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:

Click here to view the embedded video.

Thanks to Clara Young for the heads-up!

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.

Originally, I can very well believe that LL didn’t even intend to make “money transfers” more widespread. After all, just the ability to allow an item to sell itself, or sell its contents, was more than appropriate in the very early days of the SL economy; everything else could simply be transferring L$ by paying avatars directly (or from their profiles). Looking at the protocol that implements money transfers between avatars (you can look at the code yourself and correct me if I’m wrong ), at the early days this was simply a modified Instant Message with a “special status” flagging it as a payment — IMs in SL can be used for far more interesting things than merely sending text to other avatars; inventory offers and similar things also use the IM system.

At some point in time, however, I can imagine that LSL programmers asked LL to allow them to get them an event to tell the script that some money was paid to the object, and to transfer L$ from the object’s owner to another avatar. This would allow the creation of the ubiquitous “multivendor” — a device with few prims that would display textures for different items, allowing the user to select the one they wished to buy, and pay the device to get that item delivered to inventory. The major reason for having these functions was that each item would have a different price, and a way was needed to make sure that people paid the correct amount and got a refund if they made a silly mistake.

This interface is, though, particularly primitive. There are no guarantees that you actually get the event to be fired when an avatar pays the object — which might happen on an insanely laggy sim. If the script is rendered inactive for some reason (because it crashed), someone might pay to it but the script will never detect the transaction — which will make the buyer very unhappy. Both cases are very rare these days, but there are still no guarantees that this will work all the time.

Sending money from an object to another avatar is even more tricky. It requires the avatar owning the object to specifically give the item permissions to debit from their L$ account — a very reasonable demand, to avoid scamming (imagine an item that gets attached to you and sends L$ to someone else without you knowing about it!). But this also means that if a sim gets rebooted and is in a strange state (e.g. “forgetting” about what state each and every script is in), those scripts might have resetted and now require the object owners to manually log in, give the items permission to debit again, and fix things that way. While this manual step is not taken, residents will find that their money transactions are not being delivered.

To make things even worse, if the object owner doesn’t have enough L$ in their account, this function to send L$ to someone else fails silently. Neither the owner, nor the recipient, get any warning. In fact, even if the transaction is successful, nobody gets a confirmation message. To be very honest, this is at least — ridiculous. Even the most primitive form of “wire transfers” in, uh, 1830 or so, would require an operator to manually send a confirmation back to the sender. But in the strange, anachronistic world of SL money transactions, this was never implemented. The ever-resourceful Jacek Antonelli has contributed some code to implement at least a label for the transaction, so that it shows what the payment was for. This allows people to at least catch a successful L$ transfer on their Transaction History.

Before June 2004, communication in-and-out of world was only possible with email messages; June 2004 allowed at least XML-RPC calls to be made from outside the world to in-world objects. This was what permitted things like the Gaming Open Market (a currency exchange that pre-dated LL’s LindeX) and the SL Exchange (today known as XStreetSL, which was bought by LL) to be launched. Since these require L$ transactions between avatars to be automated (and bots didn’t exist in 2004!), designing such a gateway to the L$ money transaction infrastructure required a lot of patience — and redundancy. It also introduced the concept of the in-world ATM: a device that would accept a payment from an avatar, catch the payment (most of the time) in LSL, send an email message to an external server logging the transaction, and then flag an in-world object (in the case of XStreetSL, a box containing items) to do something.

So many things can fail along this complex route… the original payment might not have been catched. The email message might never get sent by LL because their email servers might have been down or too slow. If it is sent, it might never be received. If it is received, the external server might correctly process the transaction, but flagging the in-world object via XML-RPC (or email!) might fail, because LL’s XML-RPC servers might be down or slow, or the sim where the object is might be down… or the object might have crashed and is not accepting any external messages anyway. With such a long list of points of failures, it’s actually a huge surprise how we have developed this incredible economy of micropayments with such loose foundations!

These days, at least external communications are a bit easier, thanks to the LSL HTTP interface. Although messages are seriously limited in size, and there is a cap to the amount of messages you can send and receive per minute, this at least properly implements two-way communication via HTTP to an external server with a reasonably amount of confirmation. Most modern gateway systems using ATMs or “item boxes” to allow users to “deposit” L$ or “pay L$” to make a payment (for a service, like a rental facility or leasing an audio stream) or buy an item via a website use this method. You can add some redundancy having several objects scattered across the grid — the probability that all your objects on all the sims are down simultaneously would be very, very low (unless the whole grid crashes, but, in that case, you’d not need to transfer L$ anyway ). These communications can be encrypted, too, for added security. So at least on that side things have progressed well in the past 5 years.

