Wednesday, January 9, 2008

The unbearable lightness of banning: Linden Lab's lack of strategy

The demise of banking * analysis of Linden VPs * Linden Lab's problem solving algorithm explained * a friendly advice to Phillip * it's a brave old world * patronizing advice

By now, you are sure to know about the Linden Lab's ban on in-world banking. At a glance, it seems like a reasonable decision: the banking activity in Second Life was often suspicious, and it has had its fair share of scandals. But what might it mean for the long-term future?

A rush on banks on Tuesday (source)

On Monday, I attended the Metanomics event featuring Robin Linden. The Metanomics events are often boring, especially the ones featuring Linden VP's. Last year, we had Ginsu Linden, whose answer to the questions ranging from in-world monetary policy to the laws of supply and demand was the mantra "Second Life is a product". This one was no exception, except that Robin's mantra reply to the questions ranging from land zoning to JIRA and reputation systems was "It's very hard, so we are focusing our efforts elsewhere", peppered with an occasional "Well, if the community implements something, we might use it".


(hint to surviving Metanomics events without falling asleep: watch it at Muse Isle, where the atmosphere is fun and joking constant)

Boring as Linden VPs may be, they do provide an insight into the workings of Linden Lab and the future of Second Life. Briefly stated, their problem-solving algorithm is:

  1. A problem arises in Second Life
  2. Problem grows worse; L$ are lost, blog posts on the topic abound, possible solutions are put forward
  3. The JIRA is mobbed
  4. Time passes
  5. Some more time passes
  6. Linden Lab implements a quick fix by either:
    1. banning the activity in question
    2. extending RL governance to the SL activity in question
While this may seem to work (hey, gambling is not a problem anymore, right?), it proves that Linden Lab has no long-term strategy for Second Life. This is a bit shocking: all Phillip's speeches and LL's mission ('To advance the human condition') sure make it seem like they know where Second Life is headed. There seems to be a disconnect at the middle management layer - you have visionaries and enthusiasts on the top and bottom, but the VP layer is made out of old-school businessmen. We all remember how it went when Apple tried a Coca-cola executive, so my advice to Phillip would be "Watch your back!".

Oh, Phillip?

The essential premise of Second Life and its biggest competitive advantage is freedom - freedom of creation, freedom of communication, freedom of interaction. Of course there must be some limits to freedom; but instead of giving us the mechanisms to evolve these limits, Linden Lab simply stamps the real-world solution on the troubled area. Problem with the banks in Second Life because there is no regulatory body with authority and tools to regulate banking? No problem - let's allow only real-world banks which conform to real-world restrictions. Bit by bit, they are making Second Life a carbon copy of First Life - just with wings and furry avatars.

An aside: Linden Lab states that Linden dollars are "fictional currency". So why must you have a real currency bank certificate to open a bank in Second Life? Wouldn't a certificate of fictionality be more appropriate? I fear that LL has opened a Pandora's box with this decision - it will be interesting to see how the future develops.

Am I concerned about my Second Life? Yes and no. I love Second Life, but what exactly do I love about it? The crashing viewer and an abundance of Ruths? No - I love the way it enables me to communicate with others, by creation or by interaction. Exactly who provides that service is unimportant in the long term. Once something has been done, it's easy for another to copy and improve it. If Second Life fails, I have no doubts that a Third Life will await me down the road.

Ruth army (source)

I offer no concrete suggestions to Linden Lab; other posters have done that better than I could have. I do have one advice for Robin Linden, the "VP for community", though: make deciding about the "hard" issues your priority. They (and not viewer stability, GRID architecture or banking regulation) are key to Linden Lab's and Second Life's future.

Friday, January 4, 2008

Second Life for fun and profit: the cycle of added value

Introduction * a newbie's response * the value of.. well, value * the formula for success * give before you take * a hearty guffaw

Virtual worlds are tricky. That holds true for users and companies alike. The old behavioral patterns no longer apply - there are no quests to embark on, character level is not measured with simple stats, repeatedly hacking at things doesn't guarantee a level-up, and pouring money into shiny builds does not guarantee an increase of sales.

Ah, the simplicity

What is a person or a company confronted with a brave, yet incomprehensible new world, to do? Well, most simply leave. That is evidenced in low user retention rates and the exodus of companies to greener (or so they think) pastures - to other virtual worlds or back to the warm embrace of traditional advertising. Yet, some persevere and a few of them even prosper. What do they know that the rest don't?

"There there, we'll do it much better this time"

It's simple: the prosperous ones understand value.

The key ingredient of a successful and eventually profitable Second Life presence is added value for the Second Life community. Only by adding value can companies build their Second Life community, and only a Second Life community enables the companies to reap added value from Second Life.

The cycle of value

A process for real companies entering Second Life should therefore be something like this:
  1. Company starts creating value for Second Life users. That can be practically anything: free content, free music, regular events, education, ..
  2. A community forms around this and grows
  3. After a community has been established, the company can reap the added value benefits - brand promotion, attracting new customers, business partners or employees, sales of virtual and real goods, content creation, market research, experimentation with business models, ..
But why does it work like that? It's nothing but the old "Give before you take" rule applied to business.

Looks familiar..

The "GBYT" rule is one of the cornerstones of human interaction - in a way, our default behavior. Big corporations were only able to circumvent it by hammering advertising messages into us and controlling the supply. In Second Life - and all open virtual worlds - this kind of a heavy-handed approach doesn't work - everybody's free to teleport away and the playing field for content and service providers is extremely level.

I believe the virtual worlds are here to stay. Not necessarily Second Life, to be sure, but there will be virtual worlds and they will shape our life - both personal and professional. Like with the internet, the sooner you "get it", the bettter - and that goes doubly for companies. Which means that in order to prosper in virtual worlds, they will have to learn what it's like to be human again.