Second Life is interesting to me - I truly respect the service, but I don’t love it. That is, I have a lot of intellectual respect for the way they’ve run their business - they’ve been bold, innovative, and relentlessly experimental. But the service doesn’t grab me emotionally. I also think that their high technical barriers to participation and the fact that SL is a closed standards system ultimately deters them from reaching mass market adoption. Yes, they get a lot of publicity and their logins are growing at a fast clip - but I suspect there is a significant amount of churn. I spend a lot of time in the area of virtual worlds - because I think we’re just at the tip of the iceberg here.
One day, there will be an open standards based platform that makes virtual asset/world creation as easy as choosing templates and widgets for your MySpace page. In fact, today’s social networking services like MySpace and Flickr already incorporate some smart game design principles, such as levelling up, collecting virtual objects, and homesteading in the form of customization. I expect that virtual items will one day become a far more legitimate asset class and that there will be much improved liquidity for these assets in the future. It sounds absurd, but there are some basic economic reasons why this concept of real money trade (RMT) makes sense, despite all of the negativity that RMT receives from the core gaming community:
1) Virtual goods can confer real economic utility,
2) It can be much cheaper to buy virtual goods than procuring them via more traditional methods - such as actually spending the requisite time necessary in-game or in-world,
3) Virtual goods can generate attractive investment returns.The folks who are already making their living in Second Life know this and they are the pioneers for what is to come. What the Electric Sheep Company and Edelman PR is doing with this business plan competition is exciting and I’m happy to be a small part of it. For the record, CRV is not investing in any of these virtual Second Life businesses - I’m merely a judge. I’m interested to see how these real entrepreneurs adapt to problems that aren’t idiosyncratic to virtual worlds (the stability of the currency) and ones that are idiosyncratic (how the recent CopyBot problem may mean that only services centric businesses can thrive in Second Life.) Also for the record, I don’t believe that the current patterns of real estate values in virtual worlds will hold - for reasons that I’ll get into in a later post.
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November 29, 2006 at 4:01 pm
World’s First Virtual VC: Susan Wu « Yoick - Hightechwire
[...] Susan is an associate at Charles River Ventures, blogs and has heard funding pitches in a virtual world (part of the Edelman business planning comp in Second Life). She has a keen interest in the MMOG space and her recent post on Second Life is right on the mark… [...]
November 29, 2006 at 5:01 pm
tim
Susan,
Do you think that limited sustainability of Second Life is in part due to the fact that there are not clearly defined property rights? I understand that Linden allows people to own the IP on their creations, but not on the actual in game “real estate” space.
November 29, 2006 at 9:32 pm
tecosystems » Blog Archive » links for 2006-11-30
[...] Second Life: Incredible innovator, but probably not sustainable « Susan Wu - Venture Capital more Second Life skepticism, this time from Susie (tags: Wu SecondLife CRV VC business models economics) [...]
November 29, 2006 at 11:12 pm
Susan Wu
Hi Tim - I actually think the limited sustainability is a result of the user experience, not from uncertain property rights. I think most of the mainstream market aren’t yet sophisticated enough about content creation to really care about the property rights - what they are looking for is a fun, immersive environment. SL is immersive but IMHO, it lacks structure, cohesion, and a sense of purpose. It gets a lot of things right, but the openness of its design isn’t palatable to the mainstream audience yet, I don’t think.
November 30, 2006 at 10:14 am
Allen Sligar
@Susan
“In fact, today’s social networking services like MySpace and Flickr already incorporate some smart game design principles, such as levelling up, collecting virtual objects, and homesteading in the form of customization.”
I agree with this somewhat, we’ve incorporated this into our design actually its pretty robust and tied to real and percieved community member benifits.
I expect that virtual items will one day become a far more legitimate asset class and that there will be much improved liquidity for these assets in the future. It sounds absurd, but there are some basic economic reasons why this concept of real money trade (RMT) makes sense, despite all of the negativity that RMT receives from the core gaming community”
Theres a great thread going over at Raph Kosters site atm.
raphkoster.com
As well as a few SL and recently a RMT thread over on Terra Nova
terranova.blogs
“I think most of the mainstream market aren’t yet sophisticated enough about content creation to really care about the property rights - what they are looking for is a fun, immersive environment. SL is immersive but IMHO, it lacks structure, cohesion, and a sense of purpose.”
