The Facebooking of Second Life

June 20, 2010 by
Filed under: Linden Lab and Second Life 

We have all heard or read people talking about how Second Life is becoming more and more like Facebook. It is a clear path identified by the management at Linden Lab, so there’s no mistake in those prognostications. But the perspective we all get trapped into using is the ‘Customer Perspective” on Facebook; we forget to look at the business model Facebook turned into a success.

To really understand it better, let’s go back in time a bit … to the early days of Web Portals. Take for example Yahoo. They created a business by providing a Web Portal that had a number of attractive features to draw customers. Games, chatting, searching … all services and pastimes they presented on the web. As a result of the traffic they drew, they found they could attract advertisers and additional income.

Single Point Creation Model

This model, draw “Visitors” to your portal then get others to pay to put stuff in their face, was a popular model for a time, but before long it got old. Yahoo found they had to keep producing more and better content to keep those people coming. If they stumbled or slowed down for any reason, some other competitor would snatch away their traffic. This “Single Point Creation” model put a lot of stress on Yahoo (and others with the same or similar model) and thus tended to be very expensive to maintain. Yahoo’s cost per visitor kept rising until finally the company had no more money to invest in new attractions and their customer base began its decline.

Then along came sites with a Facebook type business model. While Yahoo and a few others had tried to incorporate “Social Networking” as a means to capture and keep visitors, they didn’t really succeed at the same level as Facebook did. Partly because they didn’t provide enough services that make networking like that enjoyable, but also because they kept moving the actual interaction off their site and into standalone client programs (like Yahoo Messenger).

What distinguished Facebook from the others, as far as the social networking attraction goes, was that they did everything on the site so they kept you and your browser on their pages, but they also provided a wealth of services that let people express their own creativity. The “Wall” was one of those points of contact that not only let folks keep in touch, but it put the touch out in the open so anyone could come by and scribble something on it, then go along their merry way.

But Facebook didn’t stop there. Sure they gave you a way to “keep in touch” with friends and family, but they provided something even more interesting … Social Gaming. Social Gaming is a somewhat unique type of personal interaction, even competition, that closely resembles the age-old informal activity called “Keeping up with the Joneses”. In Social Gaming, you get to do stuff that not only grows and expands and keeps you chasing more success, but you get to shove it in other people’s faces in a polite competitive way. Very quickly it caught on because people found they could combine their creativity and drive to succeed with their online socializing. If one of their friends happened to do something bigger or better, that didn’t dissuade them, it just made them want to outdo their friend.

Multi-Point Creation Model

But hold on, that’s not the real revolution that created the success that Facebook is today. It was not the “What” that they provided, it was the “Who” that created those services for them. You see, Facebook doesn’t really produce all those games and activities that they host and sell through their site. They “allow” outsiders, 3rd party companies with creative staffs, to design, build and deliver their games and activities through Facebook’s portal. Presto … Farmville.

This model, call it the “Multi-Point Creation” model, allows Facebook to remain disconnected from the continually increasing need to provide fresh, creative, ingenious content to their visitors. It means they just sit back and tend the machines, while everyone else scrambles like madmen to stay ahead of the “Boredom Curve”. When one of the games or services gets tired and worn out, it isn’t Facebook’s problem. Coming right up on the heels of the worn out service are 10 others waiting to step into their shoes. Facebook makes money from all of them, so they really don’t care. In a word, Genius!

The only drawback to this model is that Facebook does need to ensure they keep visitors on their site. They are required to make sure the basic delivery service stays operational, that it provides sufficient tools and features for new content creators to actually grow and improve, and they have to make sure they don’t piss people off enough to drive them away. When they make fundamental changes, like they recently did with the Privacy Fiasco, they risk losing the whole ball of wax, but fortunately they have enough momentum that it is difficult for them to lose.

The Multi-Point Creation model that Facebook has capitalized on is limited by one really fundamental problem. Creating games and activities that are attractive enough to draw large groups of loyal players is a large undertaking. Typically it requires a medium to large-scale staff and a company with enough financial underpinning to “Run Dry” (operate on no income) for long enough to survive not only creating the game itself, but endure the start-up period before it catches on. This does necessarily limit the field of possible creators and thus constrains Facebook into depending on the whims of those companies. If the folks that make Farmville suddenly decide “We think SocialSceneWorld.com is a better platform, so we’re going to target development only for there” … Facebook is hosed. In a sense, it does make them vulnerable to the whims of the larger and more successful creators.

