A company that develops content for virtual world “Second Life” has laid off several employees, including Austinite Joel Greenberg, who was profiled in this Statesman story in April. The Washington-based Electric Sheep Company, which develops content for virtual worlds such as Second Life, has laid off 22 employees, according to published reports. Greenberg, the vice president of marketing innovation, was hired to develop an ad network for Second Life, a virtual society in which online role players act out alternate lives.

Greenberg had left his job as senior planner at Austin ad agency GSD&M in March to work at Electric Sheep, which helps corporations market their brand and products online. He worked out of his home, or used his laptop at coffee shops like Austin Java.

In April, Greenberg said he wanted to help Second Life residents to sell their own ad space, turning ordinary people into moneymaking publishers.

Some wonder whether Electric Sheep’s layoffs are indicative of a broader problems with Second Life. TechTurn addresses this in a recent post.

There are some indications that the heavily hyped “Second Life,” isn’t as popular among marketers as it was when it first debuted. Fortune 500 companies such as Dell and Toyota clamored to set up virtual lands in Second Life. Dell sells customized virtual computers or allows customers to jump to its Web site where they can buy a real computer. Toyota created “Scion City’” where it sells virtual Scions.

Companies saw the society as an opportunity at cheap publicity and a shot at wooing the hip, computer-savvy Millennial generation.

But now some companies have left Second Life and other sites remain empty. A July 2007 story in The Los Angeles Times reports that shopping for real world products on Second Life isn’t a “main activity.” And that “some marketers are second-guessing the money and time they’ve put into it.”

The L.A. Times reports that Starwood Hotels & Resorts Worldwide Inc. is closing its Second Life shop and donating its virtual land to a nonprofit. The article goes on to mention that many of the sites that remain on Second Life sit empty. Best Buy Co.’s Geek Squad Island was “devoid of visitors and the virtual staff that was supposed to be online.”

It also points out there might not be enough Second Life citizens to sustain this business model. Forrester Research says at peak times there are only 30,000 to 40,000 users logged on.

To read more about Electric Sheep, check out the company blog here.