Righto, I like second life, (despite my issues with registered vs actives, churn, and a badly designed interface) but theres a high barrier to entry or the non-technical that will prevent broad based adoption.
SL is immersive, there is no structure, cohesion, and sense of purpose is self derived because its a sandbox. Sandbox experiances only appeal to a particular MMO segment, the segment broadens and gains depth as more sandbox games are introduced, however the majority of participants prefer scripted, well defined game play (in MMOG’s) which getsd into the debate about if SL is a virtual world or a MMOG…thats terra nova territory….
Great blog btw
Allen
November 30, 2006 at 11:20 am
Trevor F. Smith
Susan: “One day, there will be an open standards based platform that makes virtual asset/world creation as easy as choosing templates and widgets for your MySpace page.”
“One day” is today! There are several projects working on exactly such a platform. I have a browser based 3D platform over at the Ogoglio project and the developers of Open Croquette are making progress on a space which runs on top of Squeak.
December 1, 2006 at 7:35 pm
The Forge · Is Second Life Sustainable?
[...] Susan Wu, of Charles River Ventures, doesn’t think so. She mentions the standard litany of problems with Second Life: high barrier to entry (in terms of using the interface and creating anything), closed standards, and so on. When I take the dropcloth off the giant crystal ball that inhabits my living room, I see a number of big problems for SL. Keep in mind that despite my pessimism and snarkiness about Second Life, it IS growing at a healthy pace. Nothing like the pace Linden or their media fluffers trumpet of course, but it is growing. [...]
December 1, 2006 at 11:21 pm
MMODump.com » Is Second Life Sustainable?
[...] Susan Wu, of Charles River Ventures, doesn’t think so. She mentions the standard litany of problems with Second Life: high barrier to entry (in terms of using the interface and creating anything), closed standards, and so on. When I take the dropcloth off the giant crystal ball that inhabits my living room, I see a number of big problems for SL. Keep in mind that despite my pessimism and snarkiness about Second Life, it is growing at a healthy pace, though it’s still not profitable as far as I know. Nothing like the pace Linden or their media fluffers trumpet of course, but it is growing. [...]
December 2, 2006 at 1:04 pm
Life A Venture
I think you are right on about the high technical barriers to participation; it requires too much an effort to lead a life there.
You should include this cartoon in your blog
http://blaugh.com/cartoons/060803_first_second_life.gif
Cheers
Zheng
December 3, 2006 at 12:20 am
Markus Breuer (Pham Neutra)
Two points on your (refreshing and thoughtful) post: (1) I think you are making a common little error in your opening assessment: “I don’t like it - so it can never be a success”. This is not a bad attitude for a VC. Warren Buffet got very rich by it. Maybe not exactly with the same attitude - but it was mentioned in some bio, that he tends to invest only in companies whose products he personally likes.
But it certainly is not very objective as you mention platforms like MySpace, YouTube and Flickr, but ignore that these platforme are great successes, even though they miss “structure, cohesion, and a sense of purpose”, too.
(2) Where I absolutely agree with you is, that Second Life could have a much flatter learnung curve, a much better newbie experience and that it is totally irrelevant for the current marketing, business, educational and other experiments in Second Life, if this platform survives or not. The ideas of Second Life will live on and finally lead to an open Metaverse. And the lessons learned here and now will give you a valuable head start.
December 3, 2006 at 2:19 pm
susanwu
Hi Markus,
I think you may be misunderstanding my opening paragraph, but I can see how you’re reading it the way you are. What I mean to say is that 1) SL doesn’t emotionally resonate for me the way I wish it would and 2) I think SL is not sustainable for the same reasons that Prodigy and AOL weren’t sustainable in the long term. I’m not saying that SL will fail because I personally don’t like it. I think that would be a very arrogant claim.
