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Summary:

Second Life, the user-created world backed by Linden Lab, has found itself in an increasingly competitive market lately; Google’s Lively is just the latest entrant into the virtual world space. So I sat down with Linden’s recently appointed CEO, Mark Kingdon, to find out how he plans to turn things around.

Back in April, ex-Organic CEO Mark Kingdon took the helm of Linden Lab, replacing its charismatic founder, Philip Rosedale, at a time when the company was already struggling in an increasingly competitive market. While Linden claims to be profitable, its market share has plateaued, with scalability and usability woes keeping the number of monthly active users around 550,000 since last summer.

Is Second Life still relevant in this far more dynamic playing field, which now includes Lively, an offering from the Internet’s biggest player? I posed that question to Kingdon a few days ago in an extended conversation at the company’s spacious San Francisco headquarters.

“Anytime Google enters a new market,” Kingdon told me, “people’s reaction is ‘Oh look! Google’s there; they’ll win.'” But he doesn’t even see the search giant as a direct competitor. “I think the thing that most people looking from the outside don’t realize is how diverse the use cases [of content in Second Life] are,” he said, citing everything from art exhibits to a company’s shareholder meeting to a new educational initiative. By comparison Lively, Kingdon said, “…has I guess you could say almost a single-use case, graphical chat.”

As an author and blogger who writes about Second Life, I remain convinced that user-created virtual worlds are a transformative medium. But I’m less clear as to whether or not Kingdon can address the myriad challenges that await Second Life in the post-Rosedale, post-Burning Man era. So I wanted to know how he plans to fix them, especially with the proverbial train already going 60 miles per hour.

The Infrastructure

“We’re working on three things really intently,” he said. The first is “solidifying our proposition for what we’re defining as our core markets.” That includes the traditional personal user of Second Life, which is typically someone in their 30s, as well as the “enterprise segment,” which addresses the many corporations that use Second Life for conferencing, job fairs and other business applications. And finally there are the educators that use the virtual world as a teaching tool. “I think 18 of the top 20 educational institutions in North America are in Second Life and doing wondrous things,” Kingdon said.

The second task, he went on, is improving Second Life’s complex user interface, especially in relation to its confusing first-hour experience, which he admitted prompts many people to give up. “We’re also working very hard to make Second Life intuitively, and maybe even delightfully, usable,” he told me.

The third crucial task relates to what Kingdon called the “stability and scalability of the platform.” The Second Life client and server grid is notoriously crash-prone, but he said they’ve been working on it for months and were showing good progress so far.

The Competition

Linden Lab has also recently added ultra-realistic, 3D graphic enhancements to Second Life. But it remains to be seen if the market will broadly embrace immersive 3-D worlds. As I pointed out to Kingdon, World of Warcraft has cartoonish graphics, while the web-based, teen-oriented virtual world Habbo Hotel, which is just as big, is in 2.5-D.

Kingdon, however, insisted that he was extremely optimistic about the 3-D experience. “The 2-D or 2.5-D experience doesn’t offer you the rich, meaningful, visceral, profound connection that you get in Second Life,” he said. Take an in-world meeting with colleagues; the immersive sense of interacting with them as customized avatars via voice and text chat, he said, “beats a video conference hands down.”

The Money

In the last couple years, several Linden Lab staff have described the private company as profitable; on my Second Life blog, I did some back-of-the-envelope estimates of Linden’s publicly known revenue sources, and it seemed like the company was making $40 million to $60 million dollars in profit. But Kingdon said it wasn’t quite that much.

“I won’t say [how much], but it’s not that high, although we are profitable and generating positive cash flow,” he said. Much of that’s going into “making hardware purchases, improving the experience for users, investing in people, hiring a lot.”

And what about recurring rumors that the company was already preparing to go public?

“Our focus — I can tell you — is very much on the three initiatives I talked about before. That’s what’s occupying the minds of the management team right now,” he said. “It does take some time to get ready for an IPO, so since that’s not on my agenda today you can probably do the math and form your own conclusions about when it might be a possibility.”

The Future

Finally, I brought up the recent joint announcement made by Linden Lab and IBM that they’d managed to move several avatars from Second Life to Open Sim, the open source virtual world. This could eventually create a market for interconnected virtual worlds, but moving mere avatars was a tiny step toward meaningful interoperability, which would also require transporting objects and other virtual assets between worlds — a much more daunting, perhaps insurmountable challenge. Did Linden Lab have a road map for that?

“There is a plan and a timeline,” Kingdon said. And while he acknowledged the interoperability challenges ahead (“it’s an incredibly complex technical issue”), he said progress was imminent. “The next milestone will be between now and the end of the year, but it may not be the milestone you have in mind — so stay tuned!”

