Caught Up in their own Fantasy

I was reading an article yesterday about Pathfinder Linden leaving Linden Labs. The article was a bit sketchy so I don't want to draw too many conclusions from it. But it did occur to me that one of the problems that LL may be having is that too many of their people have gotten caught up in their own fantasies. Allow me to explain.

First, it is not new for a high tech firm to get caught up in its own fantasies. During the dot com expansion, it was standard operating procedure. People began to ignore conventional wisdom about price earnings and began to believe that the old rules of economics no longer applied. It was a classic economic bubble mentality and the economy stuck back, as it always does, in the dot com crash.

The problem in the case of Second Life a little different. For example, I believe that virtual land and virtual products have real economic value. And, I believe that virtual worlds represent an opportunity for economic expansion not unlike discovery of the new world. So, that is not the issue at hand.

The fantasy that so many residents of Second Life get caught up in is how easy it is to do things. You can fly. You can make friends. You can dress well. You can own your own business. If you want to be a scholar, actor, counselor, or world class lover, just put a group tag over your head and Bang! you are what you want to be.

This fantasy of ease has led many residents astray. They buy islands and set up businesses or speculate in virtual real estate with the fantasy that they will become the next millionaire. While a few do manage to eek out a small profit, most leave angered, disillusioned, and disgusted. Some even abandon their thousand dollar investment in order to avoid future tier fees. Unfortunately, the old rules of hard work and good business sense still apply. And you cannot make a go of it, even in a virtual world, without following those rules. I had a class of mine several years ago interview business owners in Second Life. They found, not surprisingly, that nobody really had any idea of how a business operates.

It did not occur to me until I read that article that the employees of Linden Labs might suffer from similar illusions. And, further, that may explain why this amazing technology has not done any better than it has. Next time I will make the argument for why I believe that may be case.

Second Life Viewer 2

The new Second Life viewer is now available for download and I have very mixed feelings about it. On the positive side, they are clearly making an effort to make Second Life easier to use and the new look has some positive features for new users. The most significant positive feature is that you can fiddle around with the interface and figure things out. With the old client, you nearly always had to ask someone how to do something. The second positive feature is that much of the unnecessary functionality (at least unnecessary to new visitors) available in the old client is now hidden.

On the other hand, the new client is somewhat frustrating to veteran users. I am constantly trying to figure out how to do something that I already knew how to do using the old client. Some times I just give up and relog using the old client.

I've also noticed a new Welcome Island and a new Discovery Island. Apparently these islands replace the old Orientation and Help Islands. Personally, my favorites were the ones a few generations ago that had a Disney Land feel to them. But, critiquing the new client and the new islands seems to miss the point.

There was a hit movie in the late 1960's called Midnight Cowboy staring John Voight and Dustin Hoffman. In this movie Hoffman played a homeless character in New York City named Ratso. One day Ratso steals some items from a sidewalk stand and takes them home for dinner. The items are just whatever he could grabs so he makes a makeshift salad out of coconut, green beans and yellow squash or some similar hodgepodge. Later on in the movie Ratso falls asleep and dreams of being the star of a cooking show. With great fanfare he makes his salad of coconut, green beans, and yellow squash. It is both sad and funny because he has no idea how to cook and thinks whatever he does had appeal if he can just get it out in front of the right audience.

With the new client and new islands, Linden Labs is once again offering its coconut, green bean, and yellow squash salad to its customers. I suspect that the reception will be no better this time than it has been in the past. If you want to be the star of a cooking show, you need to learn how to cook. And if you want to offer software applications in an application dense environment, you need to learn how to design them.

Development and Consulting Services

Once the client and server software is readily and freely available for creating virtual worlds, innovative system admins will begin downloading and installing it. It is free, after all, and impressive. As that happens, a lot of companies will find themselves in a "all dressed up and no place to go" situation. I have actually seen this happen several times. Somebody downloads and installs the open source version and nobody else will have anything to with it. The problem (certainly not the only one) is that people cannot see the potential. The learning curve is huge and the payback is not obvious. Nonetheless, some companies will invest the time and effort to experiment with the software.

But only the most dedicate will persevere on their own. Most will need some help and that is where the development and consulting services come in. The first step in building a relationship would be to send out a small team of imaginative application specialists to discuss the possibilities of using virtual worlds for business applications. This should be relatively inexpensive as you cannot expect someone to commit a large amount of money until they know what they may get for it in return. This team will discuss the possibilities with the companies management and see if there are any opportunities. Most likely there will be as virtual worlds have a great deal of potential.

Once the application team has identified the most promising area for a business application, the consulting team is sent in. The consulting team proceeds to identify the requirement for the application being built. There is potential here to develop a proprietary methodology for gathering the requirements of a virtual world application. When the requirement phases is done, the company will have a spec for a business application.

The company then can take the spec and attempt to develop it themselves, or they can purchase further services in the form of development services. Either way this turns out as a win for LL. If the company decides to have LL develop the application, then they provide development services, for a fee, of course. If the company decides to develop it on their own, then there will be yet another virtual world application and the their development team will be in need of training and documentation. Training and documentation is yet another busienss opportunity that I will turn to next.

An Old Crisis in Information Systems Development

Most people today are too young to remember the early days of Information Systems development. However, those early days were fraught with problems, cost and schedule over runs, and failed development efforts. In fact, the number often cited, at the time, was that 75% of all Information Systems development efforts ended in failure. That number can certainly be dissected and discussed at length. However, the point is that things did not go well in the early days. And one of the reasons was that most people really had no idea what they were doing.

