The Alphaville Herald

Linden Lab Has No Apparent Business Plan

by Alphaville Herald on 28/09/10 at 11:48 am

by Ron T Blechner (Hiro Pendragon on SL)

How does Linden Lab, creators of the most popular non-game virtual world, Second Life, make their money?

Easy: land and a cut of the marketplace.

How are they going to ensure that they continue to have this revenue stream?

Easy: Stick their fingers in their ears and pretend its competitors don’t exist.

Losing Education and Corporate Focus

Virtual tradeshows? Business meetings spaces with integrated file sharing software? Okay, let’s face it – Second Life was never great at them, and any focus they wanted to have they abandoned with canceling SLEnterprise, a sturdy, behind-firewall corporate solution, and laying off 1/3 of their company earlier this year, which including canning everyone on their enterprise team, with the exception of literally one or two people. I’m still waiting to hear from Linden Lab that they weren’t meeting sales figures on SLE, but I digress.

Now education is a shocker – Second Life is a natural place for collaborative educational space, for simulations of science and history, and for social experimentation in a safe environment. Maybe Linden Lab figured they didn’t need to spend money on convincing colleges and universities to come play, when they fired off anyone who marginally had any relationship with helping educators in Second Life? Then they canceled the Teen Grid, which puts a halt on secondary school level projects.

OpenSim and Direct Competitors

I recently have gotten the chance to work with OpenSim directly, and also with ReactionGrid’s implementation of OpenSim. While these are both easy to work with, the HyperGrid that connects many OpenSims lacks two key things Linden Lab provides in Second Life:
- A central economy with IP protection for content creators.
- A large existing community.

For all intents and purposes, OpenSim is the same as Second Life otherwise. Sure, OpenSims tend to be a bit less stable, but nothing worse than where Second Life was in 2005 or 2006. OpenSim has a couple of features that don’t work right – like groups – but then again, groups in Second Life is pretty much broken anyway. Who needs a limit of 25, and have chat routinely break, and no way of controlling group invites as spam, etc?

But with the two advantages that Second Life has, it should be obvious that these are not advantages for long. A economy for virtual goods is not a Linden monopoly; as the number of people grows, so does the potential for money-making, and there will naturally be companies that step in to fill the need for handling micro-transactions. A large community is only about where people are, and people are mobile. Time and time again, people will upgrade to new technology as it becomes available. And so only in the availability of new and cool features can Linden Lab expect to keep communities in Second Life.

Linden Lab Gives Away Features

I love the fact that full collada-compatible mesh support is coming to OpenSim soon after it hits Second Life. And I love the open source initiative that Linden Lab promotes. Second Life would have been stale and buggy and passed by a competitor if it hadn’t initiated this back in 2006. However, if Linden Lab gives away all of Second Life’s features, what advantage does it have in this respect? Up-time? Better machines?

Nice Things About OpenSim

• All of the controls land owners have begged Linden Lab to implement in Second Life since 2005? Control? Back-up? Changing settings like prim count? Create whatever avatars you want and control who accesses them? Done.
• Can run on almost any machine you want.
• Run on a decent machine, can outperform Second Life, especially on a local network.
• Can support different grid architectures, including Intel’s latest forays into making 1000 avatars in a sim with basic load-balancing techniques.
• Can be customized by developers to run custom applications directly with the software.
• Entry price is cheaper per sim.
• No licensing fees.
• Roadmap for developing features shared with the community, rather than a black-box need-to-know methodology as Linden Lab takes.

How the hell is Linden Lab going to compete with that?

Marketing!

Yes, Linden Lab has money. It can market Second Life better, right? Well, they just lost their main marketing person. (Who, as word on the street goes, was good, but always had her hands tied.) And their strategy for marketing over the past year has basically been 100% escapist. I mean, besides the fact that "Second Life" as a title screams "fantasy world" flavor of gameplay, they’ve done promotions this year including, "Go be a vampire in Second Life". Seriously?

So, if Linden Lab wants to promote itself as a game, it enters the big, BIG leagues. EA and Blizzard and Activision and 2k – game companies with far bigger revenue streams. They can outresearch, outdevelop, and outmarket Second Life in far shorter release cycles. Linden Lab taking on the entertainment space is a mistake. They should stick to what they do best, and what legitimately is better than other platforms – Second Life has the most diverse set of communities.

Go The Facebook Route?

Linden Lab could build on community-making as a platform. Where Metaplace failed because of an immature economy and a lack of 3-D immersion, Second Life can shine.

Unfortunately, Linden Lab seems intent on killing this, as well, as they just shut down AvatarsUnited, which was a multi-virtual-world avatar social network.

Let me say this a different way.

Rather than try and corner the market on avatar communities, while companies like Facebook enact official policies banning using avatars as primary identities, Linden Lab decided to wall themselves off and shut down their one resource that could help them branch out to more communities.

So What Is Their Business Model?

I can’t see it. Anyone have any ideas?

I’m a fan of Second Life. I’ve heavily promoted the platform for years. And when Linden Lab makes smart decisions – and they do make a fair number of them – I do praise the decisions. So I’ll be clear – I want Second Life to succeed as a platform.

As it currently seems to me, while the platform will survive, and Linden Lab will need to rethink its strategy – or pull something from up its sleeve that they’ve been hiding – if they want to survive.

[this article has been reprinted from Ron T Blechner's Second Tense blog by permission of the author]