Martian Chronical

I imagine that there has been more than a little schadenfreude circulating in the Linden Lab offices this week, as they digest the news that yet another pretender to the virtual world crown has hit the skids. Blue Mars, with its superior graphics and scalability, was hailed as the future of the 3D web, but, having reportedly never managed to attract more than a few thousand subscribers, now seems set for an uncertain future as an iPhone app.

It’s interesting to note that, despite all the flak they take from Second Life bloggers, the Lindens are still running the only profitable corner of the metaverse in existence. Could it be that they actually know what they are doing?

Maybe it’s just that chilled west-coast vibe

Brink of the Clouds

I was briefly excited by the news that a test version of Skylight, the fabled browser-based SL client, was up and running; I hurried to log on, only to find that it didn’t work on my iPhone or my netbook. I’m not sure if this is due to hardware limitations, OS incompatibility (iOS4.1 and Linux) or bandwidth issues, or some combination of the three, but whatever the cause it doesn’t bode well for the promise that the project would bring SL to low-powered mobile devices. I guess I could try it on my desktop, but that would seem to defeat the purpose a bit.

It is just a beta of course, and the final version, if it ever emerges, may sort these problems out. I still think the concept has some potentially fatal flaws though.

The central problem is that it is not at all clear that enabling browser access to SL is a good thing, business-wise. The theory seems to be that lowering the entry barrier will encourage more new users, but even if this works, there is still the problem of extracting enough revenue from these people to cover the substantial hardware, power and bandwidth costs associated with server-side rendering.

Currently residents are monetised via subscriptions, land-sales and tier charges, and participation in the in-world economy. However the particular population that this new service is supposed to attract – people who will look at SL in their browser, but can’t be bothered to download and install the client – seem less likely to be sufficiently invested in the idea of virtual worlds to make a significant contribution to these revenue streams.

What does that leave? Pay-per-minute access charges? Some sort of Farmville-clone that encourages people to spend money? Advertising on the web-page? I guess that the Lindens have worked out a business model, but it’s hard to see how it adds up.

Personally, I think that Skylight’s best chance of success lies in selling it as a way of adding value for their existing customers, rather than attracting new ones. I would certainly spend more time in-world if I could do it on the move, or even from the couch rather than at my desk, and I might even be willing to pay a bit more for my premium account if it included browser access.

So, bring on the clouds

Fading Skylight

Looking back through the SLS archives, I noticed that I seemed to have spent a lot more time in Second Life last October than I managed this year. Back then I wandered around Burning Life for ages and took in several Halloween activities; this time around I haven’t been in-world for more than about ten minutes. The problem is that I never have time to sit down in front of my desktop computer these days, and, since I can get most of what I want from the internet via my phone anyway, I don’t often have the inclination either.

I, therefore, must be exactly the target audience for the browser-based interface the Lab is rumoured to be working on. I’m obviously no expert in this area, but I do wonder about the timing and economics of such a move. I imagine that server-side rendering would massively increase hardware and bandwidth costs, and would need a big leap in revenue-generating visitors to make it pay off. That might have been possible a couple of years ago when SL was still getting a lot of attention, but now, I’m not so sure.

Universal Gloom

The Tory Party Conference is under way, and the headline news today is George Osborne’s plan to abolish child benefit payments to higher rate taxpayers.

This is a smart political move, as the fuss the cut will generate among the middle classes will dominate the media, and provide cover for the even harsher cuts he has in store for poorer sections of society (the full horror of which we probably won’t know until the conclusion of the spending review at the end of this month), promoting the fallacy that “We are all in this together”.

The attack on child benefit isn’t just about saving money though, it is a strike at one of the central pillars of the Welfare State, the concept of Universality. The idea that all children have the same entitlement, whatever their background, is a powerful statement of social equality, and eroding it is part of the Tories’ plan to turn back the last 60 years of progress and return us to the divided society of the pre-war era.

