Saturday, November 18, 2006

Philip's risky gamble with Second Life

syndicated from _notizen

When you visit Second Life these days, you will meet a lot of grumpy long time users. The huge success, which SL enjoys lately, is a reason to celebrate of course (for early adopters, who "knew it all along"). It has some disadvantages, though.

With more than 12,000 new accounts every day and the number of concurrent users doubling in a very short time, Second Life's infrastructure is under a terrible stress; not only the technical infrastructure. If you log in to SL at peak times, you will experience slow load times for textures and an unusual amount of "lag" (long response times) - even in former low-lag areas. The system is literally groaning under the load.

What's more: the support structures for newbies can't cope with the flood any more. Volunteer helpers burn out - they have always been too few, anyway. And this support is badly needed. Second Life not an easy system to learn. The consequence is, that many newbies leave SL after a very short trial period - probably for good. Tateru Nino has written an excellent arcticle on this topic.

But this is not simply "bad management" from Linden Lab, as some disgruntled residents would like to see it, but part of a grand strategy - and not an uncommon one for markets like this.

The winner takes it all!
The developments of the last months were heavily critized in many weblogs and forums, with the general qualification of Philip and Linden Labs management, which is responsible for the hyper-growth strategy, being put in doubt. The explanation "They are all idots" falls short, of course; like in most similar cases. What we are witnessing actually, is a risky, but quite common gamble according to the rules of Web 2.0 Economy / Social Software Platforms.

These rules are simple and can be summed up with "The Winner takes it all!"

Today Linden Lab is more or less without competition in its market segment. (I know, many will argue with that, but - honestly - I don't see any real contender in the market for open, user-created 3D spaces.)

With all of the hoopla around Second Life this will change. Growth rates of 20% per month will attract other companies. And - to say it frankly - it is not that hard, to build a better platform for this purpose. Second Life at its core is 5 years old these days. There have been improvements in technology which Linden Lab seems to be unable to integrate and the user interface is not a masterpiece from a usability point of view. The learning curve is unnecessarily steep.

On the other hand ... Second Life more than 95% "user generated content"! And the attractiveness of such a platform is based to a large degree on exactly this content (not on the quality of the platform itself). Look at YouTube, MySpace or ... eBay. Every new contender in such a market will start from a very uncomfortable position. "Market entry barrier" is the word.

A huge competitor could - maybe - compensate this with a marketing campaign that simply bullies Linden Lab out of the publics visibility. Never forget that Linden Lab is just a small company with less than 100 employees and some 20 Million VC funding - most if which is probably spent already. But even Marketing can not overcome the advantages of a large userbase above some critical size. Nobody could easily challenge YouTube or eBay these days - no matter how much money they spend for marketing.

My personal estimate is, that, if Second Life can grow just one more year without a serious competitor reaching the market, they will have secured such a position. A competitor would have to spend Billions, not Millions, to have a chance for success ...

And exactly this is Linden Labs gamble:
Grow as fast as you can to reach this critical mass, and don't listen to the funny sounds from the engine room.

We are in for a rough ride
We - as residents and developers - can only watch this game. And it certainly is interesting to watch. We are in for a rough ride.

But it is is a small risk for us anyway - in the long run: Should Linden Lab win, the growing pains will be overcome in one or two years. Should they loose the game, this will only happen, because some other company has brought something considerable "better" to the market. Switching over might be inconvenient for a while.

But in the long run we all would profit from this "better" system. And if Linden Lab wins against a strong competitor, this will only help to improve Second Life through pure market pressure.


  1. As I have been arguing, SL is really just a virtual developing country looking to attract enough attention that foreign investors parachute in and save it from the brink of collapse. The question is, will SL be the next Asian Tiger or the next Nigeria?

  2. Thanks for the link to Tateru's article, a fascinating read.

    It is a gamble and I, for one, hope it pays off.

    I am a newcomer, and I am sold - I have not needed to ask for help, in my short time here, but I have been given help (and it was welcome) - and I have been given grief, but that happens in real life too.

    If the gamble pays off and Second Life is the only player we might still be using it in a years, two years, some years time - perhaps a bit more investment, a bit more imagination, a bit more listening, could all help get over the hump and into a more stable continued existence.

  3. You forgot to talk about the LL "lock-in" that inventory represents.

    As primarily a *consumer* of content, I have spent probably US$1500 on virtual things that as of right now I cannot possibly hope to migrate to some other virtual world platform, even if it were 100,000 times better than SL.

    The only way to keep my inventory is to stay in SL. Otherwise, I'm basically writing off a huge amount of money.

    I realize also that I might in the minority in terms of how many Lindens I buy and spend per month, but the fact is your inventory ties you to SL more than just about anything else, because your social network can always migrate (however slowly that process might be) to something else.

  4. Oh, stop grumping. New people are good for business. They'll get it working, have some faith. And as for newbie retention, maybe the huge waves of new people might knock over the ridiculously broken and ineffective newbie-greeting industry that Tatero exemplifies. The Lindens and their Nervous Nellies at the Gates trying to steer everybody into Useful Employ and make them go learn how to build or script before they can be accepted in society need to get out of the way of progress.

    Let the market handle it -- as soon as the Lindens get over their ideological welding to the concept of voluntarism and crowdserfing -- putting people to work for free to do their customer service scut-work -- and they allow both business and nonprofits to advertise in welcome areas and also contract as outsourced (not crowdsourced) actual professional *help* to newbies, we'll see a much better retention rate. The Lindens should auction off avatar spots in the Welcome Areas and sell advertising on billboards to the highest bidders. Worried about newbies being picked up by sex clubs? But they already *are* and this would at least provide more visible pluralism at the early stage.

    Prokofy Neva

  5. Gambling Commission under the old regulatory regime, applications have progressed to full hearings while the fortitude of these Online Casinos Extreme
    commissions and licenses are all but operational; some of these are thought to be dormant and others under construction. Concern at the spate of applications and imposed a cut-off date of April next year for submissions under the old legislation.