Even more modern generations of payment gateways use bots. Bots will at least get alerted when money comes in, and this allows the programmers to act upon it immediately — and bots, of course, are not limited to the amount of HTTP requests they make or the size of the messages sent, since they’re not really running on the sims. Real life companies, like Multibanco and PayShop in my country, process L$ sales that way (article in Portuguese only, sorry). Still, bots can crash, or might be shut out of the grid for some silly reason, so this is not a 100% safe way to implement money transactions. And, of course, they’re also harder to programme, which means that the overall solution might be more expensive to develop…

But the actual money transaction is still at the same stage as early 2004 Linden Lab developers are fondly quoted (or misquoted) as having claimed that “it’s too difficult to implement” or “people really don’t need this”, or, well, “it’s a nice idea, but our transaction system doesn’t support it, and very likely never will — so use what we have today, but caveat utilitor“.

True or false, there seems to be hope on the horizon. Somehow, as if by magic, XStreetSL is now able to process instant L$ transfers between avatars without requiring an object as an intermediate step. Now, we might exclude the case that XStreetSL is directly interfacing with the LL central databases to do that (it would be a huge security risk!). It’s far more reasonable to expect that they have developed an internal API to allow quick, easy, and safe L$ transactions which come from a “trusted site”. If that’s the case, the question is only: when will this API be released to the public?

If you have never developed an interface to a payment gateway — be it PayPal or a myriad of gateways out there — you might not realise how important this is. General-purpose payment gateways are not easy to create for Second Life’s microcurrency. But it’s child’s play to add a donation button for PayPal — and it will take an experienced programmer an hour or so to quickly set up a shopping cart using any of the most popular payment gateways out there. The real world, once it implemented easy payments on the Web — since the early days of Digital River, who at some point dealt with almost all software sales via the Web — allowed for the web-based economy to be so commonplace that we don’t think twice about it any more. eBay or Amazon.com would have never existed if they had to process payments manually!

Some analysts predict that 2010 will be the year of premium content on the Web. It seems that finally the lessons learned during the dot-com bubble — “everything is for free” (and so companies never managed to get a return on investment and catastrophically failed) — is slowly being replaced by “everything should be incredibly cheap”. Major content from reputable sources like the Wall Street Journal, the Financial Times, Medline, or the IEEE have always sported premium content — it just gets cheaper over time. The model was sort of abandoned for several years because it was not successful in extracting enough money from the readers, and advertising was seen as a better way to cover the costs. But for 2010 this might change: some people think that if content is really very, very cheap, it might be far more successful than ads. After all, ad networks (like Google AdSense) are paying less and less, even though the model is still quite worthwhile for the sites with tremendous amount of traffic.

But imagine that you’d be able to pay just a cent per month to read, say, Massively. Massively has enough viewers to make this profitable enough to pay for their journalists. The question is, would you be willing to pay for that?

And the answer, not surprisingly, is “no”. Why not? Because no matter if it’s a cent or US$100, it means registering, putting your credit card there, and get charged for it every time. Credit card gateways are not targeted for micropayments, they have too high fees; even PayPal frowns at transactions of merely a few cents (I have tried that!). And, frankly, it’s a mess to set this up — not to mention that many people don’t really go through the whole routine. It’s far easier to look for some content or information that is free than to pay for high-quality premium content that costs a cent a month, just because it’s a pain to register. And what if you don’t have a credit card or mistrust PayPal or any of the other payment gateways? Micropayments never became ubiquitous.

Except in Second Life.

Let’s face it, the whole economy of Second Life is based on micropayments, and has always been so for at least 6 years and a half. It’s not a small market — worth US$ 0.6 billion, annually. It already reaches 18 million registered users, who might not use SL much, but who have a L$ account that can be used at any time. Yes, registration is a pain; but the point is, those 18 million users have been, at some point, exposed to a micropayment-based premium content economy. A million and a half are quite familiar, on a daily basis, with that model. Tens of thousands of content suppliers — we call them creators or designers! — make a living (or part of a living at least) by providing premium content using a micropayment economy. The model works. We have proved it works

Now imagine the next step: LL announcing their “money transaction API” to the public, allowing anyone, anywhere to transfer L$ between their avatar account and any other, without fuss or mess, and with true transactions, with all checks and confirmations — just like any other payment gateway. Unlike PayPal or other payment gateways, where you have only a single source of converting your credit card balance into “electronic money” (so you have to implicitly trust the company operating the gateway), Linden Lab allows anyone to create their currency exchange (and offers two of their own, the LindeX — and XStreetSL, which also has a currency exchange with better rates and less limits than the LindeX). They just act as a L$ broker, pushing L$ from an account into another.

So giving the above example again… no, you might not go through the whole registration procedure to get your credit card billed every month for a cent, but if you already have a SL account, you might be quite willing to pay one L$ to read, say, New World Notes, the SL section of Massively, or the Alphaville Herald. You might be happy to pay L$ 1 to get the PDF for this month’s issue of the Second Style magazine. And — why not? — WSJ and FT might set up some avatars in SL, and you might also be willing to pay L$1 to get access to their articles, too. What does it hurt, if it’s just clicking a button away? L$1 is something anyone can afford — except, of course, current payment gateways which charge insane rates for micropayments. But Linden Lab doesn’t!