There is already a two-tier education system, which will be extended by the plans to allow Universities to charge what they like for tuition, effectively reserving higher learning, and the economic advantages it bestows, for the rich. The NHS in England is going to be dismantled in favour of a patchwork of privatised provision, and the general benefits system is threatened with huge cuts. All this while a double-dip recession looms, and millions face joblessness. The wealth gap may have grown massively over the last decade, but it looks like it may get mediaeval in the years ahead.

Grim times. It would be nice to think that things were looking brighter on the other side of the Atlantic, but it seems that the right is set for an unlikely resurgence there too. This month’s Rolling Stone has an excellent article on the Tea Party, their regressive politics (summed up succinctly by writer Matt Taibbi; “After lengthy study of the phenomenon, I’ve concluded that the whole miserable narrative boils down to one stark fact: They’re full of shit”), and how, ironically, their incoherent populist anger is being co-opted by the Republican Party to serve the interests of the financial elites that the TP-ers supposedly despise. The Democrats, meanwhile, seem to have been stunned into inaction by the disappointment that has been the Obama administration.

Grim, grim times. We can only keep working away, and hope that the cold winds of change blow some life into the embers of revolt.

Blame It on the Boogie

Exciting news from Scandinavia this week, where Swedish developers MindArk (the team behind Entropia Universe) have teamed up with the Michael Jackson estate to produce Planet Michael, “an innovative interactive gaming and social experience that celebrates Michael Jackson’s life as an artist and humanitarian”.

I could use this as a cue for a whole host of bad-taste jokes, but we’re much too classy for that here at SLS, so instead I’ll note that MindArk, along with other virtual world firms like (NSFW) Utherverse Digital Inc., seem to be following the sort of business plan that we’ve been advocating for Second Life for a while; don’t chase the mass market, go for the niche customers who are willing to pay a premium for the particular virtual experience they are interested in.

Rubber Soul

I was thinking the other day about this article, published on Salon around a year ago. It concerned the waning fortunes of the company behind Crocs, the aesthetically-challenged footwear brand. At the time the piece was written the firm looked in serious danger of going under, and its stock price had plummeted from a high of $70 to around $3. Worse was to come; at one point the shares traded for 79c, though today they are back up to $13.50, and it it looks like the hopes of discerning fashion-lovers everywhere that Crocs might disappear altogether are likely to remain unfulfilled.

What went wrong? Crocs were wildly popular in the middle of the last decade, and the company expanded massively to meet demand that they expected to keep on growing. In fact though, by 2009 everyone in the world who wanted a pair of Crocs had one already, and, since their indestructibility means that no one ever needs a second pair, sales dropped precipitously.

Crocs have managed to come back from the dead by refocussing on their core niche market – people who stand around all day at work – and forgetting about chasing mass appeal. Their advertising now emphasises comfort over fashionableness, which seems pretty obvious in retrospect.

How does this relate to virtual worlds? Well, I think the main lesson is that it’s important not to mistake enthusiastic take up of a product by a particular subsection of the market for a sign that said product will be equally attractive to other sections of that market. With enough media buzz it may be possible to whip up a short-term fad, but long term survival depends on looking after the core demographic, those who find enough genuine value in the product to keep them coming back for more once the initial novelty has faded.

Are there signs that Linden Lab is heeding this message? Yes and no, judging by what Philip Rosedale has had to say recently. He does seem to be alert to the fact that long-term residents need to be taken care of, but he still comes out with hyperbolic comments like “It is all going to happen, and we are going to get everyone in here eventually“, and “The fundamental belief that I have is that Second Life and virtual worlds are going to profoundly affect the human experience, profoundly, and in a positive way“. It may be that Philip doesn’t really believe this, and is just talking up the platform’s potential appeal to draw in new investors, but I fear that it’s more likely that he has so much invested in the idea of Second Life as a truly world-changing technology that he can’t bear to let it go.

Philip should relax, and embrace SL‘s cult status – even niche products can have a lasting cultural impact.

Virtual alchemy

When Second Life Shrink was in its planning stages a few years ago I checked out several different blog-hosting services before settling on WordPress. I liked that it was open-source, and a couple of people I knew had recommended it, but what sealed my decision was the amount of statistical information that the platform provides. As well seeing the raw visitor numbers I can analyse where they came from, which pages they have looked at, and which links they have followed, providing me with hours of pointless distraction.

