StartupRx: No Second Life for unfocused startups
Unless your name is Larry David, you’re probably not going to get away with building a business around “nothing.” But, it seems, that’s exactly what Phillip Rosedale had in mind when he started down the road of developing the massive multiplayer online community of Second Life. After several years of rocky riding, with rumors of shutdown swirling more than once, the company’s recently announced 30% staff layoffs, and the resignation of its CEO Mark Kingdon, begs the obvious question: does Second Life have any lives left?
Like many entrepreneurs, Rosedale started with a technology, then sought to build a business around it. In his case the technology was an extension of something that was already working: the virtual world of gaming. While Rosedale toiled and tweaked his virtual world technology, the phenomena of massive online multiplayer gaming grew up. Just about the time that Everquest and World of Warcraft were hitting it big, Rosedale launched Second Life with the intention of unleashing the inner geek in a much bigger audience: the rest of the world. Unfortunately, he didn’t realize that the “if you build it they will come – with a can of Mountain Dew firmly clenched in their sweaty hands” mantra doesn’t necessarily apply to those of us who already had a Real Life.
Rosedale told Inc. magazine (2007) that Second Life is a “heaven for entrepreneurs,” with thousands of businesses selling things ranging from clothes to real estate to body parts (for Second Life avatars). And what kind of avatars did you find there? Everything from human sized raccoons to cheating spouses to “cultists” who set up sexual and spiritual retreats. Then in 2007 several political avatars very publically joined this party. John Edwards, Hillary Clinton and Barack Obama all had Second Life headquarters with virtual trappings like stages, informational leaflet center and helipads (necessary in a world where everyone teleports?).
And where there’s money, the PR and marketing firms were quick to follow. Edelman and Leo Burnett were two notable examples; you can find the rest of the companies here. It wasn’t long before these bleeding edge “playas” were spreading their Second Life hyperbole in the Real World. Their hype machines were putting out releases like “1st organic market,” “1st tabloid newspaper” and “1st PR campaign” opens in Second Life. Well, the Wild West good times didn’t last too long because the 4-500 residents of Second Life community Dreamland became the 1st to ban PR people from their area.
It all seemed to be going well through the end of the presidential election cycle, then life began to slow down. According to Linden Labs, 18 million accounts were registered as of January 2010, with no information on actual usage provided. Clearly there wasn’t enough to keep at least 30% of the staff and one CEO busy enough to maintain this virtual world.
Rosedale stepped aside in 2008 so a that a new CEO, Mark Kingdon, could “focus” the company. After a brief tenure the new/old CEO Kingdon resigned to “make Second Life simpler.” Rosedale resumed the helm as old/new CEO in 2010 and announced that his mission will be to “simplify and focus product priorities.” All this talk of complications, simplifications and lack of focus leads one to wonder if Rosedale’s business model was written by his avatar.
What happened? Rosedale’s hubris lies in assuming that Second Life would be immune to the forces of Real Life – and that little things like the recession wouldn’t impact the happy times in his virtual world. Earth to Phillip Linden (Rosedale’s Second Life avatar): people are more likely to feed and house themselves before their virtual identities.
What Rosedale didn’t count on was what his potential investors repeatedly told him: “you’ve got to turn this thing into some kind of a game, it needs to have a purpose.” Beyond the trolls who reimaged themselves as Brad Pitt, milquetoast husbands or wives scurrying around this virtual world “cheating” with other avatars or store owners peddling real estate, clothes and body enhancements, Second Life didn’t really have much to offer – it didn’t have a plot. There was no endgame, no real reason to be there. Second Life really couldn’t hold a candle to Real Life.
StartupRx: Rosedale is no different than any other technologist who has fallen so in love with his code that he feels the rest of the world will do so as well. He developed one piece of a business equation and felt that it was sufficient to sustain a company. Rosedale’s pride got in the way of his logic. It seems as if Second Life was launched primarily on gut instinct. Was there any market research conducted? Were there long term testers who vetted the model? Was there any historical data of sustained self written game play? The closest thing to the Second Life model might be the Sim franchise. Remember that? It has been eclipsed by properties like Call of Duty: Modern Warfare, that offers a plot driven game supported with a robust online community and a ranking system. These models work because there is a framework to function around.
