Tuesday, December 13, 2005

No, we are not "there"!

"And we won't be soon!" I would like to answer to Forsetis post from last Friday.

Like him I am on the one hand excited by the possibilities that SL offers as a platform. On the other hand I am disappointed or maybe even frustrated by the shortcomings of the current SL and in some parts by the decisions (or non-decisions) by our wise overlords at Linden Lab. I agree with Forseti, that there are still some huge barriers between the current SL and a real "platform" for the development of "really cool applications" - next step: The Metaverse! I agree with some of the barriers he identifies, I am unsure about others. And this is an issue that fascinates me so much that I decided to write an answer:

Yes, I firmly believe that for more substantial growth, cooler applications (and a better SL) this platform needs infusion of resources (money and manpower) from RL. And: yes, its a hen-and-egg problem.

I agree with Forseti that better collaboration tools would be very nice. And doing business in a society where everyone can disappear in seconds and appear under a new indentity (or many) the next day sounds very risky. The main issue - IMHO - seems to be another: how can a company (or team) tap a revenue stream that is sufficient to guarantee a sizeable income for the employees (plus a small profit) or team members.

If this is not possible, those people will have to focus on their RL jobs. Of course I am excited about all the projects that already have been created in SL with teams working part time besides their day time jobs. But we all know that such work models have some severe limitations.

Welcome to a small village called Second Life!
For any serious business Second Life is a very, very, small world. Even if it grows tenfold from the current size to 1,000,000 residents, SL will still be relatively small and not really attractive as a target market for a big company in RL. Lets look at some numbers to get a feeling for that: currently SL has nearly 100,000 residents. The average weekly turnover in the SL economy was some 140 Million L$ per week in November equivalent to roughly half a million US$ per week, or 25 Million US$ per year. Whoa! Quite a sum! Quite a sum? No. As an economy this is rather puny.

It's a small world

If we assume a culture with a medium to low prosperity level we might be talking about a buying power of maybe 6,000 US$ a year per capita. An village with 5,000 inhabitants in such a culture has more buying power than all of SL today! And if Second Life grows to 1,000,000 residents (with the same economic parameters like today), we are talking about a small city.

Would you, as CEO of a company would put much money into the development of a product which you only can sell (in the best case) in a city with 50,000 inhabitants? Hardly - at least not when its a large company. For a small business with 2 - 20 employees this could be an attractive market ...

But we are not there yet. This is still a Second Life with 100,000 residents. And that's why the biggest "companies" we can see today are typically lone warriors, teams of people doing some business on the side or mom-and-pop companies like Anshe.

But if I believe in a growing SL and a target market of 1,000,000 (equivalent with 50,000 RL consumers in a low income nation) seems enough for my ideas? Then I still need to secure a sizeable revenue stream. This is not easy in SL currently of you are not selling a "product" - and maybe that would be the most interesting entertainment products. In the current market its not possible to have people pay for entertainment/attractions etc. (similar to the internet). And the dwell system is seriously flawed and won't exist for long anymore.

Bedazzled's U:SL, awesome
but without much revenue possible

There are different models but all of them would need a decision from the side of LL to give up some control over the platform or to really share part of the revenue stream with others who lead people into SL, urge them to stay there and spend money inworld. I believe that such a system is possible. I am not sure if LL is willing or able to implement it. Details to follow in a future post ...

Bridging the gap to RL
All of this was of course said under the assumption that such a business is targeting "residents" and wants to sell them products or services in SL. But residents are real world consumers, too. If one could use Second Life to fuel business in RL the situation becomes somewhat different. That's the reason, why one if the biggest project to date (Stagecoach Island for Wells Fargo) is not meant to make any money inside of SL but is purely intended as a marketing tool for a RL company.

Stagecoach Island - The first big project spanning the gap between SL and RL

There are hurdles for such projects, too. (The current number of "eyeballs" in SL is small even for that kind of project.) Cost and potential ROI inside SL are not huge problems.

For example: A little while ago I did some rough calculations for a project idea I had for one the clients of my company. It included some 18 sims (two clusters of 3x3) and had an intended time frame of one year. So I was planning around 60,000 $ "cost to Lindens" (18 sims setup, still 1,000$ at that time, and 12 months tier for 18 sims.) This was the smallest part of the project business. And the project was a small to medium size one for my firm. Cost was not the problem.

What finally lead me to cancel any further steps in that direction where two other aspects:

  1. Quality shortcomings
  2. Instability of the platform

With regard to point 1: As much as I am fascinated with what is possible in SL already, it is somewhat hard to "sell" some of the current limitations to a demanding customer, who has seen what is possible quality- and performance-wise with console games or platforms like WoW. Oh, I myself can perfectly well understand why these limitations exist and what advantages SL has in other areas. But is "hard to sell".

Even more dramatic is the instability. It is simply not acceptable to most big-brand clients that such a platform - beside the unavoidable crashes - has to suffer updates (at unpredictable points in time) which in the worst case will kill it more or less until another patch is installed. The update to 1.7 has reinforced this feeling.

While it may be hard to understand for the seasoned SL veteran where all the whining and bickering comes from ("hahaha, we had much worse ..."), an update which leaves an application in molasses for weeks - and to the current day regularly throws me into a world of gray goo or a geometric wonderland for minutes after rezzing in a texture rich area ... that is simply not something a nervous client will accept. If I had launched this project, my head would have rolled in November at the latest and my company would have been discredited with an important client.

Developers of such projects would need much more flexibility and control. For example: If I want to host it on more powerful servers, this should be possible. If I want to forego an update while an important RL event is running, this should be possible, etc. etc. I am sure, all this can be done. But honestly I don't want to negotiate for months with LL about it. This all should be standard options which can be selected in a developers pricelist.

Maybe it will happen. But it will be a while, until we are there. Probably a lot longer than the 6 to 9 months anticipated by Forseti. And, yes, I would love to be proved wrong!

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