Philip Rosedale returned as CEO of Linden Lab and all I could remember was this running tally I used to keep at the side of the blog: the number of days since Philip had last blogged.
With the debacle of Viewer 2.0, Mark Kingdon had capped two years of transformative change with a flare-out (or was it a fizzle out?) but you had to admire that he had set out some clear goals and had ruthlessly pursued them. He had brought in the adults, set strategies and goals, and had a vision for improving the first hour, snazzing up the platform, and creating the infrastructure for a ‘social media-ish’ virtual world.
While we were left with broken search, a Marketplace that doesn’t quite function, a Viewer that new users didn’t mind but old users hated, a sexy looking new Web site, Avatars United, and an Enterprise product that wasn’t given the time or resources to gather steam – at least it always felt like there was a methodology, a plan.
With Philip back at the helm, he begged for patience at first, and then revealed his own version of a strategy: fast, easy and fun; a more focused open source development project (Snowstorm); and….well, and then silence (other than a post about third-party viewers).
Sure, we have mesh imports and display names. But both projects were well underway before Philip returned, with the former announced well over a year ago by Tom Hale, and the latter tested in focus groups and NDA marketing focus groups in the spring.
Now, it’s not that Philip didn’t set out a strategy. He highlighted two main efforts: fixing the Viewer, and the system by which it is developed; and improving the Marketplace. But his big call to action was fast, easy and fun and his theory was that if you can do that, and do it as a sort of Grid-wide thing, the sub-markets and communities would follow:
As a final note, I would note that we are not planning to change Second Life to exclude any categories of users. Our restructuring messaging around ‘consumers’ and ‘web’ versions of Second Life seemed to mistakenly suggest to some that we plan to more narrowly focus the experience on a specific demographic or use model. We aren’t. We are reducing efforts across the board that in our opinion are being done in the wrong order, but those resources will re-focus on creating a single effective system that is better for all categories of user. We believe we first need to improve and complete the core experiences that drive Second Life, before we dive into how to customize it for different markets.
Strategy Obscura
So, back in the day my running tally of days since Philip last blogged was a sort of proxy call for better communication of strategy.
We’d hear general sort of pronouncements and then we’d go months without hearing from senior management (and Philip himself) and we’d end up trying to decode more granular changes to see if we could figure out the strategy behind them.
Hindsight is everything, I suppose, but these days I can’t help thinking that I made a mistake: it wasn’t that the strategy was obscured, it’s that there wasn’t one, there was just a sort of draft set of principles, vaguely worded, and the folks working at the Lab had as much trouble as I did making sense of it all.
I can’t help wondering – if you’re on the Snowstorm team, do you have anything more to go on than fast, easy, fun? I mean, maybe that’s the entirety of the strategy and you have to decode it yourself.
But yesterday’s announcement that the Lab was raising prices on education and non-profits has kicked in a sort of reflex instinct: maybe there is a strategy, and I’m simply too mortal to get it.
I have no idea why I’m doing this to myself again. I went through this for, hmmm, a few years I guess and it turned out that there wasn’t any sort of secret answer, there wasn’t much more than the Love Machine, and Mark Kingdon was brought in to answer the same question I had pounded my own head over: where are you trying to go, and how are you going to get there?
So maybe I’m feeling nostalgic. Maybe the Lab is charting a specific course and just can’t tell us about it.
The Way Ahead
So with all that in mind, knowing that this is a fool’s errand and that when sacrifice chickens (or pigs) at the Oracle of Linden Lab you’re more likely to get vague, cryptic and spluttering replies, I’ll take a crack at it anyway.
I mean, maybe there is a strategy, after all, and our view of the world is just too narrow to see it.
Money Well Spent
On yesterday’s Metanomics, we closed the show with a quick discussion of the Lab’s move, and Robert made the point that it’s possible that the decision was calculated based on known data and that it could be related to profitability.
If this is the case, it’s possible that the Lab has factored in the size of the education and non-profit markets, has taken a survey, has assessed the attrition through some sort of mathematical model based on customer insight and come away with a conclusion: a price increase will see some attrition, but the losses will be mitigated by the gain in revenue.
With 800 education institutions in Second Life, and countless non-profits, let’s just take a guess and say that there are, hmmm, 500 islands say which will be affected by the price increase. That’s roughly $75,000 in revenue each month. You would need to lose less than half of your customers to be making more money at the end of this.
