I Think I'm Giving Up Again

In the late 1980's a personal computer appeared called the Amiga which was known for cool features and a small but savagely loyal customer base. Few people today would remember this name as it has drifted into the mists of computer history. However, it serves as warning. Having a technologically sophisticated product is not sufficient for success.

Another good example is a collection of computer companies in the 1960's and 1970's called the BUNCH (Burroughs, UNIVAC, NCR, Control Data Corporation, and Honeywell) that competed unsuccessfully with IBM. IBM was never known for technological superiority. And yet it managed to beat out all the other companies that were.

What do these two examples have in common and what does it have to do with Second Life? Second Life is the most impressive technology to come along in a long time. And yet it is failing to capture the market, even though it is really the only competitor in the market. It is on wobbly financial ground. And it shows no prospects for living up to the hype it generated in late 2006. Why is this?

Having a technologically superior product and no business plan is a formula for failure. I have complained many times in this blog about how LL does not seem to have any idea what it is doing and events are beginning to bear that out. I think that Second Life is likely to go the way of the Amiga. It will have some cool features but no plan for business applications. It will have a small but savagely loyal customer base. It will continue to pursue the "fantasy world created by its users" strategy despite the fact that this has proven to be a faulty strategy. And it will fade into the mists of computer history. It is sad but I am having a hard time trying to justify wasting any more time on it. So, I am closing this blog with the following quote:

“For all sad words of tongue and pen, The saddest are these, 'It might have been'.”

John Greenleaf Whittier

Phil's Back

Apparently part of the reorganizing at Linden Labs, that led to layoff's of a third of staff, also lead to a replacement of the current CEO with the once and future CEO Philip Rosedale. I have a suspicious nature and can't help but wonder if the old CEO wasn't kept on long enough to lay off the people so any residual resentments would accrue to guy who left. But, that is just idle musing on my part.

I thought about this quite a bit and decided that this is probably a good move. Philip Rosedale is a likable, charismatic visionary kind of person who is needed to provide visionary leadership for a product like Second Life and a company like Linden Labs. I saw a recorded video of a talk that he gave and you cannot help but like the guy. And his childlike enthusiasm with technology is infectious.

This kind of leadership energizes a company and so I see it as a positive move. My main concern is whether or not that energy will directed into productive applications. And, I guess, that remains to be seen.

Voice Morphing

Linden Labs introduced a new feature for Second Life - voice morphing. For three dollars a month you can alter (read disguise) your voice. The vast number of free accounts compared to premium accounts attests to the fact that most people are unwilling to pay even a token amount for their Second Life experience. And yet Linden Labs believes that these people will fork over $3 a month to disguise their voice. Who would do such a thing? Well, several categories of people come to mind.

Celebrities who have very recognizable voices and are incognito in Second Life may wish to alter their voice so as not to be recognized. OK, that covers a dozen or so people. But really, aren't we talking about a different market here entirely? Who would need to disguise their voice? A few possibilities come immediately to mind: 1) men pretending to be women, 2) women with husky voices from too many years and too many cigarettes, 3) teens pretending to be adults, and 4) over the hill pedophiles pretending to be teenagers.

Do you get the point? Of all the things that LL could have spent development money on to make the product viable voice morphing is NOT one of them. After having laid off a third of their work force you'd think they would stop barking up the wrong tree. But, they seem to like that tree and they seem to like to bark. So, I guess I shouldn't expect any better of them.

Downsizing at Linden Labs

There were numerous articles, forum posts, blog entries and the like, this past week, about the major downsizing at Linden Labs. The staff was cut by 30%. Operations are being consolidated in North American. And they are focusing on a new strategic direction.

First, I would like to offer my condolences to all those people who were laid off. Losing your job is never a pleasant experience and in the current economy is it even more dire. Add to that the special status of Lindens in the Second Life world. It will be very difficult to return to being a normal person.

I suspect that many employees got caught up in the hype just as the residents did. There is no end of bitter residents who thought their Second Life careers would make them millionaires only to find their dreams dashed and their wallets a little emptier. Now I suspect that there will be no end of ex Linden Lab employees who saw themselves as the next generation of Internet start up millionaires only to find themselves unemployed. For these people there is no upside to this situation.

