“If we were ineptly plodding along, why aren’t there any competitors that have wiped us out by now?” asked Philip Rosedale during a talk with Mitch Wagner recently.
I’ve been meaning to write a followup to that, because it’s a question that I know the answer to.
Simply put, investors don’t – as a rule – put capital into things that don’t look like they’re going to succeed.
The overall impression of the unique mix of factors in Second Life is not necessarily that it has failed, or is failing; but more that it defies success – that it has problems which may be insoluble and intractable.
Therefore, when other businesses are looking to compete with Second Life, they simply won’t compete with it on its own terms; terms they see as being significantly flawed.
From having spoken to people who’ve made such pitches as well as venture capitalists who’ve been approached with them, it tends to go something like this:
(I didn’t have to make up any text in the second panel. That was a quote. This strip was originally published on Massively)
Make no mistake… if Linden Lab figures out how to get on top of certain issues (like scaling, general appeal, griefers and the like) there’d be no shortage whatsoever of people ready to pour money into emulating it.
Until that happens, though, the particular formula that makes Second Life unique is something few investors would want to touch with a ten-foot pole, let alone a capital investment. That means that any potential competitor is going to be operating at a tangent, and often a significant divergence from the Second Life model.
If you’re expecting Second Life’s competitors to generally follow Second Life’s model… well, you’ll hardly see much of that unless the Lab manages to find solutions to its problems.
Linden Lab’s persistent inability to overcome what are considered to be the major criticisms of Second Life are what keeps direct commercial competitors out of its way.
Judging by the number of virtual environments that are based around World of Darkness (more than two hundred last time I looked), it’s a very popular setting. I’m not really sure if the upcoming MMOG rendition will work as well, and if it will tempt players away from their traditional WoD virtual worlds. That all remains to be seen.
A large part of SL’s failure is presentation and a fundamental lack of understanding on the part of Linden Lab with regard to both their product and their customers.
The two biggest complaints the average potential user will have after trying, and dismissing, Second Life are 1) It’s ugly and 2) there’s nothing to do.
Linden Lab has failed entirely to address very basic visual design issues from the outset, and has completely blundered the social aspects of the platform which could bring groups and communities together. That LL has failed so spectacularly on these two aspects, and yet achieved a modest amount of success, speaks volumes on the potential for profit in a virtual world if a competitor could succeed in the aspects Linden Lab has dismissed and ignored.
SL’s reputation for poor visuals is not, despite common belief, due entirely to the amateur nature of “user generated content”, nor is it due to SL’s graphical limitations. These are both factors, but carry a disproportionate part of the blame in light of just how poorly developed SL’s content creation tools are. Not to mention the amateurish look to Linden Lab’s own official content, such as the starter avatars and welcome areas.
A bit of an anecdote, but a good friend of mine was showing people in IMVU screenshots from a role-play sim in SL. The immediate responses were that the screenshots could not possibly come from SL. They had all tried SL and SL did not look like that.
This perception is common, and extremely bad for Linden Lab. They are the only ones who can alter that perception via the experience of potential new SL users and improvements to SL’s content tool set.
Improvements to the social aspects, both in terms of personal profiles and groups, as well as search related issues such as the land descriptions and the search engine itself, would also be integral to any real success. Linden Lab shows no interest in the former, and an inability to understand their problems with the latter.
In addition, SL suffers a severe lack of engaging content beyond playing dress-up or visiting clubs. There is no method for animating prims with any reasonable level of quality. Linden Lab has dismissed outright the concept of “Non-player Avatars” beyond clumsy use of bots. “Games” in SL are primitive, environments are static. Immersion is a concept the Lindens love to talk about, but has snown no interest in actually understanding.
My criticism comes from that of someone who is very active in SL and has been for years. I’d very much like to see Linden Lab succeed, but to do so there needs to be some very significant attitude changes within the company.
That was a tad longer than I intended. Let me sum up my point as this, Second Life has failed to show virtual worlds as a profitable market, so there has been no rush of imitators to steal their success.
However, it is all too common for business analysts, company executives, and such to dismiss something as a failure without actually understanding why it failed.
SL is not a failure due to a lack of public interest. SL is a failure due to mismanagement, a lack of development in critical areas, and extremely poor marketing.What success Linden Lab has managed despite the many flaws of their product show that there is, in fact, a substantial amount of interest and profit potential which remains largely untapped.
It’s also common to dismiss something as a failure if it doesn’t meet the commentator’s own subjective and perhaps quite arbitrary definition of success.
Are you suggesting Second Life is a success then? If so, how do you define Second Life’s success?
As I stated in my previous comments, I do believe Second Life has achieved a modest amount of success, but Linden Lab has clearly have not achieved the success they had hoped for, nor are they even currently enjoying the level of success they had when the hype surrounding SL had peaked.
Clearly they are not successful enough to encourage imitators. It is also clear that Linden Lab has not been successful enough to maintain the size of their work force, hence this year’s not insignificant staff reduction.
