he believes they wouldn’t work with the grain.

Rivers Run Red worked with the BBC this year to transmit a virtual version of Radio 1’s Big Weekend in Dundee. About 30,000 people attended, while 6,000 others registered and listened on Second Life.

That kind of pick-up shows why advertisers are interested: Second Life is already beginning to exhibit some of the lift seen by the video sharing or social networking phenomena, the two most recent insanely great things on the internet.

Residents number 1.2 million, of which about 100,000 are from the UK. User numbers in September were up 36 per cent on August. An estimated 50,000 avatars visit daily, for an average of four hours.

Although Second Life was founded by Philip Rosendale with the goal of creating a world “better than reality, without political or religious issues”, according to Mr Fleck, and was first dominated by familiar minority tribes — such as goths — it had a capitalistic element from the start.

“We encouraged that. When you bring people together you should offer people a chance to monetise their work in the community.”

Second Life residents use Linden dollars to buy and sell items, creating what was initially a craft community, that is still permeated by offers to buy clothes or trinkets for L$200 or so. The exchange rate floats: the present rate is L$272.9 to US$1.

Some people generate real income: the actual dollar value of trades in the 24 hours before this article was written was $584,000, and last week an adviser to the US congressional economic committee worried about Second Life’s tax status. Anshe Chung Studios, in China, sells Second Life land, which it claims to make a living from, although the arrival of big business risks squeezing out artisans.

So, is Second Life over-commercialised? As any visitor will testify, the environment supports uses ranging from the serious to the pornographic. It is perfectly possible to spend hours in Second Life without coming across a single brand.

Linden Labs itself makes money on a feudal basis: by charging people who want to own land. Membership is $9.95 a month, and land tax begins at $5 a month. The company says “over 100,000” people are paying, implying revenue of more than $1 million a month.

Mr Fleck says that “profits are not the focus; we’re in growth mode right now”, and with backers including the eBay founder Pierre Omidyar, Amazon’s leader Jeff Bezos and the veteran technologist Mitch Kapor, money is not an issue. Nor is it likely to be if more people can be persuaded to pay up.

“We’re open to an IPO or a sale, whenever that occurs. But there’s no rush,” Mr Fleck adds.

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