Second Life

When Amazon Buys Linden Lab

Hey Jeff, its been a while since we talked, way back in the day when you took an early stake in Linden Lab and Second Life.

And thanks again for the money you sent our way back in 2006 – I guess it was a little early to do that “going mainstream” thing.

But we’ve been thinking about you. A LOT.

Actually, its been kind of tough not to let the cat out of the bag and it’s kind of surprising how few people have picked up on it. But I’m sure you figured it out – you’re a smart guy, and all you’d have to do is glance our way now and then (you’re getting the shareholder updates, right?) to see how much we’ve been doing on your behalf.

Now, we know you have a lot on your mind what with that whole iPad/Kindle thing you’re worrying about. But actually, that’s why I’m writing. See, I think it’s time for Amazon to swallow us up, and I think it will give you a big leg-up on Apple, and Facebook and all that crowd. But let me explain that in a minute.

The Time is Now
First, just wanted you to know that we’ve been laying a lot of groundwork for you to take the keys to the place. And even though there’s more work to do, this might be just the ticket for both you and for us.

We’re just about to do that whole social media thing I mentioned in our last shareholder report. We’re going to go viral and all that. Run some ads. Grow the user numbers. But before we do, you can probably convince Philip and the board to sell us for a decent price. Get us now before our numbers start going up and our valuation grows.

But you should know a little secret about that, and it speaks to why Amazon is the perfect purchaser of Linden Lab: we can’t seem to ‘scale’ this thing. Our concurrency has been flat, and there’s speculation that it’s because people log off as the lag grows – but the reasons don’t matter. The solution does, and you know what it is: the cloud.

So why don’t we chat – without Amazon and your cloud thingy, this whole social media/advertising thing we have in the wings might not work. And the asking price is lower anyways while we have relatively flat growth but a decent run rate on our virtual economy.

But imagine how awesome it would be if we could just scrap our whole infrastructure and run the entire operation from your cloud engineering group. Kills a whole bunch of overhead, takes away the worry about scaling, and I figure you guys could do a better job of it anyways if for no other reason than there’s more of you.

What We’ve Been Up To
So, if you haven’t had a look at Second Life recently now’s the time. I think you’ll be impressed with how Amazon-friendly we’ve made everything.

We’re about to launch this new Marketplace thing which is really one giant tribute to Amazon. I mean, have a look, and tell me if this isn’t reminiscent of what you guys do:

We have wish lists, store fronts, even the equivalent of one-click shopping! And what’s better, none of the warehouse costs of physical goods.

In fact, we’ve done a lot to make Second Life commerce friendly. From the moment you sign up it’s commerce all the way. We want to get our users engaged in the whole experience of shopping in a rich, 3D environment. In fact, one of the Second Life ‘journalists’ calls it like being in an Apple store selling Microsoft products! Take that Steves!

But my point is that we’ve been working hard to think about what the Amazon of the future looks like and we figure it looks a lot like Second Life. We have merchants selling individual objects, stores, wish lists, one-click shopping….and we’ve been looking at a whole user rating system, not unlike what you guys have. We send out e-mails to our users encouraging them to, well, to buy mostly. They’re plunking down money for virtual homes and virtual shoes. It’s awesome!

Oh, and don’t worry about the whole DRM thing. We have that covered. We’ve been working really hard to plug the content theft stuff you heard about a year or so ago. We’re not all the way there yet and probably never will be – I mean, you know as well as I do that you can never FULLY secure digital content, which is why it’s so nice to know that you understand it’s an issue of technology plus enforcement.

Remember the time you recalled a bunch of books from user’s Kindles and faced a big firestorm about it? Well, that doesn’t happen in Second Life. We just delete it from their inventories and no one’s the wiser, and if they are, our DRM reporting system is totally hidden and users never know why something was deleted or who reported it. Genius no?

The 3D Value Chain
But the shift to a commerce-friendly virtual world is just one of the reasons you should buy Linden Lab. That’s just the window dressing really. It must really irk you, for example, that Facebook is getting all that press coverage for the virtual goods being sold through Farmville and stuff like that. I mean, we sell more virtual goods in Second Life than those guys, so why do they get the big market valuation and Amazon is left looking from the sidelines?

