Prokofy Neva reported that both the Electric Sheep’s OnRez and XStreet are both being bought out by Linden Lab, now confirmed.
The Lab reports that in addition to bringing both systems under their banner, it opens the door to other improvements:
“There is also potential to evolve the shopping experience with new tools (sharable wish lists, anyone? Gifting to non-Residents? Scheduled deliveries?) and capabilities. But like Amazon or Ebay, the core of the experience will always be about efficiency. Kitting out your avatar, buying a house/castle/skybox, or getting your inworld business off of the ground can be done in minutes. The range of offerings is both impressive and accessible and the goods are delivered inworld quickly. And because the shopping experience is browser-based, it’s easy to shop from work (on your lunch hour, naturally!):
The purchases give the Lab pretty much a lock on the current content sales sites related to Second Life. Both OnRez and Xstreet allow residents to sell content through both Web sites and in-world vendors. This move means that the Lab will own a significant chunk of the commercial marketing channels for user-generated content.
The move isn’t surprising, and I agree with Prok’s assessment that this mitigates against the inevitable lowering of profit from sim sales. The Lab has been going on and on over the past months about how important content creators are to the success of the platform. Without user-generated content, Second Life has no value. As server space becomes increasingly difficult to defend at high prices against far cheaper alternatives elsewhere, the Lab needed to make a move to create new revenue streams for itself that might have cross-platform opportunities.
With a currency system in place, and now two established “retail channels”, the Lab is putting itself in the services game, with the option to both siphon off a lot of pennies from OnRez/XStreet transactions in both Second Life and perhaps on openSim.
OpenSim and Trust
It strikes me that it will be ironic that some of the main drivers of value in virtual worlds – the ability to create content, sell it, a currency to support those transactions, and trusted sources to facilitate those things – are the very things that the developers of openSim choose to “leave until later”.
Over time, as Hypergrid and scatter-shot approaches to currency and markets erode the overall trust by users in “those openSim worlds”, it will be brands like the Linden currency and XStreet vending systems that may benefit – bringing “trusted brands” to grids that have deferred trust decisions until later.
The Lab will be able to cover its bets. Now that it has a suite of products, it can reopen the discussions of interoperability within the context of a suite of services and products that “trusted partners” can buy into. The model will be in services and content, not in hosting. The Lab recognizes this long-term strategy.
The Elevation of Content
But there’s perhaps a deeper play at work here. I’ve blogged numerous times that the folks who can solve a few key challenges will be winners as the virtual world industry evolves.
One of these challenges is search. And the reality is that XStreet is a far more effective search engine than anything the Lab has come up with. Shopping for content in Second Life is plodding, clunky, and ineffective. I’m probably not the only one who either starts and finishes a purchase on the Web (say, need a quick chair or a plant or whatever), or starts a search on the Web and links to a store or mall through the SLURL in an ad.
XStreet gives the Lab a “built” search engine that WORKS. People use it. It saves time. It makes vendors money. Residents are happy. OnRez just completes the picture – taking a competitor out of the market (and sure, it has a few nice features of its own).
But if XStreet works for object search why can’t it work for other types as well? I mean, people sell land there. I’ve even seen business services offered.
But even past search, value is being accrued at ever higher “levels of meaning.” For example, one time if you were setting up a virtual office, you’d go to a furniture store, a building sim – you’d buy the OBJECTS. Increasingly, with schools rolling in or enterprise, you’ll see content aggregated at increasingly higher levels of value. The best example of this is Immersive Workspaces – it’s a prepackaged build, really, with the best technology aggregated, some new stuff built (Web-side stuff in particular), and consulting services tacked on for good measure. Rivers Run Red isn’t selling desks, they’re selling packages that aggregate value. (They also have the advantage of a firewall, but one day we’ll all have access to that as well).
The problem has been that the Lab had no easy place to point people. Sure, there’s the preferred partner list or whatever it is. But that’s not the same as a telling a teacher that you can buy a “classroom in a box on the Linden Lab-owned content exchange”. The Lab doesn’t even need to make that much MONEY from those sales – what they earn is the ability to control an important communication tool to content creators and to guide the proper packaging of their content into things that are useful to specific segments.
The sale doesn’t just give them pennies, it gives them a whole new platform for building bridges between resident content creators and market segments.
Maybe there WILL be an upside to residents. Prok would argue that they’re co-opting success: buying out success and, in a way, killing innovation. I’d argue that there may be a larger objective, which is to take a role in helping residents to package their work for specific segments, to build out the ability to search and find it, and sure, to make a few bucks off the top, while also building services that they can port to other platforms.
