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In this transitional period, many of the best investment and growth opportunities to watch are not the worlds themselves, but the solution providers offering developers the means to better monetize their existing MMOs. Opportunities also exist in niche MMOs that appeal to consumers seeking entertainment outside the established fantasy and kids social MMO space. However, new players that would enter this already crowded market must foster a community of users by rewarding user-created content and continued engagement, while also being architected with multiple revenue streams and play platforms.

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Here’s a demo we got from Mike Beltzner, director of Firefox, that shows one such possibility. Mozilla evangelist Paul Rouget created an in-video facial detection algorithm using JavaScript that picks up on faces in a video playing within a browser using HTML 5, and notes the color of the shirt below the face. Then, in any other video loaded in the browser with that same facial detection algorithm, that face can be identified as one and the same. Beltzner emphasized that this was put together in just one night.

With the incorporation of actual facial recognition technology, you could see this being quite cool — simple use cases might include security cameras or easy Facebook tagging. Though it’s true that developers have already made many cool things with existing video players like Flash and Silverlight, the inclusion of video as an element in the coming HTML 5 means that video can be more flexibly manipulated and extended across web sites, without ever downloading a plug-in.

Another Mozilla evangelist, Chris Blizzard, used Rouget’s facial detection demo to show how a person’s latest Twitter update might be overlaid onto a video above their head, once their face has been recognized. For those interested in investigating this further, here’s his longer demo from the Open Video Conference last weekend.

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To be clear, Second Life is social media. If you break down the key features of social media, you will see that Second Life stacks up very well against other popular tools. Here are some of the reasons why you’d be remiss to leave Second Life off a well-rounded, integrated social media marketing plan.

1. Conversation. We all talk about social media being about the conversation. In most social networks, that conversation comes in the form of forums, email or IM. Second Life includes an IM feature, but it also has voice chat, rendering it far more of a conversation enabler than Facebook or MySpace.

2. Community. Second Life contains a deeply connected and immersive community. Instead of your community existing as flat avatars or icons next to your name on a threaded message board, your Second Life community exists within 3-D spaces where your avatar can move about, gather with other avatars, even shake hands with them. You can attend and organize events. You can build gathering places and spaces from a treehouse, to an auditorium in the clouds, to an underwater conference room. Your avatar — and by extension, you — can actually be somewhere when interacting with your online community.

3. Groups. Facebook has groups, MySpace has groups. These are really just glorified forums or message boards where people congregate and converse by leaving messages. You might be able to broadcast a message to the group. You can promote things to the group, if appropriate. Second Life also has groups where you can broadcast notices, send IMs to group members who are online at the same time you are, and you can even hold voting for issues.

4. Events. Facebook Events are just listings of real-life events. Sure you can have web-based online events — via something like GoToMeeting or Calliflower or BlogTalk Radio — and use text or audio or images or a combination. But regular social networks can produce nothing like the events taking place in Second Life. Whether you attend a concert or a fundraiser, a comedy show or an educational workshop, a panel or a movie screening, an event in Second Life is the epitome of interactivity with images, sound, voice, movement, actions and reactions. If you can’t really be there in the real world, you can participate in an event and practically “be there” by accessing it via Second Life.

5. Advertising. There are many advertising methods available in Second Life as well as the ability to give away or sell goods and services. Advertising can be as simple and static as a billboard (although you can make billboards clickable, so that they give out notecards or lead to a web site). You can sponsor events and have signage on display like you would at a real-world event. You can purchase a booth at an expo within Second Life. You can even purchase ads on Second Life television networks such as Treet.tv.

The downsides of Second Life are few, although they can be substantial, including:

1. Accessibility. Not everyone can access Second Life for reasons ranging from computer capabilities to bandwidth issues. It is not for the weak tech setup.

2. Learning curve. Second Life is also not for the faint of heart. You have to love staring into a computer screen, have an uncanny facility with your keyboard, mouse and/or track pad, and be willing to put in time to learn how to stop bumping into walls.

3. Crashing. The technology is still evolving. While I still believe Second Life is the best virtual world out there with the most flexibility, freedom and possibilities out of all those I’ve tried to date, I also feel the pain of crashing mid-event or being unable to access an event I’m managing because of a technical failure on the server side.

4. Ownership. Linden Lab owns Second Life. If Linden Lab goes under, we lose everything we’ve created. We will be shut out of “our” Second Life.