Do the math:
- If you lose 25% of your customer base, you still come out ahead $37,500 per month (based on there being 500 sims, if there are more, it’s more, if less, it’s still a profit)
- That equals $450,000 in new revenue per year, even though you’ve lost 25% of your customer base. Even if you think you’ll eventually lose 50% of your customers, you’ve still netted out a big chunk of change
So the logic might be really simple: “What could we do with roughly $500k in new revenue. Even if we assume that we can hang on to 75% of our customers in the first half of 2011, that’s still $250k – and we can lose another 25% of them before year end and still come out even. What can we do with all that cash?”
The benefit, to the Lab, isn’t just the gained revenue, it’s that the revenue gained can be spent on something else – and theoretically, the something else includes increasing the number of users, the number of islands being rented, or the amount of revenue to be gained.
The problem, of course, is that the math is one thing, but the calculation of goodwill is another. And there’s an implicit gamble: that the loss of goodwill will have a neutral effect. For myself, the loss of goodwill is, decidedly, NOT neutral but then I’m not Linden Lab.
New Product Offering
The Lab has a history of making announcements, waiting for the fallout, and then announcing something new with a post that begins: “We’ve heard your feedback and we’re pleased to announce….”
I’ve often wondered whether this is a refined form of back-peddling or is something more devious. But whatever.
In the more devious scenario, the pricing announcement is actually prep work for a new product launch of some kind. Lord only knows what it might be, but my guess is, based on previous hints from Terrence, is that it would have something to do with a geographic archipelago.
Following panic about a price increase, the Lab would announce something along these lines:
“We’ve listened and we’re pleased to announce that we’ll be forming an education and non-profit section of the Grid. A continent for schools and a continent for non-profits. These continents will enjoy reduced tier. If you’re interested in relocating, let us know.”
But why would the Lab do that? And my theory has to do with something else, namely….
Second Life Will No Longer Be One World
In this theory, the Lab is trying to force march institutions to aggregate with each other by using price increases as a way to shake up attention and bring ‘sectors’ together geographically. The price increase is followed by a retraction, but the retraction includes the caveat that institutions need to “physically” come together.
Geographic contiguity, however, wouldn’t be done because the idea of being able to roam through an education archipelago makes geographic sense, but because the Lab’s longer term plan is to spin off Second Life into separate products. Separate Grids, interconnected via identity systems, inventory, Marketplaces and currency….but stand-alone Grids.
In this long-term play, the Lab will end up with a series of “mini-Grids” and would start to spin out the management of those mini-Grids to stand-alone companies or third-parties.
Linden Lab will become a services company providing software development, identity systems, currency, etc. but will leave the management of communities to stand-alone companies and organizations.
The Non-Profit Commons would manage the community of Non-Profits. The Teen Grid would be managed by the teen educators or ISTE or whoever. The military islands would be managed by a third-party military contractor, etc.
Linden Lab as a services company, Second Life (the consumer world) as a stand-alone company, and the specific segments of users managing their own little mini Grids through whatever third parties step in to take that on.
Open Source the Servers
All of which would lead to the “big play”.
Here’s the scenario:
- Bring the education sims together and then split those sims off into their own archipelagos, with the long-term goal of spinning off the management those archipelagos to third-parties as well. Same for non-profits, etc.
- Spin Second Life off from Linden Lab. The “public Grid” would be a stand-alone company making money solely from tier and would be responsible for community management.
- Linden Lab would be a private company making money off of the software services (commerce, Markeplaces, identity, etc) it provides, the servers it rents to individual communities, but would NOT manage those communities itself.
- Finally, a new entity would be formed: the Linden Lab Foundation, which would take on the task of maintaining the Viewer and the server code development under a new open source arrangement modeled on Mozilla.
News Before the Storm
Of course, the above is early morning speculation. And there’s another side of the coin.
Often, bad news precedes big news: layoffs are made before Philip returns. The new management wants a clean slate so they aren’t saddled with having to handle the negative stuff, they can always blame it on the guy who came before.
Or maybe there is no strategy. Maybe it’s just, well, a decision, and they make it, and they see what happens and move on. And as always, of all the things that it could be, perhaps that’s the scariest speculation of all.
[...] This post was mentioned on Twitter by Dusan Writer, Doubledown Tandino. Doubledown Tandino said: via @DusanWriter Decoding Linden Lab and the Oracle of Virtuality http://bit.ly/bV4RhY [...]
