New Website!

I am happy to announce that we have finished our new website and I am moving the blog. We have all kinds of information and resources at the new site: white papers, forums, knowledge base wiki, product info, recent news, and of course our blog. Please come join us as we continue to explore the imerging i3D.

WWW.METAVERSETECH.COM/wordpress/

The Truth of the Matter

Today I found referenced on Slashdot an article in which the author compared Second Life to a Pyramid Scheme. At first I wanted to dismiss the premise outright. I mean, the cited source was Valleywag, which is slightly better then a supermarket tabloid, but the author promised ‘financial analysis’ of their conclusion. So I read on, and tracked the article back to the full version written by Randolph Harrison. Now I have never heard of Mr. Harrison before, but anyone who has a dual MBA from UC Berkley and Columbia in NYC deserves a careful review. Unfortunately, I have to say that I am disappointed with his characterization of Second Life. I did not find any of his criticisms untrue, but just surprising in the significance that he associated with them. So I have pulled a few of them out for our own review.

The first problem we encountered was one of counterparty risk. Yes, you are absolutely correct. Right now Second Life is the wild west of commerce. Just because you can reach it within minutes of logging into your computer does not make it any safer then the emerging markets of faraway places. I have heard of stories of manufacturing plant managers in China running one location for one employer, while they are redirecting shipments of materials down the street to the facility that they themselves have started up. Things are improving, just as they will in Second Life, but I hear CDs are still pretty cheap on the streets of Beijing. Volatile disruptive markets are messy, if they were already regulated to death there would be little potential for explosive growth. Especially exploring what Mr. Harrison calls “the appearance of a virtual ‘securities and exchange commission’, virtual banks, virtual currency exchanges, and even virtual venture capitalists and REITS.” He himself points out that these institutions are run by individuals and not Linden Labs. Not to be glib, but do you also buy stock from spam email links that litter you email?

Although he eventually concedes that despite this risk factor he was able to make a good return on his investment, he was unable to remove at one time significant amount of the capital gained.

Enter the second problem, the L$ exchange markets are effectively rigged. In a nutshell Mr. Harrison was put off by the fact that the exchange system effectively prevented him from removing more then a few thousand US dollars at a single clip. Thank goodness it does. This is an incredible new developing market, and requires significant influx of cash to fuel its rapid growth. Now I am for open markets, and the article points out that the exchange “is actually not a virtual currency exchange market so much as it is an open auction”, but his problems sound like a free market self regulating effect to me. The rate system prevents destabilizing and totally destructive transactions larger then the market can handle at this point.

I think that there is potential for all of Mr. Harrison’s criticisms to be resolved in the future, and Second Life has the capacity to grow to meet his expectations, but it is just beginning. If you look at the statistics provided by Linden Labs, there are less the a hundred individuals making more the $10,000 US a month. Now that number looks like it is doubling every month, but it is still relatively small. In the end, all we can do is wait and see. I, myself, am not waiting on the sidelines. You can find me and mine setting up shop in Big Mushamush region of tomorrows 3D Internet. See you all there, eventually. :-)

Ads in Second Life

To many of the big companies entering into Second Life, their entire presence in the 3D world is a form of advertisement. I assume that was a common mindset when the Internet first came about a decade ago. Everyone could have a web page, and it was like a 24/7 virtual billboard. It took a few years for the web to develop into something more functional then information delivery only, and eventually the concept of advertisement as a viable revenue source developed. Don’t get me wrong, email ads and annoying banners have been a way of life for the 2D virtual world since almost the beginning, but as a source of revenue it took a little while. It wasn’t until targeted ads with the backbone of AdSense and AdWords, courtesy of the Google empire, that the Internet maximized the ad model.

Now consider Second Life again. We have the Linden run classified system, a primary method of finding anything in SL, and we have several developing ad models more directly present in-world. I have seen networked billboards that let anyone pay to display on the network, while the landlord realizes a piece of the revenue. I have seen ad space sharing, similar to the banner link trading of the 2D web, and the often seen standalone, occasionally hideous storefront sign. My question to you is: Are targeted ads with a AdSense/AdWords effectiveness possible in a 3D environment such as Second Life?

Well, my answer is maybe. From a technical perspective one of the first problems is the concept of targeted. It is much harder to garner useful information from the current 3D environment of SL then it is for Google to keyword search the webpage you are browsing. You could use the type of store or establishment that the avatar is in if someone would qualify that information for you in a meaningful way. You could query the description of items that the avatar is wearing or carrying, if only scripters and builders would bother to fill those in all the time.

I think that the person that comes up with the right solution might just build their own empire one day.

3D Internet

Second Life is a 3D version of the Internet. At least that is how I have come to describe it to those who ask. You start saying things such as “it’s like an online game, but it is not a game” and you have resigned yourself to an hour of blank stares from reasonably intelligent people. So I tell them it is what the Internet is going to be. I hope that I am right about Second Life being it, but weather or not SL survives intact the tremendous growth spurt that is starting, they have forever changed what is possible. There is no going back!