But then again – we’ll just have to see. Because a lot of it would end up in the execution. And as we’ve seen lately, execution can be a tricky business.
Dusan, you obviously don’t attempt to run a business inworld, or you wouldn’t be making these claims about the X Street search.
Yes, we all go to X Street to do searches, simply because it is arranged in categories already, like amazon.com — not like Google, not like Search ALL, but more like Search Places.
I can go first and manually drill down to something like structures — prefabs — offices and then search within that refined category.
But then what happens is I get such a huge list of stuff that I can’t often reasonably make use of it. There’s an enormous amount of stuff on there, and people madly advertise by putting every single colour variation of every single dress or table into the system to try to show up.
So Search/Places still drives the inworld sales, because after seeing there might be something possibly interesting in a store from the huge grab bag you get from X St, you go inworld to that store and hone in on what the thing actually looks like because as in RL, the picture can be very different than the 3-D virtuality/reality.
I understand why LL did this, but I really don’t like some of the fine print I’m reading now that merely confirm my queasy feelings from the start.
o they will eventually merge X St with their own search, and therefore feature those merchants that decide to go on that service. Maybe not everyone will. Not everyone will want to sell an have the Lindens take a commission — it’s like being left out of the yellow pages, however, if you don’t agree to go on this system
o X st used to represent what GOM represented, an offshore “bank” of sorts where you Lindens were held and your dollars were held, apart from the SL system. If the Lindens unfairly banned you for any reason or no reason, you’d still be able to appeal to X St to cash you out or even transfer your account, whereas the Lindens would not cash you out.
o There is the freedom of information and expression of the independent forums — not trivial, for many reasons that have to do with a sort of “better business bureau” function to curb fraud — the sort of threads the Lindens automatically shut as “defamation of individual or group” which they now have unfortunately stealthed into their AR system
o And yes, when LL takes over one business and another, it’s unsettling, because it isn’t necessarly in the public interest, only in LL’s interest. They needed a revenue stream, they bought one. We needed an independent shopping site — we lost one.
Over time, Linden Lab will be able to make it much easier for merchants to sell their stuff via the web store (XStreet or whatever they rename it – maybe “SL Exchange”!).
Why?
1) New SL residents who want to buy or sell something on the web store won’t have to create a special XStreet account and then jump through hoops to get it connected with an SL account. The web store will just use their already-existing SL account.
2) Right now, to sell something SL object on XStreet, you have to put the item inside a special inworld “magic box” that will send it to whoever buys the item via the web. Linden Lab will be able to eliminate that hassle. Sellers will just check a “Sell on XStreet” box or similar (in the item’s properties). The seller could leave the item in their inventory. When someone buys the item via the web store, Linden Lab will just instruct XStreet Linden to send you a copy (straight from the asset servers, where everything really lives anyway).
3) It would be easy for LL to make the listings for each item on the web store available via the SL client.
Prokofy makes a good point that it can still be hard to find stuff in XStreet. I’ve spent a lot of time wading through pages and pages of listings in hopes of finding something good. I wonder if it’s possible to move the whole thing over to a more modern webstore platform.
I think Onrez is superior in most ways. I would hope that LL maintains Onrez functions like the vendors, the Onrez wallet, and the vastly superior web design. SLX always strikes me as a fine example of a web page from about 1995.
On the other hand, I am concerned about the future of the independent forums and of SLX’s currency exchange which is faster and cheaper than the official exchange.
A number of commenters have been bitterly critical of LL collecting sales commissions. I am not, provided that the commissions stay at a reasonable level.
LL needs a more diversified revenue base. Relying entirely on land tier means only that landowners are paying a large subsidy to non-landowners. In an ideal world, and I’d the last user to say LL always meets that standard, the sales commission revenue could be sued to capture a contribution from users who do not pay tier. Real world communities stopped trying to run on land taxes alone several hundred years ago. Sl may not be medieval but right now it uses a medieval fiscal model.
It should be noted that OnRez isn’t being integerated; they’re being shut down, completely. There are things behind the scenes going on here that the majority of SL users aren’t aware of– and it all points to Linden Lab trying to secure a monopoly in the virtual worlds field.
This isnt’ surprising considering that the OpenGrid project is quickly approaching viable stage. Linden Lab taking control of the two primary online markets is a guarantee that the Open Grid project (and specifically OpenLife) will not be able to access those resources.