The “hypergrid” strategy, as you summarise it, is not a bad one, in fact. But if it really is THE strategy, LL must communicate it in full scale, so that the single steps make sense to the customer. The days of almost religious blind trust in Linden Lab are over, lately since the homestead and viewer 2 fiascos. People who invest time and money want answers and a reason for Linden lab doings, which affect them directly and indirectly.
And even if it is the balance sheet alone behind it, then they should disclose this as a reason. SL is not the mythological nirvana for VR enthusiasts anymore, which it was in the early years. It´s a billion dollar business meanwhile, with a clear line between the company running the biz and the consumer paying for a service.
Phil might be a visionary guy who made VR big, but in the end it´s not about customers supporting Phil Rosdale, but Linden Lab supporting customers in a reasonable way. And this they never did and i see no change there.
Well, I think there is something worse than having no strategy: Microsoft taking over SL. It is very likely that they would close it down and use the software in another product which would be very different from SL.
But I agree with you. I always had the same idea, that Linden Lab will be kind of a hosting company for virtual world servers and service provider. Second Life will be kind of 3D Internet and people can host their own sims. Teleports between those sims and the big grids will be possibe. That would be a good long term strategy, but I don´t believe the Lindens would communicate that, because it creates expectations and at the end everything will turn out differently, like it always does. We cannot predict the future. So for now the strategy needs to be making SL just work. Let´s get rid of lag and have better performing sims and maybe for low end clients a cloud version of SL. Second Life is about user created content, and once Second Life is working fine, that will bring a bunch of new content inworld. Everything else is something that will happen in a few years.
I would bet my maximum bet against a strategy that has them open sourcing the servers and working towards interoperability.
Three or four years ago, after the client was open-sourced, there was this vague notion that the server would be open-sourced too. That was more or less the last we heard of it. What happened was OpenSim– there was already an open source server implementation that used the same client. Instead of open sourcing the server, Linden started working on interoperability. Then they slowly choked off that effort by not putting many resources to it, and finally officially killed it off in Lindenmageddon last May.
They’re just not set up, and haven’t done the work, to do this kind of multi-grid spinning off that you’re talking about. They were too busy working on dead-ends like Viewer 2 and SL Enterprise, and now they’re just struggling to stay alive.
I think it’s pretty clear that the whole education/non-profit thing is just a case of trying to do whatever they can to increase the short-term bottom line. I agree that from a goodwill point of view, it’s a disaster of a long-term strategy. Some of the greatest “free marketers” for SL have been educators, pushing SL inside their institutions; a sudden factor of two price increase on them is a major “see Figure 1″. Then again, as early as the trademark debacle of 2008 (or whenever that was), Linden has made it clear that they don’t hesitate to pull the rug out from underneath their boosters and free marketers.
So, we’ve got them doing whatever necessary to increase the short-term bottom line, either knowingly at the expense of the long-term, or (more likely) in denial that this could affect the long-term. (The denial may be cynical and conscious; they may be thinking that, yeah, people will complain for a few months, but will eventually forget about it just like they forgot about the trademark insults, just like they forgot about the sudden Openspace price increase.)
I have a feeling Phil is passing around this post and saying “This is what I meant, Number One! Engage!”
Great tea leaf reading. It certainly makes a good amount of sense.
I have to question what the larger repercussions of this kind of splitting of the grids by sector might create. A lot of the vitality of Second Life has come from the opportunities for creative collaborations between people from different backgrounds, expertise and sectors. If we start dividing up avatars and institutions by sector, where is the public square where differing ideas and perspectives converge, conflict and stimulate each other?
Perhaps the “public” Second Life is where that happens? And then the government agencies retreat back to their grid, while the teachers and students ‘port back to their own grid, but meet from time to time in the shopping mall that Second Life will become. I don’t know how I feel about this.
mortal? or too moral?…
the better world… all based on the wealth of Linden lab.
another turn over all ye wealth to the king.
bad planners at the lab…they think they can be tylenol…but they are way past edsel.
even gordon gecko coudlnt “really” be a new good guy….it not in virtualities nature.
