IBM plans to announce Friday an initiative to work alongside Circuit City to explore retail business models in 3D virtual worlds.

　　The companies hope to discover how such environments can be utilized to improve customers' experiences with retail brands, and therefore have built a digital Circuit City store on one of IBM's islands in Second Life.

　　The initiative is part of a larger effort on the part of IBM to look at how virtual worlds, and Second Life in particular, can be used to further the company's goals. Those include fostering internal communications, as well as helping clients and end users by creating a multimedia platform for product and services experimentation.

　　IBM has clearly decided to put a major emphasis on virtual worlds and the potential such environments offer it and its many partners. It has around 1,000 employees who are spending some time in Second Life, and according to its metaverse evangelist, Ian Hughes, IBM has three employees who are doing nothing but working on Second Life projects.

　　"We now have a business unit forming for digital convergence to work on all virtual world projects," said Hughes, "as this has become clear as a key place to work and touches on all of IBM's business[es] and skills and highlights some new ones."

　　Of course, IBM is hardly the only big company to set up shop in a virtual world. Other Fortune 500 firms, including Sun Microsystems, Dell, Wells Fargo, and many others, have also invested in the space. But IBM's efforts may well be the most extensive for a big company.

　　Hughes said IBM is considering creating a virtual world that would be primarily used by its 340,000 employees for internal communications, company meetings, and much more.

　　It's not clear what platform the company would use for such an effort, although Hughes said it could be based on Second Life.

　　In the meantime, the company's partnership with Circuit City has resulted in a 3D "store" on an IBM island in Second Life, in which avatars can walk through aisles, see 3D, virtual representations of consumer electronics products and even try out a tool that lets consumers move a couch back and forth to mimic the layout of their living rooms to help determine which size TV they should buy.

　　Meanwhile, as IBM moves forward with its virtual-world experiment, it is not entirely clear how the company measures the return on its considerable investment. Irving Wladawsky-Berger, the company's vice president of technical strategy and innovation, told CNET News.com Tuesday that the company expects to launch an emerging business-opportunity group centered around virtual worlds in January.

　　Hughes wouldn't say how much IBM is spending on the effort, but he did say that it is part of a group of 10 initiatives to which IBM has committed $100 million.

　　As for return on investment, Hughes said there is no specific metric right now. But over time, he said, the company will have to measure how many people are using its considerable space and projects in Second Life.

　　"Unlike a standard software install," Hughes said, "ROI is much harder" in Second Life.