Current micropayment gateways all lack a user base. Lots have been started and closed as the model was shown not to be worth the trouble. I can very well believe that content producers on the Web might see 2010 as the year of premium content — they just need to look at the Apple iTunes and App Store to see how well it works financially for Apple (and, if they’re bold, they’ll see how Second Life beats Apple’s transactions) to see that the model, well implemented, actually works. The trouble is to pick, among a selection of many, which one to support. Premium content producers trying to avoid credit card payments will have to support a plethora of gateways, as their clients will not use a single source. Each will require separate contracts, agreements, and expensive transaction fees — as well as licensing costs. And, of course, each will require specific programming. I find all of this too cumbersome.

But Second Life as a micropayment gateway has far more impressive credentials. Linden Lab, after a decade of operation, is not a start-up that is here one day, gone the next. Second Life is already the largest premium content marketplace with a working microcurrency, offering billions and billions of items for sale (let’s forget if they’re prims and clothes; who cares, so long as people are willing to pay for them? After all, an MP3 file downloaded from the Web is just bits and nothing else; but prims, textures, and music are nevertheless created by artists that love to get paid for their work, even if it’s just a few cents). It has been in operation for over 6 years using this model. It’s a profitable, successful company. 18 million residents have opened an account on SL, and over a million use it very regularly.

No other micropayment gateway in existence offers similar conditions, nor has the same reputation, nor a valid business model. Second Life has it all.

So, Linden Lab, what are you waiting for?

[UPDATE: There was a stupid mistake re: the GOM, which I've corrected. Thanks, Troy!]

There.com, unlike many other virtual worlds who were just a passing fad (like Metaverse!), also had a solid business model — so solid, in fact, that they managed to split off the “technology” part of There.com and resell the VW engine as a separate product (OLIVE) under a different company, Forterra, which has been quite successful, selling licenses to the US Army and government, and satrted to diverge from the original product very quickly. Ironically, Forterra now sold OLIVE to SAIC.

There.com’s future started to become cloudy once several programmers and the original founder, Will Harvey, left There.com to found IMVU, which continues to be a huge success, has twice the number of registered users than Second Life, and the last time I checked, almost as many items for sale on their web-based content shop as LL’s XStreetSL (which, as we all know, only shows a very small amount of all content available for sale in SL). Still, I incorrectly predicted that There.com would “live forever”, the major reasoning behind my claims being that their subscription-based model would allow There.com to operate indefinitely thanks to their very loyal customer base. The theory worked for almost four years. There.com didn’t grow in size, but it also didn’t grow in costs. It remained a niche VW, but that’s fine — it’s far better to have a financially sound business model behind a niche market than to expand to the mainstream and utterly fail.

Loyalty, however, seemed not to be enough. Unlike my most optimistic predictions, There.com announced that it would close operations on March 9th, 2010. Ironically, except for the odd SL blogger, the news of the end of There.com seemed to spark some activity mentioning that VW all over the VW blogosphere…

Personally, I’m sorry to see There.com go. I always liked their attitude and stance in general; I remember how their management teams and developers were quite happy to come to discuss things in Second Life, on roundtables and public meetings. This is not really very common in the tough and competitive market of virtual worlds And when the Electric Sheep Company announced that MTV’s Virtual Laguna Beach would be implemented in There.com and not Second Life, mostly because of Linden Lab’s lack of commitment to allow a stronger enforcement against griefers and pirated content, most SL residents actually backed that decision and agreed with it. It’s also ironic that Linden Lab has only recently announced the SL Enterprise product which is addressing what MTV wanted in 2006…

The OLIVE team, however, will most certainly continue this spirit of “cooperative competition”. They’re also part of the IETF group pushing for interoperability. While I’m quite sure things won’t be rosy, at least it’s nice to see a competing technology that is willing at least to talk with their competitors.

So while I failed yet another prediction, I’m still bold enough to stick to my more dramatic one: virtual worlds will come and go, as money runs out and companies fail to attract funders, but Second Life will remain. Even if it’s not Linden Lab’s Second Life but a spin-off encompassing OpenSimulator, realXtend, OLIVE, and several other technologies that, unlike all others, are working hard to interoperate with each other, and whose work, albeit at a very slow pace, is going ahead. It’s a relatively safe bet that after 2011, to survive, a virtual world platform will have to be part of the MMOX group.

In the mean time, Frenzoo, a virtual world with user-generated content which currently in beta, is extending a nice gift to all former There.com users: a free lifetime pass if they’re willing to move over to Frenzoo.

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.

Making money in SL’s remote past

A few years ago, it was far easier to “make money fast”. All you needed was a Basic account and to log in for a few minutes: you’d get L$50 every week that way. If you wanted a bit more, you could just join one of the hundreds of daily contests that were sponsored by Linden Lab, and they would give you, say, L$500 — if you won. But you could always participate on a different contest.