The Virtual World Model

Then along comes the final permutation on the Content Creation Models … The Virtual World. For lack of a better term, lets call this the “Massively Multi-Point Creation” model. In the same sense that online games such as WoW are “Massively Multi-player”, Virtual Worlds like Second Life are Massively Multi-point Creator platforms. Second Life exploded almost overnight because it suddenly opened the doors to not just a few hundred creators, but to 100’s of thousands of them .. all at once. No longer were the entry-level requirements pegged to medium sized companies with large creative staffs, the Content Creators for Second Life were normal every day folks. Content Creators didn’t need a whole lot of resources, and in fact they paid Linden Lab for the privilege of creating. In a word and a half … Massively-Genius!!

From Linden Lab’s perspective, they were totally insulated from the whims and fortunes of any one Creator. If someone decided “I am going to develop for BrandNewVirtualWorld.com only” … well that was okay because there weren’t just a few handfuls of people ready to step in, there were thousands of them. Just like Facebook, all Linden Lab had to do with Second Life was just make sure the machines kept running and keep the platform fresh and vital enough for creators to come and do their thing.

Bend Over … Time To Get Facebooked

Not too long ago the management staff at Linden Lab changed hands. The current CEO, Mark Kingdon, is absolutely fascinated with the business model and success of Facebook. He looks out across the vast landscape of odd and varied creators that feed the Second Life machine, and realizes he can’t control them. He can’t point them where he wants them to go, and he damn sure can’t tell them what to create. For a starched-collar business type like Kingdon, this lack of control is an evil thing … and a thing that must be destroyed. After all, control is what you need for success. When you have a giant population of workers (content creators) that don’t answer to you, when you can’t control them, then it obviously means this whole thing is gonna fail. It’s just gotta!! Right?

Wrong. You see, it’s the Ant Colony analogy. Individual worker ants in a colony are valueless to the colony. If someone steps on a few hundred of them, so what? There’s still 10,000 more doing their jobs. The damage to the colony as a whole is negligible. Thus the colony survives undamaged. So it is with Second Life. If a few 100 content creators get pissed off and leave, so what? You have to have faith in the model and in the overall combined efforts of the population. And if you haven’t got that faith, then you are going to panic and start trying to herd them all in the direction you want them to go.

Mr. Kingdon doesn’t have that faith. Instead he’s got in his head that somehow he must obtain control of the Creator Horde and get them all doing exactly what he wants. He’s tried a few different approaches to that, but so far the horde has resisted his best efforts. Dammit, they just keep doing what they want to do, and not what he wants them to do. Grrrrr!

Chopping Off The Curve

There are two extremes of Content Creators on a virtual world like Second Life. On one end you have the philanthropic folks that make some amazing things and then … *GASP* … they give them away! No profit motive there at all. Second Life and Linden Lab make nothing from those freebie transactions. On the other end of the spectrum you have the highly creative and very profit minded folks that are amazingly creative and successful and generate a lot of revenue for themselves. But Linden Lab only gets a tiny bit of spray from that money stream, and money going past Mr. Kingdon’s fingers without most of it sticking to him is another evil that must be done away with. So what’s the solution to these two problems?

You got it, chop off those two extremes on the curve.

Last November, part one of their plan went into effect. With little fanfare and much panic, Linden Lab announced through their Commerce Team that “Real Soon Now” they would start charging an exorbitant fee for freebies sold through their new sales portal, Xstreet. Of course the reaction in the population was instant and angry. The freebie makers got very upset and most of them stomped off the game, vowing never to return. Presto .. the first part of the problem was solved.

Just recently Linden Lab announced their new “Linden Homes” program. Buy a premium membership and you automatically get a house made by them, provided by them, and hosted by them. The restrictions they place on people that live in those homes ensure that precious little in the way of enhancements can be purchased. None of the really fancy or high-priced items can be purchased and used in those homes, but that’s okay because Linden Lab still makes their cut of the deal. However, as the people living in those homes feel the need to grow beyond that limited scope, they are fleeing and moving to private island Sims, buying from the top-end content creators and thus once again stealing revenue from Mr. Kingdon’s pockets.

Thus we come to the axe again. Linden Lab has just recently announced their new Marketplace 2.0. The response to this “State of the Art Sales Portal” has been vociferous and angry. But look who the people are that are screaming? Yup, you guessed it .. the top-end Creators. One thing that distinguishes a top-end creator from your basic run-of-the-mill creator is the complexity and sophistication of their advertising and product presentations. They use tons of photos, lots of ad copy, fancy lettering and text enhancements .. all of them have a style that is first class. And all of them take money from Mr. Kingdon with every single sale. Oops.

