NeXT Life

Time Warp

Unless you have been hiding in a warp hole somewhere (like I am!) you might have missed the latest announcement from Linden Lab: Second Life: The Next Generation, or SL2, or — as I prefer to call it — NeXT Life, is currently being developed, and the first beta will probably appear sometime in late 2015/early 2016 or thereabouts.

To make sure that current residents don’t panic, Ebbe ‘Linden’ Altberg, current CEO of Linden Lab, was anxious to pass the message, during the Third-Party Developer Meeting which happened last Friday, that Second Life is not closing down. Linden Lab will continue to support Second Life. They will just launch a separate, independent, alternative, brand shiny new virtual world. And no, it’s not High Fidelity, although they’ve hinted they might use some of the open source code published by Philip Rosedale’s other company.

Here is a summary of what we know so far about ‘NeXT Life’, copied shamelessly from Jessica Lyon’s post on the Firestorm Viewer blog:

  • The current plan is that the new platform will not be open source at least initially. (This means there will be no Third Party Viewer alternatives at least initially, and there will be a new viewer built by LL.) This could change over the course of time.

  • LL intends to continue maintaining and developing Second Life while they develop the new platform and will operate them in parallel even after the new platform is launched. SL will remain as long as it is profitable for LL to continue operating it.

  • The new platform will be built “in the spirit of Second Life” and will put focus on content creators as the primary customer. LL wants to make it so good SL users will want to migrate to it.

  • Assets (inventory) from Second Life will “likely” not be transferable because they do not want to constrain what is possible by maintaing backwards compatibility. This wasn’t said with complete certainty, though, which suggests some content may be permitted.

  • Second Life will continue to be improved, albeit on a smaller scale. Oz Linden is now Technical Director and in charge of a small team who will keep development in SL going.

  • This new platform is still in very early stages, and it is unlikely even a beta will be seen before next year.

Inara Pey seems to be publicly leading the group of enthusiasts about this change. You can see on her blog a reply from Peter Gray, Linden Lab’s Director of Global Communications. His message can be summarised as:

Don’t panic, get excited!

Well. I’m not so sure about that.

Abandon Ship!You see, the problem here is that Linden Lab is expecting everybody to be excited about the huge change, without telling us a lot about what’s going on — just the essentials — and without taking into consideration that, by 2016, there will be serious competition. Perhaps for the first time in the Lab’s history.

Second Life competing with ‘NeXT Life’

Because of the uncertainty in SL’s long-term future, it’s conceivable that the SL resident population will diminish, and the rate of shrinkage very likely accelerate even more (so sad, now that we were almost recovering from the losses and finally achieving some equilibrium!).

This is a classical issue: every time that Linden Lab announces something drastic, the population diminishes. When they shut down gambling, they got a 30% loss in residents. Shut down banking, another slice of the population shrunk. Move adult content to Zindra, and the population shrunk again. Change the ToS to make content creators wary of what will happen, and the population shrinks again. Even when ‘forcing’ people to use the new viewers, the population shrunk! In fact, if we look at all the major decisions made by Linden Lab in the past, almost all resulted in loss of population and a contraction of the land mass.

There are a few exceptions. When LL launched SL, of course everything was growing! When they announced the SL 1.4 Viewer, a major turning point in terms of features, with a Mac version, SL started to grow like crazy. But the biggest single change that got the population growing exponentially was when they announced that basic accounts would be free.

No other measure brought in a significant amount of new users (that remained around for a long time). And there have been tons of good reasons for that — incredible technical advances on the viewer, a revamped Marketplace (so potential new users would get a taste of what the content inside SL looks like before joining), Linden homes for premium users, mesh support, the ‘navigation mesh’ for AIs and gamers, and even SLGO, allowing SL to be used on tablets and low-end computers. The list is pretty much endless, but did it have any effect? No. It just made current residents more happy — specially the content creators, having new tools to play with, which in turn generated awesome new content, which in turn made customers more happy, which in turn made the in-world economy slightly recover, growing a bit. There is always the odd new resident that does, indeed, appear. I have spent some hours on the Welcome Areas recently (mostly to test an infamous text chat bug which only affects Mac users, still unfixed after a year of reporting it and affecting tens of thousands of users…) and it’s true that we still get the occasional new resident there.

It is thus quite unlikely that this major announcement, even considering it’s not merely a major overhaul, but a completely new virtual world designed from scratch, will attract many new users. Why should it? The best that might happen is that everybody in SL switches over to ‘NeXT Life’. They won’t get more users just because they introduce new, shiny tech. But I’ll expand this further!

So what I see as a major problem is that SL starts losing residents and landmass very fast, well before ‘NeXT Life’ is due, and LL’s revenue stream collapses. They expect more revenues from ‘NeXT Life’ to compensate, but… will the users joining ‘NeXT Life’ (almost all coming from SL) compensate what LL will lose with a shrinking SL? And, if the math doesn’t balance out on LL’s accounting department, then the big question is, what will LL do? Shut down ‘NeXT Life’? It might be too late — SL might not ‘recover’ those users again. If things go too far, they might come to a point where they cannot support the effort of maintaining the whole company — because the revenue from SL will be dwindling further and further, and the ‘new’ revenue for ‘NeXT Life’ will not be enough to compensate for the overall loss.

The only solution left at that dramatic point is to close doors and liquidate the company.

Now, many might argue that, in the past, there was not a significant exodus of users that ruined LL. Quite the contrary: as said, LL certainly has made terrible announcements in the past, and each has shrunk SL further and further — but never to the point of collapse. In fact, until recently, LL never felt the ‘push’ to change their business model: even on a reduced income flow, they did manage well so far. One can argue that the extra revenues from the Marketplace — as well as a slight increase in LindeX exchange rates, when LL started being more careful about allowing third-party exchanges to operate — might have compensated for the loss of income. One can even argue, as Inara Pey does, that two out of the five ‘new’ products on LL’s ‘app game’ line are relatively successful, bringing a much desired new revenue stream to LL. The truth is that we have no clue about those claims — LL is not showing their numbers. We can calculate very roughly how much LL makes from Second Life alone, and even from the LindeX, but not from the rest of their products. So we can only speculate that they are compensating the reduced income from land sales with other sources of revenue, and this has worked so far, but… it doesn’t allow LL to grow. It allows LL to survive with a reasonable amount of profit. And no matter how ‘destructive’ their announcements have been, in general, they lose more from ‘erosion’ over the years than from a direct consequence of their terrible announcements.

So why should 2016 be different? The main reason is that there will be two new players in town: ‘NeXT Life’ will have competitors — while Second Life has not. And it’s worth taking a look at those competitors first.

High Fidelity: The hippy virtual world company

Linden Lab is a very traditional company, in spite of their innovative product. They ‘go by the book’ on almost everything, specially in the post-Rosedale years. Although they dabble with open source code and adopt some development methodologies typical of open source companies, they’re not really ‘serious’ about open source development. If they were, they would be just like every other company with an open source product (say, Automattic, to give a well-known example): everybody would be contributing to it. Instead, what LL has is a mess of independently forked viewer projects, all using 99% of their code, and many of which have incredibly innovative ways of dealing with things — but which LL hardly ever considers using in their own code as well. This is so totally wrong that one might ask what was the point in opening up the source code — if not for crowdsourcing free work, then what?

High Fidelity, Philip Rosedale’s ‘other’ company, is completely freakish. Everything they have, except the core services (we’ll get to that in a bit), is open source. A core team of developers does most of the work, but anyone can contribute. In fact, in some cases, High Fidelity will pay for your contribution. Or hire you part-time. Or even full-time. The point is that there is a large crowd of developers, some working for free, some for money, some as employees, and this huge mess is brought together towards developing an unified goal.

If you are a regular reader, then you know that my ‘prediction’ of any successful business/product comes from looking at the financial numbers. My spiritual mentor in business analysis, Kevin O’Leary, on one of the Shark Tank shows, once shook his head at someone who had a nice product to send (physical) postcards from a website. He told them that the Silicon Valley Bubble had exploded. It wasn’t the time to launch a ‘cool idea’ (that can be copied so easily by others) without a solid business plan. They had neither — the idea was trivial, easily copied, and their revenue model hopelessly flawed. All they had was some sales and a good background as marketing managers for MySpace. In fact, the very same idea is being used by many competitors. O’Leary, as an investor — not as a venture capitalist — is wary of ‘ideas’ without any ‘business’ behind it. What he looks at is how well a company fares — as a company, not as an idea. And that means worrying about  getting customers, of getting paid by them, of generating a revenue stream, of being profitable. Not about how much money they can raise from venture capitalists and business managers to keep digging a hole in the treasury — that leads, most of the time, to total collapse. Silicon Valley companies still do that all the time, because some of them get lucky and get bought by one industry giant — Google, Microsoft, Facebook, Yahoo… — which allows them to make plenty of money from selling the company even without any customers. Most, however, disappear forever from the face of the Earth, taking all the money of their investors with them.

So how will High Fidelity (HF) work? Philip Rosedale knows very well that one of the biggest hurdle of Second Life is how expensive land is (both for customers but also for the company running the servers which host content). Make it cheap, and things will improve. But if land is too cheap, you cannot afford the infrastructure to run it. Therefore, Rosedale’s strategy is clever: he gives away all the code, and let people run it on their servers instead. You buy a server, lease one, get a VPS, go to Amazon and order some cloud services, use your own laptop… that’s up to you. Install the software, launch it, and you have your virtual world. As big as you wish. Then you need others to come and visit you and buy your content. This is where High Fidelity’s ‘core servers’ come in.

A full discussion of the business model is presented much better on HF’s own site, but you can understand that a virtual world will have users (who wish to go everywhere — from visiting your house inside your laptop, to a huge city running on thousands of servers somewhere), and that means dealing with identity (and inventory, but we’ll come to that later). Users need to know where to go, and that means a location service — HF calls it ‘name servers’, because they clearly wish to see this as the ‘3D Internet’. And, of course, you will wish to buy and sell content, and buy and sell land. That means having a currency.

Rosedale also learned from surprising sources — from Bitcoin to Kitely! His model is based on the following assumptions: if I lease a server to put some content there and others come to visit me, I ought to be paid for the bandwidth/CPU costs. On the other hand, when I visit others, I should be the one paying. This sounds suspiciously like Kitely’s business model, specially now that they have added Hypergrid access: if you wish HG-enabled users to visit your regions on Kitely, then either you pay for them to stay at your place (they will be consuming resources that you lease from Kitely), or you have to demand that they pay for those resources. The difference under Kitely’s model is that Kitely is the sole entity providing servers for content creation. HF, by contrast, allows anyone to be a ‘virtual world provider’. And yes, you guessed it, they are using their own cryptocurrency — deliberately not Bitcoin, because Rosedale wants to have a currency that doesn’t fluctuate wildly, but predictably, just like the Linden dollar. It’s not a cryptocurrency for speculation, but for exchanging bandwidth/CPU costs — and for buying and selling content.