Nonetheless, there is a potential upside for both Linden Labs and the residents of Second Life who still see its potential value and have hung on all these years despite the problems. I say potential because, although this is a good step, it is still unclear that thinking at Linden Labs has turned in a fruitful and positive direction.

There are two elements of their new strategy as noted in several of the postings and articles that give me pause. The first is the elimination of the custom client in favor of a web browser based client. And the second is the improvement of the "In world experience". I will take these topics up in the next few posts.

Another Revealing Article

I came across another revealing article about Linden Labs from which I would like to emphasize two points.

First, it says, "Linden Lab's plans for Second Life are as visionary as ever -- 'to enhance and improve the human condition.' " The inner quote is presumably from Linden Labs, and, I believe I have encountered it elsewhere although I don't have the link. Nonetheless, this is not a business strategy. It is not a business plan. It is not even a legitimate philosophy of life. It is, at best, silliness. What is the 'human condition'? How can it be improved? How can it be enhanced? Being guided by such nonsense, it is no wonder they have had the struggles they have. How can you make a business decision if you first must determine how it affects the 'human condition'. Is it better to provide free accounts or charge for them? Well, which one improves the human condition? Is it better to maintain intellectual property rights over in world content or relinquish them to the creator? The answer is simple. Just choose the option that enhances the human condition.

Second, it says:

"'I'll settle for a million active users by the end of the year,' said Tom Hale, chief product officer for Linden Lab, which develops and operates Second Life. The service now has about 700,000 active users, who spend more than an hour per month logged in, up from 680,000 active users in February."

Back in 2006 they were boasting some 13 million accounts. Now they are admitting that less than a million of those accounts spend more than one hour a month in Second Life. My guess would be that there are more like 100,000 regular users; that is people who log in everyday, spend a few hours, and participate regularly in the Second Life economy.

The problem with this is that a lot of people made investment decisions believing that Second Life was a much bigger, more popular, more robust economy. I know I am one of those people. While my financial investments have been somewhat limited, my investments of time learning the application have been enormous. A lot of people who were similarly duped feel betrayed.

I still maintain two key points that I have maintained all along. First, Second Life is the most amazing technology that has come along in a long time and the future potential impact of this technology is enormous. Second, having this technology in the hands of Linden Labs is a lot like turning over national security to a group of summer camp councilors.

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.

Houses For Premium Members

I received emails for several of my alternative accounts stating that Linden Labs is going to be offering free homes in Second Life for premium accounts. On the surface, this seems to be a good idea. Yet, I can't help but wonder if LL has thought it through. It is a good idea because it addresses several problems with premium accounts in Second Life. First, there is little incentive for people to become premium account holders. Very few people are seduced by the lure of being able to buy land. Basic account holders who want land can rent if they really want a place to call home. So, the 'right' to buy land, especially given the softness in the virtual real estate market, is little incentive. From this perspective, the premium membership is little more than just an added tax on those who want to buy land anyway. Second, showing up in Second Life without knowing anyone is a lot like showing up in New York City without knowing any one. It can be a cold and lonely place. Having homes in communities can provide a sense of belonging that current does not exist.

There was a program several years ago refereed to as 'First Land' where premium residents could buy a 512 square meter piece of land for L$512 and put a home on it. However, it failed and was terminated. The main reason for its failure is that many, if not most, people who bought their first land for L$512 turned right around and sold it for L$9000 feeding the speculative bubble in virtual real estate. The speculators got what they deserved, however, as land prices crashed and are still about half of what they were at the time. And Linden Labs got what they deserved for not having thought this through a little more carefully.

First, consider the math. L$512 is roughly $2 US. L$9000 is roughly $36 yielding a profit of $34. A one month premium member ship cost around $10. So one could spend $10 and make $34. While this is not a huge profit, it is a profit. And when you consider the hype at the time along with the fantasy elements of Second Life, a lot of people felt good (in their fantasies) about making money in virtual real estate. So, the idea that most people would simply buy and sell was entirely predictable. Further, the notion that this buying and selling would create a real estate bubble was also predictable. And the consequence of the bubble bursting at some point was also predictable. So, the First Land initiative turned out to be an unqualified disaster. But, money was not the only reason why it failed.

