Business and Technology in Second Life

The recent crash of the world-wide airplane network across northern Europe and the United States showed how simple natural events, like a volcano eruption, can disturb our already fragilised economy by simply preventing business meetings and conferences to happen. This means that besides the usual costs of airplane tickets and hotel accommodations, there is also the cost that the conference/meeting has to be postponed because, well, lack of flights or closed airports simply prevent those from happening. It’s true that we don’t see volcanos erupting so dramatically every day; on the other hand, the bad weather during severe winters will prevent planes from flying, and that is something that happens every year…

So it’s not just about increased costs: it’s the very real possibility that external conditions, climatic or otherwise, simply force a conference, meeting, or even a concert, to be postponed.

Not so with virtual worlds. MakeMyWorlds, a German/French Second Life Gold Solution Provider, recently sponsored a meeting in Second Life with a group of people coming from all over Europe — during the period where all flights were cancelled. Unlike the other dozens of thousands of similar meetings that happen every day, this one was not cancelled. This was a pretext for the French TV show La Matinale Canal+ to cover briefly the event and explain how virtual worlds like Second Life can, indeed, successfully be used for business to be accomplished, without fear of disruption, at a much lower cost, and with the convenience of not requiring any physical travel at all, thus reducing the wasted time, as well, of course, as being more ecologically sound.

You’ll need to be fluent in French to follow the 5-minute extract of the show:

[youtube]http://www.youtube.com/watch?v=BJ75DMpa3z8[/youtube]

Thanks to Clara Young for the heads-up!

Linden Lab has just revealed a nifty feature implemented on XStreetSL, the web-based shopping site for Second Life that they acquired a year ago. Following the downtime on March 3, two things were immediately apparent: firstly, a slight tweak on the design elements allows now XStreetSL to have a “fluid” layout, getting rid of the ugly, nasty horizontal scroll bars that were a hallmark of XStreetSL from the very beginning.

The much more interesting announcement, of course, was the ability to directly use your L$ stored in your avatar’s account on XStreetSL, and vice-versa, immediately transferring L$ from XStreetSL to your avatar. It might not seem much (it had been promised since last year), but there is some dramatic magic going on beneath this apparenly simple, yet useful, feature.

Most services that have L$ transactions associated with it — and this is not just XStreetSL; think about web-based rental systems or the many audio/video streaming providers that accept payments in L$, or, of course, the alternate currency exchanges (which offer a far wider range of payment systems beyond LL’s offer of PayPal and credit cards) — have a rather difficult time in swiftly moving L$ between avatars. The main issue is that, although Second Life is by far and large the vastest digital marketplace for virtual goods in the world (yes, it beats Apple’s App Store!), it has a very primitive programming interface to deal with money transactions.

Launched at about the same time as Second Life, There.com used to be seen as “SL’s little brother”. For a long time it used to be compared with Second Life as one of the few serious competitors out there, in the sense that it was a long runner, that outlasted the period of venture capital funding. While the avatars and overall scenario was of inferior quality compared to SL — even in 2004-6 — it had at least three major advantages over SL: vehicles worked quite well; you could have a tighter control over your environment and friends (e.g. “the grieferless utopia”) which made MTV select it over SL for its Virtual Laguna Beach project, alleging that Linden Lab didn’t give MTV the kind of tools to enforce a rigid control over users and content; and it was stupidly simple to use. It also had a way for users to engage with the community and get “ratings” and “goals” to follow doing social activity (something which recently was brought up for SL as well).

Let’s face it: we all were newbies once. While some of us might have immediately plunged into a creative spree like never before, and just remembered after two months that our avatar was in its newbie clothes that they started with, this is hardly the case of the majority of new users…

Sooner or later — often sooner! — a new user will know that they need money. They might have read magazine ads telling them how successful business in Second Life® is. They might have browsed through blogs and forums, catching numbers here and there, on how much money is being transacted in SL, and how some content creators and live music performers make a living here. They might even have come to a conference or two at the Beta Business Park and listened to people talking about their business experience in SL. Or they just looked up on the top of the screen where it says “L$0″ and wondered how to get more.

No matter what the reason was, usually rather early in the process of getting acquainted with Second Life, one of the very, very first questions asked is how to make money in SL (often seconded by “will you give me some L$?”). Unless, of course, you just came in for the dating

Traditionally, the usual answer you give to an intelligent new user is that it’s “as hard as to make money in the real world”, and follow that up with a comparison with making money from Web design. Some helpers just take the trouble to describe what you can create, from buildings to clothes, from scripting to animations, and patiently explain how you develop a brand in SL, make it a successful, and retire on a Caribbean island (even a virtual one!).