When creating the model for your own startup look at historical examples and conduct your own research. Talk to the potential consumer, let them play with your idea. Steel yourself to the fact that it may only be part of a solution that answers a market need. Don’t make Rosedale’s mistake of falling so in love with your technology that you become blind, deaf and dumb to the market you’re seeking.
Take a look at the Gartner numbers from last year and Second Life came in second place – SECOND – only to World of Warcraft – to total user-hours, and FIRST when it came to average hours per week per user.
How do your assertions of how unpopular Second Life is compare to these findings? Perhaps you might rethink your reasoning.
Sorry – I meant Neilsen, not Gartner. My mistake.
“According to Linden Labs, 18 million accounts were registered as of January 2010, with no information on actual usage provided.”
* Linden Lab, not Linden Labs.
* 19,684,656 accounts as of midnight, US Pacific time.
* Usage figures are readily available, and always have been.
I tire of correcting this type of badly researched, knee-jerk journalism, but once again, here goes:
Firstly, to say that Second Life needs to have a purpose, an endgame, is like suggesting that a programming language needs to have the same. The very reason SL has been so successful is because it has no endgame. People can create their own reality tailored to suit them. They dont have to run around dressed as orcs fighting a level 47 druid. They dont have to eat and drink every hour a la The Sims. They can just exist.
Yes Linden Labs has laid off 30 staff members, and yes, the CEO has stepped down.
This is actually good news for second life.
For the past two years since Mark Kingdon took over from Philip as CEO, Linden Labs has repeatedly made bad decisions, ignored its client base, and failed spectacularly at nearly everything it has attempted with the notable exception of improving stability. Linden Labs badly needed the restructure, it was unfocussed, unprofessional, and this would have eventually had a very negative impact on Second Life itself. All Linden Labs has done is consolodate its business in the US (only non-US personal lost their posts), and replace the struggling CEO.
However all this is in no way related to any failure of SL’s business model. Q1 2010 (yes thats right, last quater), saw records broken in every aspect of Second Life. User concurrency, in-world sales, hours spent on line and most importantly, user to user transactions, all reached record levels. Last year, Second Lifes user transactions totalled over 1/2 billion US dollars.
1/2 a billion dollars…
A flawed business plan and vision?
I hardly think so…..
The problem is not the focus of the actual workings of Second Life, but what Linden Labs thinks is their perfect audience.
In the real world people generally entertain themselves by either… Watching TV/movies, socialising, playing/watching sports or games or by having some sort of hobby.
Most of these themes are covered well on the Internet except the ‘hobby’ part. This is where Second Life comes in.
I like Second Life because I like to create. It’s like a big 4d Lego set (the forth dimension added because you can actually write code to make your creations function in some way). Now whilst Lego is not a game, it’s still a very valid form of entertainment. The same applies to Second Life.
The problem is Linden Labs seems to think that everybody is a hobbyist and that Second Life is a mainstream environment. It doesn’t get it that most people just haven’t got the focus or attention span to be bothered with all extra effort it takes to create an avatar or think up their own game-plan for the place.
Yes there is a social aspect to Second Life but it’s not the same as say Facebook. The social aspect comes in when people share those creations in some way or another. The focus of the socialising is around things/events within Second Life and rarely does the real world have any impact.
Second Life is not for everybody just like not everyone in the real world has a hobby but there’s a significant minority out there that do get the concept, if not the implementation of such an environment. Linden Labs should stop trying to please everyone and focus on those creative types that would get it.
So what if Second Life can only ever appeal to say 10% of the Internet using populace. That would still be 180 million people.
They should be enhancing it’s creative potential, not dumbing the place down so that casual users can dip in and out.
I honestly can’t think of any reason I would want to just pop into Second Life for just 15 minutes say during my lunch break. So why Linden Labs is hell bent on creating cut down browser plugins and whatever for the casual user is beyond me. SL needs much more of my attention and I would rather spend 2-3 hours one maybe two evenings a week there (I have a real life too) with some proper development tools on an optimized-for-3D application.
Secondlife isn’t a game… that’s why there’s no score, no *end game*.
It’s a second life. Period. End. Stop.
Along with those that choose to create content there are those that want to enjoy and perform music… Music from all over the world.