Until fairly recently just about all our traffic came straight from search engines. We’re top on Google for “second life shrink” of course, and lately we’ve been doing well with “second life demographics” too. “Second life addiction” and “second life psychology” seem to come and go; we’ve been on the front page with both of those at various times, though currently we’re languishing down on page three, where only dedicated searchers will find us. We tend to do much better on Bing for some reason; I’m not sure whether that should be a source of pride or shame.

We used to get very few hits from direct links; unsurprisingly, with a couple of exceptions, no one has ever felt that any of our posts were worth drawing to the attention of a wider audience. Recently though we have been getting a steady stream of visitors from a whole host of unlikely sites. I won’t link to them for reasons that will become obvious; suffice to say that they are not the sort of places we would like to be associated with.

I figured that this was likely to be the result of some sort of traffic-generating scam; and a little research has proved that this is the case. The program in question promises to deliver hits by automatically visiting millions of blogs and spoofing an incoming link from the site that is being promoted; the theory is that bloggers, their curiosity piqued, will follow the link back, and then purchase diet pills, or click on Google ads, or otherwise participate in whatever shady e-commerce scheme the site owner is counting on to make back the $70 the package costs.

At least this sting only leaves the would-be web-entrepreneur out by the cost of the program; most of the get-rich-quick-with-Google/Twitter/Facebook offers that litter the web these days are potentially much more expensive. Victims are lured in by the promise of secret marketing tricks for a payment of only a couple of dollars, but after handing over their credit card details they find that they have subscribed to a “newsletter”, for which they are billed $50 or more a month. Of course they can cancel any time, by simply calling a premium-rate number in the Virgin Isles, staffed by operators who will put you on hold for 20 minutes before asking for your bank account number so that they can process the transaction. These sharp practices are not always confined to the murkier recesses of the internet; last year Facebook was awash with similar scams that tricked people into signing up for overpriced cellphone services, though these have been mostly purged now.

What’s interesting about these confidence tricks is not that they are new, but that they are ancient. Persuading people to suspend their disbelief by invoking some magical new paradigm must go back to the days when enterprising cavemen extracted shiny pebbles from their gullible fellows by promising to share the secrets of how to generate revenue using that new “fire” thing that everyone was talking about. From medieval alchemists tuning lead into gold, through Gregor MacGregor’s tales of colonial riches, to Charles Ponzi‘s arbitrage of the International Reply Coupon, today’s blog fraudsters stand in a proud line of grifters and shakedown-artists.

While I like to think that I can see through crude scams such as these, I have to admit that I am not immune to the subtler form of self-deception that keeps me handing money over to disreputable virtual-world-pedlars, not in the belief that it will enrich me materially (nothing so base), but in the hope that I might be able to reinvent myself as a better person (despite all the evidence to the contrary). The alchemists of old sought the Philosophers’ Stone, the mystical substance said to grant enlightenment and immortality; perhaps Second Life, which promises to allow one to transcend the limitations of corporeality, is its modern equivalent.

Resident value

When I left on holiday last month I was half-expecting Second Life to have vanished into the ether by the time I returned. That may not have happened (yet), but there are still plenty of reasons to be gloomy about the future.

Predictably enough, Mark Kingdon was forced to fall on his sword in the wake of the Lab’s severe downsizing, a pretty clear sign that the company’s investors had lost faith in in the management. (This event prompted an amusing post by Hamlet Au, in which he solemnly informed us that he had known all along that the Lab was on the wrong track with its enterprise strategy, though, rather like the financial experts who claimed to have seen the crash coming, he didn’t explain why he hadn’t told us about this before). Philip Rosedale is back in charge, and talking about a “back to basics” strategy, but it may be too little, too late.

