King of Spades Out, Ace of Hearts In

But did it work?

Gwyn at Colonia Nova

None of these goals are “idealistic” or “utopian”. They are good objectives, solid goals to implement and please the shareholders. Indirectly, those goals also trickle down to the media, and the media finally got the message that “Second Life is about serious business”, boosting PR to a degree. Education, for instance, flocked to SL in masses when they understood that the proven technology developed by LL was not going to be dropped soon, but would be around for decades — this is the kind of technology that academics love, since the cost of switching all the time to new technology is expensive (that’s why they love Moodle for e-learning, when there are so many better solutions — but Moodle has resisted the “test of time”, while other technologies come and go). Well, at least until Pathfinder was kicked out of the Lab — that made academics suddenly rush to OpenSim instead, which is pretty much the same thing (so all investment wouldn’t be lost), but where you can successfully trade off running costs (sim tier) by cheap labour (which universities have).

However, something went wrong.

And it’s not easy to see what. There were some hints. As a SL Developer myself, I was quite eager to see the development of a much closer relationship between Linden Lab and their developers. We finally got some notion of what kind of features would be implemented in the future, so that we could properly inform our prospective clients. We got documentation. We got training seminars (which were excellent!). We got products specifically designed for enterprises with supporting materials. But… we didn’t get many clients. Why? The way my own company analysed things was that LL’s target was way above our own level of usual prospects: multi-billion companies with millions of US$ to invest in SL. Almost all our customers are way below that level; even the multi-billion companies just wish to invest a handful of US$, not millions. So effectively LL didn’t have “useful products” for the developers to sell — or at least, not for the small-sized developers. Their sales pitch was very sound and backed up by a lot of researched data, but… it was for a class of customers that we couldn’t reach. Now I’m aware that my competition is definitely able to work the kind of clients that LL had in mind — most of them have, indeed, clients in the “millions of dollars” range — but apparently these clients were not enough to bring LL enough revenue from the Enterprise division.

Here is the problem with this model: while a SL Developer might get a few million US$ from a client entering SL, LL wouldn’t get much: perhaps a few sims’ tier. With luck, one SL Enterprise box. But that is little return from all the investment they made on their Enterprise division. I guess that they were expecting to sell hundreds of SL Enterprise boxes, but more likely they just sold dozens — even if the SL Developers, in the mean time, might have indeed attracted clients worth dozens of millions of US$. (No wonder, thus, that LL tried to implement the SL Work Marketplace where they expected to get up to a 30% cut from content sold through that!)

There was also something in the enterprise pitch which captured my attention. During the 2006/7 hype days, companies were criticised that they weren’t “engaging the community”, and this was pointed out as the major reason for failure. Looking back, it seems that the analysts were right: almost all so-called failed projects did not engage the community at all, they were just “media hype” and hardly attracted anyone beyond the launch date. A few, like Orange Island, IBM, or Cisco, who actively engaged the community year after year, were much more longer-lived.

LL, for the SL Enterprise division, came up with a different pitch. Forget the community: just use the technology. Reduce training and meeting costs. Do simulations. Be separate from the whole of SL, which is full of sex-crazed addicts, gamblers, and deviants anyway — keep to the sterile environment of your own private island, or, better still, your own “private grid” using SL Enterprise boxes, well behind your corporate firewall.

Now I think it’s obvious to me that this is a very limited and specialised market. It’s certainly one market worth tens of millions of US$ annually, but it’s not all the market. When all the enterprise efforts focused on this market failed to provide LL a huge return, it meant rethinking the strategy. But don’t forget that companies did come to SL for this market (and they still do!), and they did pay SL developers millions of US$ (and, again, still do). We just don’t see them because they’re behind their fenced gardens — but they are around, and they’re not isolated exceptions good for case studies and little besides.

The big difference from 2006/7 and 2010 is that the non-residential market is invisible to the residential market, i.e., SL-at-large. Thus the “feeling” that universities and companies are “leaving SL”. They’re not. They’re just not intermingled. In a sense, they lead a separate existence, one that has little to do with SL-as-the-community, but with SL-as-the-platform. And their projects are successful, we just can’t visit them, or even read anything about what they’re doing.