There are those of us that want to develope quasi personal communicative relationships with people from all over the world.
Personally I came to Secondlife at age 65 a complete newcomer to computers. I met a person in Secondlife from Bangladesh that has taken me from one that couldn’t copy/paste to someone that understands enought HTML to have a reasonably well read blog.
This report would seem to be another of articles written as “filler” material and one more instance of those who would *report* without investigation.
Considered solely as a vehicle for VOIP, Second Life is not far behind Skype. It is, by all means a niche market, now and perhaps always, but it’s a pretty lucrative niche market. When you consider that many of the 30% cut loose were customer service staff in England, and that many customers could not understand their bizarre provincial accents, the firings make a lot of good sense.
Following Second Life for almost 4 years now, articles like this give me a lot to think about, but not about Second Life, but about journalism. Someone with no insight at all can pick any number of default statements about any subject from the internet, and cook himself an article, drawing any kind of conclusions based on his own prejudices and preconceptions. Problem is, since none of the statements has been verified or set into proper proportions of importance, only something surreal can come out of it. So if you just question a few of the initial statements, the entire article falls to pieces. Thinking that a big deal of the information we have at hand about the world we live in is like this, explains why our planet is in the state it is in. Big confusion.
Here we go again, somebody prematurely pronouncing the death of Second Life. The author might want to look at how education is starting to use this virtual world; hundreds of schools are setting up here. These are not ‘games’ and they are finding a real purpose for this wonderful work of technology.
The author of the original article obviously doesn’t “get” Second Life.
I agree with Phil Clarke- The appeal of Second life is that it DOESN’T have an endgame, or an agenda, or ‘levels’. It is NOT predicated on warfare, conflict, or competition. All those other games where the only purpose is to see how much you can steal, or how many of the enemy you can kill or intimidate is totally repugnant, and, I feel, antisocial.
When I came into Second Life, I immediately “got it”. In Second Life my world is what I make it. I have been a Second Life resident now for more than 3 years. My avatar lives in a place crafted, from the bedrock up, by my own creativity. I can be or do ANYTHING. I have friends from around the world that are like minded, driven by creativity, curiosity, and cooperation- not by an urge to destroy or steal, or beat the other players at any cost, or get the highest score. Certainly, there are places in Second Life that are like that, but I don’t have to go there- another strength of Second Life; there IS something for everyone, once you learn your way around and learn the tools. If you can’t find your niche, you can create it yourself. The fact that the learning curve is steep, and there is always something new to learn is an appeal, not a disincentive. I tire of places that are continually “dumbed down”.
At first, I was alarmed at the 30% layoffs at Linden Labs, but now I am cautiously optimistic. It is stated that the consolidation is to concentrate on its core customers, and core functionality. It is said that many of those let go were involved with failed initiatives to small segments of the user base, to the disaster called the version 2.0 client, and to the efforts to “facebook-ize” the platform. If this refocusing on its core comes to pass, Second Life will stabilize and continue on, with a loyal user base of modest size, a refuge from the teeming masses of hypercompetative assassins, orcs and warriors.
Daela made the comment that he thought “Linden Labs seems to think that everybody is a hobbyist and that Second Life is a mainstream environment” – this was the philosophy pushed by former CEO Kingdon, and it failed. Kingdon had it wrong- good riddance to him. Lets see if Rosedale can re-establish the vision.
I agree with Deala where he says-
“So what if Second Life can only ever appeal to say 10% of the Internet using populace. That would still be 180 million people.
They should be enhancing it’s creative potential, not dumbing the place down so that casual users can dip in and out.”
I have my fingers crossed, hoping that Rosedale will put his ship back on its proper course.
This level of response is wonderful – and there is clearly a lot of emotion in the many Second Life users who are reacting to my piece. My assessment of Second Life comes from the position of business and marketing analysis – it’s not a matter of “getting” the company – as if it was some wine that required a certain pallet. It’s a company – pure and simple that is either moving forwards or backwards.
I don’t buy unqualified published numbers like “number of users.” A company can have a buyer who shops once and never returns – does that make that buyer into a customer? I think not. So the numbers being floated on users are worthless unless they are qualified as active – and further qualified for how long.