There were at least three other reasons why this initiative was doomed to failure. First, most new residents do not know enough about building to build a home on their first land. So, nearly everybody put up one of the freebie homes. This was fun for the 45 seconds it took to rezz the freebie home but not much fun after that. Second, 512 square meters with 117 prims is not enough to do anything with. This is like selling somebody a bite of a prime steak for $2 and telling them the second bite (and every bite after that) is $36. Finally, without any kind of a development plan, the hodgepodge of First Land plots gave Second Life the feel of a trailer park without any zoning restrictions.

Hopefully, this new initiative will be thought through a little more careful although I am not optimistic about that prospect. Nonetheless, I will look into some of the key issues next time.

Is Second Life Empty or Just Not Happening?

Numerous articles have appeared recently discussing the question of whether or not Second Life is empty. I know from personal experience that students of mine report rarely encountering other people when they visit Second Life. Since Second Life is largely a social technology, this is a problem. Linden Labs counters these claims with statistics that show the number of hours spent in Second Life along with the amount of money spent is increasing. All these statistics show, however, is how out of touch LL is with everything.

It isn't how many hours or Linden dollars are spent. It isn't how many accounts there are or how many islands have been created. It is the perception of the average person of the Second Life experience. This perception can be first or second hand. Both are important and neither is captured in the statistics.

First hand experience is when someone creates an account, logs into Second Life and does something. If that something is exciting, rewarding, interesting and memorable it is positive and the person will want to return. If it is frustrating, boring, and confusing it is negative and the person will probably not want to return.

Second hand experience is when someone reads something in the newspaper or overhears someone else talking about Second Life. It is the 'buzz' as they say. When there is a lot of buzz, people believe that Second Life is happening. When there is no buzz, people see it as a failed technology.

The statistics only matter to the extend that they reflect the first hand experience and generate second hand experience. So, the problem here is not whether or not Second Life is empty. The problem is whether or not Second Life is happening. In the next couple of posts I will explore this question further in terms of first and second hand experiences.

A Lack of Vision

I read an interesting article about how the power users of Second Life are holding back the development of Second Life as they pressure Linden Labs to do the things that they would like rather than allow them do things the ordinary user would like. There are certainly no end of things of things that would make the Second Life experience better for average users. Security could be better. There could be a lot less lag. There could be better management tools and better development tools. There could be a whole host of better better applications. And yet, Linden Labs keeps tinkering with a small set of specialized issues such as mega prims that most people do not give a hoot about.

It raises the question of whether applications should follow technology or if if technology should be developed to support applications. While this is an interesting question and worthy of discussion, I believe that it misses the point. The point is why is Second Life in the shape that it is in after more than five years of serious global exposure. And the answer is very simple - a lack of vision.

Linden Labs appears to have absolutely no vision of where they would like this wonderful technology to go. They have some vague claim about a world created entirely by its users. This is no more a vision than getting a job to put food on the table would be a vision for one's career. I am a big fan of the mass collaboration movement and applaud LL for its support of the concept. But mass collaboration does not work automatically. It takes a lot more than just a simple notion. It requires a vision of where all the efforts of the mass collaborators should be directed. Otherwise you just get a lot of people milling around and nothing getting done.

The power users apparently have little vision either. If they did, their collection of efforts would amount to something. Instead, they view the next technical achievement - such as mega prims, or allowing you have more than 25 groups, or allowing you to hide your groups - as worth goals. But, I would ask - why do you need to have more than 25 groups or why do you need to hide your groups? Since LL has no vision of where it is going, it cannot say whether these are worthwhile changes or not.

This is a symbiotic self destructive relationship between LL and its power users. LL doesn't know what it is doing and the power users give it something to do. This allows them to ignore what they really should be doing which is developing a long term product strategy and a vision for the technology. The power users, on the other hand, are unhappy with the progress that their efforts in Second Life have made and think that if they have mega prims, they will be happy. But they won't. Mega prims are not the problem. They are just a diversion. A lack of vision is the problem.

I think the clock is ticking for Linden Labs. This is a wonderful technology and somebody is going to figure out how to take it to the marketplace. Sadly, as the clock ticks, the likelihood that this somebody is Linden Labs decreases.

A Parallel with AOL

In the early 1990's there was an Internet company called America Online. It is still around, but far fewer people have heard of it today because it has slipped, unceremoniously, into obscurity. America Online (or AOL for short) provided a custom Internet experience for users before web technologies became commonplace. However, when web technologies became common place, they slipped quietly into the mist of the history of the Internet. There are a number of reasons why this occurred, not the least of which was an unfortunate merger with Time Warner, Inc. However, I would like to focus on two specific elements.