You bring up YouTube and Flickr - I don’t think these are comparable analogies to SL because they are fundamentally not virtual world environments. MySpace is a better analogy - because to some extent, it is a virtual world environment with its own social ecosystem. I would argue that MySpace does have some structure and purpose. There’s a well established rhythm for how to participate in MySpace - the profiles have certain structured containers for data input, communication, and discovery. Yes, the presentation is customizable, but the behaviors within the MySpace system are fairly well defined.
-s
December 3, 2006 at 7:58 pm
Markus Breuer (Pham Neutra)
Susan, please forgive me, when I misunderstood you. I tend to do that. But maybe, drawing the line from your personal dissatisfaction to some of the other “minuses” you mention later was not too farfetched. But I certainly don’t want to insist on this interpretation of your post.
Regarding your point (2): I totally aggree with you that there are (dis-)similarities along the lines Internet / Metaverse and Open HTML / Second Life, which you imply when mentioning AOL and Prodigy. Maybe Second Life is doomed because it is not open. Who knows. It is certainly more “open” (when you don’t equate “open” with “open source”
than AOL and Prodigy were in the 90s.
Regarding your other points: I guess comparisons are always hard and often don’t make much sense to the “other side” in an argument. What is comparable and what is not usually is part of the argument in many discussions. Comparisons of Second Life to other platforms on the market are especially hard as there IS NO similar platform. Maybe you can compare SL to There but certainly not to WoW or similar offerings.
When I mentioned MySpace, YouTube or Flickr I did not want to imply that they are virtual worlds or can be compared to Second Life in many aspects. All I wanted to say is, that these platforms don’t show much of a clearly defined “structure or purpose” (at least to me personally) and still are considered successful.
And if your replace “structure and purpose” with “building blocks” or “patterns of behavior” (maybe that is what you mean with “rythm for how to participate”?) there are a lot of similarities between MySpace and Second Life.
A Second Life resident buying some land, building a house, decorating it, installing an audio and video stream and inviting all the people for which he has collected cards so far to his house warming party is not THAT much different from a user creating a MySpace page. It is all a matter of self expression and making connections. And there are very well established rythms for how to do that. You are just using different mataphors and have a lot more freedom in Second Life.
It takes a lot more effort, too and this does reduce the mass appeal significantly. I totally aggree with you on that.
But - making the admittedly shaky comparison between the Internet and the Metaverse again - I am not sure if we already have reached the point in the development of the Metaverse where MySpace-like applications make a lot sense. In the early years of the Internet, building your personal homepage was a lot harder, too. There were not many easy to use tools. And there were not many established patterns on how to structure and “use” it.
Just know, Second Life is an open-ended platform like the Internet of 1995 - on which you could slap on a customized front end to build a kind of MySpace-like “virtual home builder”. If there is a market for that, it will certainly be done; maybe based on Second Life, maybe based on some other platform.
And, no, I am not saying that SL IS “sustainable”. Nothing is - in the long run. No disaggreement there. I guess we only disaggree a bit on what lessons can be learned from the past and what comparisons make sense…
December 4, 2006 at 9:34 am
susanwu
Actually, I reread what I wrote about YouTube and Flickr and realized I wasn’t explaining myself well enough. I think that all successful online multi-user services, whether they be implemented in a virtual world metaphor or not, start to resemble virtual worlds at some point. Even services like YouTube and Flickr. That’s because these services realize that incorporating design elements that facilitate community building is one of the most powerful ways to increase user loyalty, decrease user churn, and trigger network effects, amongst other things. Once an online service starts to function like a community, rather than just being an unrelated collection of autonomous agents, then it starts resembling a virtual world environment in that each community has its laws (either explicit or implicit), ecosystem, behavioral infrastructure, and social mores.
If I were designing a consumer facing web service, I would absolutely hire game designers to help me figure out how to build game-like features & functionality into the platform - as these features can help foster a sense of equity ownership on the part of users, increased user loyalty and affinity for this ecosystem, and a sense of fun! that keeps people coming back. I started my career as a MUD developer, and as I transitioned into building large web based commercial services, my learnings from my MUD experience definitely informed how I thought about designing good web communities.