HF themselves will not ‘own’ any servers to provide content. These will all be in the hands of the users. That sounds really very much like the Metaverse on Neal Stephenson’s Snow Crash — people group together, buy their own servers, and interconnect them. Users in Snow Crash with low-end computers, running areas of the Metaverse from their laptops, may have low-rez avatars. Since HF uses a voxel-based renderer, this might very well be the case. Jump to a high-end, bandwidth-rich server, using your high-tech desktop with a gamers’ video card, and you might get spectacularly detailed environments, rendered at very high frame rates; jump to someone’s laptop on a free Wi-Fi connection, and the image will automatically degrade to handle the bandwidth demands. And, of course, while this is happening, cryptocurrency is being exchanged between servers and users. So, under HF, there will be a ‘land business’ which is strictly tied to the ability to maintain high-end servers with good throughput. But that won’t avoid home-grown solutions to participate (I have almost 10 MBps upstreaming bandwidth at home — plenty to make some money with HF once I get the software to compile!! hehe). And obviously there will be a huge content marketplace — think about what Kitely is doing, selling OpenSimulator content to all Hypergrid-enabled grids. Last but not least, to be able to navigate across this hugely asymmetric jungle of ‘nodes’ in the HF Metaverse, you will need to register your server with HF’s core servers. This will not only provide location services (for others to be able to find your server), but also provide you with a digital certificate and secure authentication procedures. So, yes, your sold content won’t be able to be opened up by anyone who hasn’t paid you for it. It might even be copied among users, but it will be digitally encrypted, so it will be worthless — unless, of course, you got a signed digital certificate from the original creator, allowing you (and only you!) to open it. 100% secure? Of course not — digital certificates can be hacked, and so can cryptocurrency be hacked as well, but it will be tremendously difficult to do so!

Where does HF’s revenue come from? When you buy something at the Marketplace, HF charges a fee. If you exchange some cryptocurrency for ‘real world’ money, HF charges a fee. If you wish to make your server available to everybody, and register for HF’s location services, you pay them a fee. And possibly if you wish to have an avatar with an unique name, and the ability to roam HF’s virtual world, buy and sell services, engage in the ‘land business’, etc., very likely HF will charge you a fee as well. Stop paying the fee, and they’ll revoke your digital certificate, and you won’t be able to do anything outside your home-grown virtual world.

So how can HF ‘survive’ only from those fees? After all, LL also charges fees for the LindeX and the Marketplace (and so does Kitely). But LL can’t survive on fees only; they need the very lucrative land model to survive. Well, HF is not in the land business. They don’t need servers. They don’t need sysadmins to stand-by on duty 24h/7 to oversee the servers. They don’t need bandwidth — except for the core servers, and, if Rosedale is clever, he’ll just go for cloud services — the more customers he gets, the more virtual servers on the cloud he needs, so he pays just the ‘right’ amount for providing those services. Contrast that to LL which have to plan for peak performance even when 99% of Second Life is empty — and besides owning all the hardware, they still have to establish contracts to deal with bandwidth during peak hours, and pay them premium for the privilege.

HF is lean and mean! That is a very sound business model!

Will this attract customers? Perhaps. As always, content creators and a new class of ‘land barons’ will have an edge in HF. Content creators sell content, so that generates an income for them, with which they can roam HF’s metaverse and easily pay for access everywhere. They will be the ones having more fun. Similarly, people owning big servers able to handle truckloads of content without a glitch will be more often visited, and, as such, they will earn more money — and they will, in turn, also be able to roam the virtual world with their pockets full of cryptocurrency. It’s the ‘average consumer’ who will be constantly paying for everything — for content and access beyond their home computer. While it’s highly likely that universities, NGOs, public entities, etc. might set up their own servers and not charge anything to visitors — thus giving even the poorest user some chance to see and do something on HF — I imagine that the majority of HF users will ‘stay at home’ to avoid spending money, just occasionally roaming the virtual world to buy some content, attend parties, etc. But it’s truly a completely different model than LL’s Second Life. Will people get used to it? I mean ‘normal’ people — consumers, not content creators. The answer is unknown. HF will certainly need to wait a few years to see what kind of in-world society and economy develops. They can afford the costs of running the core servers at a loss during that time because, well, they don’t need to support a huge infrastructure.

There is also a hidden risk. Because all code is open source, some people might simply interconnect themselves and forget all about HF. They can, in a manner similar to OSGrid, just ignore content on HF’s ‘official’ virtual world, and create their own ‘underground’ servers. They can create a model where all content is for free, and all visits to each other’s servers is free, too — and develop their own location service. All this is true, but… it also means that professional content developers won’t be offering anything on those ‘underground’ servers. Ultimately, the survival of HF is the same as always: will this attract enough people to make spending time (and money!) on HF worthwhile, and generate income to HF?

Surely during the first few years this won’t be an issue. Very likely this will immediately attract thousands of anxious users, eager to see the wonderful new technology that Philip Rosedale has developed. A few content creators, looking at expanding their market, will learn how to upload meshes, see them converted to voxels, and see if they can sell anything. It might work or not. It’s impossible to predict. And, of course, the big question is — if HF attracts, say, 5,000 users (what LL had back in 2004 — a time when they wondered if they should go on with SL or not), and generates just a few dozens of thousands of dollars every month, will that be enough to keep on going?

(Needless to say, the academic community will be delighted to tinker around with another free, open source virtual world — specially one that will look much better than OpenSimulator, and promises to deliver way better graphics and performance on much lower-ended computers. Even if HF fails as a company, academic researchers might stick to HF for quite a while afterwards, even continuing to improve and contribute code to it.)

Why should you not move to HF? Well, on one side, and that’s the good news, there will be a very easy-going ToS — because content is not hosted by HF, that means you could run servers doing practically everything. Depending on how Rosedale sets up the terms of use of their cryptocurrency, and how he fights his way with his lawyers, this could mean virtual worlds where not only adult content will be widespread, but gambling and banking will be allowed — because, ultimately, HF is not responsible for anything that happens on your computer. They just provide software and interconnection. They don’t provide anything else. This might be a huge advantage for many.

Of course, HF is not compatible with SL and OpenSimulator, so it means forgetting about all your content, all your inventory, all your friends, all your groups. It’s a completely new, separate place. It means starting all from scratch and having nobody else around. For many, this is not a problem. I have no doubt that thousands will experiment with HF — as thousands did with Blue Mars and Cloud Party. The problem is the long run. If content creators are not persuaded to tweak their content to work well inside HF’s voxel-based renderer, the world might remain empty. And a content-less world doesn’t attract anyone; people are far more demanding these days than they were in 2003…

After all, new HF users will have bought an Oculus Rift and a gazillion of VR gadgets — HF supports all of them — and expect to have something to do besides looking at the incredibly ugly and primitive avatars that HF has for now… there must be so much more around to catch their interest.

FaceWorld

Sooner or later — and probably sooner! — Facebook will launch their own virtual world as well. While some people expect that not to happen in less than 5 years, I have some doubts about that. I think that they will be able to launch an early beta around the time that both ‘NeXT Life’ and High Fidelity are doing the same (HF has a slight edge here, since you can already download the code, compile it, and register with HF’s servers — it’s possible, just very hard to do). Why? Because Facebook already has some of the coolest former developers at Linden Lab, snatched by Cory when he moved to Facebook. And on top of that they have game developer superstar John Carmack from Oculus Rift. Zuckerberg has clearly stated that he wants a virtual world with user-generated content, where people will be able to buy and sell content from a Marketplace — paying a small fee to Facebook.

Facebook’s virtual world, of course, will be absolutely proprietary. No mucking around with source code on people’s home computers! Instead, their business model will be very closely aligned with Second Life — or ‘NeXT Life’. They will host content, probably free, allowing upgrades for a fee, on behalf of everybody — but perhaps only probably.

Why? The huge difference between Facebook and HF/LL is that Facebook is filthy rich. If Cory and Carmack tell Zuckerberg that they need ‘a few dozen thousand servers and a few hundreds of Terabits of bandwidth’, all Zuckerberg will say is, ‘consider it done’ and send an email to Procurement. If they need to keep their virtual world alive for 3-5 years without making a single cent, they can afford all that. In fact, they might even write it off as ‘R&D’ and get tax refunds!

Zuckerberg is not really worried about presenting a detailed business plan as Philip Rosedale has done. He just sees that if he gets a few millions (not thousands) of users shopping on the Facebook VW marketplace every day, even if they just spend a few cents each, he’ll get millions per month. That should be enough. But he’ll get some more.

He said that at the beginning he wouldn’t sell ads. But soon that will change. Maybe they will not be very obtrusive — just a pop-up here and there on the viewer. But that adds a few more cents here and there — multiplied by millions of users.

In the mean time, of course, he’ll get petabytes of consumer data to sell. He will know what kinds of content people buy in VWs, what their shopping habits are, what music will be heard on streaming events. He will know how many people will invite and look up their friends on the Facebook VW — and promptly sell that information to his advertisers. So, for a long while — certainly 3-5 years — he will justify the whole operation as another source of data mining for Facebook’s business. That means that he can hold on for a long, long time.

Of course, there will be no privacy in Facebook’s VW. Everything will be logged. It will also mean no adult content — the liability to Facebook would be huge otherwise — and people will get kicked out for the slightest offense. Being a multi-million-user environment, tech support to users will be next-to-nonexisting, and users will have no recourse when kicked out or scammed. If companies start to look into Facebook’s VW as a means to expand their advertising, then Facebook will hold them in a silver platter, and take good care of them — but I don’t think that Zuckerberg is counting on that. All he wants is to people to have fun with the Oculus Rift inside a VW — driving more sales for the Oculus Rift, of course, but mostly, putting more data on his massive profiling database. In the mean time, Facebook can always replicate the Zynga model — get people hooked on a free service, but get them to pay for ‘upgrades’ or ‘special features’. Just a tiny fraction of the users will do that, but when you have millions and millions, there will be plenty willing to pay a bit more for that extra edge.

Will people switch over from Second Life to Facebook’s VW? Honestly, I don’t think that Zuckerberg even cares much about that. Content creators — a few thousands — will most certainly appear, because Zuckerberg can show them numbers: even if only one out of thousand Facebook users joins their VW, that’s 1.3 million users. 1.3 million potential consumers of virtual goods — and that’s just on day one. For a talented Second Life content creator, that means potentially an order of magnitude of more sales. Of course they will try it out. And, being Facebook, they will have the assurance that their content won’t be ‘stolen’. The only thing that will make them hesitate is Facebook’s very likely insistence in keeping all IP rights — as they already do with every picture posted on the 2D Facebook.

Many die-hard SL veterans will be very reluctant to discard their virtual personas, their habits and pleasures they enjoy in SL, in complete privacy — and go to a world totally dominated by Facebook’s absolute control to the tiniest detail. But at least when joining up you’ll instantly know if your friends are there, too, and easily connect with them. So the world will not be ’empty’ — at least, even if there is not much content at the beginning, you will have hundreds or thousands of friends waiting for you.

Needless to say that this whole discussion about what will happen to SL will never bother Zuckerberg much. In fact, he might be laughing at this time: because, while Linden Lab is shooting again on what remains of their foot, Zuckerberg might just absorb the whole economy and society of Second Life overnight, as soon as he opens the doors — and when Linden Lab shuts down theirs.

It looks like SL’s future is bleak, if they have to compete with such a behemoth with ‘unlimited everything’ — unlimited funds, unlimited bandwidth, unlimited servers, unlimited users. In fact, that’s not quite the case; however, it remains to be seen how Linden Lab tackles this challenge.

Ladies and Gentlemen, Start Your Engines: The Race for the Metaverse is On!

So, during the next 18 months or so, all will depend on what exactly Linden Lab is willing to share with us.

By 2016, Second Life will have to compete with not two, but three platforms. It will have to compete with LL’s ‘other product’, SL2, ‘NeXT Life’, or whatever it will be called. It will have to compete with High Fidelity, at least for a while. It will have to compete with FaceWorld, or Facebook VW.