First, they built their business on a propriety layer of Internet technology. When open source Internet technologies became available they were hit by a double whammy. They had to advance their proprietary layer in attempts to keep up a rapidly evolving technology rather than assuming the technology and building on top of it. I think it was Fred Brooks who said that we have to learn how to stand on each other's shoulders in this field rather than stepping on each other's toes. It was good advice then. It is good advice now. And it will probably always be good advice. The other part of the propriety whammy is that developers are generally not interested in relying on a propriety infrastructure for their applications. So, not only did the infrastructure move in a different direction, it took the applications with it.

The second element in their flawed strategy was a focus on the social aspects of the technology rather than the business aspects. AOL provided email, chat rooms, groups, and all sorts of features to enhance the social experience. At the same time, they virtually ignored the business aspects such as online transaction support, group decision support, distance education or any number of other business applications. So, when the fickle social crowd drifted off to their next thrill, AOL was left holding an empty bag.

I say this because I see strong parallels between the AOL strategy and the strategy of Linden Labs for Second Life. In the early 1990's AOL was the Internet force to be reckoned with. A decade later most had forgotten its name. In 2006, Second Life was the emerging name to be reckoned with. I wonder what its status will be in 2016.

A World Created Entirely By Its Residents

Imagine a restaurant that advertised meals cooked exclusively by its customers. Would you go there to experience fine dining? Probably not. In fact, we have a name for this sort of dining experience. We call it a pot luck dinner. Pot luck dinners are not without merit. They provide a social experience. There is usually plenty of food. And the food is generally tasty and filling (meaning high in salt and fat). And people enjoy pot luck dinners, as long as they don't go very often. The problem with pot luck dinners is that ordinary people create relatively ordinary food. If you are going to go to the trouble of getting dressed up and go out, you really would like to experience something extraordinary. You would like food created, not by your neighbor who clips coupons, but by a chef.

Consider another, parallel, example. What if a Hollywood movie studio boasted that its line of movies was entirely made up of home movies. Last year's big success was Sally's Surprise Party and this year they are betting on The Travails of the Bar Mitzvah Band. Would you expect this studio to produce classics of the caliber of The Godfather, Jaws, The Terminator, or Fargo? Probably not. There are television shows that rely entirely on home movies and they are fun to watch. They are the pot luck dinner of the movie industry. But, their cultural contributions are nil. And their enduring value is nonexistent. If you want to see a movie of enduring value, you have to see one that is produced by professionals.

Now imagine a virtual world created entirely by its residents. Oh, wait, we don't have to imagine that. It is Second Life. And while the residents of Second Life do come up with some interesting things, they are the virtual world equivalent of Aunt Betty's creamed tuna over noodles. No matter how good that creamed tuna may be, you get to a point where you can't stand it any more.

I suspect this is the reason why the retention rate is so poor. And yet LL continues to redesign the orientation islands and reorganize the volunteer groups. What is that old line about rearranging the deck chairs on the Titanic?

The Tragic Flaw

In another two months, I will mark my third anniversary in Second Life. Reflecting on my experiences over those three years, I wonder how I could have been so far off on my expectations of this wonderful technology. In that time, Second Life has added voice which is good. It has banned gambling which was probably not good as it caused land prices to tank. It is moving adult content to a new continent which is a good idea although handled somewhat poorly. And it has open sourced the technology which is good because it takes control of the technology out of the hands of Linden Labs who do not seem to have the foggiest idea what they are doing and into the hands of people who may know how to exploit it. But, overall, this is meager progress at best.

For their part, Linden Labs has sold a lot of virtual real estate; infuriated a lot of their customers; and dashed the dreams of countless people who saw potential in the technology but failed to achieve that potential for any number of problems most of which can be traced back to poor management on the part of Linden Labs.

Also, during that time, reliability has improved only slightly; lag still persists; inventory still gets lost; and LL seems totally unequal to the task of controlling griefers. In more paranoid moments I have even considered the possibility that the griefers may actually work for Linden Labs. They seem to have free run of the place and perhaps LL sees greifing as a bonding experience for residents. Who knows?

For all my hopes, its seems like the future of Linden Labs is to keep the grid and servers running and to keep adding virtual real estate. All my expectations for future applications in education, commerce, tourism, event management and so on seem to be failing to materialize.