The casual user, however, is not interested in how to make money that way. They want to make money fast. They know they’re unskilled, so they hardly expect to become the next super-architect or boots designer in SL, but they still want money. Quickly. Painlessly. Without an effort.

At this point, most helpers just shake their heads and sigh.

What is the value of content in Second Life®? This might be the most stupid question to ask, but… did you ever ask yourself why things cost what they do?

We have to turn back the clock a few years, to the time Linden Lab introduced the stipends. Every Basic Account used to get L$50 every week they’ve logged in; Premium Accounts got L$500 every week, no matter if they logged in or not.

This set the reference for the price of things in Second Life: content creators targeting newbies (who would start as Basic Accounts) would know that if they priced it from L$0-50, they would get newbies to buy their content. If they wished to go upscale and sell to Premium Accounts, up to L$500 would mean that they’d get a sale per week. That’s why the first generation of outfits (usually just two pieces!) would cost up to L$500, since you expected residents to buy one per week (hopefully!). Skins, or other items that wouldn’t be bought every other week, like vehicles or animation overriders, would cost around L$2000, since you wouldn’t expect them to buy a new one very often. So that’s why things cost what they do

When GOM first introduced their currency exchange for Second Life, a similar question was asked: what would be the “fair” price to charge, in US$, for a handful of L$? Again, we needed a reference. Since the easiest way to get L$ in-world was by being a Premium Account, and that costed US$9.99/month (less if you paid annually!), and this got you L$2000/month, it meant that LL “valued” (indirectly) L$200 to be worth 1 US dollar. Well, almost: since the cheapest way to get L$ was to pay an annual fee — for US$72 — this meant that you could get L$333 for 1 US$. There’s your range — from L$200 to 333. Average it, and you get L$266/US$. Now you know why the L$/US$ ratio has been floating around that “magic” value for so long

Finally, land is also valued used similar baselines, although here the concepts of “speculation” and “location” play a huger role! Still, like in real life, you can see that the cost of land can be compared to the “base welfare stipend” (the original L$2000/month) which included 512 m² of tier on the mainland. The value of land overall is tied to this and is not totally arbitrary.

So knowing the base metrics that define why things cost what they do in Second Life, we can ask ourselves next: what will be considered a good, successful SL-based business? And what will distort the market? And this will finally let us ask us the last question: should Linden lab attempt to “regulate” the market (in the good, European sense of the word) or just let it do whatever it pleases and whatever the results are (in the American sense of the word)?

On the day that Linden Lab launched their major business-oriented product, Second Life Enterprise® (formerly known as “Nebraska”) and its companion site, Second Life Work Marketplace®, Google links to it went up from zero to 14,000 in a few hours (there are now almost half a million as I write this!). Not only the SLogosphere reported on this very thoroughly, but the major news media didn’t miss the opportunity to talk about it either, from the Financial Times to Information Week. According to Amanda Linden, who lead the incredible effort of promoting this new product with her team, during the official launch, done as a mixed-media event in San Francisco and Second Life, the physical location was so crowded that they had to project the session to the exteriors, where many more people were eagerly awaiting the news but unable to enter the room. Inside Second Life®, partnering with Metanomics, the session was viewed live by over 300 residents spread among many locations (I found it very amusing that Metanomics’ Dusan Writer was picked to talk “in the flesh” in San Francisco as the host of this event; then again, who better than Dusan to explain what business in Second Life means?). The video stream apparently peaked at 2,500 viewers or so at the same time (but will probably have many more downloads in the next few days). So, overall, the product launch might have been followed live by some 3,000 people.

This is no mean feat. Obviously there is still some way to go to beat Steve Jobs’ keynote speeches once or twice a year. But nevertheless I believe it was a huge success (Amanda Linden calls it the largest promotional event ever run by Linden Lab in their decade of existence) — it’s no mean feat to have a product launch with 3,000 users. In real life, on a “traditional” product presentation with a press conference, getting 3,000 people to attend is quite rare! It’s also true that huge countries like the US will attract more people — I’m sure that any product launch by, say, Microsoft, will probably feature a similar amount of viewers — but I’m more used to audiences of 30-300 (and the latter number for Fortune 500 product launches!) for a new product. Your experience might be different, but in any case, we’re contrasting the launch from a relatively small company to a big, huge launch by a Fortune 500 company, which is a bit unfair to Linden Lab

In the same day, two bits news were widespread across the SLogosphere: Philip “Linden” Rosedale is going to start another company and Eshi Otawara, a long-time resident and superb content creator, decided to leave Second Life® forever. All this just before the Burning Life festival started.

We usually expect the captain to be the last one to jump ship when things are not going well. But in this case, is Philip really leaving? Are things really that bad?

How can we then explain the latest press release from Linden Lab (from late September), where it shows a lot of statistics demonstrating how big Second Life actually has become?