Nevertheless… it’s not a market where LL gathers massive revenues.

Thus, the 180º turn announced by Mark Kingdon as his last official corporate orientation for Linden Lab: “let’s forget the corporate market, where we are not going to make huge profits, but have to invest a lot and gather little revenue from occasional sim tiers. We can do much better on the residential market, where people buy sims anyway, no matter how much LL “invests” (and I’m assuming in this case promotion — LL’s “investment” in the residential market is made on ongoing development), and where we have other sources of revenue anyway (LindeX, fees from the XStreet SL Marketplace, and even from Premium accounts).” We don’t if this change of overall strategy came from the Board, from Kingdom himself, his marketing department, or from simply analysing what worked well and what didn’t in the past two years.

But I might imagine that Mark Kingdon is not very familiar with the residential market and thus preferred to drop out of LL; while his former work at Organic definitely made him deal with targeting marketing campaigns to consumers, his clients were companies, not individuals at home. So if he leaves LL because of that, he deserves my respect twice: first,because it’s no shame to admit publicly that one doesn’t know everything. It’s far better to leave and let others do a better job. But secondly because Kingdon might have realised that Second Life, as a community-plus-technology, is way too weird for a “normal”, traditional CEO to deal with. Mainly because just calling SL residents “a residential market” and expecting to apply traditional methods of dealing with the residential market (for instance, developing content to be consumed…) do not apply to SL either.

So is Philip the Right Person for the Job?

Enter Philip Rosedale. The most important aspect of his Second Coming is, naturally, excellent PR. The SLogosphere was insanely happy about his return — he is seen as the “return to normality”, to a Second Life where the resident is the focus, and having a visionary leading LL once more. So, after these dark two weeks, we were given a message of hope: Philip is back, and he’s going to put SL back in order!

But… is he? Make no mistake, I always loved and admired Philip, and will always regard him very highly for what he has done; he is part of the gallery of visionaries that challenged the ongoing computer science paradigm and brought an innovative vision to the IT market. I’m not going to discuss how SL builds on previously existing technologies — nothing exists in a vacuum! — even though there are certainly some technological elements that are unique to SL.

However, the real originality of SL is, as we know, in the very special relationship between its residents and the virtual world. It goes a step further than any other environment in allowing residents not only to “build nice-looking things”, but to create their own virtual environment. There is a subtle difference here, and one that gets often overlooked: “creating content” is not just gluing prims together or designing nice fashion clothes. It’s the immersive experience that we create and participate in.

Now, I’m prepared to believe that Philip is not too bad in designing tools for creating content in the more concrete sense of the word. He did, after all, lead Linden Lab to create most of the tools we have today. However, there is a huge leap from “providing tools” to engaging the immersive environment in order to make the residents happy. There have been indeed few people at Linden Lab with that ability — I’m sure we can all name a few — but it’s not exactly a skill shared by all Lindens, even the ones that were residents long before they were employees.

The big question is, of course, if Philip can do it as well. Like many have pointed out, he wasn’t so great with community engagement. He definitely has empathy with the creators and programmers. He has a strong vision, even though he was not always excellent in explaining how to accomplish it. He is very enthusiastic about SL — but I have this strong feeling that he asks himself all the time, “what now?”

The question is hard to answer. What is LL’s future as a company? SL won’t grow exponentially any more — not without dramatic changes — because it’s not a mainstream product and will hardly ever be, unless it gets dumbed down to the level of Habbo Hotel, and there are no guarantees that a “dumbed down” version of SL will be a successful product for LL. In fact, as the leadership of Kingdon showed, changing SL too much to become something more appealing to a different audience seems to lead to failure. People resist change all the time — they don’t even want to change the viewer experience.

