SUZANNE Vega got her start on the New York folk scene, but now she has found a following in cyberspace. With the help of some programmers, Vega created a 3D-animated image of herself, called an avatar, and, earlier this month, performed inside a world accessible only through a website, where other people represented by avatars attended the concert, streamed live to computers all over the globe.

As Vega strummed her guitar inside a real studio, about 100 lucky fans sat at their computers and guided their avatars into the online scene of an outdoor amphitheatre, where Vega’s avatar - youthful-looking with short hair - appeared on stage. When the real-world artist played and sang, her online alter ego did the same, although the avatar’s lips did not move.

Fans heard the concert on their computer speakers and commanded their avatars to smile or move to the music with a click of a mouse. Later, Vega answered audience questions, sent as instant messages visible to everyone in attendance.

While webcasts are now commonplace - Sandi Thom, famously, found a large audience through online gigs - this is one of the first attempts by a well-known artist to interact with fans in a completely computer-fabricated world. "The response was terrific," says Vega. "I am still hearing from people who were in the ’room’, friends of friends and people all over the world who were ’there’."

Record labels say websites that put users into video game-like virtual worlds are a unique way to reach out to audiences, who are increasingly spending their time and money on the computer instead of at concerts. Although still experimental, such sites offer fans more ways to interact with one another and band members directly. Duran Duran are now following Vega’s lead, with plans for a gig on a virtual island. And Regina Spektor built four virtual Manhattan lofts where fans could walk around and listen to streaming music from her new album before it was released.

"A virtual world brings something to the table that a website doesn’t: it’s building a more immersive experience," says Ethan Kaplan, director of technology for Warner Bros Records. "It’s really cool and a lot more fun and creative than just putting a MySpace page up."

One drawback is that avatars can’t keep up with humans’ real-time facial expressions and gestures. In Vega’s performance, the virtual guitar would not appear on cue and, at first, appeared to stick out of her elbow. The number of attendees at some concerts is limited because crowds take up too much processing power. Sometimes, planners of virtual reality events ask attendees not to bring too many accessories, such as big hairstyles, because they take up too much bandwidth.

The appeal stretches far beyond the music industry too. The virtual world has generated attention from retailers and marketing firms, who use it to experiment with new products. Clothing company American Apparel set up a virtual store on the Second Life site in June, where people can spend real money to buy T-shirts for their avatars. Several other online designers sell fashionable jeans, tattoos and even hairstyles. Next month, Starwood Hotels plans to open a virtual loft-style hotel on Second Life, where avatars can check in, a year before the company builds the real thing in the real world - or "RW" as people in the virtual world call it.

JUST A HISSING FIT

WHAT’S scarier than snakes on a plane? How about internet buzz about a movie called Snakes on a Plane that falls short of the media hype? For months this year, New Line Cinema basked in movie marketer’s heaven - an avalanche of excited internet chatter and blogs about its new thriller Snakes on a Plane, starring Samuel L Jackson. A studio couldn’t hope for better pre-release publicity. Not only did the unusual title grab attention, but Jackson’s fans were all over themselves about his line: "I’ve had it with these motherf***ing snakes on this motherf***ing plane!"

In the end, the high-concept film opened to so-so business last weekend, falling short of sky-high expectations. So what does it all mean? "I certainly don’t think internet buzz has been a reliable predictor of box office," says Adam Fogelson, head of marketing at Universal Pictures. "You want a community of like-minded people around the country or the world, and the internet is a great place to do that. But a lot of online discussion does not necessarily translate into box office."

For Hollywood studios, the internet is still largely mysterious territory that holds much promise as a marketing tool, but also pitfalls. "I think we continue to learn something about the medium every day," says Gerry Rich, president of worldwide marketing at Paramount Pictures. "Still, it’s difficult to quantify whether [internet buzz] represents the masses ... or a segment of the population that may or may not be indicative of the general public."

Universal had already been disappointed by three recent films that had plenty of internet buzz before their releases, but were only moderate successes. One was Serenity, a spin-off of Joss Whedon’s cult sci-fi TV series, Firefly. "We created a marketing campaign largely around the internet," recalls Fogelson. "We screened the film early. There was lots of chatter on the internet about the film." The studio also counted on the internet to boost the box-office prospects for George A Romero’s Land of the Dead. The thinking was that Romero had a built-in fanbase going back to his 1968 cult classic, Night of the Living Dead. There was also massive online interest in comedy-horror Slither. All three films were box office disappointments.

Tom Sherak, former head of distribution at Twentieth Century Fox, says there was no question the web created buzz among hardcore moviegoers. "Does it create enough buzz at this point to open a movie? That, I don’t know. I don’t think any studio would just rely on that to open a movie."

That said, the internet is credited with playing a significant role in 1994 in bringing moviegoers out to see the sci-fi film Stargate on its opening weekend. And in 1999 Hollywood was caught unawares when Artisan Entertainment released The Blair Witch Project, a huge success. Scenes from the film had appeared online, and, in an era when many people were just being introduced to the internet, many thought the footage of a group of film-makers trekking through the woods with dire consequences was real. "That is when the internet was exciting for young people," says Paul Dergarabedian, who heads the box office tracking service Exhibitor Relations. "The Blair Witch Project created a mystery, that what you were going to see is real. Now, years later, I think people look at the internet as being a marketing tool. But back then it was, ’Wow, it’s on the internet! It must be true!’"