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Summary:

As it celebrates a decade of enabling virtual experiences, Second Life provides startups with a few hard but valuable lessons on the realities of creating products and building audiences.

Wagner James Au Second Life 10th Year

This week the once-trendy virtual world Second Life officially turns 10 years old. It’s been years since its initial hype wave – when many technorati thought it would be as important to the internet as Facebook itself (yes, many really did) – and many may even be surprised that SL still exists. In fact, the pioneering VR world is both profitable and maintains  a relatively large userbase for a 3D online world.

Users largely frequent SL to chat with others but also occasionally to play games, attend events, and visit fantasy/adventure regions. This hasn’t changed much since SL came out of beta, though in the first five years there was also a strong element of community dedicated to building, improving, and exploring a new virtual world; most of that zeal has since gone away. (Indeed, lately 70 percent of regular users don’t explore the world at all when they log in.)

I’ve been writing about Second Life since 2003, first as Linden Lab’s “embedded journalist,” then as a GigaOM editor and for a book, and still continue covering it on my own blog. Still, I recognize that it’s very much a niche product that today isn’t adding users. So unless you’re among them, you’re probably wondering why its 10th anniversary is worth thinking about at all.

The short answer: Because it remains a valuable case study of an ambitious and influential (albeit flawed) innovation. And also, because there’s a good chance Second Life will finally have, well, a second life. As real-world social networks like Facebook reach a usage plateau and new tools like Google Glass and the Oculus Rift emerge, it’s easy to foresee a  fairly broad desire for platforms that enable immersive, imaginative, real time interaction within a large community.

I’ll explain that point further,  but first some key takeaways from Second Life’s first 10 years:

Your product is whatever consumers say it is

Early in its development, company executives committed to a vision of SL that seemed sensible and exciting at the time: Its potential was to become the 3D web (a la the Metaverse of Neal Stephenson’s “Snow Crash“). I believe that was ultimately key to SL’s failure to go mass market because it ignored what the overwhelming majority of the users were actually doing in SL. While Linden Lab decided SL wasn’t a game, its users were primarily using it for social game activity like roleplaying, virtual fashion, collaborative sandbox building, and yes, virtual sex.

Many subsequent moves proceeded from that flawed assumption – such as a disastrous attempt to create an enterprise version – leading to few new users, but lots of layoffs. Linden Lab learned too late that companies need to evolve their product based on what it’s actually used for – not what they want it to be.

Innovation must account for usability

Years before social media became integral to the internet, Linden Lab envisioned an entire ecosystem of user-generated content. Yet many VCs refused to fund it because, as founding executive Hunter Walk once told me, back then they all considered creativity a “dark art” best left to professionals. SL was among the first platforms to prove this assumption wrong. (Unsurprisingly, Walk went on to become an exec at YouTube – perhaps the premier source of user-generated content anywhere – which launched a few years after SL.)

SL’s goal to be a platform for 3D-based user-generated content fell short because of an overly complex interface and pervasive usability problems that still hamper it today. Consequently, it’s been eclipsed by simpler, easier-to-use alternatives – chief among them the blockbuster game Minecraft, from a game developer with no Metaverse-making pretensions. There’s little point in creating an innovative product if its innovations are too frustrating and confusing to use.

Be wary of vulnerable revenue models

Counter to many tech startups of its era, SL quickly became profitable thanks to a brilliant new revenue model: selling and renting virtual real estate, on which landowners could build businesses (nightclubs, fashion outlets, sexy hangouts, etc.) and hopefully earn some profit for themselves, too. SL also had its own virtual currency, the Linden Dollar – which was exchangeable with real world currency;  back in 2006 the GDP of SL was estimated to be $64 million.

As user growth and activity stagnated, however, this revenue base slowly but inexorably began eroding. And while the company now reports 1 million monthly users, 400,000 of them are new sign-ups – and almost all of them give up after the first try. So the real user base is not that different than it was five years ago, when Second Life had about 550,000 active users.

And without new users spending Linden Dollars, landowners can’t afford to keep paying monthly land tier fees, which make up most of the company’s $75 million annual revenue. Linden Lab is struggling to find alternate revenue streams. As a general takeaway, it’s better to diversify a product’s revenue model when times are good, so as not to be vulnerable in leaner years.

