Further Thoughts on Virtual Land and Second Life

July 28, 2010 by
Filed under: Linden Lab and Second Life 

Apparently there are a lot of strong emotions tied up in Virtual Land. Stands to reason I guess since RL Land has been the cause of a lot of spilled blood over the eons, we might as well continue the tradition by spilling innocent pixels over the Metaverse too. My previous blog post “Changes in the Virtual Land Market in Second Life” caused quite a few folks to choose up sides and start lobbing blog bombs at each other. After all the hoo-hah died out though, a lot of good information started coming in. From that information I’ve had occasion to do a lot of thinking about Virtual Land, Second Life, Linden Lab and the future of them all. This blog entry is a result of that information and thinking.

The Way Linden Lab Does Business

Before we start though, we have to understand how a company like Linden Lab does business. It’s not the same as it “used to be” … not by any means. LL has changed their strategy and many say for good reason. They are no longer the nimble little enterprise that started building Second Life all those years ago, and they’re no longer the mid-sized media darling they were in the middle of this past decade either. They are a multinational, multifaceted, mega-corporation in all its glory. (Okay, I may be overselling it some, but bear with me. I promise it’ll all make sense soon.)

Mega-corporations do things differently because they are large and they turn slow and they take a lot of energy to start and stop in any one direction. Therefore a lot of their “innovations” come not from inside their walls, but from outside. They “acquire” new stuff, new companies, new ideas and “assimilate” them into their being. Yeah, I know, kinda Borg-ian huh? But it’s not a bad thing, honest!

First of all it gives those large companies fresh injections of talent, ideas and creativity that tend to get diluted inside the massive corporate structure. Breathing fresh life into something like Linden Lab can and has happened before. When they bought up OnRez and then SLExchange, they got in the deal some very smart people, some very good technology and some excellent results. With a little bit of intelligence, strategic enhancements and smooth talking, they’ve managed to pretty much corner the market on Virtual Goods sales … at least for Second Life residents.

Changes in Virtual Land Outside Second Life

Thanks to many people that tossed references, links, blogs and noise at me after the last blog post, I’ve had the opportunity to do some reading and understanding of what is happening “Out There” .. in the great big Metaverse outside of Second Life. I especially want to thank Maria Korolov of Hypergrid Business for her very succinct post on the Second Life forums that spelled out a lot of the details I was lacking.

What it all boils down to is … everyone and their brother, sister, cousin and aunt is getting into the Virtual World Simulator business. With very little money and very little iron, you can actually run your own Sim. Wow! Cool! Sorta ….

You see, that Sim that you can run, it’s not Second Life quality. It’s heading there but it’s not there yet. Best estimates put it at 2-5 years away, but personally I’m gonna guess closer to 5 or more. Part of that is because LL has a pretty good lead and a nice bankroll to work from, and part of it is due to the fact that those Sims are being developed in 100’s of varieties and installations using a giant uncoordinated development team called “Open Source”.

Now don’t get me wrong, Open Source projects produce some AMAZING stuff. But fast just ain’t how they do it. So while they will eventually get to the level Second Life is at now, by the time they catch up to Second Life, we may ALL be chasing a different goose. Of course it is possible LL could stumble, drop the ball and let the OpenSim folks lap them, but I have doubts. If anything, they’d go out of business rather than limp along as an also-ran.

Consume or Die!

Not too long ago I made a statement to the effect of “Evolve or Die!” Since then I’ve had a chance to reflect on that sentiment, and I now believe different. The answer is not so much to evolve as it is to consume. Consume in the same fashion they consumed OnRez, consume in the same way they did SL Exchange and Avatars United. Consumption of the bright ideas encased in tiny companies run by smart people with too little capital and not enough experience or market presence. And then you have to ask yourself, “but what are they consuming?”

Planting Seeds …

Linden Lab has a very good opportunity right now. An opportunity I’m not sure they see, and I can promise you I didn’t see until I got the feedback from my previous post. As you’ll recall, that post was about lowering the Tier (or rent) on a Sim. But I now think that’s not the direction they need to go. You see, Linden Lab’s value isn’t in the iron and infrastructure they own, it’s in the software they developed. The whole advantage they have over every other Virtual World out there is that unique piece of bits and bytes that runs everything. It’s theirs and theirs alone and ain’t no one else can touch it … yet.

However putting iron under that code, running fiber and hooking into the Internet, those are things just about any garage enterprise can do. Notch that up to real business class operations and you’re still cutting way below the costs that LL has for the same service. Why? Because they have so much debt history they have to carry. It’s taken a long time to get to where they are, and in the process they’ve accumulated a lot of extra “stuff” that a newer, more agile hosting company won’t have. And that hosting company? They can meet the needs for uptime, connectivity and customer service that LL just can’t seem to nail down.