The 3D virtual world is upon us, and we should embrace it or be pushed aside. Now to be clear, I am not saying that the 2D web is going anywhere. Radio did not die when TV arrived, it simple maximized upon things that it did best. And in the same fashion, text and images and video are vital forms of 2D communication that will only be enhanced by their new 3D home, while the 2D framework will still play to its best abilities.

You might ask how am I sure were all going 3D, or say that you don’t think that you will ever make the jump. And first I would say, that’s what my grandmother said about the Internet for the past decade. But this year she did all of her Christmas shopping on Amazon. Then I would tell you that I know it is coming for two reasons. 1) The technology is finally here. Bandwidth, graphics processing, general computing power, massive parallel network competency, it is all here like a perfect storm. 2) 3D tickles the human brain in ways that 2D never will. A recent study in SL showed that people controlled their avatars, in reference to things such as standing distances and other interpersonal communication measures, in a similar fashion to real life. They acted unconsciously in some ways as if their avatar was actually their real body. Think on that one for a minute.

Second Life goes Open Source

Well the big news of the day is that Second Life open sourced its client side viewer under the GNU GPL standard. Complete with a snazzy developers wiki and a lot of audaciousness (their word, not mine), the Lindens have made a giant leap forward in guaranteeing the success of the 3D internet. They have talked about this path many times, claiming that it has been an integral part of their dream from the beginning, but I would have loved to be at the board meeting when Phillip Rosedale explained to his investors that he was actually serious about it! Just to see the look on their faces. Really, how many VC sign up to make history rather then money? I might be wrong, and there is a lot to be said about them to this point, but WOW.

I of course, like any application developer paying any attention, am fanatically happy about the situation! We have just been given the keys to the kingdom, and we are ready. I think the analogy the Lindens made to the open release of Mosaic, web browser whose open source release by Netscape pulsed throughout the net, is totally accurate. All of the interactive applications that we at Metaverse Technology have been developing, in spite of the total lack of client side access, have now just been set free. Imagine the web with just HTML, without Flash and QuickTime plug-in, without Java support, and now AJAX. That is the Second Life of yesterday, and as for tomorrow, you will never believe the possibilities!

Second Life Resources

I was doing some research and I thought that it might be interesting to everyone. I am intentionally leaving out the real estate companies because they are outside the scope of my interest. Other then that, I think I have covered many of the major players. Please let me know if you think I have left anyone out.

The Electric Sheep Company

http://www.electricsheepcompany.com

The have about thirty employees and are most likely the biggest player in SL. They have handled many high profile projects. They run

http://www.slboutique.com/

one of the two main SL retail websites, they sponsor

http://www.3pointd.com/

, and are in good with the Lindens.

SLEXCHAGE

http://www.slexchange.com

They are the biggest SL retail website, and they handle currency exchange. These guys are the powerhouse of SL retail, and 90% of our current sales go through this site.

Infinite Vision Media

http://infinitevisionmedia.com

These guys are newer but the got the Space Flight Museum and now the Dell account, so they are coming up. They get good press and they have serious talent and experience in Drew Stein, one of the partners of the company.

Here is a great blogpost from them on marketing in SL.

http://infinitevisionmedia.blogspot.com/2006/06/avatar-based-marketing.html

Rivers Run Red

http://www.riversrunred.com/

London based, big money, existed before Second Life. I see these guys all over the place. The website is uber slick, and you should check out their full media kits and other materials. If I had big VC these are the guys I would hire.

Millions of Us

http://millionsofus.com

Need to learn more about this company, They have the most corporate deals with the biggest main stream companies, and they have been covered by the big news outlets more then anyone else.

Linden Lab

http://lindenlab.com/

It is always good to stay up on the founders, and this is different from

www.secondlife.com.

Check out the press release sections and the white papers they published when they first started.

Crayon

http://www.crayonville.com/

Not sure what I think about these people yet. They have money, but they botched there debut in SL by claiming they were the first company to launch in SL.

Here is a list of SL news sources.

http://secondlife.reuters.com/

http://www.secondlifeherald.com/

http://nwn.blogs.com/

http://www.slquery.com/

http://www.metaversemessenger.com/

http://www.thekonstrukt.com/

http://www.metaversesessions.com/ (podcast)

http://slbusinessmag.com/edition/ (The most professional by far. I would read all there back issues.)

http://www.secondlifeinsider.com/

http://blog.secondstyle.com/ (Lots of traffic, but not as relevant to us.)

http://www.secretlair.com/index.php?/clickableculture/C90/

http://history.secondserver.net/index.php/Main_Page

http://secondlife.com/newsletter/2006_11/

I keep a running list of articles where SL made it into the mainstream.

http://www.metaversetech.com/postnuke/html/index.php?name=News&catid=1&topic=&allstories=1

Here is a list of Forums.

http://forums.secondlife.com/ (Main Linden Labs hosted)

http://www.sluniverse.com/forums/

http://sl-forums.com/

http://slhomepage.com/forums/index.php

http://secondresident.com/phpBB2/index.php

http://slprofiles.com/forum/default.asp

Metaverse, Not SL only.

http://adverlab.blogspot.com/

http://terranova.blogs.com/terra_nova/

SL Grid Issues and the Future

I woke up early this morning to begin working in Second Life, as I have done for about six months now since Metaverse Technology opened our headquarters there, to find that the grid is once again down. I spent about twenty minutes reading through then Linden blog, and the 323 comments that had been posted by the time I got to the end, and realized that this would be a good time to address all of these grid closures.