SL is really a tricky environment. Surprisingly, the nearest analogy I can come up with is… World of Warcraft! WoW is pretty much the “same game” for years and years. Sure, there are expansions, and some minor tweaks, but it’s the same experience. Gamers pay for WoW because it stays pretty much the same. Change it too much… and people will leave, and Blizzard will lose their billions of US$. Of course, they can design new games… but why should they? WoW is a cash cow. It doesn’t need to grow more to make Blizzard (and their parent company) happy. It doesn’t require much additional investment, either — mostly maintenance costs and the odd flurry of new content every other year or so.

Second Life is similar in terms of ongoing experience, although it’s a much more dynamic environment in terms of overall content (and I’m not talking merely about prims and clothes! Live music is content too). It’s not “static” in the sense that no innovation can be introduced to SL: rather the contrary. The experience has to improve over time, or people will leave. New features — like flexies or sculpties or Windlight — allowed SL to be expanded even further to become more immersive, attracting more creativity and more talent to develop new kinds of content, and engaging a wider audience. Not, however, an exponentially-growing audience. So innovation has to continue — Havok 7 right now, meshes “soon”, and viewer-side plugins next, for example — or there is innovative stagnation. Nevertheless, these innovative features will just address the current user base, not attract a flurry of millions of new users (for them, everything is new!). This ought to give LL a hint that addressing the current user base is far more important than attracting new users; current residents are already “sold” to the environment and thrive in it, in spite of its faults, bugs, and limitations.

Thus the issue with the new users. Yes, it’s the hard learning curve that keeps them off, but also something much more subtle. SL is designed to be entertaining for intelligent people. I know that this sounds very elitist from me, but the more time passes, the more I believe that the kind of residents that stay in SL for years and years are simply different from the mainstream consumers. The most important difference is that they are, to a degree, producers as well — it means that these people have an unique talent: the ability to entertain themselves (and others). The form of entertainment can be isolated — a lot of builders and programmers have no desire to interact with fellow residents — or quite collaborative, like during a live music event — but, in a way, all residents, to a degree not present in other environments, are both consumers and producers of entertainment. Even if it’s something as simple as chatting! (Not everybody in the world likes to chat online; most find it very boring in fact — unless it’s to get girls undressed on webcams, most don’t even bother to chat at all)

In a sense, this uniqueness of the SL residents is, again, not unlike, say, World of Warcraft. It’s a quite known fact that just because someone has a computer and an Internet connection, they’re not necessarily gamers. Gamers are a special population among all Internet users, and not everybody is a gamer. There is a limit of the number of gamers available in the market. Sure, as the Internet grows — and people buy more computers, even on far-away lands which were recently too poor to afford them — the market for games also grows, since potential gamers who had no access to computers or the Internet suddenly find themselves with the required equipment and connectivity to actually become games — but this number of “newly discovered gamers” doesn’t grow exponentially either. It’s a slow, linear growth. The difference to SL is that gamers usually get bored with games after 6 months, so there is always a market for new games. But this market is not infinitely elastic, although it’s huge — 70 million Facebook users play FarmVille, after all, and that’s just a small fraction of all gamers world-wide.

Immersion in virtual worlds like Second Life, where each and every user is supposed to learn how to entertain themselves, have far, far less potential users. I personally blame TV 🙂 It created a new paradigm for entertainment which doesn’t demand anyone’s brain to be turned on — TV is completely passive and has unlimited choices for all tastes. Of course we also had passive forms of entertainment before TV, but they were nowhere as universal as TV, which is really the lowest denominator on all possible forms of entertainment, and thus its success…

So the TV generation looks upon other forms of entertainment comparing it to TV. They mostly look for different types of content, but the same form of passive entertainment that TV provides. SL, however, requires active entertainment: you have first to learn the interface (very hard). Then you have to figure out where to go to see things you like (quite hard too). Next, you need to interact with others that will tell you where to look for further entertainment (also hard, specially if you’re so dumbed-down from TV that the mere notion of talking to people becomes obnoxious — or even causes anxiety!). And in some cases, that entertainment also requires active participation (even going to a live music show, you’re expected to chat, to touch on dance balls, to dress up, to join groups… and to tip the entertainers on stage).

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