“Just three years ago technology experts predicted Second Life would become the internet sensation of the decade, overtaking YouTube and MySpace in the process. Now the same experts are predicting its imminent demise”, writes Rupert Neate in the Daily Telegraph.
Published in the Daily Telegraph 8:19PM BST 30 Mar 2009
While the site is still beloved by geeks and the socially awkward, Deloitte’s director of technology research, Paul Lee, says it has been “virtually abandoned” by “normal” people and businesses.
In 2006 multinational companies, including BT, Coca-Cola, Adidas and Toyota, were scrabbling to create “in world” presences to profit from what was expected to be the next great internet cash cow.
But today the Second Life high street is mostly deserted, as businesses have realised that despite management claims that the site has 15m members, far fewer people actually play the game. Research for The Daily Telegraph shows just 580,000 people logged on to the game last week.
Matthew Brotherton who runs BT’s presence on Second Life, says most major businesses “have gone cold” on the game as they “can’t see how it is possible to make any money out of it”.
“T-Mobile, Vodafone and a host of our competitors all had public presences, now you cannot find them, they are all taking a step back to save money,” he says. “There are definitely far fewer businesses than there used to be, it is a struggle to find the ones that were there just a year ago.”
Mr Brotherton says he would not be surprised if Second Life has died a death by the end of the year.
At the peak of its hype, Reuters even set-up a bureau on the site but it closed down its operations last year. Eric Krangel, who reported under the byline Eric Reuters, explains why the news agency left: “The very things that most appeal to Second Life’s hardcore enthusiasts are either boring or creepy for most people: spending hundreds of hours of effort to make insignificant amounts of money selling virtual clothes, experimenting with changing your gender or species, getting into random conversations with strangers from around the world, or having pseudo-nonymous sex (and let’s not kid ourselves, sex is a huge draw into Second Life).
“As part of walking my ‘beat’, I’d get invited by sources to virtual nightclubs, where I’d right-click the dance floor to send my avatar [Second Life character] gyrating as I sat at home at my computer. It was about as fun as watching paint dry.”
The overt seediness has caused businesses to think twice about whether they want to be associated with the game.
Concerns about the ubiquity of adult content have forced Mark Kingdon, the chief executive of Linden Lab, the company behind Second Life, to introduce tough new rules to restrict sexual activity to “red light” zones within the site.
But he insists users come to Second Life for more than just sex. “You can learn French art at a Parisian café, go on an African safari and meet interesting people from all around the world,” he says.
Paul Jackson, of Forrester Research, warns that if Second Life is too draconian in clamping down on its seedier side it risks alienating its current users without the guarantee of securing new followers.
“The gloss has gone off the whole virtual world segment,” he says. “It only appeals to a very specific mindset, most people don’t have the time to sit in front of their computers for hours on end playing a virtual game.”
Mr Kingdon, who took over as chief executive of Second Life last year after its creator Philip Rosedale stood down from day-to-day operations, claims the site is attracting new players at the rate of one every 10 seconds and is adamant that a “good number” of companies are still present in the game. But he refuses to state how many, claiming Second Life does not keep a record of businesses in the game.
And even if businesses, faced with recession, are pulling back from hyper-reality, ordinary users may end up using the site more, according to Mr Kingdon. “People who can’t afford to go dancing in the real world, will buy a tux for a $1 in Second Life and dance the night away,” he says.
Mr Kingdon also stresses that Linden Lab itself is “very profitable”, though he refuses to disclose any financial information on the privately-held company. Second Life makes money by exchanging real money for Linden dollars, which players can use to buy land, goods and services in the game. Mr Kingdon says $37m (£26m) worth of Linden dollars were transferred between users last month alone.
Repeated requests for financial data on the company were ignored despite Linden Lab’s press office saying they would “love” to provide figures to back-up their claims of profitability.
The company is owned by a host of venture capital funds, including those run by Amazon chief executive Jeff Bezos, eBay founder Pierre Omidyar and Benchmark Capital, the backers of eBay. To date, Linden Lab has not publicly released any details of its revenue or profits. Valley Wag, the respected Silicon Valley gossip blog, has meanwhile created a Second Life “death watch” as it believes the site is on its last legs.
There are fears that as the cost of data storage rise the company is struggling to fund enough servers to run the site. Users complain that the website crashes frequently.
The booming popularity of newer social networking sites, like Facebook and Twitter, is also bound to affect Second Life’s usership and its cache.
“It is a very different proposition [to Twitter and Facebook],” says Mr Kingdon. “We have an incredible business model that any social media property would envy. Facebook and Twitter may have more users, but Second Life actually has a business model and makes money. I wouldn’t trade places with them.”
Second Life has also suffered an exodus of executives over the past year. Mr Kingdon, a former online advertising executive and senior partner at PricewaterhouseCoopers, took over from Mr Rosedale last year. A couple of months earlier its chief technology officer, Cory Ondrejka, left for EMI after a spat with Mr Rosedale.
Only last Friday, finance director John Zdanowski left the company, completing a near total shake-up of the senior management team.
Gone are the days when Linden Lab’s executives — as a frog, a beagle and a jellyfish in one instance — had their meetings in the virtual world they created. Instead, perhaps, as Second Life’s critics would have it, it’s time for Linden Labs’ management to face reality.