Second Life, however, has a head start, and one that is definitely not to be overlooked. It has proved that, up until today, it survived as a valid business model for a decade. It has hundreds of thousands of users, and an economy worth 0.5 billion US$ per year. Stagnation or not stagnation, it works, it gets improvements, it still has tons of enthusiasts. It has such an extraordinary amount of content that even if everybody on Planet Earth held their hands full of prims, Second Life would have far more content than that — it’s completely flabbergasting! SL protects very carefully people’s privacy and allows adult content. Because it’s not ‘tied’ to any ‘social giant’, it also means that no information about what you’re doing is being sold to third parties or advertisers. It’s free to join and to use; but land is extraordinarily expensive. In spite of all the naysayers, their rendering engine is not obsolete — just try to see SL maxed out on a decent graphics card running at 100 FPS, and you’ll see that SL looks great. Not perfect, but great. There is still a lot of appeal to it for content developers to become even more creative. Of course, there is a lot of room for improvement — but this improvement is getting harder and harder to accomplish, and that might be the ultimate reason why Ebbe Altberg is giving up on SL.

Now this head start is important, because it sets the kind of expectations that most users of SL have. Most users of SL are not content creators. They are consumers, and they expect that any new virtual world has at least what SL has, but does it bettereasier, and, if possible, cheaper.

SL is very complex at all levels, and that’s why we have complex viewers, complex permission systems, complex land management systems, and complex methods to deal with things. ‘Simplifying’ all that requires ‘dumbing down’ the world, to an extent that it becomes not enjoyable any more. So, any direct competitor will have to tackle the very difficult choice of making things simpler in terms of interface, but still complex enough to have appeal. Let’s give a stupid example: if any ‘competitor’ also allows beds with sex animations, and someone asks, ‘yes, but how many different animations can I use?’ they expect the answer to be ‘unlimited’. Because that’s what SL promises. That’s what others will need to top.

This is the consumer experience that I’m talking about, not the content creator experience — nor the gamer experience. I’m not implying that everybody is interested in beds with sex animations 🙂 but there is an interest in a certain amount of complexity. It’s not just RPG communities that want better ways to design their games in-world. Even the less technically-oriented resident wants to have millions of options to place furniture in their homes. Just having dozens or even thousands will never be enough. That’s the kind of freedom of choice we enjoy in the real world, which SL has captured perfectly.

So all three competitors will start with a huge handicap: zero content.

The next thing that the common resident will want is to keep in touch with their friends and communities. Here, HF is at the losing end: sorry, guys, you will need to start completely from scratch. Facebook, by contrast, offers you a different community right from the start: your Facebook friends will all be there. ‘NeXT Life’… well, we don’t know. But this is the first thing that they should immediately address: every ‘NeXT Life’ user should have the same identity (avatar name and password), the same friends, the same groups as they already have on SL. Only LL can make that happen, and this is one of the things that is relatively easy to do: it’s not a technical hurdle, it’s a question of policy.

Average residents have spent hundreds if not thousands of dollars — not to mention thousands of hours — in acquiring content. Now, again, HF and Facebook have no solution for them; you have to buy everything from scratch. ‘NeXT Life’ very likely won’t be able to migrate any content, in spite of LL’s vague allusions that ‘this option hasn’t been excluded yet’. They’re not being very honest with us. Textures, notecards, and sound clips are easily transferred; these are not a problem. And of course anyone having the original meshes for non-apparel content (buildings, furniture, etc.) will have no problem re-uploading everything. This, however, is also the case for HF and Facebook: if you are the original content creator of a meshed object, there should be no problem in re-uploading it to either of those platforms.

Where LL has an edge is that they can migrate content that you own but have not created. This also includes prim-based (and sculpty-based) content. The major third-party viewers already allow exporting any content to COLLADA files — i.e. meshes. I have tried these tools out very extensively, and the results are absolutely awesome. Of course the resulting meshes are huge and waste a lot of triangles, but that’s besides the point — it works, so that content can be preserved. The problem is that it only works if you are the creator of all components (including textures); ownership is not enough. The edge that LL has over their competitors is that LL can migrate owned content, not merely authored content (i.e. content that you have created by yourself). This means that if at least this content gets migrated, then ‘NeXT Life’ has an advantage over their competitors. It’s not a tiny advantage; it’s also not huge; but it means that at least you will still carry over some things.

True, any scripted content won’t work anywhere else.

Because all three competitors have different avatar skeletons, this also means that none of your clothes and apparel will work, not even on ‘NeXT Life’. Content creators designing meshed clothes and attachments will need to tweak their meshes to get them uploaded to any of the three virtual worlds; that might be not too hard to do (even with rigged meshes), and allow them to easily start offering their content for sale everywhere. Consumers are out of luck; it will be next-to-impossible to convert the items they own (but haven’t created) in SL to any of the other platforms.

In fact, not even old ‘texture’ clothes from 2005 will work. These rely upon UV maps designed specifically for SL’s avatar mesh. So everything is lost. Some shoes — specially those that do not include feet — might be able to be converted to ‘NeXT Life’, but it’s safer to assume that it would be too difficult to do so.

One possibility would be for ‘NeXT Life’ to allow any avatar skeleton to be used, and, in that case, the SL avatar skeleton could possibly be migrated as well. That would allow pretty much everything unscripted to be transferred to ‘NeXT Life’. This would most certainly give ‘NeXT Life’ a huge advantage over their competitors! However, I imagine that LL will not allow this to happen. The new avatar skeletons will be completely different and will have to look awesome to compete with those gorgeous avatars that (one day) will be created on HF and Facebook. So it would be in the interest of LL to ‘force’ people into completely new avatars, to be able to compete graphically with the other virtual worlds. This is a tough choice to make, because I would certainly believe that a good argument for switching over from SL to ‘NeXT Life’ would be saying, ‘you can bring your avatar and your unscripted clothes with you to NeXT Life’. Of course, the new avatars and the new clothes created for them would be gorgeous and people would soon switch. But we have seen the evolution of texture+sculpty clothes in SL to meshed clothes: it took some time, but the demand for meshed clothing in SL is nowadays overwhelming, and nobody wants to use the old clothes again. The difference is that LL did not prevent people from using prims and sculpties; rather, both co-existed, and will continue to co-exist, but more and more prim-based content gets replaced every day – a long migration period, until, eventually, everything is meshed in SL (if it continues for a long time, of course).

Another thing that LL can do easily is to allow you to keep your Linden dollars. This is mostly a psychological issue, but it means, for those who have a revenue stream in SL, that they can now use the L$ in their account to buy new content in ‘NeXT Life’. This would certainly be very easy for LL to do, and one of those ‘niceties’ that might persuade people not to abandon LL, and try out ‘NeXT Life’ instead — because the competition will force you to sell all your L$ and buy their currency instead. Keeping the L$ in both SL and ‘NeXT Life’ would also mean no hiccups on the LindeX, and no need to fear a market crash. It would be a wise decision.

Of course, then there is the issue about land. Not all residents have land, but those who have, have spent tens of thousands of US dollars in tier. Some might be happy if LL gave them an equivalent plot and transferred all objects to it — converting prims and sculpties to mesh — even if it meant that no scripts would be transferred. Again, this is a psychological thing. If LL can create a virtual environment which starts with everybody’s homes, even if crippled; everybody using their old avatars, even if their animation overriders don’t work; keep their money; and continue to see their friends and groups in-world, well then… the switch would not be so terrible to endure. You’d still lose a lot during the transition — but far less than what would happen when joining HF or Facebook. In fact, that’s precisely the problem that OpenSimulator grid owners also face: many residents are reluctant to switch to OpenSimulator because it means losing everything. And even if you’ve joined one grid, that grid might fail — or all your friends might have moved to a different grid — and that means starting over and over again from scratch. That’s the reason why OpenSimulator grids have been around for 7 years or so, but still failed to attract more than a few dozens thousands of users, and grow very, very slowly (even though their combined landmass is nowadays bigger than the SL Grid).

This is naturally speculative. LL has not said anything about how the ‘land’ business will work. Since they have stated that nothing is open source, that means that at least it will be LL hosting all content in exclusivity. But will there be ‘land’ and monthly fees, or something completely different? Some vague rumours have suggested that LL might be switching over to a business model more similar to Kitely’s. But all this is wild speculation. The truth is that we don’t know, and, as such, it’s safer to assume that there will be no way you’ll get any land on the new virtual world ‘NeXT Life’.

Still, to recap, Linden Lab has an edge over the competition when pushing SL residents into ‘NeXT Life’. Unlike their competitors, they can:

  • Keep their identity (avatar name, password, etc.) and continue to ensure their privacy
  • Keep their lists of friends and groups
  • Keep their Linden dollars
  • Keep their textures, notecards, and sound clips
  • Partially allow some content to be migrated
  • At least temporarily, allow their avatar and most clothes to be migrated
  • If the land model works similar to SL’s, then they might allow something equivalent to be migrated as well (and get residents to resume payments for tier on the new environment)

It sounds far less bleaker than ‘starting from scratch’! None of the competitors can offer as much, except that they can promise that your Facebook friends will be easy to find. HF is committed to privacy, so very likely you won’t even be seeing your Facebook/Twitter/Plurk friends… unless you explicitly allow them to see you.

Making Money

We get back to the business model again… what will be the business model for ‘NeXT Life’, and why should it be better for both LL and consumers and content creators?

HF’s business model, at this stage, is the one that is most clear, because Philip Rosedale was very open about it. By pushing the responsibility of hosting content to users, not to the company, it means that HF’s sole revenues will come from three main sources — identity certification/location services, marketplace fees, and cryptocurrency exchanges. All the rest is beyond HF. Their risk is only in betting that enough people are willing to pay those fees for them to stick around for a long while. But because they have a freakish development model, it also means they can survive with far less human resources. And because they will not be content hosters, it means they won’t have to worry about the infrastructure for running the virtual world (users will provide that infrastructure), thus saving huge costs. However, it means that they are relying upon users to provide high-quality service for others to enjoy. This might happen or not. If everybody in HF only has crude access to the Internet and underpowered computers, then the HF virtual world will look terrible — and HF will fail, but not because of their fault! What Rosedale needs to do right now is to establish some agreements with organisations and companies that will host some servers right from the start, or everything will collapse before it even starts. The beauty of the system is that it will allow very different ‘land baroning’ models to co-exist, and compete among themselves in search of users. In fact, every kind of service currently existing in SL — from music venue hosters, DJs and live players (HF has been developing quite a lot of audio-related things), to red-light districts, to vast communities subletting land — will be not only possible in HF, but, free from any constraints existing in SL (ToS, prim limits, avatar limits, and so forth), they might be far better. Or at least far different. I can imagine that if HF is a success there will be many, many competing business models around the same services, all eagerly experimenting with the way to attract more users (and paying customers!). In a sense, HF has the potential of being a much more advanced enabler of a social-economic environment — with far wider diversity — than Second Life ever was. Obviously, there is a big if. People really have to be sold to Philip’s idea of how a metaverse will work. For many residents, for example, the notion that there is no ‘appeal’ to HF from scammers and bad business practices might be a deterrent. There won’t be abuse reports or anything like that; each server connected to the HF Metaverse will deal with visitors of their slice of the virtual world under their own terms. While this is exactly how the World-Wide Web works, for old SL veterans it might be a too dramatic change. And it remains to be seen if HF attracts anyone outside the SL/OpenSimulator community to make a difference.

