Second Life: So Amazing and So Awesome

23 Jan
2007

Second Life this, Second Life that.

I ran across the funny little parody Get a First Life when it was mentioned on TechCrunch.

Parodies are a great way to get a point across, provided people understand that it is a parody (when I see people taking Colbert seriously as a right-wing ‘pundit’, I shake my head). And if there is anything that needs to be gotten across, it is this: Second Life is over-rated

For those that have read my about page, you will know that I was once very intimately acquainted with MMOs and their large virtual worlds. Second Life was then, and still is, cumbersome, confusing, and crap. There, I said it.

Back in 2004 I met the Linden Labs fellows. I was hanging around with the IGE folk, and they were very close to having a deal signed. In fact, they did have a verbal agreement. They would provide the backend/market, and Linden Labs would sanction them as the ‘official’ company to go to. It would be win-win – Linden would get much needed income flow (the ‘world’ was floundering), and IGE would get its first official backing.

I left IGE soon after that (I was always marked as an independent contractor), and the deal never went through. From what my sources told me, Linden Labs had inflated the numbers, and having gotten greedy, had pushed out IGE in favor of setting up their own system.

So there are two things I want to raise issue with:

  1. Second Life is over-rated And not over-rated like some sports player. Over-rated like the Origami Project (which I admit may still become useful). The numbers and metrics thrown around make no sense, and I don’t understand why people do not point that out. From BusinessWeek comes the number that a total of 1.5 million people have logged into SL once. Of that, only 17% still logged in after 30 days. But anyone that has worked with MMOs know that 30 days is no big deal. The real staying power is 90+ days. At that point, the player has done a significant investment into the world he/she is playing in. With the way Second Life is setup, how many of the users are actually contributing to Linden Lab’s bottom line?
  2. The amount of money made in Second Life is a pittance. There was all this hype and news about how Anshe Chung becomes the first virtual world millionaire. Bullshit. The story (really a press release) made as much sense as Kevin Rose making 60 million dollars. Two things yelled ugh about this press release:
    1. Using some fuzzy math, Anshe claimed to be worth a million dollars. She doesn’t have a million dollars (far from it). But golly gosh darn it, she is worth that much. Nevermind having to find someone that actually pays that amount …
    2. What about Yantis, Brock, et all (of IGE fame). Back when I left them over two years ago, they were pulling $200,000 a day in revenue. Profit margins (never officially confirmed to me) were in the neighbourhood of 25%. That would mean roughly $50,000 a day in profit. That equates to $18.3 million in profit a year! Steve Slayer, the president of IGE, estimated the worldwide secondary market to be worth $800,000,000 over two years ago. So, I’m sorry, but Anshe’s story (already built on fuzzy math) is nothing impressive. IGE and the rest (even smaller companies like Lewt and Mogs) make more than a million dollars a year.

I will end with one final comparison. A 2006 year in review post by Terra Nova stated that Second Life’s peak concurrency was 20,000. I remember EverQuest 1 hit a concurrency of 100,000 when it had 500,000 paying subscribers. Second Life just does not warrant all the attention it gets.

4 Responses to Second Life: So Amazing and So Awesome

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Mike Bowden

January 23rd, 2007 at 4:05 pm

It’s funny but true. I logged into SL for about 20 minutes, looked around and said, what’s the point? I have since not logged in but do keep a premier account running, why? Well because over a year I’ll make around $20 extra just from owning a premier account. Which probable explains why they aren’t making any money. What game would allow you to pay for an account and from the money you earn actually make a profit from owning a premier account?

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Fred

April 28th, 2007 at 11:51 am

$200,000 a day? That’s neat. However, if sites like mmobux.com ever manage to gain a foothold, IGE is going to be pretty much screwed. The rely on their brand, if the market gets turned into one for a commodity by making it transparent, they lose their most valuable asset.

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Ahmed

April 28th, 2007 at 1:18 pm

Not so simple – two things:

1. In life there are generics, but brands still exist. Eg ibuprofen or acetaminophen – people still buy the brandname version.

2. This is virtual currency we are talking about. Half the battle is getting the customer to trust you. IGE? I trust them. Lewt & Mogs & Team-VIP? Those too. Anyone else? Nope.

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Sam

June 6th, 2007 at 7:38 am

Interesting blog post – got here through googling our own site.

I agree on brands. As long as their a way to distinguish a seller (even if it’s just the color of the packaging), brand plays an important role. However, just like in the real world, big brand currency sellers have lower priced sites that are basically the same but are sold “incognito” in order to reach more price conscious customers. Revealing this kind of information does have an impact.

Furthermore, given enough motivation price-wise, customers tend to give even unknown brands a try. Take a look at the massive success low-priced discounters have in the US and Europe. They hardly offer any branded products.

Brand/Trust (it’s the same in this case, isn’t it?) guarantees a certain monopolistic price margin. It doesn’t make sellers invincible to the forces of the market.

There are roughly 25 sellers of game currency in the US/EU market with a customer base that exceeds 20,000 players (which pretty much guarantees an annual revenue of more than 1 million USD). That kind of operation is difficult to uphold if you are unable to provide a trustworthy service. That’s already 24 highly professional, efficient and trustworthy opponents for IGE.

The only thing they lack is credibility provided by third parties and exposure – I think either of those is a matter of time. Unless IGE manages to buy them all (after all, they are working on it) it will lead to a massive price competition given an increase in the market’s transparency.

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