Beyond the experiential data offered in the comments – and the clear emotional ties most of these commentators have with the company – the rest of the facts on Second Life (less the PR hype put out about why decisions are made) – seem to be these:
The vast number of users are unqualified (another PR tactic).
30% of the staff is now gone.
The new CEO is now the old CEO and the old CEO is now the new CEO.
The PR seems to be working well on the company’s fan base.
Second Life’s downturn is not a new story – I’ve personally worked with or seen over 100 high fliers take a nose dive. I’m not singling this company out for failure – because I seem to have misplaced my crystal ball.
I do agree the article has some errors, I am a consultant and expert on Viral Marketing and have been following Second Life’s “Life” since its creation, over 6 years I have watched it, even taken part.
I called it quits earlier this year after a tough decision. I ran a very large group that assisted with player driven Development of Second Life.
I have repeatedly said this, many many times before. Including to Mark Kingdon during a conference.
Second Life has no user support, your community team has been distanced from your company, your “Lindens” as you call them have no in-world presence. You have abandoned all the trust that the previous “Government” has built and your asking for trouble.
Its like having a city and suddenly every city official vanished and no one knows who to follow anymore.
All I got back was a chuckle and that was it.
Mark tried his best with trying to develop the usability of second life, but at the cost of abandoning the community already built to try and gain new users, the community ended up worse off.
They took all the support from in-world out, and put it on a “support portal” they then out-sourced this support portal to third party companies and to volunteers (or so I believe, but maybe mistaken), secondly they began imposing strange rules on their staff about “mixing” with the general population of the game… further distancing themselves even more…
Then the in-world events slowly died off, and seeing a “Linden” became an even rarer event.
Then there is the land crisis, Mark Kingdon began giving free plots of land to premium members, small houses to decorate as they wish. A smart move if it was done in the beginning of the game, but then a new problem surfaced… all the land that already existed was abandoned, prices dropped and now there are empty plots all over the virtual world.
I sometimes wonder if this is my fault, if I took that job offer in Jan 09, could I have changed anything?
Excuse my messy grammar, and bad word order… I will follow Second Life closely thats for sure.
Consider this statement:
“And what kind of avatars did you find there? Everything from human sized raccoons to cheating spouses to “cultists” who set up sexual and spiritual retreats. ”
Seems to me, the writer, if he visited Second Life at all, sought out & visited only certain types of places.
Ummm…. thanks for sharing? ^^;
Actually that description was provided by an Inc. magazine interview with Rosedale. Please reread the article – you’ll find the attribution.
Steve, the fact that you quote a negative characterization coming from a magazine is further proof that you didn’t do any serious research of what really Second Life has to offer. How can you not expect Second Life residents to be annoyed by such colorful remarks as “cheating spouses”?
Why not quoting the thriving musical and artistic communities? The hundreds of live concerts, art and cultural events, charitable events, talk shows, seminaries, roleplaying, sport events? Just to mention gaming/roleplaying, there is a large virtual sailing community with races scheduled every single day and several yacht clubs, did you know that? What about people from all over the world being able to socialize in ways that no social network could ever match?
Second Life is an environment with an incredible variety and a very passionate membership base. And, no, it’s not just a matter of company PR working well. As much as Second Life residents are ready to defend THEIR world, they are ready to dissect figures and harshly criticize the company.
Second Life is just the opposite of what you recommend. Second Life is a canvas people can use to create anything they want. The more one explores the environment, the more one find an incredible amount of talent and creativity. Second Life is a social experiment that attracts artists, creatives, intellectuals, technologists, futurists, transhumanitarians. Second Life is not your run-of-the-mill virtual world or a game where the only intent is to form hordes and kill your enemies. The level of intellectual exchange has a very high profile.
For startups, you recommend: “When creating the model for your own startup look at historical examples and conduct your own research”. Well, the same applies to you: when dealing with something as complex as Second Life, do some serious research. Don’t copy/paste from other articles because most journalists make the same mistake you did. Research, just follow some of the more active residents on Twitter to find a wealth of information. Ask for opinions.
I recommend you read this blog post by Ciaran Laval for a balanced comment on your article compared to one written on MMO Hut. It’s interesting reading: http://your2ndplace.com/node/1811
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