A common response to this lack of understanding and experience was to hire a consulting firm who did have some experience to guide you. Over time consulting firms developed their own software to use as a base for their consulting (so as to avoid reinventing the wheel with each client) and this lead to the current state of application generators.

When web applications became popular this problem did not repeat, or not, at least, to the extent that it had occurred before. One of the reasons for this was that inexperienced web developers could always look at successful websites as models. And in most cases, at least in the early days, you could also look at the code if you wished. There was a lot of "Monkey See, Monkey Do" and far fewer disasters.

Now we are once again facing the "I have no idea what I am doing" problem with virtual worlds. But this time around companies are not diving into the technology because they are not under competitive pressure to do so. But the market is ripe for Development and Consulting services. A few killer apps would set off the competitive pressures and the demand for services would grow. Next time I will develop a business model for Development and Consulting services.

Software versus Fantasy

Linden Labs currently sells fantasy. The Second Life experience from creating your avatar look, to social experiences, to buying clothes or land, to attending classes is all fantasy. There is nothing wrong with this and they do an excellent job. However, from a business perspective there are two major problems. First, the market for self induced fantasy experiences is somewhat limited. And, second, this is a fickle market with little in the way of loyalty. I don't mean to demean the fantasy market. I can easily see a day in the future where somebody creates a compelling fantasy experience and others pay to participate much in the same way you would pay to see a movie. But that day still lies too far into the future for today's business plan. So, in order to remain economically viable, Linden Labs needs to move into a new market. That market, I believe is the software and services market. Today, I will consider software. In future posts I will address services.

In order to have a virtual world, you need a simulator which is the virtual world equivalent of a web server and a client which is the virtual world equivalent of a web browser. LL has both of these, of course, but they are proprietary. There are open source versions but the development required removes them from consideration. So, the first thing LL needs to do is make freely available versions of their simulator and client that anyone can download and install. Currently, there is is a dearth of imagination regarding virtual world applications. Until talented people can download the software for free and play with it the dearth is likely to continue. But, it is difficult to make money on free software.

The second thing LL needs to do is provide a subscription service for enterprise simulator features. Anybody can download the basic software and play with it. But, if you want enterprise applications, you will have to pay. I am not prepared today to describe these enterprise applications. I will save that for a future post. However, I can say that if we look to the early days of enterprise web servers we can get some ideas.

So, free software goes out to anyone who wants it. They, in return, develop applications and new ideas. Corporate sponsors pay subscription fees and in return get advanced enterprise features. The subscription fees pay for the free software deployment and the free software deployment provides ideas for more (enterprise) applications.

This effort should be kept completely separate from the current self induced fantasy market. In fact, that service should be treated like just another client. Hopefully, by the time this fickle market finds a new home, the software business will be sufficiently viable to thrive without it. But, the software subscription service is not the only new business. In fact it is only the beginning. In the next couple posts we will look at two additional markets: Development and Consulting, and Training and Publications.

Supply Push versus Demand Pull Technologies

There was an article on the front page of the Washington Post yesterday about entreprenuers in Second Life. It was an upbeat article even though the facts did not support the upbeat tone. There was an entreprenuer cited who makes several hundred dollars a year on virtual products. Of course, you cannot live on several hundred dollars a year. It also mentioned the number (a few dozen, if I recall correctly) of people who actually make a living in Second Life. A few dozen out of millions is not good either. So, why was the article and others like it so upbeat? That got me to thinking.

Most technologies are supply push technologies. That is, the technology is developed and marketed, THEN people buy it and find uses for it. Computers, laptops, cell phones, web sites, etc. etc. all follow this model. In fact, as I have written many times, when I first introduced the idea of cell phones to a class of mine back in the very early 1990's they did not think it sounded like a very good idea. And, yet, when cell phones became available, and affordable, everyone wanted one.

Other technologies are demand pull. That is, there is a demand for the technology before it is actually available. Two rather stunning examples come to mind: robots and intelligent machines. People envisioned uses for these technologies before the technologies were availabe. In fact, in these two cases, the technologies actually failed to meet the demand. A simpler example that did succeed was digital recording and play back of videos. People were ready for this technology before the technology was ready for the people. This is a great example of demand pull.

I think virtual worlds are a demand pull technology not unlike robotics and machine intelligence. They have captured the imaginations of visionaries who cannot wait for them to become a reality. However, virtual worlds, unlike robotic and machine intelligence probably will deliver on the technology. This give me an idea for a workable business model for Linden Labs which I will turn to next time.

Virtual Worlds - Slow to Catch On

I ran across an interesting article yesterday that suggested virtual worlds are not dead they are just slow to catch on. I am inclined to agree with the essence of the author's argument but would like to expand upon it just a bit. In order for a technology to catch on there needs to be two things: capability and need. That is, the capability has to be there and within the reach of the average person; and the capability has to allow them to do something that they need to do. If the capability is not there or the need is not obvious, the technology will not catch on. If the capability is there and the need is there, then the benefit has to be worth the effort.

In the case of Second Life, both capability and need have fallen a little short of the the mark. However, this condition will not last forever. The capability will improve when there is an open source simulator that will allow anyone to download software and create their very own virtual world. This does not yet exist in a form that is accessible to the average person. In addition, a browser is needed that will be able to access any virtual world created by any person. This does not exist either. Finally, there need to be tools that will allow on to easily create their own virtual world. This does not exist either.

The needs will also have to be better understood. I have ranted enough in this blog about a lack of imagination and a lack of applications. These will come along eventually as well.

So, I am inclined to agree with the author of the article that virtual worlds are not dead but just slow to catch on. It will take time for all of the things to come together. But when they do, there will be no stopping them.