Much has always been made of Linden Lab’s solid revenue stream and profitability, but there is more to business than profitability; profitable businesses are shut down every day. What’s more relevant to Second Life is the question of the rate of return on capital, and the company’s position in the investment cycle. The venture capitalists who have their money tied up in the Lab are not in for the long haul; they will be looking for a liquidity event at some point in the not too distant future. An IPO would seem to be out of the question in the current financial climate, which leaves two options – further private equity, or sale to a bigger company. Attracting the former would depend on convincing investors that the Second Life business has enough growth potential to underwrite a decent return on their capital when they cash out in a few years, which would be no mean task.

So that would seem to leave a sale as the only way forward. The Lab has two main assets: its technology and its customer base. The former, for all its faults, may be ahead of the field; the problem is that no one wants to be in that race any more. The future doesn’t lie in a big downloadable client that needs a high-end machine to run on; what people want now an experience they can access through their browsers and on their smartphones, and Second Life isn’t that world.

So the only thing that Linden Lab has that is worth a damn is us, the residents. They have worked out how to monetise us, through subscriptions, tier fees and Lindex commission, but if they are going to market us as a saleable asset they will have to figure out how to securitise us too. The only way I can see of doing that it to follow the social-media model.

Philip may be promising a return to the old Second Life, but the reality of the situation may force him to continue with Mark’s plan to turn SL into a 3D Facebook, though obviously that hasn’t worked out too well so far. Like I said, the virtual future looks bleak.

Preternatural Greenies

This article, written by our occasional arts correspondent Olivia, was posted well over a year ago, but it still gets a steady flow of hits, mainly from people searching Google for some combination of “Second”, “Life” and “Greenies”.

Most of the Rezzable sims reviewed in Olivia’s piece disappeared from the main SL grid last year, and have since taken up residence on Open Sim, but the Greenies Home hung in there, still drawing in the crowds with its whimsical charm.

But now an era is drawing to a close as the loveable little aliens prepare to blast off for pastures new. Is this an omen? There are many stories of animals mysteriously sensing impending natural disasters, such as these reports from Sri Lanka of the 2004 Boxing Day Tsunami. Perhaps our diminutive green friends have forseen the coming apocalypse, and are getting out while their Linden dollars are still worth something.

I too shall be disappearing, but only temporarily, as I venture out of the range of 3G and WiFi for a summer break. I’ll be back in a few weeks, to find out if Second Life is still around for me to write about.

Linden layoffs

Meanwhile, back in the virtual world, the news is rather downbeat too. As you will know by now, if you are interested in these things (as you must be if you are reading this), Linden Lab laid off around 100 employees this week, a third of their workforce, closing down their outlying offices and winding up the enterprise division.

I’m not one of those bloggers who affects to be on personal terms with the Lindens, so the list of redundancies means nothing to me, but apparently among the casualties are a VP, and various key staff in the technical, sales and marketing departments. The official spin is that the new configuration will allow the company to focus on its key objectives, but it’s hard to see such a level of cutbacks as anything other than a sign of corporate distress.

The response of the Second Life community to this news has been characteristically solipsistic, with a memorial garden set up where residents can show their grief for the fallen, since obviously our pain is the main story here. I suspect that the now-jobless Linden staffers may have appreciated a little practical solidarity more than such virtual gestures. I’m feeling a bit guilty that I never actually got round (so far at least) to organising a Second Life Communist Party, instead of just talking about it. We could have staged some sort of in-world protest, and our San Francisco comrades could have picketed the Lab’s offices or something. I hope the Lab’s remaining employees have seen the writing on the wall, and are getting themselves unionised.

What does this mean for the future of Second Life? The optimistic view is that the Lab is realigning itself with its core market, content to be a successful niche player rather than being hell-bent on expansion. My more pessimistic take is that the cuts are the desperate actions of a management that has no plan other than preparing the company for sale.

I’ve always been doubtful that the current Lab management knew what they were doing, and I think the ideal long-term outcome would involve M Linden turning the whole operation over to the residents, and letting us run it as a cooperative. I suspect though that he would rather see it fail than flirt with such a progressive ideal, and I’m not sure that many residents would be up for life as virtual communists either.

Time will tell I guess, but right now the $70 or so I paid for my last annual subscription is looking like one of my less smart investments.

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