The economy ceased to be subsidised several years ago, and thus making money fast became far less easy. Gambling in Second Life, outlawed in August 2007 (except for the immensely popular Zyngo, that Aargle Zymurgy for mysterious reasons is still allowed to run), used to be a major way to make money — or, more likely, lose it very quickly. Unless, of course, you set up your own casino The politically-correctly named “escort service” was another way to get some money at the very beginning, and with luck, your “sponsor” would possibly pay for your initial set of clothes and an “appropriate” Animation Overrider. But besides that, making money didn’t seem to be very easy…

Enter camping. In the past, Linden Lab would pay land owners for the ability to drive traffic to their locations. The very naive concept behind this was simply that “cool places” would be popular, thus making residents happy, and this should be rewarded with a financial incentive in the form of a lower monthly tier payment. Thus, land owners quickly found out that they could set up chairs on their location that would pay any resident sitting on it a small fee per minute (or per hour) — artificially driving up their traffic, and ensuring a higher return on the monthly “incentive payments”. Camping chairs were born, and some of those were quite ingenious, like the “camping dance poles”, where attractive avatars would just sit inside a “dating parlour” and let their avatar be animated with sexy poses or dances. My favourite ones were animations cleaning building façades or lawn mowing

Linden Lab then removed the financial incentives for higher traffic. For a while, the impact of this measure was not unduly felt, since higher traffic still meant higher ranking on the internal search engine, and camping chairs were still useful for that. But then “camping bots” were invented — they would be much cheaper to maintain and guaranteed to attract an artificial crowd that could be “sitting” for any amount of time desired. Bots became the bane of Second Life, since they are so easy to setup, require almost zero maintenance, never leave their place, and naturally enough, do not require any payment. Camping chairs for human avatars became less popular.

Of course, the next predictable step by Linden Lab was to consider any measures to artificially increase traffic to a location illegal — specifically, camping bots, but also camping chairs or their more exquisite alternatives — and even go so far as to require users to flag their avatars as bots or humans. Using any of those systems became a bannable offense, and for a while, the reduction of the number of simultaneous users by 15-20% was attributed to the removal of dozens of thousands of bots grid-wide. They’re not all gone, since LL is unable to catch them all. And, since high traffic still gives an advantage on the search engine ranking, some locations continue to have variants of camping chairs for humans: in some cases, avatars actually have to stand up and walk a bit around the place to ensure that, if the land owner is reported, they can prove that their campers are not just sitting in the same place for hours and hours.

No matter how successful those techniques were (or still are), the point is that paying people to simply come to your place have become less popular. Without gambling variants, you wouldn’t be able to provide entertainment that would give L$ to unskilled people — and skill games are far less attractive than unskilled ones (for a new user). The notion of just paying people to sit on a bench and stay there disappeared. So there were no more easy ways to make money in Second Life.

The new generation of money-making schemes

In the real world, there are a lot of methods for unskilled people to make money — not much money, but at least something that is worth the time spent. Possibly the oldest of those methods comes from market analysis: it’s popular to give a small gift if you fill up a form or reply to an interview regarding a product’s perceived brand awareness. It’s just to thank you for your time. Lots of sites actually list events and things that give out free gifts or even some money in return for your time; some people spend all their (real world) time just looking for those — which can quickly turn into a full-time job! — and do little else besides searching for “free money” or “free gifts”.

But I still think that the best model is something automated… like Google AdSense. Google turned the common user into a billboard for advertising services — not a novel idea, but they definitely do it massively. The idea is simple: you’re already driving traffic to your website. Ad sponsors want that traffic. Google acts as the middleman putting both in touch and charges a percentage (how much, we don’t know; but it definitely accounts for billions of US$ in annual income for Google!). Anyone can set up a website in minutes and place a Google Ad on it, and immediately start making a few cents. Work harder to get more traffic, and Google pays you more. It’s simple to setup, simple to understand — although very hard to make a living of it (my other blog barely pays for the annual hosting expenses with the income I get from the ads!).

The whole idea is, however, easy to understand, and a few variations are naturally possible. Market analysis, for instance, can send you a gift if you fill up an online form — a gift which could be, say, a Google AdSense voucher, or a voucher for Amazon.com or eBay. In the not-so-distant past, people were paid to click on links, just to drive traffic to websites. Charities very often have links where you can click, and they’ll send some money to feed people all over the world, for example. The notion that a micropayment is more than adequate for people to do very simple tasks online is quite popular, and many variations exist.

Needless to say, clever Second Life entrepreneurs have figured that they could do the same. Billboards in Second Life never catched on, except perhaps on the mainland, since hiring spots to place ads was too expensive for the little traffic they guaranteed (if you had a spot already with a lot of traffic, why bother with placing a board there?) Metrics were also inadequately supplied. The same problem exists with billboards in real life, too: if you have a board on a location that is “seen by 100,000 people every day”, how many of those did actually buy your product? Unless you have a way to measure the return, this is usually dealt with heuristics — and some follow-up questionnaires.