Facebook’s content hosting will very likely be mostly for free or subscription-based, e.g. anyone might start with a parcel or place, but if you want more — or if you want to get listed, place ads, etc. for people to be able to visit your parcel — then there will be ‘upgrade’ costs. This would be consistent with Facebook’s pricing structure. Thus, content creators will make money, but it’s likely that all ‘land’ management will be a Facebook monopoly. Obviously some people will very likely sublet their parcels, but we will need to see how the whole virtual world works to be able to speculate about business opportunities there. One thing is for certain: content creators will have a Marketplace and be able to offer virtual goods there. And because Facebook is full control of the environment, it will be very ‘tamed’. Anything outside very strict rules will not be tolerated; Facebook can kick out millions of users every day, just because they have a billion users happily logging in.

About ‘NeXT Life’ we know almost nothing.

Because that virtual world is under full control of Linden Lab, we can expect it to be more similar to Second Life: there will be loose guidelines — as we have in SL now — but a lot of things will continue to be forbidden. Although nobody knows how the land model will work, it’s expectable that they will have ‘wholesale retailers’ (the ‘land barons’ of today) because it’s more manageable for LL that way. Because at this stage LL is not worried about kids in the virtual world any more, it’s conceivable that we will continue to have adult content and services. There might be added privacy, to levels that SL cannot provide (because it was never designed that way) — e. g. no need for skyboxes, nobody will be able to enter or look inside your home if you don’t allow them. So, in a sense, there will be more ‘familiarity’ — it’s the same old company with their same old moods, but providing the same old service overall. The difference might be a focus on content creation, which will make at least the early adopters very happy. However, the virtual world cannot survive on content creators alone. It needs a massive amount of consumers to make the content creators happy, too. And that’s the catch: because LL will have to persuade the ‘average resident’ of SL that it’s far better to go to ‘NeXT Life’, where everything will be familiar — only much, much better! — than to simply disappear to HF or Facebook and never come back again. And here I can only see the arguments I’ve listed before — and even I am skeptic that they will be enough.

Yes, the world is ending

Let’s fast-forward to two alternative universes.

On the first alternative universe, LL has given up ‘NeXT Life’. They toyed with the idea for a while, scaring everybody, but reluctantly let it drop, and focus solely on SL.

At some point in time, HF will be good enough for early adopters to use (right now, unless you are a compilation guru, it won’t be easy to even join). They will have to struggle with a psychological barrier: that in HF the world is truly in the hands (or, rather, the computers) of its users, and that HF is not providing more than the ‘glue’ that holds it all together. While certainly thousands of eager SL residents will try it out — some never to return! — the common, average resident will not. They have seen OpenSimulator and similar experiences, and they are ‘strange’ enough for them. SL is familiar. HF is too wacko — it puts too much power into individual hands. Sure, it will be cool for geeks, but will it appeal to a massive number of non-geek users? Probably not. It will take time for organisations and companies to start running sections of the HF virtual world and provide the kind of ‘familiar’ services we have on SL today — community management, dealing with land issues, abuse reports, technical support, etc. It will take a while before we go from the early adopters to the stage that we get ‘early adopter organisations/companies’. In the mean time, HF will be burning investor money all the time.

So all will depend on if HF is lucky. Or if they’re bought. But the average SL resident will stick to SL.

Then FaceWorld is launched. Many SL residents are wary of Facebook’s policies. No adult content? Hmm. No privacy? No way to opt-out? All my data is being sent for profiling? All my content will be owned by Facebook? Hmm. Many will try it out, but find it ‘mostly empty’ — except with endless hordes of avatars desperately looking for some content. Again, content creators might be enthusiastic about working side-by-side with legends like John Carmack, but the regular SL resident will have to look hard — and wait long — until they find anything that captures their attention. And it will be much easier to chat with their Facebook friends on 2D text chat, outside the virtual world… or on Skype. Why bother to get an avatar to interact with others?

Still, because Facebook has unlimited funds, they can hold on for years, and wait for content to magically appear.

So, ultimately, on this scenario, Linden Lab would have nothing to worry. Neither HF nor Facebook will ‘steal’ a significant amount of their users. Obviously a few thousands would be lost, that would be inevitable. But sooner or later they would return, at least some of then. When Blue Mars collapsed, we started to see familiar faces again. When Cloud Party shut down, old friends started to pop up once more on our friends list. The same would happen with HF and Facebook. LL might see a further erosion of their revenues once those worlds are launched, but not a significant one. To compete with HF, they could open source their server software, and allow current OpenSimulator grids to interconnect; there are so few users there anyway that it wouldn’t make the Lab any difference, and they would still be able to boast similar degrees of ‘freedom’ as HF can boast about — ‘you can do whatever you wish on your own mini-grid, under your own ToS, running on your own servers — but you’ll still be in Second Life!’.

Pretty much business as usual, and, in spite of the competition, SL would go well into its second decade of operation.

Now let’s switch to scenario 2.

Here, LL is nudging gently that residents should switch — not to the competition, but to their new (and incompatible) product. They offer little more than saying, ‘it has awesome possibilities, in terms of graphics, and it opens up content creation to a new level’. So what? Their competitors are doing exactly the same. So what would be the motivation to be in ‘NeXT Life’ instead of High Fidelity or FaceWorld?

What can LL offer future ‘NeXT Life’ residents more than the other two companies cannot?

For me, this is the fundamental question. It’s not about telling us residents that ‘NeXT Life’ will be much better and cooler and easier to use than Second Life. We all know that! But we also know that High Fidelity and Facebook’s VW will also be better, cooler, and appeal to content creators (possibly for different reasons) than Second Life. It’s no good even telling that ‘LL has been in business for a decade, we know better’. They have a terrible track record — one where almost every decision resulted in loss of revenue, and the major decision that actually increased the user base dramatically was… giving access away for free. Not good.

The LL we have now is not the LL of 2004. Almost everybody has gone. There is no doubt that the current batch of developers (and management!) are extremely competent professionals — perhaps even more so than before! However, it’s not ‘the same LL’. In fact, Facebook and High Fidelity have almost as many ‘original LL developers’ as LL has! There is not really a sense of ‘continuity’ — and even if there is, it’s not as if LL is the ‘coolest’ company out there. Facebook, of course, is intractable and impersonal. But High Fidelity is all hippy culture and much closer to the end users — in fact, right now, users and employees work together, side by side, to create their own world. LL could have done that long ago, when they started open-sourcing the viewer software, but, in spite of their frequent collaboration with third-party viewer developers, the truth is that there is a huge gap between both. There is no ‘user governance’ — residents have no saying in the future of SL. So none of these arguments are actually good for LL!

So, when facing the big choice — staying into a SL with an uncertain future, or moving to any of the other three platforms, what will residents do?

If they had no choice, then, sure, ‘NeXT Life’ would be the place to go. Many would escape to OpenSimulator, many more would simply give up, but ‘NeXT Life’, because it would be the only choice, would easily capture the majority of current residents. It would take some time to rebuild the complex society and economy we enjoy in SL from scratch, but, not having a choice, what would people do otherwise?

But because there will be choices — possibly even better choices — LL has now a huge problem to face.

They need to have good arguments for pushing people out of SL and into ‘NeXT Life’. So far, the only arguments they have given are exactly the same that the competition has given. That’s not enough; not by far.

LL has 18 months or so to carefully prepare their sales pitch. If, as I suspect, they completely ignore the competition, and blindingly follow their ungrounded belief that ‘everybody will want to go to NeXT Life’, then what will happen is that they will just face a massive exodus from SL, as people realize they have to start from scratch. Not content creators; those will spread among the three new technologies and see where they can earn more money. Not early adopters; those thousands will also have accounts on all three technologies, and eagerly jump from one to another, just to be dazzled by the new and shiny. No, it’s the masses that are neither content creators not early adopters. Those will have no place left to go. They will stick to SL until LL, short of revenues, will have no choice but to shut it down — for purely economic reasons. But if they only managed to grab a few thousands — probably the same thousands that will be on HF and Facebook as well — and these few thousands do not generate enough revenue to sustain ‘NeXT Life’, then what?

In two years or so, Linden Lab might have to face the dilemma that they have just shot down their cash cow, but their replacement is not enough to sustain them. Then it’s not merely about continuing to sustain one or the other virtual world, as they have announced. It’s about the ability to sustain the company. They might not be able to survive at all as Linden Lab.

And this is what they’re gambling with now. They’re staking their reputation and their company on the belief that people will eagerly jump to their new platform, abandoning all they have done in the past decade, and that this will generate enough revenue to sustain at least the new platform. Well, fortune favours the bold, they say, but in business there is also the notion of ‘unnecessary risk’. Unless, of course, that LL is so desperate that they have no choices left — but this is something that goes contrary to what we know about LL: they have managed to sustain their revenue streams from different sources, compensating for the loss of revenue in SL.

So, for me, more important than dazzling us all with ultra-cool new tech, which will definitely appeal to some (I’m certainly one of those!), I believe that Linden Lab should be doing some deep thinking about what real arguments they have for the majority of residents to switch over and continue to spend money in their new platform as they have done so far in Second Life. This means presenting a clear migration path. No matter how much content will be lost forever, it’s the ability to provide this migration path that sets Linden Lab apart from their competitors: neither High Fidelity, nor Facebook, can offer that.

I have given some suggestions on what the ‘migration path’ could entail. Those are arguments that can be given at the moment ‘NeXT Life’ is launched and they have to ask themselves, ‘should I stay or should I go?’ These need to be well presented and quite clear. Or else people, without any reason to ‘stay’, will ‘go’ — to the competition.

I have read in many places how LL is, to a degree, trying to emulate what Steve Jobs did at Apple. When Apple was desperate, Jobs pitted one department against the other — the brand new Macintosh team against the ‘old’ Apple team. Both struggled hard to win the hearts — and the wallets! — of the users. At the end, the shiny tech, represented by the Macintosh, won. Why? There was a clear migration path. The original Mac could run the old Apple applications. And every time Jobs announced a huge change — from OS 9 to OS X; from PowerPC to Intel — the fanbase trembled and cried out loud in despair. What was Jobs answer? Show them a clear migration path, always a clear migration path. Microsoft didn’t fare so well when trying to push people to ‘abandon’ Windows XP — they simply didn’t have any good arguments to switch over (XP’s last incarnation was stable, fast, easy to use, and relatively free from virus, if well-maintained — why switch to Vista, which had none of that?).

In terms of internal business strategy, it’s not a bad idea to pit ‘Second Life’ against ‘NeXT Life’. But the ‘NeXT Life’ team has to learn the lesson from Apple in order to succeed. It’s not enough to dazzle customers with shiny new tech. Sure, early adopters and fans will always come over. What really matters, however, is how the migration path is handled.

That doesn’t mean that everything should be migrated; it might be a technological impossibility. But at least some things, the ones I’ve pointed out, can be migrated. And by doing that tiny little bit of effort, Linden Lab will at least tell its common residents that there is a place for them waiting on ‘NeXT Life’. There might be a lot of inventory missing, but it’s better than the alternative: remember, on HF or Facebook, nobody will know your name, nobody will recognise your avatar, you won’t have any money, and your inventory will be empty. On our platform at least we’ll keep those things for you.