Despite the downsides,  many marketers are making a mistake by not at least experimenting with Second Life. Even pure experimentation in Second Life sets you up with a new skillset — moving, building, marketing and selling in a 3-D space — that will come in handy as technologies continue to evolve. In the same way that it is shortsighted not to at least try Twitter in order to understand this “newfangled” communications tool that has influenced new styles of communications, it is shortsighted not to get an avatar, download the Second Life software, and explore.

And if you need a friendly tour guide, look up my avatar: Cybergrrl Oh. She is always happy to help!

What are your thoughts on Second Life as social media?

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It’s great to see Om returning to non-writing venues and I think he had a good time. So much so, that he’s thinking of pulling in other GigaOM network editors for regular audio chats, which should be a treat. As I mentioned over on GigaOM, this first effort is plain and simple: no intro music and not too long, making it easy to digest. You can listen through the inline player above, or download the 9.9MB file directly here.

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At issue are the fate of so-called “Openspaces,” Second Life regions where wilderness and open ocean predominate. Such regions were designated for “light use” when Linden put them up for sale earlier this year, but that term was somewhat ambiguously defined, and what happened next is a case study in the challenges inherent in managing user-generated content. Many residents began building massive constructions and businesses on their Openspaces, causing unexpected server load. Meanwhile, others kept their land use comparatively light, adding Openspaces to existing property to buy a better view, for example, or to use as extra space for virtual sailing and other activities. No one was happy when the company announced the price hikes, but the light users in particular felt unfairly penalized.

In the revision, Openspace owners who comply with these regions’ original intent will be exempt from the increase, but will have to abide by technical limitations that Linden Lab is now implementing into their world’s server architecture, to insure they’re kept light use. Those who don’t comply will eventually pay the original price hike. So far, the virtual world’s user base seems largely receptive to the change. In an unscientific survey on my Second Life blog, reaction currently runs overwhelmingly positive, with nearly 70 percent describing themselves as satisfied — though much of them, just begrudgingly so.

Image credit: “Libris no more,” by Wildstar Beaumont.

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There have been protests like this throughout the world’s five-year history, but without a competing virtual world offering all the unique features of Second Life, angry customers have largely stayed put, despite their grumblings. Now, however, there is an increasingly viable alternative: OpenSim, an open-source platform for developing virtual worlds, that was, ironically, made possible after Linden Lab released its viewer code. Though still in beta mode, OpenSim has attracted developers with IBM, Microsoft, and numerous startups, so it’s bound to rapidly improve.

Within 24 hours of the price hike announcement, more than 800 frustrated SL users, including influential members of the community, had registered with an attractive OpenSim variation. That might not seem like much, but Linden Lab is profitable primarily through virtual land sales, and less than 17 percent of its 507,000 active users are premium subscribers who can own SL real estate. (Economic stats here, SL reg. req.) That number has been slowly but steadily decreasing — there were 93,000 premium subscribers in December 2007, but in August 2008, the last published figure, less than 85,000. So if a few thousand of its land-owning users quit SL for OpenSim, accelerating this slide, the company will likely feel the pressure.

I contacted freshly minted Linden CEO Mark Kingdon for his comments about the protest. In a statement provided by his publicist, Kingdon told me, “We understand that this price adjustment will affect businesses and other projects of some our Second Life Residents,” and emphasized the cost increases were only directed at select landowners, who have until January 2009 to adjust themselves to the new rates. “To be clear,” Kingdon continued, “this price adjustment affects only a portion of land in Second Life; it does not apply to private islands or regular mainland property. We made this change to ensure an optimal Second Life experience for all Residents.”

That may be, but anger over this increase (which many consider unfair) and concern over future price hikes have become added incentives for users to consider OpenSim grids that charge less for virtual land. Second Life does retain a lot of goodwill among its supporters (including me), which will dampen any calls for a general exodus. Still, one thing remains clear: “I’m moving to OpenSim!” has already become the metaverse version of the “I’m moving to Canada!” threat we hear every U.S. Presidential election.

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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

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This is a question founders get asked again and again — by the curious, by company “lifers” and “fulltimers,” and especially by those who have their own little start up in their back pocket. But I don’t think this is the right question, because it forces an irrational decision into a rational framework.

For many of us, knowing when to “cut the cord” and commit to our startup dreams is challenging. (Some of you, including, “Hasan Luongo”:http://gigaom.com/2008/03/07/the-dangers-of-a-startup-democracy/ and “Ravneet Grewal”:http://gigaom.com/view/question-of-the-day56, have written great posts about this.)