While these missteps might lead one to conclude that SL is destinated to sink deeper into obscurity, there are several reasons why Second Life’s prospects in the next 10 years are still quite good.

An unexpected and important use case

SL enthusiasts have tried promoting it as a platform for any number of real-world applications, such as remote conferencing and architecture visualization, but only one consistently shows substantial and unique value: a real-time, immersive social space for people with physical or mental disabilities that impair their first lives, who often find comfort and security interacting through anonymous avatars. (Indeed, some academics believe using Second Life might even help improve motor ability for people with Parkinson’s.) This capability alone almost justifies SL’s entire existence. As the developed world experiences a spike in senior citizens, SL very well could find a new audience.

Virtual worlds still entice

SL co-founder Philip Rosedale (who stepped down as Linden Lab CEO a few years ago) just launched a new startup, High Fidelity, with the explicit goal of creating the next generation of virtual reality technology. And SL co-founder Cory Ondrejka, who went on to become Facebook’s VP of Mobile Engineering, is an investor/adviser of Cloud Party, an innovative, web-based 3D virtual world seemingly designed to specifically avoid all of Linden Lab’s early mistakes and pitfalls.

Talented technologists like them maintain an active interest in virtual worlds for a similar reason that I do: the ongoing conviction that virtual worlds have the potential to be an important facet of mainstream culture. The missing puzzle piece then is finding the right platform to deploy them.

It may finally be ready for the rest of the world

Linden Lab will soon introduce a version of SL that runs on Oculus Rift, the widely admired virtual reality headset (which just secured $15 million in funding). This move echoes a prediction made by original Second Life investor Mitch Kapor, who insisted to me back in 2009 – after SL’s major hype had cooled – that it would still become a mass-market product.

“I think it’s all a question of what’s the appropriate time frame,” Kapor said then. “The interaction metaphor is not going to be a mouse and keyboard.” Based on the growing buzz over the Rift, the right metaphor may finally be here.

Wagner James Au currently lives in China and is working on his next book.

Screenshot by “Janine “Iris Ophelia” Hawkins.

 

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  1. Bob Cameron Sunday, June 23, 2013

    An interesting take on SL’s trials and tribulations. The ultimate result may be that SL becomes what the LP or cassette tape was to the music industry. It lead the way to mainstream usage of 3D environments, but it wasn’t the endpoint for development. I agree with you that we’re in store for something much more immersive and easier to use than SL, and it’s probably right around the corner.

  2. Lani Global Sunday, June 23, 2013

    10 years on, the Second Life “virtual land” business model is obsolete. The size of Second Life simulators at only 256m x 256m are antiquated, and most of the users are stifled by these false limitations of Second Life’s world. Many of these false limits are based upon the failed virtual land business model.

    1. Simulators of 256m X 256m?
      Big enough for me!

  3. Lani Global Sunday, June 23, 2013

    10 years on, Linden Lab’s “virtual land” based business model for Second Life is obsolete. It limits most users and is the cause of the decline in the user base.

    OpenSim, the open-source 3D virtual world metaverse, has more “virtual land” than Second Life now.

    If Second Life is to stop its negative growth, and get a second life of its own, it must shed its antiquated business model.

  4. SL was ahead of its time. Now we have multi-touch, accelerometers, retina displays, and quad core processors in the hands of millions.

    If some UI enhancements were done and some focus was put on content, I can’t see any reason why this couldn’t take off.

    For example, when the Rolling Stones concert at the Staples Center in LA sells out, why not offer another 50,000 streaming tickets for $30 each at the SL Online Staples Center? Of course there will be t-shirt vendors who will ship to you, etc, etc.

    I think execution is the issue with SL now.

  5. Deanya Zenfold Monday, June 24, 2013

    It’s not rocket science: SL just needs to shift to a business model if it really now wants to be a business. It wasn’t created to make money, was it, Rosedale?

    Start a real SL2 that is available on mobile devices. Lay a foundation similar to Habbo: charge residents who want to be able to change their avatars out of non-system clothing. You could even now charge a sliding rate based on avatar LI.
    Allow people who create content to really make the money: charge a basic rate for a plot of land, but then pay creators based on how many paying people use it that week.