And I conclude with a final suggestion. Linden Lab, please sit together with the top content creators in Second Life; you know who they are. Tell them how awesome ‘NeXT Life’ will be. Then hire them — yes, pay them money — to convert a substantial part of their content to ‘NeXT Life’. In return, they will ‘allow’ residents switching over to pick brand new copies of their content, for free, in exchange for the equivalent content they had in Second Life. This would save all the costs of planning to migrate content. Let the content creators do that for you — probably what you’d spend would be about the same. Mesh content creators only need to re-upload their existing meshes and tweak the parameters to work correctly with ‘NeXT Life’. This takes a lot of time, which they would be paid for by selling their content once again on ‘NeXT Life’. But if you pay for that work, they could allow people simply to get the new, advanced content for free. Not only the average resident would be more happy; content creators would be faithful for life to you!

In 18 months, a lot of content could be converted that way. It would mean that at least much of the best content would not only already be in place in ‘NeXT Life’ for future shoppers, but existing residents would be able to at least exchange some of their old SL content for brand new ‘NeXT Life’ content — and not feel completely lost, and naked (literally so!).

Think about it. Your competition could never pull that off to attract disgruntled SL users. But you can.

Make it so.


Note: Of course I have no idea how LL’s product will be called. I’ve used the fictional NeXT Life name, which is an obscure reference for anyone who never bought an Apple computer in the 1980s. In 1985, during a power struggle at Apple, Steve Jobs resigned, and founded a new company, using radical ideas that he wanted to introduce on the (then) brand-new Macintosh, but was prevented to do so. His new company was called NeXT — but because Jobs retained shares at Apple, it was amusingly known as ‘Jobs’ other company’ for a long time. Eventually, Apple bought NeXT in 1996, Jobs went back to work at Apple, and the core of the NeXT operating system became eventually what is known as Mac OS X today.

The NeXT workstation was rather innovative for its time. One cool feature it had was that it emulated PostScript for everything — the whole screen was PostScript — and this means that it could drive a laser printer directly (for similar reasons, Mac OS X started by emulating PDF for everything). Thus, instead of selling high-end laser printers (which had to include a full-blown PostScript interpreter running inside what to all purposes a complete computer — something which was very costly!), Jobs sold with the NeXT workstation a very cheap high-quality laser printer, and let the workstation do all the work of rendering the page. I was privileged to have such a workstation with laser printer at one of my former companies. The NeXT workstation ran the accounting application, and I will always remember doing a night shift all alone, being barely awake, when suddenly, in the early hours of morning, I jumped up when an unknown female voice very clearly (and loudly) proclaimed: ‘The printer is out of paper’. I think my heart stopped for a few seconds until I realised that the NeXT workstation was speaking! Not the usual synthetic voices we had in the 1990s, but something which was 20 years ahead of its time, and utterly realistic in those days…

One NeXT workstation became famous, because the World-Wide Web was invented by Tim Berners-Lee on it. The first web server ran on that workstation. Later, the first graphical WWW browser was developed on a NeXT. Because of all that, ‘NeXT’ stands in my mind as a symbol of innovation way ahead of its time.

Ironically, High Fidelity is Philip Rosedale’s ‘other company’ too. Not unlike Jobs in the 1980s, Rosedale has been pushed out of Linden Lab, and now founded his own company, with his own vision for how a virtual world should be — a radically different one from Second Life. It would be even more ironical that, before LL’s new product is out, LL agrees to buy High Fidelity, absorbs their product, and merges the code with their own solution. What would the resulting product be called? Why, ‘NeXT Life’, of course 🙂 Rosedale is an Apple fan, too, and I’m sure he must have been toyed with NeXT workstations when he was younger…

Still, any name is better than ‘Second Life Two’. The designation Second Life: The New Generation has also been popped around, but I don’t think you can call a virtual world that. ‘Third Life’ would be obnoxious and makes no sense. It’s possible that Linden Lab revives the old ‘LindenWorld’ name (how SL was called in the early alpha), but I personally hope that they pick a much better name. Until that is revealed, I’ll be gladly calling it NeXT Life, until someone stops me from doing do 🙂

CC BY 4.0 NeXT Life by Gwyneth Llewelyn is licensed under a Creative Commons Attribution 4.0 International License.

2 Pingbacks/Trackbacks

  • Pamela

    As always, a brilliant indepth analysis!

  • Thanks, @Pamela — let’s hope it makes any difference!

  • Inara Pey

    “Inara Pey seems to be publicly leading the group of enthusiasts about this change.”

    If reprinting information and announcements the Lab is circulating is “plublicly leading the group of enthusiasts”, then you’d better include all the other blogs which received the e-mail an reprodueced it in full or in part. The list includes: Jo Yardley, Ciaran Laval, Hamlet Au, Nalates Urriah, Hypergrid Business ….

    Don’t confuse printing items which are newsworthy as a sign of my personal opinion. Same goes for my offering alternative viewpoints to your own comments on my blog (viewpoints which, btw, have actually hinted at my own doubts about the broader ambitions LL holds in trying to leverage their new platform into mainstream use).

  • Canary Beck

    Fascinating analysis. I especially enjoyed the two scenarios (1. LL gives up on their new world and goes back to focusing on SL as their cash cow, 2. LL nudges residents over to the new world but is non-communicative on a migration path). Both are credible, and I’m sure there are other credible scenarios yet to be put forth.

    Here’s another to chew on: LL does a Hernando Cortes and burns the ship, thus in one decisive move maintaining all of its advantages (which you correctly point out), squashing the mutineers, while removing the option of retreat. The choice would become much clearer: join the competition (as you point out – unattractive), give up on all options (unlikely) or move forward with the new virtual world.

    This approach would at least help offset one of LL’s known weaknesses (a historical inability to communicate effectively with its base).

    Would there be casualties, undoubtably. Might it be more effective to simply force an already addicted market onto the next platform, likely. After reading your analysis, I’m tempted to say this strategy sounds more effective than hedging your bets… How is that for bold? Your thoughts?

  • Pep

    I agree with most of your analysis. Ebbe’s misjudged and calamitously unsupported announcement was, of course, a knee-jerk reaction to the threat of PlayBook – my preferred name for what you refer to as FaceWorld, because it’s going to be game driven.

    Pep (I have a feeling that a reversal of strategy is likely before the end of the year, coinciding with Ebbe’s departure.)

  • Haw Haw

    Very logical and balanced. What you missed was the obvious fall-off in CEO leadership at LL. HF is lead by a guy who indisputably knows VW and FB is lead by an incredibly rich, successful tech giant.
    And LL is lead by a ski-school graduate with ZERO VR experience and a history of failure in past jobs.

    Which ones have a better shot at success? Easy enough question.

    Ebbe’s hiring makes sense. Rosedale knew he would be no threat to his project and the LL board has a convenient fall guy to hoist the ultimate blame on.

  • Haw Haw

    Your current VW leaders

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  • Widget Whiteberry

    Gwyneth – loved reading this, thank you. I’ve a suggestion for a way to boost participation through positive feedback. In either the current or next platform. But testing in with SL makes sense to me.

    LL ‘prints’ it’s own money. It would cost them nothing to regularly deposit lindens into every active account. Those lindens would find their way to tier payments, purchases and tips, giving some joy to content creators, venue owners, djs and musicians.

    Premium accounts could get more than free account holders. Accounts associated with tier payment might get more than those not associated with tier payment. It’s basic Modern Monetary Theory stimulus thinking. “Active’ could be defined in a way that reinforces logging in and doing something for some amount of time. Bonuses might be awarded to new users as they log some number of hours.

    The downside occurs if/when content creators are triggered to increase their prices; so the upper limits of payment relative to prices ratio would need watching. Worth a try, I think.

  • ciaranlaval

    I’m sorry Gwyneth but unless LL want to get off to a really bad start with their new world they really cannot migrate content and they most definitely should not be migrating content that you own but have not created.

    Content sold in Second Life is sold mostly on the basis of a licence to use in Second Life basis.

    This would be a massive can of worms, Linden Lab are better off staying out of that for their own sake as much as anyone else’s.

    They will bring the Linden Dollar with them, it’s one of Linden Lab’s most valuable assets.

    However Second Life has the same sort of advantage that World Of Warcraft has in MMO terms, Second Life has the people and they won’t be shutting their doors for quite a few years yet, the new world will have to gain traction on its own merit.

  • You might be right, I forgot about the ToS. So, no way to bring your owned content with you. That’s a bummer. Well. I’ve suggested Plan B below — pay content creators to do the migration. That way, there will be no issues.

    Now, as for ‘gaining traction on its own merit’… that’s what LL expects. My question is what happens when only a few thousands join (the rest going to HiFi or Facebook), and those don’t generate enough money to sustain the whole company, with a massive shrinkage of SL users. The more the months will pass with the new world not compensating for the lack of revenue, the quicker LL will have to re-evaluate their ongoing operations — specially keeping SL around, which might be an order of magnitude more expensive than the new world, even assuming both had the same amount of users.

    Put in other words, LL has to have a good sales pitch. Right now, they’re offering less than the competition. SL residents haven’t got a strong brand loyalty: they just remain in SL because SL is SL — where everything exciting happens.

    My issue is that it might not be ‘quite a few years’. Let’s tackle a typical scenario: SL drops 20% of its revenue in a year. The new virtual world, with merely a few thousands, generates an income that compensates, say, 1% for the overall loss. As CEO of LL, what would you do?

    Wait another year? But the income might then drop to 40% and totally bankrupt the company… even if the new world has a 100% growth from one year to another.

    At some point, both SL and SL2 will be operating at a loss. Not a loss of a few per cent, but a serious loss. How long can they keep the company going then?

    Getting investors is not the answer. How many years will you need to grow the new world until it compensates for shutting SL down? Five? Ten? That would be fine in a scenario of no competition. But HiFi and Facebook will be growing by then as well, absorbing disgruntled users from SL (and SL2). HiFi, because it’s so light-weight, might survive for 5 years with just a few thousands of users. Facebook has unlimited funds. How can LL compete with both?

    No, what Ebbe has to do now — because Philip Rosedale has already done it for HiFi — is to work on his sales pitch. He has to bring over something like a few thousand content creators (easy) and a 100,000 avid consumers (very hard) in just a few months. That means giving them all very solid arguments to switch over. Arguments like saying ‘it will have snappy, dazzling graphics and awesome building tools’ are not enough: HiFi and Facebook will have the same. So what will SL2 have that SL does not?

    This is the real question, and my answer is: provide a migration path, because only LL can do that. The others can not. They can compete with LL on price (and possibly features), but not on the migration path. So LL cannot throw their best argument out of the window and pretend it’s not important!

  • Maybe. I’d certainly add that on LL’s sales pitch. In fact, at the beginning, everybody got L$. I still own a few ancient basic accounts that get L$50/week (when I remember to log in!). This was what enabled the economy to kickstart and get content creators happy; it also provided a measure of how much things should cost in SL (even today, years after stipends have gone, prices hover around those amounts).

    When LL stopped stipends to basic accounts (yes, another one of those terrible announcements…), the population shrunk.

    So, yes, I also think it’s worth a try. The trouble is that both HiFi and Facebook can do exactly the same, so, as a sales pitch, it doesn’t set the new world apart from their competitors…

  • I agree, I’m assuming that Ebbe knows what he’s doing, and that he has excellent communication skills from his past jobs. But maybe I’m assuming too much!

  • I never thought of it that way, @Pep — but it seems logical that if in the next few months, the panic makes people pack and go as fast as they can, and this gets another 10% decrease of the LL revenue, then, yes, the Board would fire Ebbe for lack of judgement.

    Ebbe still has a chance to do it right: present, very clearly, why we SL residents should opt for LL’s new world and not jump directly to HiFi or Facebook. Philip Rosedale has already made his sales pitch, and, IMHO, it’s a rather well-presented one (people might agree or not with his business model, but we know what it is). Facebook doesn’t need to worry about anything.