Second Life, however, allows for something much cleverer: interactive billboards. A sign on the board can invite the user to click on it, and when the avatar does so, they could typically receive a landmark and/or a notecard, but also a tiny monetary incentive — say, L$1. The land owner setting up the billboard might get another L$1 (think of it as “rent”). And the advertiser would pay L$3/click.

Several variations on the theme exist. SLBiz2Life is a typical example of an operator providing those kinds of services, one of them called “Ad-Fusion Network” which is just a system like the one described.

Clicking on ads inside SL might be the most basic way of getting some awareness, but there are more alternatives. Shop owners have long since created groups to promote their products: join the group, and you get some free items once in a while; Fashion Consolidated offers a “meta-group” where thousands of content creators routinely make their announcements and send their freebies to dozens of thousands of eager residents; kiosks on the designers’ shops allow people to automatically register to the group. Subscribe-o-Matic is one of the most popular automated systems to do the same thing that doesn’t even require people to join any SL group; Jacek Antonelli’s Deliverator is a similar tool. An alternative to attracting people to your shop is just to set up a device that gives free gifts: Lucky Chairs are a popular method of doing so. The disadvantage of those tools is that you have to know beforehand where to go to get some free items (or free L$ to spend on a shop).

More innovative solutions exist. For instance, you can get paid to list a shop on your picks list. Variations, like paying you for joining a group, or list an URL or something on your profile, also exist. These days, as it’s easy to retrieve information from within SL, almost anything on your profile can be scanned and validated to see if you’re still being a good, walking ad — and if so, some L$ love will be sent your way!

What about finding new places to visit, where content merchants with their ready vendors anxiously await new customers? The above methods most rely on people finding locations first, and then joining a group (or tweaking their profiles) to get some L$ or freebies. ConeNet from Bletaverse works from the reverse approach. You can think of it as an evolutionary approach to the old camping chairs. Instead of a chair, however, you place a special Traffic Cone on your shop. You pay a certain amount to it. Now everybody that finds a Cone somewhere on the grid can click to teleport to a random location; if they arrive at yours, you’ll get debited L$2 which will go to the visitor, and an additional L$2 to ConeNet. Visitors to your location have to stay in the same area for 11 minutes to get some payment — this will obviously increase traffic, so even if they don’t buy anything, you’ll at least get a bit more traffic for your rankings. The system is quite democratic: it doesn’t matter if you invest a lot or little, you’ll still get visitors randomly allocated to your place (I’ve tried it out on my always-empty and never-visited shop in Io and got 20 or so visits in 24 hours). You can also control your campaign very carefully: no money will be debited from your account beyond what you’ve initially set up. Some cleverly simple anti-bot measures are in place to prevent bots to use the system and deplete your L$ account. An alternative, which is HUD-based and gives higher payouts (but also requires advertisers to spend more), is Pay4Visit from Earn2Life.

More complex systems exist. Knowing that people have little patience to travel around in search for new items — specially free or very cheap ones — companies like Robbie Kiama’s metaLife offer a full range of devices to facilitate capturing visitors to your location or sell them items. These involve HUDs and in-world kiosks; they add social networking and a way for people to tell friends what interesting things they found. Of course, reading Fabulously Free in Second Life is an alternative

If all else fails, well, there is no other option but to get a job. SL Job Finder from Indusgeeks is probably the longest-running job advertisement website for Second Life; another option would be the jobs page on SL profiles. However, don’t expect much from these sites: word-of-mouth is still the best way to find reputable, skilled workers in Second Life.

Last but not least, you can always search for the myriad sites out there offering L$ payment services in exchange for some kind of advertising or marketing campaign.

In conclusion: yes, you can make money in L$ without being skilled. All it takes is some time  to watch some ads.

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)?

How to make money out of digital content sales

3D content creators that are used to sell content on Renderosity are close to a “pure” market. Buyers and sellers sort of agree to what is “reasonable” to pay for a meshed object that buyers can then use as often as they like (there are no technical restrictions, just merely licensing agreements that most poor digital content creators are rarely able to enforce). It’s an “opportunity” market; since 3D object meshes are available completely for free on popular sites like the Google 3D Warehouse, it’s hard to tag a huge price on a model, since the higher it will be, the more likely someone simply uploads it to one of those “free 3D models” sites and just lets it stay there for anyone to copy. Sure, you can DMCA them out of those sites, but there are simply too many to track, and no overall organisation to remove stolen content.

3D modellers are thus familiar with this business model, which, in a sense, is not unlike indie music creators who sell online. The “impulse buyer” will be willing to spend a few US$ on digital content, if they need it for a project that requires proof of purchase; if the model is too expensive, and not worth the trouble (say, for making a quick movie or even a still image to illustrate something) they will just look elsewhere for a free model instead. I have recently been at a conference where academic researchers, encouraging the audience to participate in virtual worlds, explained that 3D virtual worlds are actually very easy and insanely cheap to create in a learning environment “because of all the free content that is available”. They definitely undervalued the role of the content creator by saying that 3D meshes, being so widespreadly copied and archived with relatively good search engines, are basically ubiquitous — hiring a 3D modeller is only wise when you need very specific content targeted to a special environment (say, recreating an exact replica of an existing building that nobody has created yet).