So the idea is that Linden Lab needs to “seed” a few good startups, companies that already exist and are making their first forays into trying to build out the network and computing infrastructure to support something like Second Life. What they lack is, of course, the experience that Linden Lab has and …. the Software. But under license from Linden Lab, a license that gets them access to run the Second Life Sim software, gets them access to the network engineers and experts that LL has cultivated and trained in-house, and gets them started in the right direction, those startups would suddenly be able to leapfrog all the OpenSim competitors out there, provide an alternative to OpenSim, and at a price point that is very competitive with OpenSim … all because it’s the real genuine certified and pedigreed Second Life software.

As time goes along, some of those startups will belly up. It happens, it’s a vicious world and sometimes even the best go down in flames. But those failures won’t be LL’s fault, so they’ll be pretty much blameless. However, they WILL have access to other startups in their stable that can take up where the fallen comrade went down, transition the users and the business almost straight across, and keep the customer base happy and online.

And Harvesting Crops

During this growth stage, Linden Lab will maintain their existing infrastructure and possibly even maintain some of the outlying island Sims too. However one thing they will ALWAYS keep hold of is the Inventory and Asset Servers. Those are the golden eggs and it’s in their best interest to keep those under lock and key. They will also be able to suck money out of the “Crop Companies” by virtue of “User Access Fees”. Those fees will be folded into the monthly Tier that each renter pays for their little plot of land. Renting a 2048 or larger will get you not only the land but also access into the full world of Second Life, and at a price that is less than what Linden Lab has to charge now. In short, it becomes a “Win-Win” for both entities; Linden Lab ducks out from under the service and support of Island Sims and hands it off to others more capable of doing it, while the Sim Hosting companies get the benefit of lots of stable, dedicated and happy Second Life residents paying monthly rent and filling up their Sim Servers with houses, gardens and the accessories of life in a Virtual World.

When the time is right, and those Sim Hosting Companies are ripe for the picking, Linden Lab will select from the best, consume them if desired … or at their leisure just keep enjoying the income from “rental” of their Second Life software and access fees to their amazing and dynamic Virtual World.

Commerce is a Linden Lab Thing

The final stake in the plan (or stake through the heart in some people’s minds) is the fact that the software those Sim Hosting companies will rent will be Commerce Disabled. Yup, just like in my last blog post. The reason for that is simple. Running the infrastructure that is the core of Second Life is a lot more expensive than hosting an Island Sim. Even if you were to roll Mainland out to an outside hosting company, they would still pay more too. Pile on top of that the extra burden Linden Lab carries from their existing debt load and the costs of continuing to develop and produce Second Life, and the whole “making the money machine run” thing … pretty soon you can see it’s gonna cost more than a few beachfronts and some houses will take.

Businesses pay more. They pay more for the access to ready customers, they pay more for the methods of doing business, and they pay more for the means to advertise and market their business.  Those higher costs will in turn pay the extra overhead Linden Lab will carry. They will especially pay more to be on Mainland with contiguous Sims (after LL fixes the Sim Crossing issues) and they will certainly pay more to be featured in the various Arts and Entertainment events hosted on Mainland, and they will pay more to get direct access to the company that writes and supports the real guts of Second Life … the Resident, Asset and Inventory Servers.

The trick is, Linden Lab is already paying for all that now. Those are all things they are supporting now. What would be removed from that equation is the support, setup and management duties of dealing with Island Sims and trying to get folks to “reside” in Second Life while at the same time providing Virtual Land at a price point people can really pay. By restricting commerce to the Linden Lab Sims, they also hold a hole card that no one else holds.

Commerce is what drives the Metaverse. However I still believe Commerce as it exists now really is not needed on Residential Only Sims. So take it out of the package they rent to the Sim Hosting companies, keep it an LL thing only, and you’ve accomplished the zoning to make sure a strip club doesn’t open up next to your home AND you put the extra money into the hands of those at the core of the world anyway … Linden Lab.

The Road Into TomorrowLand

It is my opinion that one of the biggest roadblocks to Linden Lab’s future is their self-centered “do it all ourselves” attitude about everything. Their heavy-handed, almost dictatorial release of their new Viewer, the “do it or else” tone of voice they’ve used in transitioning their users to the new Marketplace from Xstreet, and the generally cold and detached manner in which they treat their customers all speak to a corporate attitude that is akin to arrogance. In this day and age, a company cannot be arrogant and survive. Somehow they have to drop that mask and put on the happy, helpful and engaged mask they had five years ago.

Hopefully with the return of the creator, Philip Rosedale, they might just be able to pull it off. From what I can see, they need to make it happen or they will slip into the ranks of “do you remember when…?” What’s more to the point is, before they can even start to think about outsourcing their Island Sims, before they can push their support and connectivity load out to others, they absolutely MUST learn to let go and let their baby start walking on its own.

Philip? It’s time to give the car keys to your baby Second Life … and let her take the car out for the night.

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2 Comments on Further Thoughts on Virtual Land and Second Life

  1. Maria Korolov on Mon, 2nd Aug 2010 1:04 AM
  2. Darrius —

    One thing to remember is that OpenSim doesn’t have to have all the features of Second Life before it becomes successful.