    So, Mr. Altberg, what is it? Elevator pitch? Persuade me in 5 minutes why I should stay loyal to LL.

  • ciaranlaval

    SL being where everything happens is the magic ingredient, how you get to that stage is one hell of a challenge laced with a mixture of good fortune and being appealing. That’s how Second Life ended up where it did.

    However people being in SL because SL is where it’s at is precisely the reason that it will be a few years before it shuts down. I had an interesting exchange with Babbage Linden over at SLU, I said SL is like World Of Warcraft, he said SL is like EverQuest and that World Of Warcraft is where the next big Virtual World should be aiming.

    The thing is, EverQuest is still around, they released their twentieth expansion in October 2013. EverQuest II is still around too and Landmark and EverQuest Next are on the horizon.

    The point is, don’t underestimate the power of people being there because that’s where it’s at, this will keep Second Life going well beyond its sell by the date.

    As for Linden Lab’s new virtual world, that really does face a stiff challenge but the advantage Linden Lab have really is the LindeX, it works and it works bloody well, that will give them a head start, LL tick all the right boxes and comply with US laws on being a money services business, Cloud Party lost their way when they had to concede in this area.

    However the details on the new virtual world really are too thin on the ground for either of us to make even a half decent call on how it will perform, the same goes for High Fidelity (which I really like the sound of) and any Facebook VR. Facebook though can afford to be patient and long term, that may be the key factor.

  • I have very reluctantly not written about that in the clear and unambiguous way you did because… well, because somehow I wish to believe Ebbe when he said that he would keep SL around.

    However, and now that nobody is listening, I would certainly say that only your scenario makes sense.

    Consider the following: 99% of SL is empty. However, LL has to keep all those CPUs and bandwidth humming because of peak performance. For a decade they have struggled with this issue. This means that they have to support huge costs, and, of course, keep prices absurdely high. I have no doubt that the new world will address this. Either they go the way of Kitely — on-demand loading of extra servers if and when they become necessary — or they develop a completely new environment, not based on ’tiles’ like SL is, but rather an unified landmass where CPU and bandwidth is allocated on demand. I expect that the new world will be able to get the same number of users for at least a tenth of the cost, perhaps more. That will also means lower pricing — and thus less revenue — but the point is, they can shut their expensive SL servers down and just stick to something much smaller and far more efficient, at a fraction of the cost.

    While LL is a profitable company, SL, as a product, is barely so. It doesn’t make enough revenue to pay for everything — but the difference is not dramatic and is compensated by LindeX and Marketplace fees. But if the landmass shrinks by another 10%, it will be run at a loss. While, on the contrary, the new world could afford to have ten times less users and be profitable.

    So what would be the point to keep both running side-by-side? As soon as SL’s landmass shrinks below a certain threshold, and the new virtual world is launched, it makes far more economic sense to shut SL down as quickly as possible. Specially if there will be no migration path, then why bother wasting all that money with SL? Even if the new world is not making enough (which it won’t for many years), why drag the expensive hardware and bandwidth with you?

    Personally, I think that this talk of keeping both products side-by-side and pick what performs best is just throwing sand in our eyes. There is really no point in keeping SL around. The only reason for that would be if LL suddenly found out a way to dramatically reduce the costs of operation of SL and could slash the prices to one tenth of what they are today. But… isn’t that the reason they’re developing a new world? Because this is not possible to do in SL?

    So, yes, I have to conclude that your strategy makes more sense, but I understand that setting the date for Doomsday is not a good strategic move for LL.

    On the other hand, I don’t know why they made the announcement now. It’s too early. As they said, this is something they’ve been working for years now. Why the sudden rush? If SL collapses in 6 months, they will have to shut it down way before they have a finished product! It would be far better to remain silent until the new world can go into beta… meaning that it would be ‘business as usual’ for another 18 months. Now they risk imminent collapse. Even those who are very excited about the new world will definitely not spend their remaining time in SL doing awesome stuff — why bother, if it’s going to be shut down anyway? Better to hone their mesh building skills elsewhere and be prepared for the future, instead of wasting time and money in a sinking ship.

  • My apologies to all the others 🙂 But most of what i’ve read are happy to quote you 🙂

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  • irihapeti

    i get the crypto-currency model. How every exchange of it can be chained. I can see that it doesnt have to be mined initially as with bitcoins. a brandnew $H is minted by the HiFi Treasury, given a UUID and assigned to the UUID of the purchaser. Chaining ala bitcoin style from then on

    i get that stuff put on the MP can be encrypted by the seller and how public/private keys ala PGP can help with privacy

    so they all good

    +

    am not getting tho what happens after the stuff has been delivered and I have opened it. What deters me from uploading that content back into the chain as a supposed new creation of my own?

    there is a way to do this but would require that all assets be built out of $H and is no copy same like with RL products. Meaning that each copy is a object of value in itself

    +

    example

    i buy some $H from the Treasury. I create a texture say 128×128. To upload to MP I must attach 1 of my $H to it. I make a mesh. I must attach say 5 of my $H to it. Or whatever the MP dictate by vertex (LI) rule they have. When I do then the texture and mesh have the same UUID(s) as the H$

    i combine the mesh and texture to make a product. Cost $H6 to make. I upload product. The MP charges me $H2 as fee say. So cost $H8 to bring to market. Set saleprice to $H20. The product can be traced back to me bc of the H$ chain. If I use other peoples assets in my product then those assets can be traced back to them

    if somebody buy my product then I make $H12 profit. If I wish to sell another copy then I must attach $H6 to it. The $H value of the materials it is made out of

    if I as the buyer can destruct the product (bc I no longer want it) that I paid $H20 for. Destruct back into the base materials. then I got assets worth $H6. better than nothing yes. Then I can sell them assets back to the Treasury or more likely on AuctionH. I might even get $H100 for a single asset if was made by some really famous person who dont make stuff anymore. Or I might get $H10,000 even for a whole product I paid H$20 for bc they only ever sold a limited edition of that particular thing. And I can proof that is authentic bc of the chain

    is still possible for counterfeits but they can be easy spotted bc of the chain. The chain dont go back to the original H$ creator(s)

    yes people will still try counterfeit/copybot. But as a buyer I want to know is authentic and I can know before I buy bc of the chain. Might look Gucci but is not Gucci. And my real Gucci will hold its value bc is Gucci and not some knockoff

    +

    eta:

    I think that basically my point is that a genuine article that is proofable will hold its value. bc it isn’t the red paint that looks like every other red paint that makes it valuable. Is the name of the person/creative that painted it

  • Again, I have to agree with you on all points. What surprises me all the time is this strange belief that most new VW proponents have — that they actually do believe that in 2-3 years (the time they usually have before their venture capital/investment money runs out) they can replicate what took millions of people, billions of hours, and a decade to create. Well, perhaps not the whole decade is needed. But we can see that the most popular OpenSimulator grids (which benefit from the ‘technology push’ from SL) also took several years to reach some 10k users and have enough content to keep those 10k happy. They’re certainly not making millions of dollars.

    How LL expects that SL2, all of a sudden, replaces SL as their cash cow in ‘a few years’ is really beyond me. I would love to hear their arguments: the sales pitch that Ebbe made to the Board.

    Now the problem here is all about ‘time’. As you so well put it, Facebook is the only one that can hold out indefinitely. If it takes Facebook 5 or even 10 years until they can get critical mass on their VW, fine. They can afford it. They can even afford to run it at a heavy loss while still massively investing in it. Eventually it will pay off, when all others have gone, and there is nothing left in Facebook.

    HiFi is really curious in terms of tech and (most important for me) business model, but it might not be sufficiently appealing to the masses — to a hundred thousand people that will make HiFi’s revenues be enough for them to survive for years and years. Because the model is so different from most VWs out there (the closest one being, surprisingly, Kitely — in terms of how money flows, not in terms of tech), it’s a shot in the dark. It might work. It might be too alien.

    SL2, if it replicates exactly the model of SL (which we know that works), might succeed but… how long will it take? By 2007, SL had enough content and users to make it last another 7 years. Taking into account that the open alpha was around by 2002, this meant 5 years (and a lot of luck). The question is — assuming that SL doesn’t generate enough money for LL to keep SL2 around at a loss for five years, what will LL do? The longer they wait to close SL, the higher the risk that only a tiny proportion of early adopters move over. They will need to give strong incentives for people to leave SL and join SL2. While I’m sure this will be the case at some point, will those incentives be enough to get, say, 100,000 users in SL2 in little time? What gives them such confidence that this will be the case? What haven’t they told us? And can they afford to operate at a loss during the long waiting period, as SL fades out and dies and SL2 does not grow fast enough to accommodate the losses? If so, where does the extra money come from?

    These are for me the critical questions. I could even live with the idea that SL2 is a horrible VW with cartoonish characters like Lively. The tech is not very important. What matters to me is LL’s exit strategy for SL, and how they expect SL2 to thrive and be successful when all other VWs failed.

    Facebook doesn’t need to bother.

    HiFi might be sufficiently lean and mean to survive for many years without becoming a multi-million dollar company: Kitely’s business model, for instance, doesn’t require huge costs and that means they can be patient and grow as their user base grows, without needing to do constant investments in tech and people — their big investment was done in advance (development costs). HiFi might emulate that model, and, as such, afford to remain small, so that earning a few thousand dollars per month is enough to keep it around for years.

    Can SL2 do the same? Will LL’s board be happy with a long period — many years — of constant losses, when they were used to earning millions per month?

    Those are questions I’d love to see answered.

  • I think your description is quite accurate of what will happen, yes. To be honest, I’m also not sure how you can preventthe copy of something that has been decrypted in your server somewhere, and, because the code is open source, you will be able to extract the mesh and upload it as your own and sign it with your key — but I have some ideas on how that could technically be accomplished. Of course, if you’re so stupid as to use exactly the same mesh, at some point, there could be one of those pattern-matching thingies on digital fingerprints (like YouTube does for detecting copyrighted music) to figure out that now there are two meshes which are exactly the same, signed by different people, and reject the one with the newer timestamp as being fake (this ought to be easy to do at the moment the mesh is signed — HiFi would just need to hold a database of digital fingerprints, not a copy of the whole meshes). At least that would prevent perfect copies of meshes to appear at the HiFi Marketplace for sale.

    But content pirates might not be so stupid. They might be able to grab the mesh and just tweak it slightly. The fingerprint will be different. So they can sell it on the Marketplace as a different product. How can that be prevented? Sure, the original creator, once they see a copy of their content listed on the Marketplace, can notify HiFi and easily show proof of ownership. HiFi would then revoke the certificate of the pirated mesh, meaning that all over HiFi’s world, that content would fail to be displayed.

    Also, content pirates might not use HiFi’s Marketplace to sell the pirated mesh. They might use an ‘underground’ Marketplace. Or any similar method. Still, once HiFi is notified of the existence of such an ‘underground’ Marketplace, they can invoke ToS and revoke the certificates of the owners of that Marketplace, and of all content listed there for sale. In fact, I can pretty well imagine that they make it even tighter: that only the HiFi Marketplace signs valid certificates for content to display on your own server. Anything without a valid certificate will not display.