I’m not sure exactly what criteria to place on it to judge it one way or another, at this time. Certainly, for a while there it was a commercial success. An outstanding commercial success, in fact. That seems to have waned somewhat – but might yet return.
bootlegging liquor was a commercial success;) — so was Madoffs “buisness”–up until it wasnt.;) Competition demands a set of acts that “wants to be emulated”.
desciding the “success of LL or SL” is a layered exam because of “what they said” and “what they did” and “how they chose to do it” all being at odds..;)
and of course the “ends hasnt occured yet”
Pardon me for being a little slow, but “success” means “profitable”.
Is SL not profitable?
I was under the impression that it was profitable, just not as much as it *was*.
Yes, SL did enjoy some significant commercial success around 2007. My point is that it’s important to understand why that didn’t last. If Linden Lab is unable to grasp that, then any future success will be just as brief.
In fact, it can be argued that the “hype bubble” of 2007 has put LL at a long term disadvantage, that Second Life was not ready for that kind of attention and success so when it quickly crumbled it had soured the market on the concept.
It will take much more effort to get that market back now that it has come and gone.
@bx
Being profitable is not always the only measure of success. Companies often like to show growth. SL is shrinking, which is unhealthy and not a sign of long term success.
Growth shows a strong company, assuring future profitability and drawing in investors. Investors want to see a return on their investment, if the company is “treading water” that does not make them happy.
“competitor’s have not wiped SL out” is hardly an inspiring battle cry from the creator
but competition is eroding away at SL . . . or at least options exist for a small group of people like me
Q3 with its drop of 11% in user hours seems telling as well . . .
@Sveid
In the middle of a recession where many companies are *shrinking* and *losing money* then not growing but staying profitable is *indeed* a success.
To you and me, perhaps. Many investors would not see a stable profit margin as a success. Presumably that is why they have the large sums to invest in the first place.
@Tateru,
Well that’s the interesting point, because as it happens I know a couple of big investors on a personal basis and have had many, many conversations about how they choose who to invest in.
From the point of view of making a pitch to investors, LL recent behavior definitely jives in my eyes as trying to make a pitch.
And though I would concur that on the surface a business with a *stagnant* growth level even though it’s maintaining a healthy profit margin doesn’t seem to be a big investment hit, those are not the only two criteria.
If it were me doing the invest-or-not decision, the conversatin might go as follows:
LL: So we need some $$$$$
Me: K, I see you’re not growing and you aren’t making any extra profit but since you’re not losing money that shows you are managing the down-turn reasonably well. That said, I want to multiply my investment. Show me what you are doing that will enable you to ride the upswing when it comes and get significantly larger volumes….
If LL was able to answer that question with a *plausible* business plan then I don’t see why they wouldn’t put the money down.
@bx
Linden Lab’s woes began well before the recession. The economy may be responsible for highlighting Linden Lab’s troubles, but it is not the source of their problems.I imagine any potential investor would look at Linden Lab’s history, and not simply give their current state a free pass due to the state of the economy.
I believe that LL retains a great amount of untapped potential and I wish them nothing but success. The problem is that they insist on making fundamental mistakes, have shown a remarkable lack of focus and have failed year after year to show that they have a plausible plan for the future.
@Sveid,
I don’t necessarily disagree with your point but I’ll come back tangentially to a related issue:
Investors will invest in what they think is the front-runner even if the front-runner isn’t doing everything right. As long as the competitors are doing many things worse then the front runner is still in the lead.
I think that’s the case with SL right now. Go take a look at the other “competitors”. Blue Mars and Friends Hangout and Frenzoo for example.
All of them are technically superior but they all stricly limit the creativity of the people in-world and also limit what you can do.
SL may be boring to those who seek e.g. wargames but the freedom it gives you in many other areas vastly outweighs their drawbacks.
In modern business school, a successful business strategy isn’t necessarily to go after the entire market, it’s go successfully go after a market segment (a “niche”) and HOLD that niche.
No other “competitor” can come close to the niche SL holds and though it may no longer be a “rising star” it certainly is a cash cow.
Given that the main complaint on here seems to be what’s been done wrong I’d view that as an advantage. With the correct management and some *vision* SL could once more become a superstar.
I suspect that the naysayers may be mistaken once again.
@bx – Second Life is not successful. It is losing customers, losing staff, and turning over CEOs rapidly. Those are not the signs of a successful company, those are the signs of a failing company.
@Mitch
Go look at the stats in Alexa then tell me it’s going downhill.
As for losing customers you don’t have any real stats other than anecdotal evidence from the same people who say the sky is always falling.
@bx – How will Alexa help me? That tells me web traffic, not logins.
As for customers leaving, I’m looking at Linden Lab’s own numbers for that. Concurrency and hours inworld are down significantly.
@bx, Mitch is no slouch and to back up what he is saying, explain how dropping 13 million user hours in the last year is growth? an 11% drop, that’s a funny sign of success
Alexa ranking? that’s the website, not Second Life itself. heck, my SEO (via HubSpot) is higher than SL.com, but I am not more successful . . .
[...] to quote Mitch Wagner today: “Second Life is not successful“; so perhaps emulating that model may not be the most prudent approach. It is easy to think [...]