The funny thing about participating in Second Life is that we’re always thinking about the future. Will Second Life survive long term? How’s the culture going to change as more people enter it? Where will the metaverse be in one year? Five years? Ten years?

So, it’s kind of fun to look back to see how we got here. I don’t remember where I found it, probably at the Second Life Historical Museum or someplace like that, but I picked up a copy in-world of an old Linden Lab presentation from December, 2001; it looks like the audience is investors.

The vision sounds pretty straightforward, that is, if you’ve spent a lot of time in SL. If you haven’t it’s a new idea. A couple of interesting points; 1) LL touts their proprietary streaming technology, however, Cory Ondrejka said in a recent Town Meeting that they’re going to go to standard TCP/IP protocols (”In general, and you will hear this several times today, our engineering efforts are focused on moving away from proprietary solutions to existing web and net protocols that do the same thing”, quoted here) and 2) they say that they only need a builder population that’s 5% of the total population. When I spoke with Philip Rosedale last year, I asked him about this. If my memory serves me right, I think he said at that time 12%-15% of the population were active builders. What’s interesting is how small the group of active builders can be in relation to the total population in order to sustain an viable community. I’m still looking for other research along these lines to understand how a core community can sustain the whole community.

I’ve found online participation numbers hard to come by, initially. In my presentations, I sometimes a cite the Everquest product manager who says that at its peak, Everquest had 90,000 people online at once. The numbers above are really interesting, especially the ~$200mm revenue to date for Everquest, and that was in 2001. That’s some major calculator country.

Even back then, LL felt the entrepreneurial spirit of the residents would be a core part of Second Life…or Linden World as it was called then. “Empowering: Exciting ability to indelibly impact the world and economic system to reward success.” Linden Lab are capitalists that take the view that done right, capitalism can be good for the world. Sounds to me like another capitalist in the news: Bono.

Lesson: the entrepreneurial spirit is part of Second Life’s DNA. Sure, it’s fun and games, but LL also makes the assumption that being an entrepreneur, even as a hobby in a world that doesn’t exist, can be fun. Is being a store owner, and airplane builder, a clothing designer, a leisure activity? What does this say about leisure in our time? When you strip away the needs to make money to survive, the hassles of a physical inventory, the demands of a matrix organization, can it be that being an entrepreneur really, truly is fun? What are the implications for our real society? Our real economy?

Here’s my favorite. LL’s project gross margins. It costs them $1.05 to provision a user on the network. I don’t know if that’s a one time fee, a monthly fee, or a yearly fee. They reached 170,000 customers sometime around spring/summer of 2006, if I recall. I assume they were profitable before that, but I don’t know.

They made a conscious decision to use grass roots marketing. Because they didn’t rely on advertising, they could only “prime the pump” by WOM and PR in the hopes of facilitating “network effects“. The bottom chart projects 800,000 users by 2006, although it’s unclear exactly when in 2006. If memory serves, I believe they reached one million residents by 8/06. Clearly, they knew getting people to try was a key to adoption, much like test drives in the automotive industry, or trials sent via snail mail for packaged goods. They’re also smart enough to make a distinction between total residents and active residents, despite the recent criticism about SL being over hyped. One number that would be interesting to see published by Linden Lab is the monthly churn rate. Back then, they were hoping it would be less than 5%, probably echoing Everquest’s churn rate.
I don’t have any major insight here; it’s just interesting to me that many of the basics of Second Life were envisioned by Linden Lab when it started. It proves to me they’re a smart bunch of people who look at things broader than simply the technology, even though they are primarily a tool building company and want to focus on that. To me, it’s also evidence that suggests that there’s more to their analysis than meets the eye. I see this as the tip of an iceberg of strategy, supported by deeper analysis that we cannot see.

With LL’s ability to change, ie abandoning proprietary protocols, it shows that they are adaptable, as does open sourcing the client. They’re are going to need this adaptability to address their weaknesses. Some of the major weaknesses I see are:

- client updates every week are a big barrier to entry into the corporate world, where machines are locked down tight by IT departments. Updating software is a pain. This alone could prevent SL from widespread adoption in business.

- Recent criticisms about the inability to convert large sums of Lindens into hard currency will prevent large businesses from taking advantage of Second Life for revenue generating activities. I don’t think it’s a ponzi scheme, per se, as others do. I think it’s an opportunity for banks.

- Second Life is hard to use (although easy to use compared to other 3D programs; 3D is hard genre for understanding how to physical manipulate things). Although, open sourcing the viewer code can help as other companies make changes that make the user experience better.

Still, looking back and comparing it the present can provide insight into looking at the present and seeing the future.