If you haven’t been following the story so far, let me catch you up. Second Life is a 3D virtual environment created and maintained by the residents, or at least that is the tag line. In many regards it is true. You can build 3D objects, from houses to cars to anything you can visualize, and endow these objects with functionality through a basic script programming language. One of the main draws of SL(Second Life) is that the virtual economy has a direct exchange rate to RL(Real Life) currency. Lindens to dollars, about 280 to 1 on today’s market exchange.

The Lindens, representatives from Linden Labs which is the parent company of Second Life, really try to let you do your own thing. That has been one of the problems this last month. With such a spirit of openness, including the recent removal of the credit card requirement for registration, the grid has been subject to recent attacks. Although that is not what is causing the grid closure today, and we’ll get to that in a moment, hackers have been responsible for at least three serious attacks this month, all causing grid closures. Basically they create some type of self replicating, self dispersing, grey goo in an attempt to overwhelm the servers. Either they are getting better at it, or the Lindens are slowing down, because the successful attacks are getting more frequent.

These aren’t the only problems that we are seeing on the grid. Spam attacks where objects repeatedly and continuously attempt to direct you to a website from with SL, Linden released patches that don’t operate as expected, and sporadic problems that can’t be associated with a single source. Today’s outage is due to a permission exploit, that could allow someone other then the owner to gain access to an object or a script. As a growing virtual economy, the permission system is the only intellectual property protection available, and therefore its integrity is crucial to SL success. It has been a rough month for all involved.

So what do most SL residence think about these issues? It really is difficult to say. As in any community the most vocal residents are often the most polarized. (I am generalizing as there are always exceptions and I am sure you are one of them.) The forums and blog comments are filled with the continuous flame wars on the nature of the Lindens, Saints vs. Demons. I’m not sure if any of that is helpful to the process, but it is good for communities to have outlets that are relatively benign. I’m sure the Lindens watch these outlets, but I certainly hope they don’t make business decisions because of them. The unfortunate problem is that it doesn’t matter what the current user base thinks of the problems. I know that sounds harsh, but listen to me for a minute.

For whatever reason, SL already has us hooked. We are the early adopters, and although many of us can’t count or stay in years yet, we do have an edge on the hundreds of million potential residents to come. If a brand new SL from another company came out tomorrow most of us wouldn’t change, but what we need to think about are the people that haven’t made the choice yet.

Second Life is at a crucial stage in its existence. RL media attention is getting fierce. I don’t think that we have gone a week without SL being in a major reputable RL publication or feed, and Wired has had an article every month for quite a while. Major corporations are beginning to take interest, and yes that comes with its own problems but usually means were going to have the luxury of arguing about it for a lot longer. My favorite barometric of SL spreading to the masses is how easy is it to explain SL to others. No it’s not just a game exactly, yes it is a MMORG sort of, lindens are a real currency, no it’s not ebay. The truth of the matter is that the next 12 months will very likely determine the long term success or failure of Second Life. It will either continue it’s existence as a quaint little virtual experience, whose numbers are kept small by these mitigating factors, or it will explode into millions and millions of residents with a virtual economy that will give federal governments around the world indigestion.

I don’t think you have to wonder which option I place my vote on, but the cold hard truth is that this is up to the Lindens. I’m not saying that they can just wake up one day and say, oh maybe we would like to succeed. Or that even if they do everything right, we are all going to make it to the promise land. What I am saying is that if they don’t do something more we are certainly not going to make it.

I think that the Lindens have done, and are doing an amazing job. The complexity and scaling of such an endeavor is unimaginable. The commitment to openness means that certain problems will always have to be dealt with, and they are pushing the limits is realms that haven’t been explored before. Without the Lindens we would be having this conversation. Having said that, they have to do more, and they have to do it soon.

There has to be a better way to repel malicious grid attacks. I don’t think going back to credit card registration is the solution, but perhaps some type of targeted response is necessary. I certainly don’t profess to have a understanding of the millions of lines of code, that I have never seen, required to run SL, but there has to be a tiered response capability. If the Lindens declare a grid attack, all non-verified users and their objects are shutdown immediately. The next step would be residents with less then six months are also locked down until the attack is over. There has to be something.

The issue that I think the Lindens have the most control over is the update process and the permission exploits. If you have too, slow down the update process. If it means that the grid is going to be off again on again for days after every update, the new features are not worth the hassle. Test longer. I don’t know what to say, there is a reason why IT people don’t like Microsoft.

In the end what are you going to do? Second Life is the closest thing to the Metaverse currently in existence, and we are terribly excited about the possibilities. We are here to stay, and will help in any way that we can.