Regarding the search engines: imo neither the Second Life nor XstreetSL search engines are all that spiffy. Frankly, they’re amateurish, lacking any degree of professionalism or adequate usability.
I believe both Onrez and XstreetSL had their place in the VR world. But now that they have been acquired by Linden Lab, based on past history I foresee them possibly becoming far less valuable overall. While Linden Lab touts all the things they plan to do “for the customer”… the fact that they are shutting down OnRez in less than a month combined with the knowledge of the potential they are shutting out (namely, those resources being open to other grids) reeks of monopoly… and greatly devaluates the potential of those companies.
The only people this is “merger “is good for is LL. We all know it is not a merger just a buy out to eliminate any competition and also a means to stop people making money without LL taking its usual percentage .First it was raised sim prices , now this , the trust LL once had is rapidly going. Soon it will it outprice itself in the metaverse and the only people to blame will be the money greedy decision makers within LL .
Great article as always Dusan. I agree as far as our ReactionGrid OpenSim grid is concerned we will provide scripts to allow users to create their own stores on the web and inworld hich we will link together.
It is, as you point out, a lower priority than stability, customer service, uptime & education of users on how to create their own works of art.
While we understand many users will want to buy rather than create we feel on our grid these users will be in far lower numbers than SL as we try to one on one help them to create.
We very much care that our “Gridizens” are able to make money but it is not what we feel will make our grid a success first. What is the point of our smaller but more niche grids if we don’t try to focus on the areas that SL doesn’t do well?
So I say to our users we will implement a light economy, but 2009 is about you being able to login and get creating on our grid.
Thanks again Dusan for the best commentary out there!
I do want to mention this phrase “erode the overall trust by users in “those openSim worlds”. Our grid has easier access to the owners than SL. You can call our offices with issues or Skype/MSN us. We are inworld and easy to find.
We are the first OpenSim grid to host a major event for Microsoft this May with over 90 attendees planned. We have been in business hosting sites, e-commerce and business applications for over 12 years as G2.
If you are concerned with trust and OpenSim you should visit our grid and meet the staff in person to find out if there is an issue for yourself.
We will in fact build better trust with our users than has ever been done in any grid you can mention, period!
No no no — OnRez Shop would be closed anyway, the Sheep don’t want that (and the client) any more, since they’re semi-abandoning development for SL anyway. February ‘09 was the deadline for the shutdown. LL probably just bought it to at least save what they could.
I agree with Prokofy, searching in XStreetSL is a pain, because we’re spoiled by Google
XStreetSL doesn’t even allow complex searches like two words together (it searches by one OR the other). But, alas, that will now be easy to fix: feed Apotheus’ listings exported from XStreetSL into LL’s Google Appliance (the very same they use for Search > All), and there you go 
Instant Google-based search!
No, actually short-term, I think this is exciting: small content producers will definitely enjoy a huge increase in sales. It’s long-term where I worry. Webshop-based shopping will ultimately drive out the Big Brands in SL — the ones with thousands of products and millions of monthly transactions — since they’ll simply list their products on an in-world XStreetSL, and close down their sims. And all their shops. And tier down. They’ll just create content — like they do for IMVU, There.com, Kaneva, and others — and put it on the web, add some extra for classifieds and higher ranking, and that’s all. So, bye-bye in-world 3D shopping, which was one of the key features of Second Life. I cannot say how much this worries me. In-world shopping was not just about clicking on vendors — it meant browsing through shops and talking to people, it meant organising with friends to go to a shopping spree, it meant talking to owners and shop assistants to get recommendations, it meant returning to a space which was fun and enjoyable. Well, not to all, of course. But at least for a few millions.
How many sims are there which only have shops on them? Another 10,000? Well, my prediction is that they will all go away, only a fool will still keep an in-world shop and pay costly tier for it if you can simply sell it on a well-done web site…
XStreetSL and OnRez Shop, as well as the other independent webshops around there, never “hurt” commerce because they had marginal use. XStreetSL has about 1/4000th or 1/5000th of the content for sale in SL (OnRez Shop even less). The transactions from those sales, compared to what happened inside SL, were marginal, and thus, many of the major brands totally neglected to offer their products on the webshops. For small merchants, however, these were a blessing (less competition, and a large enough market, for no running costs, and no upfront investment).
