Caleb Booker

Here’s the scoop: yesterday Linden Lab announced the purchase of “Xstreet SL” (known up until a few months ago as “SL Exchange”) and “OnRez”. They’re extremely well put together and easy to navigate web destinations for purchasing virtual goods in Second Life. There’s also a currency exchange function built into Xstreet, so you can use Linden Dollars (L$) or USD in the same account. More adventurous folk actually play the currency market there as well, seeing if they can buy L$ low and sell high.

As business decisions go for Linden Lab, this was fantastic. Up to this point every virtual world on the web except Second Life has had a means to purchase virtual goods in a central marketplace. It has actually been yet another barrier to entry for newcomers when they log in, say “Ok where do I buy stuff?”, and the answer has been “Oh, you kind of look around.”

This sends people to the Classified listings and the search engine. This is a bit like handing new users a phone book and saying: “Here, find a new shirt.” Not exactly an accommodating experience.

Why was it like this in the first place? Well, up until relatively recently, Linden Lab hasn’t been particularly interested in operating Second Life like a business. This has all been a big interesting toy, a gadget that they could tinker with as they pleased. A grand experiment. The entire economy was actually just tacked on at one point.

When it was small, that made a lot of sense. It’s the kind of attitude that encourages rapid innovation, promotes creativity, and results in the creation of fabulous things the world has never seen. This is what brought the first, second and third waves of “residents” to Second Life. Come, experiment, invent.

Unfortunately (or is it?), Second Life just got too damned big for that to work anymore. Small cheap projects can grow organically, but larger projects need a definite direction if they want to continue to grow. Without direction you don’t necessarily fall apart, but you certainly plateau. Organic growth, necessarily, has a max size.

So really, Linden Lab has no choice but to change philosophies. It has investors. It’s actually illegal for them not to seek a profit. It’s grow or die. This means they have to pick a direction and make a move.

New residents are going to love where this all ends up. Integrated shopping tools (which should have been there years ago), well-run shopping websites, and a currency exchange that doesn’t have the glitches people tend to run into on Linden Lab’s website.

However, this is going to make some people really, really angry. Here’s a quick roundup of reasons why:

This takes a service out of the hands of the residents and gives Linden Lab the monopoly. The slogan is “Your World, Your Imagination”. Stop buying resident run projects! Small in-world stores will probably start to close as it’s not worth it anymore. Malls will follow suit as they rely on small stores. Potential cascade effect on land values, affecting land barons. People who make their money on Xstreet SL now have to trust Linden Lab to think of their best interests. The company doesn’t exactly have a track record of earning the trust of their customers. The mere fact that Linden Lab is encouraging 2D shopping in a 3D world is a philosophical switch many will protest simply from an immersionist perspective. etc…

This, of course, is a lot like the whole Openspace issue: when you make a mistake, people will often object harder to the fix than the original issue. Or, to put it in “philosophical net snob speak”: bugs become features, features become bugs. The virtual goods shopping experience really was broken when you compare it to the competitors. This had to happen.

I don’t envy Mark Kingdon’s position here. Being CEO of Linden Lab at a time like this means making some big changes to balance the books and get this thing running right, and while people have been clamoring for change they’ll always object when you finally give it to them. Good luck Mark, keep a thick skin!

Further reading:

• The company blog announcement
• Press release
• Acquisition FAQ
• SL Forum thread (Sorry they stupidly force you to log in.)
• You’ll have no trouble finding a few dozen pundits weighing in, I’m sure. I’ll be sure to link articles in the next Business in Virtual Worlds News Roundup.

Posted on January 21st, 2009 under business, conflict, content, customer service, governance, virtual worlds. RSS 2.0 feed. Leave a response, or trackback.