So, 3D modellers mostly work with content-as-a-service. They get hired to do specific models, but generic ones are not “sellable”. They might be posted on Renderosity and similar sites to give them some exposure and give potential buyers of 3D content a taste of the kind of 3D models they’re able to create. In a sense, this is not unlike semi-professional photographers that post their pictures on Flickr or Stock Exchange but might sell them (very cheaply) on Fotolia. It’s a way to build up a portfolio, get some exposure, but the real money will come from getting a contract to take some special pictures of an event or a person. Granted, the long tail will help to make a small income out of selling a few pictures from those very-low-cost sites.

In a sense, the overall trend is that anything digital is next-to-free on the Internet — music, videos (think YouTube!), pictures, and 3D meshes — since it’s impossible to prevent copy, and amateurs flood the market with free content for anyone to download. Very cheap and free content allow digital creators to get some exposure to (hopefully!) attract the attention of someone who might be willing to hire them to provide services. That’s how it works.

No wonder, then, that the amount of money made directly from selling digital content on the Internet is not a huge market, even though the few sites selling cheap digital content still make enough to cover the costs of archival and storage — typical examples are Magnatune (or even Apple Store!) or Getty Images. But there is not much room at the top of the pyramid.

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

Another surprise (for me at least) was the incredibly positive feedback throughout the SL community. I expected that most residents would frown at this, shrugging it off as merely hype, or irrelevant to SL (since LL admits that there are really only 1,400 organisations — corporate, academical, or otherwise — in SL), or simply something no worth wasting any time over: a gadget, a gimmick, another cool thing from the cool kids in the ‘Lab, but too expensive to make a difference, and too limited for anyone’s purpose (more on that in a minute). Actually, however, although some people questioned the business model behind Second Life Enterprise, overall, with the possible exception of Prokofy Neva (who complains mostly about the SL Work Marketplace anyway, which hasn’t been brought up yet, and not about the Second Life Enterprise solution), most residents are happy or at least intrigued by this new product. I think, once more, that this is quite a good sign — on one hand, Linden Lab’s Enterprise team did a thorough job in putting the product out; and on the other hand, residents view it as a sign that Second Life really starts to be taken more seriously outside the sphere of the “early adopters” and spills over to the mainstream — in this case, the corporate mainstream — which will make all our hours spent in-world much more worthwhile.

What is Second Life Enterprise?

But let’s unravel first what Second Life Enterprise actually is, and what it will be used for. There are always the inevitable rumours and plain misunderstanding around anything that Linden Lab launches. The most vocal residents come from different backgrounds, often without any business experience (or rather, lacking the experience on how corporations evaluate and buy technology for their workplace) or technical experience, or having only one of those, and this makes them misunderstand the purpose of such a product. We also project expectations upon things that are told us, and based on those expectations, we create a mental image on what we think it is, instead of understanding what it really is. I would say that’s unavoidable, it’s part of human nature. Amanda Linden and her team can only go so far to explain things properly to her target audience: corporate CIOs and MIS who will be evaluating products for their workplace.

Second Life Enterprise is the equivalent of a company’s intranet. It is supposed to work in complete isolation from the outside (virtual) world, and be used only for the workplace. The “behind-the-firewall” description is sometimes misleading, as many people imagined that what this means is that somehow your region would be more protected from the menaces of the Second Life Grid. This description is, indeed, misleading. Second Life Enterprise is not connected to the SL Grid; it doesn’t even share the same set of asset servers.

Instead, it’s a physical box, shipped to a customer’s office, including two servers, which have higher specifications that the current grid servers. One server is a voice server; the other, with 2 GBytes of RAM and 8 cores, will run 8 regions (sims) and have its own set of central servers, where the customer will be able to create their own avatar names (up to 100 on the standard package, which is the one that costs US$55,000 for the first year; subsequent years will apparently be charged at US$150/avatar, but this is not quite clear to me yet). The software is still closed and proprietary, and the regions share exactly the same specifications as the ones you get on the Second Life Grid: regions are still 256x256m with 15,000 prims and allow a maximum of 100 avatars in it, for instance. You cannot change those settings even though you “own” the box

In a sense, the best equivalent of the Second Life Enterprise box is a product by Google called the Google Search Appliance. Google is the world’s leading Web search engine developer, as everybody knows. Now imagine you’re a corporation with a lot of information in your enterprise — for instance, product and specification data — and would love to make it searchable. Publishing it to the Web and letting Google index it is out of the question: these are private documents that are not supposed to leave the corporate network. The solution that Google has been selling for a few years now is simply to put their search engine inside a box and ship it to you, so you can set it up inside your network, behind the corporate firewall, and only let employees use it. It’s not connected to the outside world (unless you wish so, of course). Although it uses the very same technology that Google employs on their publicly-accessible search engine, it has no connection to it — your documents’ indexed data won’t “mysteriously” be shown on the public engine. They will remain just inside the GSA and never leave it.