    Again, because this is all open source, this doesn’t prevent someone to create an ‘alternative’ HiFi, disconnected to the rest of the virtual world, where content is displayed without certificates — just remove the authentication/certification code from HiFi. I guess that Philip is aware of this issue, but knows that most people will want to be part of a virtual world with the largest amount of legitimate users, buying and selling legitimate content. A few, of course, will be ‘outside the system’. But they will be isolated. They might have fun copying content for their own purposes, but they know they will be blackballed by HiFi (and so will be their friends), so this will not scale massively. Put in other words: there will be no massive piracy inside HiFi’s virtual world. Content can be massively copied to servers that are ‘outside’ the grid, but they will quickly be isolated — nobody will be able to jump to those servers (unless they know their addresses), and, once you reach them, unless you have a tweaked viewer (one that side-steps authentication/certification), you won’t be able to see anything.

    So my point is that there will certainly be piracy, but it will be pretty much what happens in YouTube now. You can easily copy music to your computer. But you can’t use that music on your YouTube videos and make them accessible world-wide to a vast audience. You can certainly use them in your own videos and share them with a few friends. But massive exploitation of someone else’s copyrighted work — the audience of billions that YouTube has — is impossible.

    The same might happen in HiFi. Individuals with tweaked servers and clients will be able to copy content. They will be able to show it to other friends with tweaked servers and clients. But all of them will be outside HiFi’s ecosystem. Any visitors with regular clients will be unable to see the pirated content. If you switch to a tweaked client, you will lose your inventory — and probably even your account, because HiFi can revoke your own personal certificate. So it will be a choice you have to make: stick to legality, and enjoy the pleasures of a widely connected virtual world; or go the way of piracy, living in an isolated server with lots of pirated content, but unable to go anywhere on the rest of the virtual world (except other servers with pirated content). And, of course, the more you stick to those ‘underground’ worlds, the more likely your own legitimate certificates (and even your legitimate content!) will be revoked, so, at some point, you have only the option to roam the ‘underground’ — unless you switch cities, computers, browsers, etc. so that HiFi considers that the new account you create is from a different person.

    It might not be perfect, but I would say it should go a long way to make content creators happy that their content will not be easily pirated, and, even if it does, it won’t be widespread. And in any case, if someone detects that some content has, indeed, been pirated (and slightly tweaked), they can easily ask HiFi to revoke that content’s certificates — which will make that content disappear, pretty much how it works in SL, but without the need of a ‘central’ asset server or a grid running by a single operator.

    I actually find this model very clever — how to keep a certain degree of security, ensuring authentication and non-repudiation, while still allowing everybody to use open source software on their own servers. Philip certainly learned a trick or two since he left Linden Lab!

    (Then again, I understand that this was pretty much what the Open Grid Protocol was attempting to do — http://wiki.secondlife.com/wiki/Open_Grid_Protocol — but sadly that work, although approved as an Internet Standard around 2010, was stopped).

  • Hi Gwyneth,

    Regarding people paying to access other people’s worlds: Kitely, after several years of trying a model were people could pay for their own resource usage in other people’s worlds (in the form of time-based billing) switched to a model were only world managers ever pay for resource usage / hosting. The original model was efficient, fair and enabled minimizing expenses across the board but it simply didn’t click for the great majority of people who weren’t looking to have their own virtual world. The MMO landscape (which is how most people including Facebook and Oculus view virtual worlds) is now almost exclusively freemium based with no access fees. If High Fidelity tries going against this trend they will encounter the same adoption hurdles that Kitely had to deal with while it was using that model.

    Regarding content protection: when you buy an item it isn’t just you who can display it, it must also be displayable by everyone else who views that item inworld when you wear/rezz it. The content can be digitally signed to indicate proper ownership but it can’t be prevented from being easily copied as all the data that is required to render the item is sent to all viewers, some of which can be modified to store content in a pirate-friendly format.

    Regarding High Fidelity (the company) being the main High Fidelity universe and the others being an “underground”: there is very little barrier that prevents companies such as Kitely from offering the same set of value-add services and doing so in a way that is more open and cheaper for users due to them not needing to monetize various components which form the basis of High Fidelity’s business model. With Kitely having a head start in building a marketplace and various other value-add solutions this can add up to Kitely offering a more attractive High Fidelity universe than High Fidelity’s (the company).

    For example (this is a hypothetical not an announcement so take it with a grain of salt): we assume people won’t be willing to pay for access to other people’s worlds so access can be free in our distribution of High Fidelity; We already have a world library, there is no problem extending it to allow people to register their own self-hosted virtual worlds as well, and we can allow them to do so automatically and even for free if we so choose (this can include worlds that are part of High Fidelity’s own universe); We can have Kitely Market deliver items to our distribution of High Fidelity, and make that distribution open to content delivery from other non-High Fidelity (the company) websites; Seeing how people have no problem buying virtual goods with real money in Kitely Market we can skip the entire need for a dedicated virtual currency and enable people to transact with whatever currencies they wish; We already have a working system for deploying virtual worlds on demand and can extend it to multiple new usage scenarios; etc.

    High Fidelity (the open-source project) is very interesting but High Fidelity (the company) may not be the company best positioned to take advantage of that codebase. Not currently (e.g. Kitely) and not in the future (e.g. Facebook could just make their own FB-hosted distribution if they wanted and have identity tied in with Facebook’s gigantic network).

  • irihapeti

    i put another wayif thats ok

    i can see whats in it for them who own the treasury. I see whats in it for the bankers and arbitregeurs who will keep the money market supply in balance. I can see whats in it for the authenticators and the carriers. I can see whats in it for the world/grid owners. I can see whats in it for the merchants and marketplace owners. I can see whats in it for some of the creators of the stuff/content

    whats in it for me the consumer? How do I get some value, some payback, some reward, out of it for myself if I am none of the above?

    are all the above people (who I am not) just going to continue pushing out endless copies of stuff with no consideration of the cost of devaluation. Devaluation down to 0. that I the consumer must bear. Which is how the digital goods market is currently set up. Is this (or any other) new system going to change this? Or is it just going to make the devaluation more efficient?

    yes I can get pleasure out of what I buy and enjoy it immensely. But is that it? Am I just a pleasure machine? A pleasureable cash cow maybe

    +

    i don’t mean to make it seems like is your fault or anything. Is not. Am just asking the questions. Maybe is a answer. I dunno. I hope so tho. I hope that there is a answer to the devaluation problem that digital goods (as current thought about) creates. yes stuff devalues. But it dont have to devalue down to 0

    it can. but it dont have to just bc a system (not necessarily this one but any one) is designed to actual do this. Where devaluation is intrinsic to the business model itself, and what the outcome of that is in terms of mass consumer purchasing practices and reinforced behaviours

    is not just me the consumer is affected by this. Is also the LBD creators working off their kitchen tables. Prices are falling as the stuff devalues down to 0. They cant keep up their production and compete with the sheer volume of content which costs nothing production continuation-wise (other than the initial labour that went into the original). Can see this in SL now

    +

    so back to what I was think about in other post

    if it costs to make stuff and to list it (not sales tax. a fee for each and every copy of a product listed) then only that stuff which sells (and can hold its value) is going to survive (or even remain listed for sale/purchase). If it dont then is going to get destructed by the creator who cant sell it and also by the buyer who dont want it anymore. Destructed so that the value in it can be extracted and re-applied by them eleswhere

    So that pretty much whats in it for me. The consumer. Extracting some value other than 0 out of recycling what wealth I do have locked up in the stuff I own and bought and paid for

    +

    i never get into it but can see how residuals for artists/creatives can also work (bc chain) when I later on sell their creation for $H10,000 that I buy off them for $H20 when they once was a struggling LBD in their garret kitchen

    +

    ps. I just declare a interest

    i do actual make stuff. Quite a lot of stuff. I got a private grid of my own. And I just make stuff for it. Is not the greatest stuff ever ever. Objectively honest is pretty much midrange in the range of All Stuff Ever. Sometimes I give to RL friends for their own private grids as well. I never sell anything tho on SL or any other world or webstore. Mostly bc of the devaluation down to 0 thingy. I mean if is going to end up at 0 anyways then I dont see the point in trying/hoping to start at any other monetary value

    But if there was a way for people to buy my stuff and retain/regain some (even small) monetary value (other than just pleasure consumption down to 0) out of it for themselfs then I maybe change my thoughts about that

  • I totally agree with you, Ilan.

    Currently, High Fidelity’s business model requires that they pay for server and viewer software, pay to develop a marketplace, and pay to develop a currency — but they’ll only get revenues from the marketplace and the currency, not the software.

    Since the software is open source, they’ll have to be best-of-breed in all three areas to succeed.

    If they drop the ball on software, someone will come in, fork it, and do it better. Maybe run it like an Apache or Drupal-style open source project.

    If they drop the ball on the currency, someone will step in and do it better. A virtual version of PayPal.

    If they drop the ball on the marketplace, someone will step in and do it better. Kitely is already lining up to do just that, and it already has users and content in place.

    Second Life doesn’t have to the best at everything because they’re a closed system — if a competitor gets too successful offering a competing service or tool they can buy them, or lock them out.

    Gwyneth —

    I agree with you that Second Life seems to be creating a new competitor for itself. I think it could work if Second Life v2 is able to attract a bunch of new users — say, people with brand new Oculus Rift devices looking for some virtual sexy-time and disappointed that Facebook Life is all PG-13!

    I think it’s a bad sign that the new platform is also going to be closed source, however. The general tendency out there is for major platforms to move in an open source direction. By keeping itself a closed commercial world, Linden Lab won’t be able to make a play for becoming the platform of choice for the metaverse — it will be just another 3D chatroom, while High Fidelity or OpenSim or some other open source technology runs the general social, educational, non-profit and commercial metaverse.

  • Metacam OH

    Great read, thanks Gwyn. I think you sold me more on High Fideility than anything. I wasn’t very interested at first but the way they are handing servers is exactly the way I want my virtual world to be, I don’t want to be paying Linden Lab 300 bucks a month for a square plot of land that is limited size and has limited resources dedicated to it. I want to host my “space” and dedicate the resources needed to it myself. The Lab has a lot of selling to do. I’ll surely give their new place a shot, but like you said they’ve handled everything wrong pretty much and I have little faith that they have learned from their past mistakes, but good luck to them I will have an open mind.

  • Thank you both for your comments, @IlanTochner:disqus and @mariakorolov:disqus! Like you, I find High Fidelity (the tech) far more interesting than the company. In fact, I didn’t want to speculate on what Kitely might do once HiFi’s code is worth experimenting with (it might still be too early) but I would see Kitely as the ‘perfect’ company to use HiFi’s code and launch ‘a’ virtual world, independently from HiFi’s company own offering. After all, you have everything already in place — and the experience to lauch virtual worlds on demand (which HiFi The Company doesn’t have).

    My question with HiFi is really that Philip is being ‘too generous’. He gives too much away and keeps too little for his own company. So what will happen after 2-3 years if HiFi fails to generate enough income to sustain themselves? In my mind, the ones going to profit more from HiFi will be companies hosting virtual worlds and offering tech support services for a fee. Eventual fees for digital certificates, currency, and location services might be minimal compared to the cost of hosting.

    But… that is worth another article 🙂 For now, we have SL2 in the horizon, and a fading SL — which might (or not) also bring OpenSimulator down, as TPV developers simply abandon the viewer projects and go to do something more interesting. It’s nice to know that at least Kitely will have a choice. Maybe the other grid operators should really start to plan ahead. 2-3 years is not much!