    Let me say this out loud, No creator ever again should have to log in for free to fix a region that she is paying to keep going, that she created using her own time and money for texture uploads, to entertain people who are not paying her, for a company that is making money off of her creations that she cannot save or export, access to which she may be denied if LL decides they want to “suspend” her account because she does not want to give them her social security number. Just sayin’.

    If SL can stay on its feet, no other world will ever be able to touch it. It has an amazing amount of free content due to its start-up ethic of sharing and collaboration (thanks, Rosedale :-).
    I tried to join Inworldz, but promptly had merchants start attacking me for trying to make my content free to my students; they wanted to make money, and they had gone to IW mostly for what they saw as that opportunity. Well, I’m sorry; if I’m teaching in a virtual world, I want my students to make their OWN stuff; I want EVERYTHING FREE.

    And in SL, I can get it all for free. And really: Don’t whine to me about the educator discount: learn to teach in a sandbox (you’ll meet some really nice furries there). Go in with other institutions — collaborate and create. The sharing-collaborating model is alive and well in SL. But that’s not a money-making business model

    It’s SL’s business model from the ground up that needs to be revamped; specifically, it needs one.

    1. Teaching your students to make their own stuff is great but the “I want everything free” mentality is what makes virtual worlds fail. I really hope your not teaching your students that everything should be free or your just teaching them to go on welfare and live off government cheese.

      Also you actually asked if a business was formed to make money? It kind of has to even survive and exist. Sure they wanted to do something different innovative and cool but making money is the only way it can keep going. I doubt paypal donations would do a thing.

  6. Rann Xeroxx Monday, June 24, 2013

    The problem with SL is that the host does not build anything, relying only on user content and so when really great user content is created but then the user stops paying, that great content goes away. SL needs high quality.

    SL should start building or paying great user contributors to build permanent cities. You can have real life cities like Chicago. In fact you can build Chicago then copy it, and then build a apocalyptic one from the base to let people game there. You can build future cities like blade runner types.

    That’s another thing, they really need to build an very easy gaming mechanic into the system, sorta a GURPS type that will work with all RPG/first shooters.

    And yet another comment, adverting. If you build your own cities, have your own radio stations and TVs online, etc then have advertising. Start out small and charge almost nothing but build stats on eyeball views.

    I would like SL to succeed but their current business model does not suggest it will.

  7. I have tried second life a couple of times now, not for the virtual socialization of the system but because I wanted to be able to build building, houses and areas that float around in the seas of my imagination.

    Both time I was quite frustrated with the tutorials and range of per-designed items individuals had left scattered around the virtual land scape. In the end I was able to design and lightly furnished one building. While I felt accomplished for finally being able to construct something, I wanted to be able to produce so much more than the simple building design I had compiled.

    If they would either provide revised/updated tutorial or a more extensive/fixed construction interface I would gladly rejoin and buy a parcel of virtual land to develop.

    I believe a good idea for them to consider is to provide (for purchase) pre-made packages/tutorial/development buildings, items, areas for those of use who want to make a virtual home/kingdom/city/world of their own

  8. SL growth would be simple with very few changes needed to be made to the existing system.

    LL should subsidize builders that produce quality original content that brings new users. For one, lower land fees for builders so they can expand. Second, better promotional tools so that people know good content exists. Basically make it more attractive and profitable for developers to build better content and more affordable for them to keep that content online.

    I’m considered one of the top scifi builders in SL and I despite my popularity and dedication to my content for last 5 years I cannot afford to expand to meet the demands of my customers.

    1. I narrowly escaped working as an engineer in their SF office in 2011. *whew* Interesting product, no doubt, but the companies best days are behind them.

  9. stormmfirecaster Thursday, September 12, 2013

    There is no reason for Linden Labs to be charging $1000USD to set up a sim and then $295 USD a month for 15,000 prims. Other worlds are charging $60 USD a month and some have NO set up fee at all and prims range from the 15,000 like SL has to upwards of 40,000 prims.
    Linden labs makes it impossible for normal, middle class people to be able to afford their own sim and I simply cannot understand why they do that. Allowing a handful of people to monopolize land ownership and drive up the land rental prices. I understand that every company has to turn a profit, but the prices LL charges is way above and beyond anything I could have imagined.

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