That’s the model Linden Lab has used for their Second Life Enterprise box. They pretty much copied Google’s own example. That shouldn’t be very surprising: after all, if you haven’t noticed, the in-world Search engine that you use every day on the SL Viewer is actually powered by a Google Search Appliance as well

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?

If there was a more confusing week than the past one, I don’t remember. On one side, Second Life is definitely growing — but it’s not a mainstream product yet. As 2009 slowly comes to an end, and we await some of the neat tricks that Linden Lab is planning to release — like meshes, or the new viewer with an easier-to-use interface — we continue to see 8-12,000 new users registering every day, and the user concurrency climbing slowly back after the “bot purge” which occurred when Linden Lab decided to make “traffic gaming” illegal. Monetary transactions are on the rise. As the new school year started, more and more universities open up their classes with Second Life somewhere in their curricula, slowly displacing other technologies in the area of virtual worlds, but also bringing virtual worlds to completely new areas where it had never been employed before.

But even inside the many communities in SL, things seem to fare well. It’s not just Burning Life — once one of the major events throughout the year (SLCC and the SL Anniversary were possibly two of the others), but these days, with so many events, often attracting dozens of thousands of residents without being mentioned on the media (SL or RL), they don’t seem to be the focus of activity any longer. People have so much more to do these days. Intriguing new models of business have slowly emerged, of which, for me, the most fascinating is the new cover charge system for live performances, where the money from tips gets split between the artist and the venue. But I’m sure plenty of other systems are being tested right now of which I’m not even aware.

So all seems actually going quite well in Second Life…

On the other hand, I’m pretty sure that content theft is topping the list of concerns of residents, while explicit adult content is probably much lower in priority. This means that the non-SL media gets confused — instead of talking about sex, they now have to tackle copyright law, which is way harder to understand or explain to their audience. Almost everything else pales in comparison — this is indeed the #1 priority at the top of the residents’ minds, and the first reason being given for content creators to leave — like Eshi among them.

Sadly, it’s the only one that has no technical solution. But at least there are things that Linden Lab can do: limit the distribution of content, and start dealing with content theft more seriously than before.

And, of course, residents still demand the impossible from Linden Lab: getting a thousand avatars in the same region without lag. Server-side lag itself could be reduced if they moved to a platform that dynamically allocated computer resources to sims needing it (instead of wasting CPU power on empty sims), but this is not likely going to happen soon, probably not even in the next decade. It’s a complex problem because of the insanely huge amount of content in SL that could break. This is, in fact, Linden Lab’s most terrible nightmare: how to improve SL without breaking content? Of course there are a few things that will be released in the coming months that will bring some improvements, but don’t expect miracles. And, of course, there is no way you can prevent a thousand 7,500-polygon-avatars, plus thousands more from attachments, from lagging your SL client. The current generation of graphics cards is simply not powerful enough for that.

Granted, the first-hour-impression is still a problem. I would like to suggest that all Linden Lab employees actually spend half an hour per week on Help Island. They could use their own avatars or an alt disguised as Mentors. It’s going to be an eye-opening experience. The first thing they’ll immediately notice is that the majority of new residents don’t speak English. They might have their SL client translated into their own language, but there will be few around able to help them — even though the network of Mentors is quite fast at locating someone who actually talks a specific language. And, in the mean time, they can use the cute new feature from Snowglobe that automatically translates all public chat using Google Translator (or, if you don’t like Snowglobe, you can always pick one of the many Translation HUDs available out there).

But it’s not the same thing. The first question these days is not “how do I get money?” in Second Life, but very likely “where can I go to meet people?” Figuring out what new residents’ expectations are and delivering them to the right place — e.g. people that speak the same language, have the same tastes, and have created a community around it — will be the most crucial, beneficial change that Linden Lab can introduce to limit the huge rate of dropouts. Yes, of course a simpler viewer will help, too. And so will all sorts of agreements with SL communities to set up their sites to attract new users directly to their spots. But it’s important to understand that the only real way to attract a large amount of users is through Linden Lab’s own channels. There is no third-party SL-related website with as much traffic as Linden Lab’s own — they don’t come even close. This means that either LL helps residents to be correctly sent to the right places, or nobody else will (except marginally so).

10,000 people per day are a lot of people, just think about it: every 6 seconds, a new resident pops in. Of those, perhaps 100-300 remain. They’re often people that have a goal in mind: either they know their friends are already in SL, or they are logging in from their university/corporate campus, or they were lucky enough to get someone to explain to them how to search for groups or places (to the best of my knowledge, until you leave Help Island, you can’t even see the Map — a lot of new residents simply think that the Help Island is all there is to SL, and give up in disgust).

The rest simply give up. They lost the opportunity to get in touch with anyone. Second Life is an empty, barren place for them — not worth fighting against the interface and the lag to stay any longer.