For example, the exercise of deciding what parts of a ‘user homepage’ should be customizable vs rigid has an analogue in the MMO world - how much of the storyline or the world environment should be fixed, where should we allow for player creation in a way that fosters a sense of ownership without disrupting the ethos we’ve created?
Regarding ‘rhythms of behavior’… I think Amy Jo Kim has articulated this better than I have, so I’ll just quote her being quoted by MediaPost:
Amy Jo Kim, creative director at ShuffleBrain and holder of a Ph.D. in behavioral neuroscience, noted at Supernova how successful games shape our behavior by engaging us in “flow,” which is achieved through an optimum balance of challenge and skill. As humans, we need appropriate levels of challenge as our skills increase. The ability to match these two components is what makes good teachers good and great games work.
It’s in this flow/rhythm where I think SL is lacking.
December 4, 2006 at 2:17 pm
Philip Rosedale
I agree that ‘flow’ will be a key aspect of how Second Life will become truly world-changing, and that it doesn’t have it today! So many things that you do in SL are clunky. Where I would disagree with Susan is that I think it is quite possible that we (Linden) will be able to make some those changes, and that really brilliant content designers in SL will find others.
December 4, 2006 at 8:45 pm
Tom
“Yes, they get a lot of publicity and their logins are growing at a fast clip - but I suspect there is a significant amount of churn.”
You need not suspect a significant amount of churn — you can estimate the churn rate directly from Linden’s publicly-released login numbers.
I’ve been tracking the 7, 14, 30, and 60 day unique login numbers since they were first reported, and can say with a high degree of confidence that
a) the number of unique logins over the past 30/60 days is less that the number of new accounts registered in each of those time windows,
suggesting,
b) at least 1 out of every 5 accounts registered will not log in to Second Life even once,
and,
c) somewhere between 85 - 95% of accounts that existed two months ago have not logged in over the past 60 days.
These numbers suggest a modestly-sized core (probably ~60-80k) of consistent users, and a larger number of “one-off” visits (griefers, media-hyped events) facilitated by the ease with which throwaway accounts can be registered. These estimates are obviously unofficial, but I have a high degree of confidence that they’re not too far off the mark.
December 5, 2006 at 11:15 am
susanwu
Hi Philip,
I know I’m coming across as a skeptic (and I am to some extent,) but I do hope you prove the cynics wrong. Either way, you have already done so much to move the world forward and you have my utmost respect.
December 7, 2006 at 12:32 pm
Jim Stogdill
After a recent and (probably excessive) immersion in SL I drew a few conclusions.
You either get it immediately or you drop out.
If you get it, it’s a giant Skinner box that sucks you in until the pellets just don’t taste good anymore. Until then you eat them by the millions. That seems to take people about two months.
My anecdotal experience supports Tom’s conclusions above.
- Many people never come back after their first dismal experience at help island.
- Those that make it past that hurdle are consumed by it with a half life of about 3 weeks. However, unlike a half-life the decay isn’t asymptotic, people just sort of disappear when they’ve had enough. Sort of a binary half-life.
- A small group of hard core users buy land and stay for the long haul.
These days there about 1.7M total accounts with average concurrent users running about 15K. The system certainly wouldn’t support more than 20K concurrent users today. When you meet people in world they have usually been there less than a month. Occasionally you meet someone who has been there more than three.
I posted a more complete comment on this topic here.
December 8, 2006 at 8:14 am
Jim Stogdill
Not to beat this to death… but this corollary discussion might be interesting to those of you following this discussion.
December 8, 2006 at 1:01 pm
Allen Sligar
“For example, the exercise of deciding what parts of a ‘user homepage’ should be customizable vs rigid has an analogue in the MMO world - how much of the storyline or the world environment should be fixed, where should we allow for player creation in a way that fosters a sense of ownership without disrupting the ethos we’ve created?”
Gosh, we struggled with this quite a bit in our design, what it came down to for me was real and percived benifits of our service as well as guiding principles:
1. Site performance, lag, and optimization vs user customization
If I’m going to bottleneck a members customization (to maintain overall performance) of thier space in our community then there should be a equal benifit, either real or percived.
If you look at Myspace, its a very ugly UI, but it allows for maximum customization.