Now imagine the exact reverse will happen: all content in SL being offered on the webshops because they’re integrated within the SL client. Bye-bye in-world shopping…
Mmmh. Another decision like this, and by the end of 2009, there will be little left on the grid… and maybe we’ll all be on Facebook, selling avatar clothes to wear on our own OpenSim-based sims at home
[...] the real world economy back in April of 2008. Reading similar thoughts about this evolution from Dunsan, Prokofy, and Wagner provide some good insight. I really wish I had posted my internal blog post [...]
LL really does have the feeblest public relations staff in the known universe. Assuming that Gwyn’s statements are accurate, which I do, the very first point LL should have made is that Onrez was about to fold and XStreet was barely making payroll. There’s a lot of wolfpacking at LL’s expense and most of us have been guilty of it at what time or another. LL’s failure to post pertinent facts just feeds the bloodlust.
Gwyneth, don’t panic. I don’t think anything will replace in-world shopping. Even if the big brands decide to not have their stuff in-world, they are about to get disappointed at the web sales.
I have been using Onrez and Xstreet for a while and the sales on both combined cannot match a 10th of what my sales are in-world. I assume it is like that for others too, well, depending on how much advertising they do in-world.
Personally I don’t mind this move at all, the only thing that worries me is the Linden Exchange. XStreet always gave about 30 dollars US MORE per 50k Lindens (I think that’s what it was last time I looked) then Linden Lab. SO that would be like…I am losing a good chunk of money here. Do I smell a price raise?
Second Life needs to be as complete a solution as possible. Web-based search and commerce should really have been a part of SL from the beginning, introduced with the inworld currency. Seems completely (and uncharacteristically) sensible to me that LL should have bought XStreet and onez to achieve this. Of course I’m concerned about what kind of mess they might make of it but generally this is good news.
It certainly is not going to kill inworld shopping – it’s likely to do the opposite. Linden will probably, long term, tether listing on the website to inworld presence – in other words to have an item listed on the website it will probably have to exist inworld (even if packaged up in a box). Linden’s business is running an immersive virtual world not a commerce website full of questionable content from anonymous alt accounts – they’ll likely use the commerce website to encourage greater land ownership and prim usage and not less.
There are potential UI benefits too – we should be able to select a product on the site and click a link that directs us right to that object inworld – not just the default landing point of the parcel it’s on, but exactly to the point inworld where we can, if practical, inspect it before buying.
We need to remember that Second Life is not some new virtual democracy, even if Linden formerly liked to pretend it was. You enjoy the ‘freedoms’ and ‘rights’ in SL that Linden see fit to grant you – it’s a commercial platform, increasingly separate to The Grid, that has to pay its way. Out of the SL project may come a wider and more open virtual world standard that will encompass more variety of use and expression – but right now SL itself is the dirty capitalist engine that’s driving us all there.
One word : Censorship
Now LL is able to impose what is suitable or not in their grids and enduser wont’t have any choice anymore.
I guess we will see soon enough some kind of “black market” for the newly banned items.
I guess it’s just a matter of time before some items/skins will be deleted.
0.2e
SM
Hi Kyle G,
You mentioned about your companies excellent service and response. All good and very encouraging. Unless though, you can offer a true SLA, a real team who can bug fix this is not going to fly long term. You cannot as an Service Provider be expected to support the code, this has to come from a deeper source.
This is a very swift move by the Lindens, but nonetheless this will not shut down in-world shopping, which was is and will continue to be one of the most interesting activities in SL. Surely companies like metaLIFE(http://meta-LIFE.net) and Hippo(http://www.hippo-technologies.co.uk/) will benefit – cause they offer advanced in-world networked vending systems, that allow management of items in one place. These systems will replace the gap created by the loss of OnRez vending system.
For some time I thought SL will never go this way and leave e-commerce for the residents to handle, but well they are trying to create a unified system controlled by a single entity(LL) that handles all persons activities in the metaverse. Buying these sites – is a natural step in creation of such a system! we will just have to wait and see where that leads us to:
- more freedom and empowerment
- or more constraints and obstacles to go around( and formation of black markets as someone mentioned above)
Time will tell
does that mean xstreetsl will finally remove all stolen content sold there? nowadays a huge part of the xstreetsl “premade builders packs” and “buisness in a box” sold there is stolen items, its ridiculous that xstreetsl is so uncaring about it.
[...] Opensim “emerging markets” and income they may generate. There’s even a case, as Dusan Writer points out, for the Xstreet acquisition to re-open the doors to LL’s [...]