Virtual goods are growing, and they’ll continue to grow. And not just because they’re virtual, but because they’ll increasingly represent real world goods too.

Imagine being able to offer some of your current merchants a 3D store to go with their 2D storefront? With the introduction of mesh in the wings, and the growing ability to do 3D scans of real world objects, this is an ideal opportunity for Amazon.

You’ll be able to offer your merchants an Amazon scanning service which takes their stereos and furniture, their clothes or toasters, and turns them into 3D objects. I mean, with your reach and size, it would be a cinch to get up and running.

Every Amazon merchant can now have a 3D version of their stuff for sale that potential buyers can view using HTML-5 or whatever. But even better, they can buy virtual versions to test out in their 3D homes.

See, in the future, Amazon can be at the forefront of “mixed reality”. Imagine if you’re able to take a slice of every piece of the “object economy”:

- Set up a 3D design, prototyping and manufacturing value chain. Let consumers design their own tables and chairs and then send it to the Amazon plants where the designs are constructed using 3D printers and computerized to-order manufacturing!
- Then, allow those ‘designers’ to list their objects on Amazon. Take the 3D model and embed it in your Web site so other users can rotate and zoom.
- Give them virtual show rooms in Second Life (Amazon Life?) – the mall of the future!
- Let them buy both the physical object and a virtual version.

Pretty nifty huh?

I mean, you get a pretty big slice of the virtual goods market just by buying us, but then you have the infrastructure to convert that into a connection to physical world goods as well: it’s an end-to-end service to your current merchants, access to a community of people willing to buy pixels to dress up their avatars, and instant 3D show rooms.

Communities of Interest
But you know as well as I do that the era of the big online shopping mall is under siege.

The thing these days is social, and digital.

It’s all about e-Books and e-Movies and e-Everything. You’re under attack by Netflix and people are renting movies through their XBox. Your biggest market of all, books, is under attack by Apple.

But the way of the future is the provision of social experiences. And Second Life is a social experience. (You can check it out, just Google “Tom Hale”).

Here’s what I figure – by having your very own ‘Amazon Life’, you can create communities around content. Because end of the day, content is still king. And while Second Life has tons of content, it’s not the kind that translates into the kind of “making bank” that we’re all looking for.

But imagine this – you buy a book on Amazon and you’re instantly invited to a book club being held in Second Life. Or even better, the publisher sponsors a reading by an author in the virtual world and recreates, I dunno, the ancient city of Paris or something.

Same thing with movies, music, whatever you want.

The key here is small communities of interest, which is what the Net has turned us into anyways right? Small, loyal groups of viewers or readers and you’re giving them an out-of-the-box community that overcomes the barriers of geography.

Imagine what it would do for your place in the market: “Amazon goes social by giving 10s of thousands of small ‘communities’ a home of their own’.

You Have the Vision, We Have the Place
I can’t even imagine what you’ll come up with when Amazon buys Linden Lab. You’ll be able to spin it as the next generation of online shopping, beef up your credibility as being part of the whole social media trend, and get some extra leverage out of the Amazon Cloud (and maybe help us kill lag!)

We’re already working hard to make Second Life both richer (that mesh import thing I mentioned, but we’re also adding Havok 7 and lighting)….so maybe you’ll do a whole new “store” for Machinima, in-world games, or who knows what. But we’re also working hard to make Second Life “lighter” – we’re working on mobile apps, a programmable user interface (imagine the benefit to merchants!), and that connection to social media thing I told you about.

I can just picture what you’ll do with our concept of “Second Life Homes”. Maybe give a free home to anyone who buys $100 or more of Amazon products? And then stream your own shows, send product announcements, test product prototypes through this now-captive audience of virtual world dwellers?

Oh! And maybe you can finally do that Questville thing you were thinking about. What ever happened to that anyways? No worries if you didn’t finish it – we have 70,000 users or so at any time who’d love to earn a few Lindens each to answer questions.

And maybe you can get Second Life voice to work. We’re number two in voice minutes after Skype – imagine the feather in your cap if you could tie Web-based voice into your empire?

In any case, I’ll leave it to you to bring a big vision to where Second Life can go.

Looking forward to your thoughts and response, and please remember time is limited!



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