The new Marketplace 2.0 will do away with this problem too. The limits enforced by the site preclude anything resembling sophistication. You want fancy ad copy with visually appealing text and graphics? Sorry, not avaiable. BBCode and other similar tools are gone. You want lots of images so you can really appeal to the many varied tastes and draw them into your product offerings? Sorry but you get 8 pictures and they’re tiny too, so you’ll just have to make do. And when they move your data to the new Marketplace, if you’ve got anything sophisticated and classy, guess what … we’re gonna butcher it and not let you see it until AFTER your buyers do too.

Ah but never fear, they will allow a select group of people in early just to see the new site. However to gain entrance you must sign your life away and promise that no matter what you hear or learn, you will keep it secret. And just for kickers, Linden Lab has 30 days AFTER they tell you their secret nefarious plans to decide it was confidential anyway. So if they accidentally screw up and don’t make it clear that it’s a secret, no worries, they have plenty of time to change their minds and fix it … or just plain sue you.

This is sort of like Lex Luthor not only telling Superman his secret plans to overthrow the world, but rigging the caped crusader with a kryptonite time bomb so that even if he does escape Lex’s dungeon, Lex can still kill him anytime within 30 days. How brilliant is THAT? Wow!

The End Stage Game Plan

Mr. Kingdon is holding back one last card. Some time back Linden Lab began making nice with some content creators they called “Solution Providers”. These folks were the cream of the crop in two regards. Firstly they were capable of making nice things, sophisticated and classy things. Secondly, they could be controlled. The content creators that signed up were pretty much the sheep that Mr. Kingdon wanted. Over time some of them have demonstrated “Free Will” and have thus been summarily dismissed from the inner sanctum, but that’s okay because they still have quite a few ready to fill in those gaps.

Shortly after Marketplace 2.0 debuts, after the existing free spirited (and free willed) high-end creators get fed up and give up or fall by the wayside, Mr. Kingdon will unveil the final card. Linden Lab will announce special high-end classy content created by, authorized by, and sold by Linden Lab. Every penny spent to obtain that content will go directly into their own coffers. A pittance of it will be passed through to the real creators (possibly even in the form of employee paychecks), but the bulk of the profit from every sale will go right to Linden Lab.

And where will these people live? What private island sim will they take up residence upon? Oh .. right .. forgot to mention how the ownership of private sims is becoming less and less profitable for independent land owners. They are being nickle and dimed to death as it is now. There is a massive land glut and most independent land owners are bailing out because they just cannot make a living any more … especially not like they used to. So as the new residents of Linden Homes start opening their wallets further and further, they will find only one hand to put that money in … Mr. Kingdon’s.

And thus will end the lifetime of a Virtual World that started out to be everything for everybody … and instead became the profit center for a single nobody.


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Comments

2 Comments on The Facebooking of Second Life

  1. Tinsel_Silvera on Sun, 20th Jun 2010 1:44 PM
  2. There has been a lot of blog press about where LL/SL is headed since M become CEO. You are the first one I have read that truly gets it. I am blown away by this intelligent, in-depth analysis. Two points I might add to this analysis. One – when mesh is brought in it will usher in a new class of elite creators that will control the majority of the content market. Two – LL will not stop with the 512 Linden Homes program but over time offer LL-designed larger parcels at each tier break. They already offer LL-designed estates, open space and homestead sims. I cannot fault LL for wanting to capitalize on the money flowing through SL. All other games do it, why shouldn’t they? However, is this whole Facebook direction a bad thing? Only time will tell how long this social bubble lasts. And what the long term ramifications will be. Until then, I envision LL creating a web browser similar to what Small Worlds offers (which can also be accessed directly from within Facebook) or perhaps similar to what FriendsHangout offers. Maybe you can look into your crystal ball and see more than I! Bottom line is that LL must compete in a world of short attention spans, social networking, social gaming, iPhones, iPads, etc. in order to stay profitable and viable. I may not like some of the choices LL makes but one thing I do agree on – I want LL to remain profitable and SL to remain open to my log ins.

  3. Jive Talkin’ the Linden Lab Way : DGP4SL Blog on Wed, 23rd Jun 2010 3:04 AM
  4. […] Life, it seemed as though he had nailed the desires of a lot of people. As I discussed in “The Facebooking of Second Life“, the explosion in Second Life players was unprecedented and probably because it brought more […]