    Maria, I think that SL2 will succeed if it can attract 10,000 users in a week or two (not impossible) and those numbers are well published (and real!), among which thousands of eager content creators. Then they have to attract 100,000 users — consumers, paying customers — in a very reduced time frame: say, 6 months after SL2 has launched. While we have no clue what LL’s revenue system will be for SL2, assuming that they can get, on average, $10/user/month, and that the running costs of SL2 are a tiny fraction of the costs of running SL, I can imagine that 100,000 paying users (not all need to pay, of course; some will, some won’t) would allow them to cover the costs of a staff of around 100 people, and the servers and bandwidth for all of those users (eons ago, I read that WoW managed to get 20k users per shard — a single server. Granted, WoW operates in a completely different way, but I believe that ought to be LL’s goal with SL2).

    None of those numbers are ‘impossible’, just very hard. OpenSimulator barely got a bit over 30k users in 7 or so years, also starting from scratch. LL has to do a lot better than that, and beat Lively, Blue Mars, Cloud Party, and others who failed to reach that amount in the time they were active. I still claim it’s very, very hard, but not utterly impossible.

    It’s a pity, however, that it will all be closed source. Then again, Facebook’s own VW will be closed source too. The main difference is that Zuckerberg has already mentioned that he is not planning to get a return of investment in 5-10 years — he can wait. LL, by contrast, cannot wait 5-10 years until SL2 gives them the same revenue as SL did. That’s, for me, the Big Question, and I haven’t heard how Ebbe Altberg proposes to do that…

  • On the low-end side of ‘bare metal’ server hosting (designed for sysadmins who don’t need tech support and don’t wish to pay for it), you can get these days pretty decent hardware for $50/month — say, quad-cores with 8-16 GB of RAM. I can only wonder what you could do with that amount of money to run HiFi 🙂

    HiFi seems to have a way more interesting business model than SL2 will have (even though we know almost nothing of SL2’s business model, except that, being closed source, only LL will profit from content hosting — and they will set the prices as they wish).

    My issue with HiFi (to be addressed on another post one of these days) is figuring out how they plan to survive long-term just on those small fees. Sure, they’re a tiny company and won’t need many people nor many servers. Still, they need a regular income that pays for all that, no matter how little it is.

    Long-term, HiFi’s company might disappear, but the code might not. And since it includes both server and client software, maybe enthusiasts will continue to keep it long after HiFi The Company fails. But that’s at least 2-3 years in the future and way too early to start speculating…

  • I think the fact that High Fidelity is open source would normally increase the odds of success, especially combined with Rosedale’s name recognition and media skills

    OpenSim and Open Wonderland have neither, but at least OpenSim benefits from being able to ride on Second Life’s coat-tails.

    There are plenty of successful examples of companies built on top of open source code. WordPress and Automattic. Drupal and Aquia. Canonical and Ubuntu Linux. Those companies, however, make money based on hosting and services for their core product, specifically, the open source CMS or OS they offer.

    I’m worried that running a marketplace or payment service is a bit too remote, to easy to split off, to easy for a competitor to do better — especially a competitor that doesn’t have to invest any money in basic software development, but can just piggy-back on what’s already been done.

    Second Life v2 is going to have a different problem. As a developer of experiences, or creator of virtual content, do I want to make a big bet on a new, proprietary platform when the trend is clearly towards open source?

    Maybe, to get around this, SL 2 will be seeded with mesh content and converted content from SL 1 — which would explain the new TOS, at least.

  • We’ve already compiled High Fidelity and spent some time analyzing it (we even submitted a couple of patches to it). Having done so I agree, it’s still way too early for us (or anyone else for that matter) to make any kind of offering based on it. It’s still very much at the pre-alpha stage.

    One thing that High Fidelity (the company) does have going for it is easy access to VC money. With the growing interest in VR I suspect they’ll be able to raise quite a lot of funds moving forward so I wouldn’t rule them out just quite yet. The real question is what ROI will that money grant their investors. If those people are willing to play the long game and keep pumping money into the company while postponing monetization then they can become the Red Hat of that codebase, a company that open sources almost everything it develops but is still worth billions.

    In any case, I see Kitely’s future as a combination of a virtual-world hosting service and a cross-metaverse virtual goods marketplace servicing multiple virtual-world platforms.

  • Metacam Oh

    Like you said though, since HiFi is going to be open source, the product has the ability to grow and improve without much overhead. They won’t need to keep as many programmers on staff, they don’t need to lay out money for servers or bandwidth, what they do need to host can scale easily with the amount of growth of the platform. If they secure the currency, the domain names, and the marketplace etc they still make a decent amount to cover costs if the best they are looking at is the current SL user base. But I have to imagine though, that he is looking long term, if HiFi is used as the 3d Web and he is grabbing a small percent of say billions of dollars of sales, I think we’d agree that would be enough to run the company at a profit.

    I think Minecraft has changed the landscape a little bit on how people see games and virtual worlds, if the same people who use minecraft and Garys Mod to film videos on youtube start customizing their own HiFi experiences and doing similar things, I think we are looking at a much larger potential customer base than the current SL community.

    To me, I very much would love to be able to host my virtual space, and also learn some coding to go in and make it better for what I want to do, SL is the complete opposite of that experience. For open source, people take things in a direction most don’t even invision, for the Lab to do everything closed source, you’re just constantly stuck to what they think you need and not what you really need.

  • Heh. Poor Philip. He’ll never get rid of the comparison between Minecraft and HiFi because of that unfortunately leaked video 🙂

    This is much more likely how HiFi will look like once they get some real graphic designers doing some hard work (instead of clueless programmers): https://www.youtube.com/watch?v=QnbUoU_UIaM

    Note around 5:30 how building is done: yes, it starts with cubes, but then you can refine them, tweak them, make them more organic and so forth.

    Anyway, you have captured the essence of what HiFi proposes to have as a revenue model. If they can pull it off, it will be amazing — for us all, and of course for HiFi The Company as well! The big question is, naturally, if they can pull it off, and for how many years they can hold out until the HiFi economy generates billions of dollars in virtual goods…

    Second Life took 7 or 8 years until it generated half a billion dollars in transactions of virtual goods annually. How long will HiFi need to do the same, starting from scratch? And how long are they prepared (financially) to wait?

  • Metacam Oh

    Right well I wasn’t really comparing HiFi to Minecraft graphically or what have you, just saying since Minecraftmania has hit the web, the idea of an open world where you come up with your own things to do really is more desirable and accepted then maybe the whole thing was back during the SL growth. So a new virtual world in a post Minecraft world could gain traction pretty quickly. Good minecraft videos on youtube get hits in the millions, while any video involving SL will barely get in the thousands if you’re lucky.

    The name SL is a barrier IMO also to the same groups of people that find Minecraft appealing, adolescents. No one wants to go into Second Life the place where people go who don’t have a first life. It’s billed as Loserville before you even get in and find out what it’s really all about, so any new virtual world will have that advantage as well, hopefully Linden Lab doesn’t make that mistake twice.

  • Inara Pey

    Then if you are going to quote, do so accurately and in context.

    “One can even argue, as Inara Pey does, that two out of the five ‘new’
    products on LL’s ‘app game’ line are relatively successful, bringing a much
    desired new revenue stream to LL.”

    That is most assuredly not what I said.

    My comments on the subject of the Lab’s new products were a reply to your claim that all of the Lab’s additional products had “all failed, one by one.”

    In those comments, I pointed out that of the five products launched, two have been written-off (hardly surprising, a company attempting to diverisfy rarely hits the ground running, one has since been spun-off into an independent label (Versu), the fourth (Blocksworld) apears to be generating “acceptable returns” based on it month-on-month tracking through App Annie, and the last (Patterns) has yet to be officially launched, although it seems to have a popular following, so it will “be interesting to see what happens when it does eventually launch.”

    In other words, things had been a mixed bag of results, rather than a set of outright failures as you implied.

    Saying a products appears to be making “acceptable” returns for itself, and that another could be in for an interesting future once launched is very different to the way you have painted my words here.

  • Samantha Atkins

    Awesome analysis and great article. I would definitely be on the High Fidelity bandwagon but I would certainly try the others and do some events, business, meetings in whichever one seemed to make the most sense for that. On High Fidelity won’t they support all that mesh content that we expect NeXTLife to be able to use? If so I don’t see why they are any more lacking on content. Also as most users seem to be in SL for social reasons of various kinds I don’t see why HF would be of necessity so underpopulated if everyone gets a reasonable choice of avatar just for showing up and if there are enough free worlds to give them a taste.

    The HF model is very intriguing. There have been some attempts to do something like it in opensim and I know many have though along these lines. I think the biggest thing missing there is believable well managed and business friendly cross server Inventory Management as a Service. Every grid so far is rolling its own. Which is not so good for leaping from world to world with all your stuff without danger of pirating.

    I think Opensim should have been mentioned. It has, according to those that claim to know, a much more modular server design that is open source. As we wait for the new coolness, should one emerge, there is going to be more itch to be scratched to make opensim far better than it is today. I wouldn’t count it out.

  • calabash

    I didn’t see any mention of VW IMVU. As a non technical person, I rather like it. Simple for me to learn to use yet complex enough that the graphics are attractive. It seems to me that SL and some other VW sites tend to have avatars that look like claymation, which to me is not attractive at all. It also seems much easier to navigate and join chat rooms.

  • You’re right, I tend to ‘forget’ IMVU. There is a reason for it. Unlike HiFi, Second Life, OpenSim, etc., IMVU is a ‘room-based’ virtual world. The others are virtual worlds with visual contiguity, i.e. the landscape is continuous. Also, content creation in IMVU is sort of limited — you need to sign-up to become an ‘official’ creator, and there is a screening on the kind of content you’re allowed to upload and sell. This is to prevent copyright infringements and other sorts of illegal content, of course. Again, SL/OpenSim/HiFi etc. allow anyone to create their content in virtual world. So, yes, there is a difference between those two models.

    And although I can agree with you that IMVU avatars are cute and (especially with content bought from the store) can look quite realistic, I certainly disagree with you that SL’s avatars look like ‘claymation’ 😀 I’m afraid this is due to some graphic settings on your own computer: because IMVU is so much simpler than SL (you’re right on that), it has also a far less sophisticated graphics renderer, which in turn means that it runs quite fast even on lower-powered computers. SL, by contrast, requires a lot of graphics processing. Yes, you can turn off a lot of special effects on the settings to make SL run much faster, at the cost of degrading quality. Tweaking one’s computer to get the best performance out of SL while still maintaining good overall graphics quality is an art — and again, I can agree that it takes some time, some expertise, and a lot of patience. Of course, the higher-end your computer is, the less you need to worry about SL’s quality. But you can get truly photorealistic images out of SL — it’s a very high-end product — although for that you really, really need a high-end computer.

    I believe the main reason why IMVU is still around, still strong with a dozen million users (not all of them online at the same time, of course) is that it’s much simpler to use and have fun with — and, thanks to the amazing content that was created by the users, trying to improve the look on the ‘default’ avatars (which are cute enough, but not realistic enough for my taste), they have given IMVU a new breath.

  • I agree, I should have mentioned OpenSim. I was more concerned about the commercial aspects of the VWs I’ve mentioned. On the other hand, I have to agree with you — I spend so much time doing my work on OpenSim every day (exactly because of the modular aspect and the deep-level changes that can be done to the server, as opposed to SL, where the server code is obviously proprietary and untweakable, since it resides on LL’s own data centres — plus, of course, the zero cost aspect of OpenSim 🙂 ) that I rarely log in to SL these days: that should say quite a lot about OpenSim 🙂 and should have been a good reason for mentioning it!