“Perhaps the “public” Second Life is where that happens? And then the government agencies retreat back to their grid, while the teachers and students ‘port back to their own grid, but meet from time to time in the shopping mall that Second Life will become. I don’t know how I feel about this.”
lol.. feel about it…lol…where have you digerati “stars” been,,, forget LL and their one 3d toy ….
the entire communications network for humans- all being driven to the internet for 20 years has been nothing but a technocratic shiny toy non public corporate owned, people as monetized units, plan.
if you dont like to consume mall toys, dont worry, soon youll be unable too… but dont complain if then they demand to monetize your typing that down to tell everyone else to construct your “ego”..
oh wait.. they already do… typepad.TM
“like” button cube3
This may very well lead to short-term revenue gains, or be part of some larger vision, but it has always been my personal experience that educators and non-profits are among the most active, vocal, and networked communities in SL. No matter what new drama is brewing on the grid or at the Lab, you can always count on the educators to be out there making the most of it. In fact, I think its their resilience that would lead the Lab to feel that they can pull this off and get away with it. I’m afraid they might be quite a bit more fragile and mobile than they’re anticipating.
If you talk with almost any educator in SL (even before this announcement), you’ll find that they either have an OpenSim grid already, they’re planning to migrate to OpenSim soon, or they’re on the fence. I’m not convinced that they’ll find everything they’re looking for in OpenSim (yet), but I do believe that this price hike will only serve to excite an exodus that was already underway, and to curb investment in projects that would otherwise have been built in SL next year.
Education-related projects have always been a big part of what keeps me in business as a design consultant. Early on, they were exclusively in SL, but this year almost every project I’ve worked on has requested a ‘mirror version’ of their builds in OpenSim, and those with more application-specific goals are migrating to Unity.
The metaverse is expanding, the markets are shifting, and I’m retooling. Such is life on the virtual frontier!
That is exactly what they need to do if they really want to be the people behind the 3d web of the future. Google doesn’t own all the servers every web page is on, and if the 3d Web were to grow, Linden would never be able to manage all those servers. Becoming like the ICANN, or the domain registrar, or the paypal of virtual worlds etc, would allow them to maintain their spot at the top of the umbrella, and would open up the Metaverse which is inevitable, with Linden Lab or without.
“they” could have done all this 7 years ago… embarked on a sustainable biz, not buzz plan…
im sure youll all go see “the social network”…
its cool… what will it be-what can it be? fck advertising, fck ecosystems for thy neighbor, just show me how i can make bank as quick as i can, before the sheriffs arrive.. 1 billion IN VALUATION is cool…. not 1 million real dollars to enhance food and shelter for a group with:)
web3d has been only part of this VC system for 15 years…and jon. youll keep retooling, until you cant afford too, as the service you provide is completely revalued as a commodity.
Shelter has been usurped as the main reason for a “home”. BY VIRTUALITY, as you should now know.. a home was a credit card, and then a gambling note for a virtualized machine system…
and as we hear today on the news.. thousands lost their homes, cause the human robots in large corporate machines couldnt keep up with the software driving them, and didnt even read the docs,, they just pressed the “interface buttons” they were trained too, and people lost homes….
can the “legal” system even help them anymore…? well you all now seem to agree that the virtual law of SL, just dont work for those who arent “top money givers” – like teachers and artists. they only contribute to human beings growth, not software monetization machines.
rant over:)…its juct amazing that for such smart folk, you keep waiting for superman.
[...] Life: Educational Exodus? Linden Lab cancels educational rebates for SL; http://j.mp/cgiFFv @Fleep: Are you trying to hasten the exodus to [...]
I called Concierge to ask when – based on our billing cycle – the new pricing would impact Commonwealth. They couldn’t tell me. Said there is no implementation plan in place. Really.
Unless we can find a host of npo partners, this price change may make the 4 Commonwealth sims unsustainable.
Scary and sad.
Now I’m in interested in talking with folks who would like to explore the possibility of consolidating. The four Commonwealth islands – owned by the npo Envirolink Foundation – operate on the basis of shared facilities (meeting spaces, classrooms, recreation areas) and customized kiosks. We keep the prim count low (under 60%) so that interaction is pleasurable. Member groups use slideshows to minimize textures and rez objects when they are needed. Other measures might be implemented.
BTW-
I rec. an HBO documentary called “Teenage Papparrazo” for you metas, your boy henry jenkins makes a cameo.. i just caught it tonight.
My point – the blonde, spoiled as crap 14 year old who is the center of the fame/er film. speaks to the camera and tells us what is important…i nearly choked on my LOL at his words…
“fast fun easy” that was his prescription for life.
anyhow- decide for yourselves if that was funny – ha ha, or funny sad…and then of course, enjoy the Linden Show.