Monday, October 15, 2012

Downsized Dreams: From Metaverse to Creative Spaces

Cemetery Shot
If you’re satisfied with creative spaces, good luck with that, but we’re holding out for the Metaverse. #lindenlab (Tweet)
Easy for me to say, right? Although many of us invest our own spare time and money chasing personal visions of the virtual future, companies don't have the luxury of pursuing their dreams indefinitely. I know from experience.

Thirteen years ago, I was co-founder of a "change the world" internet startup. We launched an online software development community where people could share ideas, co-develop new products and split revenue from their created work.  We thought we'd change the way software was developed and sold by replacing companies like Microsoft with thousands of entrepreneurial teams collaborating through our platform.

After a high-profile launch at a big software development conference in Silicon Valley. we grew rapidly in a few months to over 30,000 members from around the world collaborating on 1,000+ software projects. A year and a half later, the dot-com bubble burst, our funding prospects evaporated and we had to make hard decisions about the future of our company. We ended up shifting resources to a sister consulting company doing software development work for large organizations. Although our dot-com dream continued for a few more years, we eventually closed it to concentrate solely on what turned out to be a thriving and profitable business.

That's why I can't fault Linden Lab for trading their founding dream of changing the world for the smaller scale vision of creating collaborative spaces. Extrapolate the accelerating decline of Second Life private sim revenue just a year or two into the future and the survival of the company is at risk. Since they've tried and failed repeatedly over the last five years to turn Second Life around, it seems to me that hedging their bet with new products is a reasonable idea. As I wrote in February:
My guess is that Linden Lab calculated that even if they solved all current issues by investing a million or two on reengineering legacy systems, revenue would still decline over time . . . There is no sign that the market for sandbox worlds like Second Life will significantly increase in the foreseeable future. So there's really not a lot of upside for them. It's no wonder that they made the decision to take advantage of their current cash-rich situation to invest in new products that offer, at least potentially, a much higher return on investment.
Will their new products end up replacing the millions of dollars of projected shortfalls from lost sim revenue from Second Life? Will dividing corporate resources between half a dozen new products exacerbate their already checkered record at improving Second Life's long-standing technical and community relations problems? Is there some new business model for Second Life that will tie in with its launch within Steam? Or maybe a browser based client? Beats me. But since they've given up on the dream of changing the world through a platform that Philip thought would one day host the virtual equivalent of RL countries, I plan on holding out for the next company that tries.


Yordie Sands said...

Hi Botgirl... We seem to have travelled a similar IPO path during dot-com to dot-bomb. Our industry was "throwing the traditional paradigm on it's ear," one newspaper reported. But the dot-bomb sent us reeling and in the end we were acquired by a giant that really didn't know how to capitalize on our technology.

I think the message in your post is that LL feels there's no future in SL and based on Rod's comment that they are about building tools or some such thing, it's pretty clear they are just gonna ride it into the ground. I don't know if there's anyone with a true vision that can save SL, but they don't seem to be onboard at LL at this time.

I don't resent a company trying to invent stuff. I do resent LL for being so blind to what they have.

Let me know if you find the next company. I'll be looking at other grids from time to time tho.

Botgirl Questi said...

Hi Yordie,

There's no telling what goes on behind closed board room doors, but their actions indicate they don't see Second Life as THE future. I do see them continuing to make investments in improving the platform, as well as marketing initiatives to to try to breathe new life (or demographic groups) into the platform. I don't think they're running it into the groung, but may just not have a plan they're confident enough in to stay 100% focused on the product.

If I was the new empowered CEO, I'm not sure what my go forward strategy would have been. I'd be very concerned about the majority of revenue being in the hands of a relatively small number of large landholders. So they don't only need to retain new users, but also figure out new ways generating revenue from the 98% of us who don't own multiple private islands.

Mobile clients would be a great way to not only engage current users, but bring in new ones. It seems like a no-brainer. An alternative browser-based client would also be a relatively low-cost way to go after the Facebook set.

It's interesting to think about. And I'll be sure to let you know about any promising new companies chasing the dream. :)