But I think the right question to ask is instead: “When did you realize you couldn’t go back?” At some point, enough critical factors or events will make it very clear that you have no choice but to found your startup — it’s a bit like getting stuck outside the breakers in a dingy, there is finally a moment when you realize you have to go out because you _can’t_ come back in. At least this is how it happened for me. It was a slow, progressive and yet _very convincing_ process. I’ll walk you through my experience _Blow-by-Blow_, and share the lessons I learned along the way.

*July 2004:*
I quit Yahoo! to co-found a consulting firm in the oh-so-hip discipline of “design thinking.” But consulting is an unnatural activity for a product person like me, so just five months after launching my consulting enterprise, I found myself moonlighting on reinventing new content management system (CMS) product with a Danish programmer named Lars.

*_Lesson 1: You can run, but you can’t hide from your true nature. Product people make products, be they engineers, designers or management. (Let the consultants consult.)_*

*April 2006:*
I found out I was pregnant. As the little person grew inside me, my interest in flying to New York for important meetings with important consulting people became steadily less interesting to me than sitting at my PC designing interfaces for our little CMS, by now codenamed _fennel_. But we discover quickly that there is no such thing as a “little” CMS. If I had sat up one morning and said, “Hey I think I’ll start a company”, I might have picked a smaller problem, like reinventing email. Our feature list kept growing and growing – of course we needed asset management, of course we needed inline editing. Eventually Lars figured out we had to cut features ruthlessly, if even if meant ripping up big chunks of code, or we’d be dead before we were live. I resisted for a bit. I wanted so badly to make something better than what was out there, and better somehow meant more features.

*_Lesson 2: You don’t always pick your product, sometimes it picks you. But don’t let it boss you around. If you’ve bitten off something to big to chew, spit it out and cut it up._*

*November 2006:*
I had my baby. Thank God Lars had also become a parent a few months earlier, or this might have been the end of it all for us. If we hadn’t been experiencing the same thing, I don’t think we could have understood what the other was going through. The skype calls took on a new tone “I’m tired.” “I’m tired.” “I need coffee” “I haven’t slept for three days.” Development slowed to a crawl.

*January 2006:*
I went by my consulting partners’ office to formally quit. In the process I signed away all the IP I had developed with them in order to get sole ownership of the IP I’d developed on _fennel_. It was an amicable discussion, and my (now former) partners offered to contribute to my baby’s college fund. _Notice I said “formally” quit. Sometimes I think I quit the day I met Lars in Copenhagen. Other times I pin it down to when I begged time off a consulting gig to work on fennel. Really, I’d been slowly quitting my day job for a year, I just didn’t notice it._

*_Lesson 3: When you notice that you are willing to give up things you normally would keep a deathgrip on, for the sake of your product, that’s a sign that it’s time to cut the cord. Having engaged in long legal negotiations with clients to keep rights over our insights, I cheerfully signed them all away in order to focus on my other new baby, fennel._*

*Spring 2006-Spring 2007:*
We spent the next year “almost launching.” We got our first online magazine onto the platform, but the status of “customer-ready” perpetually eluded us. We fought over business models, pricing structures and conference call times. Money was running low, and we had to pick up consulting gigs here and there to make ends meet. But it takes weeks to land a consulting gig , and they never end when they are supposed to, so I tended to avoid them. My husband grew anxious. My credit grew thin. Fennel didn’t launch. Finally, pushed by pressure from my bank account and lured by a former coworker at Yahoo!, I interviewed at Google. And interviewed again and again.

And then *I started work at Google*. Here is how it went:
*Day 1:* Orientation.
*Day 2:* Orientation.
*Day 3:* Meet your team and discover your little CMS company – now placed on hold – might have dreaded “conflicts of interest.”
*Day 4:* Break tooth. Go home. Soul search. Realize you can’t just walk away from your own company.
*Day 5:* Tender resignation from Google.

*_Lesson 4: They say money makes you do crazy things, but really it makes you do sane things — like take a job. But if you aren’t tough enough to spit in the eye of safety and success, you shouldn’t be an entrepreneur._*

As I walked off campus, debadged, I started laughing. Laughing loud, like a crazy person, like joker in the old batman series, laughing and laughing and laughing. My heart leapt out of my mouth and flew high above the volleyball court and the cross-current swimming pool. My heart flew high above the eight cafes with gourmet chefs, and the Segways and the Japanese toilets. It flew across the bay and into the sun where it was lit up with joy. I laughed because I had done something only an idiot would do. I quit a job others would kill for to do something that didn’t have a chance in a million to survive.

We launched a week later.

*_Final Lesson: When did I know it was time to quit my job and go full time with my start up? When I didn’t have any other choice._*

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