    If you recall, AOL back in its walled-garden days, offered email, forums, search, commerce, instant messaging, friends — all the goodies. The Netscape-Apache combo (today, the Hippo-OpenSim combo) offered none of these.

    If you wanted email, you had to go to Hotmail. For search, to Google and Yahoo. For Instant messaging — ICQ. For friends — well, you had to wait for Facebook for that.

    The World Wide Web was not better than AOL. In fact, it was inferior in pretty much every respect. The graphics were worse. It was slower. It was a giant wasteland of mediocrity and badly-designed webpages.

    And it certainly wasn’t easier to use.

    But it gave every Tom Dick and Harry the ability to put up a website that they didn’t have to pay AOL through the nose to host – and they could put anything on that website they wanted. Pictures of their cats. Conspiracy theories. Porn. Gambling.

    The more people complained about all the junk that was online, the more they wanted to see it for themselves. 🙂

    And you also had useful stuff. Dissertations and class schedules. Contact info for companies. Directories. Maps. It wasn’t as pretty and nice as it is now, but the beginnings were there and it was clear where things were going.

    The World Wide Web STILL doesn’t have the features that AOL had 15 years ago. Our friends aren’t built into our browsers. Payments aren’t built in. Groups aren’t built in. IM isn’t built in. Search isn’t built in — there’s a search box, but it just takes you to Google or whatever your preferred search engine is.

    What the Web was, however, was a very flexible platform on which people could build all these functions, and surfers could pick and choose.

    OpenSim is also a very open, flexible platform. Today there are a variety of commerce modules available for OpenSim, including PayPal and OMC.

    The thing about the web is, if you build Amazon, Apache isn’t going to come along, add commerce, and put you out of business. If you build a successful Amazon — or some other service — in Second Life, that could very well happen.

    In OpenSim, the project is run by an open source group, like Apache. They’re not out to compete with their users. Sure, individual developers might have plans to create stuff on the platform, but if they try to use the open source development process to tilt the playing field in their favor, they’d get drummed out pretty fast.

    That makes it a safer platform to build a business on.

    Not necessarily lucrative in the short term — it took a while for e-commerce to take off, as well. But a better long-term bet.

    Will OpenSim become the Apache of the 3D Web? Who knows.

    Right now, it’s in the lead. A hundred active, public grids. Thousands of private ones. Very vibrant and active user and developer communities. Fast growth.

    Open Wonderland and OpenCobalt don’t come close. The available proprietary platforms aren’t interoperable, subject to vendor lock-in, aren’t on the hypergrid, and most require professional developers and designers to create the worlds.

    With OpenSim, any idiot — and I mean that in the best possible sense — can set up their private universe and do whatever crazy stuff they want in there, and invite the world to come visit.

    — Maria Korolov
    Editor, Hypergrid Business

  3. Darrius Gothly on Mon, 2nd Aug 2010 4:26 AM
  4. @Maria – I fully agree that OpenSim does not need all the “goodies” of SL to be competitive. However my goal with the ideas presented in this and the previous blog is to make Second Life not fail. Not that I’m against OpenSim. In fact I relish the idea of a competitive product/brand to Second Life. I feel that the competition will enhance both. But these ideas are targeted specifically at ways to help Second Life establish a position of strength sufficient to keep them from floundering and slipping beneath the waves.

    I theorize that the reason AOL became an anachronism in the Online Services arena has more to do with their egotism and greed and iron-fisted attempts to control their customer base than any other factor. Yes, they had all those neat features, but they were decidedly customer hostile and abusive. When you ask people what they hated about AOL in those days, it wasn’t about the services, it was always about how AOL made them feel like the enemy … how they had to fight tooth and nail to get any satisfaction or response from the “AOL Monster”.

    This feeling among their customer base was one of the big driving factors that pushed people out the AOL door and into the wide open arms of the Open Source community. Sure they had to tolerate a loss of services to some degree, but getting away from the harassment and bad feelings they got from AOL made it all that much more pleasurable.

    The two types of “ambiance” of Second Life and OpenSim each have their own costs and rewards. Each also has its worshipers and critics. Just as we see that higher end specialty stores can survive in the face of competition from the likes of Wal-Mart, we can believe that a “full service” Second Life will survive in the face of competition from OpenSim. The ideal solution to my mind is that both should survive and both should find their own specific markets and supporters. I strongly believe they both can survive and be relevant in the marketplace of tomorrow. To my way of thinking, it’s not an “either/or” situation, but unless Second Life plays their cards right and recognizes that their appeal has more to do with quality of service and depth of experience then it is quite conceivable they will wind up trying to do battle with OpenSim on OpenSim’s terms … an fail horribly.

    They really are two different products with two distinct niches. The trick for both is being able to recognize which niche is theirs, why it is theirs, and how they can grow within that niche.