Ignoring the myriad of little problems and attempting to get to the heart of the matter, I realized that the fatal flaw in the Second Life strategy lies in the claim that Second Life is a virtual world created by the residents. This was the BIG mistake. And lest I ramble on too long in this post, I will pick of this thread next time.

Are They Neurotic?

Many years back I saw a show on television about pet store practices and how animal were mistreated. One of the specialists being interviewed said that you could tell how adverse the circumstances were for the animals becasue they developed neurotic behaviors. How can you tell an animal is neurotic? - I wondered. And they answered the question as soon as it popped into my mind. Pointless, repetitive, ritualized behaviors that do not produce a desried result are, according to this show, neurotic behaviors. Well, I thought, then who is not neurotic?

This seems to apply a lot more often than it should to people in corporate settings who attend meetings, fill out status sheets, and have ritualized discussions with their peers, but who do not actually achieve any desirable results. It also occured to me that it was a good description of Linden Lab's product strategy.

LL seems to be stuck in a rut of neurotic behaviors. They revise the website. They redesign the orientation islands. They reoroganize the volunteers. Nothing changes. So, they revise the website. They redesign the orientation islands. And they reorganize the volunteers. Once again, nothign changes. So, I have to ask - Are They Neurotic?

This is Going to Take Longer Than I Thought

In another couple of months, I will reach my third anniversary of working with Second Life. My 'rez day' as they call it, was November 3, 2006. I have to say that I thought a whole lot more would have happened by now. I am, at once, still optimistic and disappointed. I am optimistic because I think this technology has enormous potential that has yet to be exploited but will be. I am disappointed because I think that a major reason why this has not gone further is a complete lack of vision on the part of Linden Labs. Despite the endless complaints about lag, reliability, griefers, and such, I think they do a reasonably good job at the operation level. I think that any operational deficiencies could easily be cured if they were to charge a small fee for membership and use that money to shore up operations.

However, at the tactical and strategic levels they seem to be completely unequal to the task of launching this technology. They have a gold mine here and they are sending people in to mine the gold with plastic spoons. They hire people who know how to use plastic spoons and their research agenda is consumed with finding better quality plastic spoons.

I still plan to use Second Life in the classroom as I think it has a great deal to offer in helping students to envision the new world of computer applications that is slowly coming about. I also plan to continue promoting the use of Second Life in educational applications as I think its potential has only just begun to be exploited.

However, as the academic year begins and I have to decide where to invest my limited time (especially my limited writing time), it does not seem worth it to try to write a weekly blog on Second Life. Consequently, I will step back a bit and write only when I feel I have something important to say. This is going to take a while and if I am going to be in it for the duration, I will have to pace myself.

Time Out to Bitch

I get very frustrated at times because I see so much potential in this technology and Linden Labs seems so unequal to the task of exploiting it. Recently, it appears, they have begun a new policy regarding adult content. I say 'it appears' because I've had to piece this together from conversations that I've had with various people and note cards I've collected from unhappy vendors. I'm sure they would say, "well the policy was stated in..." some unclear statement on some obscure page on some obscured blog or forum. If I wanted to get clarification of the policy the chances of talking to a live human are so infinitesimally small that it would not be worth the bother. So, I have to go with what I have garnered.

Apparently, adult content is being moved to a separate area. This is a good idea. I wrote earlier about the need for zoning and this seems to be a step in that direction. And they are requiring age verification for people to visit those areas. This also seems like a good idea on the face of it. It will help ensure that minors are not exposed to adult content. But, when you think about it, the logic quickly begins to unravel.

First of all, minors have access to adult content all over the web already. So, the notion that protecting minors from exposure to these things is a red herring. Second, people who have fantasies involving adult content are the most likely to want to protect their anonymity. So, a lot of these people will be scared away by age verification. The claim is that age verification is anonymous and it may well be. But, people who are doing odd things anonymously in Second Life are not going to want to take the chance. So, this move will have a chilling effect on the red light districts of Second Life.

Some may feel this is a good thing and others may feel differently. I am not here to judge the morality of it. I am only commenting on the business strategy. A while back they banned gambling which seemed to have a serious impact on land prices. I suspect that age verification will have a similar negatvie economic impact.