The remedy:
A beautiful UI with customization based on a reward structure, that reinforces thier status in the community, that also allows for unintrusive customization.
Amy Jo Kims book should be everyones guide to building community. I took almost 75 pages of notes related to the development of our site based on her books principles.
December 12, 2006 at 7:29 pm
innovativ.in - Business Blog » Blog Archiv » Schon mal an die zweite Welt gedacht?
[...] 5 Linktipps: - Was ist Second Life? - A new world order: Virtualität trifft Realität - Die Figuren verlassen die virtuelle Welt - adidas: Wie bringt man eine Marke in die virtuelle Welt - SL: Incredible innovator but probably not sustainable [...]
December 14, 2006 at 4:05 pm
Stickiing alive
Re: VentureBeat » Susan Wu, the first virtual venture capitalist, blogs
she’s sceptical, as indicated in her blog but isn’t the only one, , Clay Shirky writes in Valleyway: A story too good to check Second Life, the much-hyped virtual world backed by Benchmark Capital, is heading towards two million users. …
December 21, 2006 at 9:25 am
nfp 2.0 » Blog Archive » What does Second Life success look like for non-profits?
[...] I’m still not sure what to make of cause-related avatars myself. I have particular concerns about their sustainability. I identify with Susan Wu’s comments about Second Life: Second Life is interesting to me - I truly respect the service, but I don’t love it. That is, I have a lot of intellectual respect for the way they’ve run their business - they’ve been bold, innovative, and relentlessly experimental. But the service doesn’t grab me emotionally. I also think that their high technical barriers to participation and the fact that SL is a closed standards system ultimately deters them from reaching mass market adoption. Yes, they get a lot of publicity and their logins are growing at a fast clip - but I suspect there is a significant amount of churn. I spend a lot of time in the area of virtual worlds - because I think we’re just at the tip of the iceberg here. [...]
December 31, 2006 at 2:43 pm
dan mcquillan
On your point about SL being a closed standards system, I was interested to read the press release by the Free Software Foundation that announced support for the Free Ryzom campaign which plans to rescue the online game and universe from the bankruptcy and release it as free software. Maybe I’m getting the wrong end of the stick, but this sounds like it could be a step on the way to an open version of Second Life.
January 8, 2007 at 3:00 pm
links for 2006-12-04 at Metaverse Territories
[...] Second Life: Incredible innovator, but probably not sustainable: Susan Wu - Venture Capital they’ve been bold, innovative, and relentlessly experimental. But the service doesn’t grab me emotionally. (tags: business secondlife virtualworlds models gaming metaverse economics venturecapital) [...]
January 9, 2007 at 10:37 pm
Second Life goes open source, though open source doesn’t necessarily equal openness « Susan Wu - Venture Capital
[...] 9th, 2007 in open source, second life, virtual worlds In a previous post, I talked about how I respected Second Life but felt that it was probably unsustainable, primarily due to the fact that the system isn’t more open. Virtual worlds and social [...]
January 16, 2007 at 9:27 pm
Yamato-Soft Blog » Blog Archive » Second Life and the Gartner Hype Cyle
[...] and some of the “i don’t like it, therefore it’s doomed” school, who, while reflecting personal preferences, might have a large following. A huge problem is the coverage in the “professional” [...]
March 20, 2007 at 10:57 am
xyzlondon » Blog Archive » Is Second Life ecologically sustainable?
[...] agree with venture capitalist Susan Wu: Linden Lab’s Second Life is an incredibly innovative platform, but is probably not sustainable. I have noted, as Wu does, that the closed system has a high barrier to entry and doesn’t [...]
April 13, 2007 at 1:34 am
upstream - agile web (2.0) softwareentwicklung » re:publica, Guten Morgen im Metaverse
[...] halten. Die Meinung des Vortragenden ist, dass alles was von Firmen in Second Life betrieben wird nicht nachhaltig ist, sondern nur zur Erprobung neuer Marketingstrategien dient. Die Kosten für die eigene Online [...]
August 21, 2007 at 8:43 pm
VentureBeat » Conduit Labs: social networking through gaming
[...] was an early skeptic about Second Life, because it didn’t offer these [...]