Its an arms race out there.
I have 17' wheels on my car, but I know there's someone out there with an 18' inch set.
I could buy a gold plated cellphone, but you know someone else probably has diamonds.
So how do you win? What's the bling that no one else can top?
Me-bling, actually. Anyone can get a ringtone just like yours, or steal your MySpace background, but no one else is going to use your own expression of yourself to top you.
So, no matter how many people get avatars... no one else will have the bald Charlie avatar who stands in front of the boathouse, goes to Met games or stands in Union Square. Why would they?
I think if we've learned anything from the whole blog revolution, its that people want to be able to interact with the media and services they consume, and to express themselves in a personal way. I think the growth of the "virtual goods" markets like in Second Life or MMPORGs, the ringtone market, etc. proves that you can also make a great business out of enabling these things. What will be interesting is how you do it on the web, where standards are open, HTML is pastable, screens are capturable, and unlike mobile phones, distribution isn't locked down.