I have also written in previous posts about the problem of anonymity. People who are in Second Life to conduct real business want to know who they are dealing with. This was part of the zoning discussion. So, I support user authentication.

However, the current policy, as I understand it, will require a measure of authentication from those most likely to desire anonymity and require no authentication whatsoever from those who would most likely benefit from it. So, the current policy seems to achieve exactly the opposite of what they would want to achieve.

I am reminded of a comment once made by ex president Lyndon Johnson. I believe he was talking about the UN when he said "these guys couldn't pour piss out of a boot if the instructions were written on the heel." This quote comes back with a special resonnance every time I hear about another business decision from Linden Labs.

The Paradox of Creativity

Many people have drawn parallels between Linden Labs, the creators of Second Life and Xerox Palo Alto Research Center, the creators of the graphical user interface. For those of you who have not heard this story, I will summarize it. The now very familiar mouse input device and the omnipresent graphical user interface that we have become accustomed to on our computers was originally invented, as the story goes, at the Xerox Palo Alto Research Center. Unfortunately, after inventing this wonderful technology, Xerox PARC was unable to exploit it. That is they failed to employ the technology in useful applications. It wasn't until the Macintosh computer employed the technology that the public became aware of it. Why is it that Xerox PARC was creative enough to develop this landmark technology and yet failed to be creative enough to see applications for it? I am calling this the paradox of creativity simply for lack of a better term. It seems to occur when one has abundant creativity in one area but creative blind spots in other areas that are necessary to fully exploit the first creative leap.

Linden Labs seems to be suffering from the same paradox of creativity. The creation of Second Life required an enormous leap in creativity. Granted many of the pieces were around in video games and other virtual worlds. But, the way these piece came together in Second is truly a leap of creativity of astonishing proportions. And yet, as with the people at PARC they seem unable to envision applications for it.

I think I have had my fill of bashing Linden Labs. Perhaps I have gotten it all out of my system now. So, as I turn this in a more positive direction, I am going to suggest four quite distinct but not necessarily mutually exclusive application areas for Second Life. I call these 1) Creative Second Life, 2) Social Second Life, 3) Business Second Life, and 4) Educational Second Life. Over the next few posts, I will sketch out these very different application area and, hopefully, it will become obvious why Second Life cannot work as long as Linden Labs continues to pursue these possibilities simultaneously.

Linden Labs and the Failure of CRM

A concept that has become increasingly popular in business circles over the past decade is customer relationship management, or CRM. The idea is that it is cheaper to maintain an existing customer than it is to recruit a new one. In order to maintain existing customers you have to understand who your customers are, and how to keep them happy. In an earlier post, I ranted on about how Linden Labs does not seem to know who their customers are. So I won't go into that again. But, clearly, if you don't know who your customers are, it can't possibly know how to keep them happy. And yet, Linden Labs still attempts to do that through two misguided efforts which I will refer to simply as customer service and volunteer management.

Customer service in Second Life is abysmal at best. Polite follow up responses to emails in place of positive actions and good answers do not make good customer service. Solving customers problems does. I, personally, have had several completely frustrating interactions with their customer service. But, my stories pale compared to the one's I've heard from others. I have contacted customer service on some issues that should have been fairly routine. For example, I deleted an account that I wished to recover. The website, at the time, said you can recover deleted accounts for $9.95. I was willing to pay the amount for the specified service so it should have been fairly straightforward. But, after several email exchanges I gave up in frustration. Another time, I was interested in setting up a collection of accounts to use for workshops. Since the policy that was espoused on the website limited the number of accounts, I thought I should contact them and get permission. You would think that it would be in their interests to have people teach workshops in how to use SL. But, I received no response. When I asked in-world mentors (and even an in-world Linden), I was referred back to the website. Eventually, I just gave up. These are relatively minor instances but reflect the inadequacy of customer service. These were opportunities to engage with a customer and develop loyalty. Instead they managed to turn it around and develop alienation. So much for customer relationship management.

Volunteer management is an attempt to engage customers in-world. A team of Linden's called the Vteam manages a group of volunteers called Mentors. The idea is that by engaging volunteers you kill two birds with one stone. The volunteers have something useful to do while in world which increases their enjoyment. And they, in turn, help other, newer, users, which makes it easier for the newer users to become acculturated. In concept this is a great idea. In implementation it is sorely wanting. Over the next couple posts, I will continue ranting about customer service and volunteer management. And, then, I will turn it around and start making some suggestions on how they could do things better.