Image credit: Kingdon photo from AdWeek.com. Kingdon’s Second Life avatar “M Linden” screenshot by Crap Mariner

  1. Nice post, very informative. Thanks for sharing.

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  2. I cannot imagine how this person from Organic is qualified to run a company like this. Odd, weird and doomed.

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  3. you could always talk to the people working on interoperability via the Architecture Working Group to get a feel for what is going on. You could even read an article or 50 (there’s hundreds of them, I think) on the Second Life Wiki. Here’s a list of lnks to get you started. You’ll need about a month of solid reading to grasp the scale. As a start, check out the organizations besides Linden Lab, who are involved in this. Its not just Linden Lab and IBM:

    Links to other organizations:
    https://wiki.secondlife.com/wiki/Category:AW_Groupies#External_Resources

    Articles and projects specific to Second LIfe:
    https://wiki.secondlife.com/wiki/Category:Grid_Interoperability
    https://wiki.secondlife.com/wiki/Category:Architecture_Working_Group
    https://wiki.secondlife.com/wiki/Category:AW_Groupies
    https://wiki.secondlife.com/wiki/Category:Pyogp
    https://wiki.secondlife.com/wiki/Category:Grid_Interoperability_Chat_Logs

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  4. Not until it comes to xBox!

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  5. In fact, someone at Linden Lab has already gotten the SL client working on an xBox using LInux…

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  6. Edward Artaud Saturday, July 19, 2008

    I wish you’d asked Kingdon to fully articulate how Linden Lab makes money from these disparate customer segments it seeks to address. My impression of Second Life is that it was a really nice open-ended virtual world that has thrived from the creativity of it’s residents, but it seems like as the company started to fall behind the MMORPG’s and social networks in terms of raw numbers of users, it started flailing around, trying to reinvent itself first as a way for internet marketers to hawk their goods, and then second as some strange replacement for videoconferencing.

    Interoperability is a good thing, only so much as open is ostensibly better than closed, but it’s hard to say what the purpose of this is. On the surface, the idea that markets will standardize around implicit de-facto standards unless explicit open standards emerge instead, would seem to provide a high-level motivation for these efforts. However, the lack of a clear, and more importantly *proven*, business model for interoperable virtual worlds makes this a questionable priority. IBM’s motivation is quite simple, the company makes large amounts of software license and service revenues from collaboration technologies, and therefore can justify tremendous R&D resources in any area that might theoretically someday yield value for that business, even if no tangible results occur in the immediate future. The motley band of hobbyists who have driven the creation of technologies like OpenSim and the open source proponents at Linden Lab have an ambition to transform Second Life into the basis of the “3d web”. Is this viable? One could argue that virtual worlds are more similar to instant messaging clients, which still have limited interoperability, or social networking applications, which are struggling with the challenges of data portability. I suspect that a true “3D web” is going to be driven by the vendors and research bodies that drove the existing web, and Linden Lab has eschewed working with any formal standards bodies in its open grid efforts.

    I wish Linden Lab best of luck as it pursues these ambitions, but I’d strongly urge them to stick to the knitting and focus on the innovations that still set them apart from their competition, such as a focus on user generated content, micro-transactions, and grid computing, before venturing into a murky strategy defined by byzantine partnerships with IBM and a standardization effort that’s neither guided by an urgency to address real world market demands nor tempered by any sort of formal standardization process.

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  7. I just wish Mark Kingdon good luck. I believe he’ll be an excellent leader of Linden Lab…He my become better than his predecessor.

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  8. [...] Linden speaks! Will Mark Kingdon’s Reign Boost Second Life? – GigaOM …. “We’re working on three things really intently,” he said. The first is “solidifying our [...]

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  9. Kingdon is absolutely right that Lively isn’t a direct competitor to SL. Lively is a 3D chat app for kids that want to hook-up online. It has none of the richness, robustness or multi-use case models of SL.

    All that being said, it’s clear that more consumable, easier to use 3D Web apps like Lively, SceneCaster and Vivaty have the opportunity to claim a much larger mass market of users that a closed, more complex virtual world like SL. For example, SceneCaster already has close to 1.5 million users on Facebook alone. While this app doesn’t even compare to SL, it offers an easy and highly customized 3D Web experience in the browser and integrated with users’ social networking profiles.

    This is where the battles will take place: between Web based and highly consumable 3D applications and large, almost monolithic virtual worlds like SL. Personally, my money is on the former.

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  10. As I wrote in April, I think this Kingdon made a very poor decision in going to Second life. It has career disaster written all over it.

    As Second Life continues to fail due to piss poor user experience, an unstable platform, a lack of true technical innovation, and competitive threats, Mark will struggle (and in my mind fail) to help them turn the corner. People are already abandoning the service in droves (the place is always empty) and nothing will help bring the buzz back once it is gone.

    http://www.i-boy.com/weblog/2008/04/will-second-life-be-career-killer_7995.html

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