Linden Lab should take a look at how all other social networking tools (and even some virtual worlds like Kaneva) actually work. The first thing they do is access the user’s contact list to send emails to all their friends — and, reversely, search among all the users on the system to see if any of their friends are already logged in. Then the next step is to figure out the new user’s tastes, and make sure that they can find any groups/pages/communities to join. And, lastly, make the personalisation of their “space” as easy as possible.

Now imagine what this would mean for Second Life. While they wait for the SL client to download in the background (which just takes a few minutes anyway), the registration page should give them the chance to pick their avatar. Not just 20 or so choices: personalise it. Pick one of several skins, one of many shapes, and an assortment of clothes, so that people can tinker with the choices before they log in. At the same time, figure out among all residents the ones that are on the new user’s contact list, and allow the new user to send them a message. This would be a “invite your friend” kind of message — something that tells your in-world friends your avatar name and your email address (so that they can confirm they know who you are!). With luck, some of them might even be in-world, and pick the new user up…

Then a simple database query would be run across the list of groups that your friends have joined, and, say, list the top 10 (public) ones. It’s highly likely that you share at least some of the same interests of your friends. At the same time, a second query would collect all Picks lists from your friends and create landmarks for each — with the new viewer, landmarks and bookmarks and SLURLs will pretty much be the same thing, and the result would be that at least you’d know where to go! And, of course, select a specific Help Island, one where people will be speaking your language — but not an isolated island in the middle of the ocean, which gives the totally wrong impression. The great thing about SL in 2004 was that you would walk out of orientation into a welcome area and into a sandbox where people would be doing creative things.

Of course we all know that “welcome areas”, infohubs, and sandboxes are crammed full with griefers and pesterers and residents soliciting all kinds of shady deals. But not all are like that! Several communities on the Community Gateway programme are providing safe places for new users; NCI has been doing so for over five years. Some infohubs are set up inside private land on the mainland, and are properly maintained by their owners, who take good care of the new residents (Ross is a good example that comes to mind).

It’s not as if LL doesn’t have the means for dealing with the first-hour experience; they just lack the knowledge on what will actually work or not. And that’s just because most of them don’t really have patience to stay on the many welcome areas and help islands to help new users. Or, if they do, they don’t have real executive power to push their feedback to the Director’s Board. It’s time that M Linden, after a year or so in SL, does a round of mentoring every week! I’m sure he’ll gain quite a lot of experience towards understanding why people leave SL.

And so, ultimately, we come to why Philip is “leaving” SL. I’m putting it between quotes, not because I’m in denial and refusing to believe that LL’s founder is going away. Philip was actually quite clear saying that he isn’t going away, just leaving his duties as part of the engineering team at LL, and spending his free time to start a new company, which he claims that would have been impossible without SL existing at all. The reaction, at least on LL’s blog, hasn’t been too bad. We all shed one tear or two — or copiously cried like Dusan Writer in the best article I’ve ever read on the SLogosphere. It’s a very moving article, and it addresses one fundamental point: in a virtual world where creativity is king, who is going to bring the vision now for the future? We have this feeling that M Linden is probably a much better CEO than Philip ever was, but Philip is the visionary — M just executes the plan. Now who will steer Linden Lab into the right direction? And remember that the right direction is not merely making Linden Lab profitable (which it is, and M will keep it that way). No, LL’s mission is to advance the capabilities of the many people that use it, and by doing so affects and transforms them in a positive way. These are bold words, but they represented the effort of a decade of work towards a certain goal, which is quite unusual to see from a company. This is effectively what Linden Lab might have lost as Philip steps down from his current role.

Although we might not really have “lost” Philip (whatever he’s doing; my own amusing poll on the sidebar of my blog is just really trying to guess wildly at what he might be doing; creating a new virtual world will very likely be impossible for a few years, due to non-disclosure agreements that I’m certain he’ll have to sign when resigning from the company), we might have lost Philip’s vision. This is, for me, the most worrying aspect of the announcement. We all know that Philip hasn’t done much for SL in the past few years, except for the Snowglobe project, which can only be described as a success so far, and something with a lot of promise, albeit it plods along at a slow pace. But we also know that Philip was talking to M every day; imbuing him with the same spirit that Philip brought to Linden Lab, while allowing M to take a perspective on things and manage LL more efficiently. We also know that Philip disagreed with many things (he doesn’t hide it, not even on his last article), although we might never know what he disagreed with.

We can only speculate what will happen next. I think that at this stage, Linden Lab needs a new visionary to step forward, and they have one person able to fill that role: Mitch Kapor. He’s an old-time visionary who carries a lot of weight. Between Mitch and Philip still sitting on the board, and with M at the helm, we might see a renewal of the efforts of Linden Lab to continue to steer the virtual world to shores unexplored and unchartered, and keep up the expectations of being a one-of-a-kind virtual world that still baffles the competition that has no idea what to do with the technology.