Linden Labs and the Failure to Understand Basic Business Principles

Most successful businesses operate according to a business model of some kind. The model reveals such fundamental components of the business such as where the revenues come from and the nature of the expenses required to produce those revenues. In the early days of the web, one of the much debated questions was - what business models are appropriate for web based businesses. At the risk of being overly simplistic, we can sort most websites in one of three business models or, perhaps, some combination of those models. First, is the website used to produce sales. The revenue generated from a sales website is a percentage of the sales. Second, is the website that draws traffic somehow and exposes that traffic to advertising. The revenue generated by that traffic draw supports the website. Third, is a website used as public relations vehicle to provide information about a company or agency. The revenue for this website comes internally from that company. The point here is not to catalog websites, however. The point is to say that in order to be successful a website must operate according to a business model and the designers of the website must understand that model.

Unfortunately, the business model for Second Life is entirely unclear. And they attempt to attract businesses into Second Life who are equally as unclear regarding their business models which creates confusion on two levels. According to published accounts, Linden Labs has wrestled with the idea of business models. They have made several decisions that reflect this. They decided to allow content creators to maintain the copyright to the things they produce in world. They decided to obtain revenue from the sale of land rather than charging for accounts or taxing sales. These are all business model decisions. Unfortunately (again) these decisions were made in the absence of a cohesive and workable business model and, consequently, appear as random, often confused, decisions.

A business model would help address some burning questions with regard to Second Life. Should users pay for their accounts? Should sales be taxed? Is open sourcing good or bad for Second Life? Should users remain anonymous? If development funds are invested, should they go into better development tools, improving ease of use, specialized infrastructure for education or commerce, and so on. But, since Linden Labs does not seem to understand the basics of business they do not appear to have a workable business model. And since they do not have a workable business model the above questions as well as many others simply cannot be answered.

Where Did They Go Wrong?

Looking back on the meteoric rise of Second Life and its almost total failure to meet expectations, I think we can point to four areas of weakness on the part of Linden Labs: 1) a lack of strategic focus; 2) a failure to understand their core customers; 3) a failure to understand basic business principles; and 4)a failure to understand products and marketing. Each will be expanded, in turn, in this post, and further in subsequent posts.

Lack of Strategic Focus - What is Linden Labs trying to do with Second Life? Are they creating a big chat room? Is it a vehicle for self expression? Is it a harbinger of the 3D web? Is it a social interaction technology? Is it the latest thing in distance learning technology? Is is a workflow, meeting, or conferencing technolog? Is it destined to be an open source technology? Nobody seens to know the answer to any of these questions. While it may have the potential to be any of these things, it cannot be all things to all people all at once.

A Failure to Understand Their Core Customers - Who are the customers of Second Life? Is it the large companies like IBM, or CSI NY who buy up large chunks of virtual real estate? Is it the thousands of individual sim owners who own one or more islands? Is it the business people who rent or buy land in order to create a business in Second Life? Is it the premium account holders who pay $6-$9 per month for their Second Life accounts? Is it the basic account holders who pay nothing but populate the world and hopefully spend a little money in support of Second Life businesses?

A Failure to Understand Basic Business Principles - In order to run a sucessful business you have to have a product or service that people want to buy. You have to understand your customers and what they want. You have to know what factors are critical to your succcess. You have to know where you are trying to go over the long term. That is to say, you have to have a business model. Linden Labs fails in this area at two levels. The business model for Second Life is entirely unclear. And they attempt to attract businesses into Second Life who are equally as unclear regarding their business models.

A Failure to Understand Products and Marketing - Linden Labs created a huge amount of hype in the Fall of 2006 with the explosive growth in basic accounts and the news stories about virtual world millionaires. Many very hopeful and now bitter people came to the virtual world attempting to make money and lost money instead. One of the biggest fiascos was speculating in virtual real estate. People who bought land for $L5000 per plot and sold it at the peak for $L10,000 per plot did OK. But people who bought land for $L10,000 were left hold the bag. In order for this scheme to continue working, it would require that there is always a bigger sucker further down the line. And this comes dangerously close to a Ponzi scheme. You have to have a product with inherent value. Selling a product whose value relies on finding a bigger sucker is not a viable marketing strategy.

Over the next few posts, I will elaborate further on these ideas.