Nine Months Later…
It has been almost nine months since the last post. Almost like giving birth to something new – we have been thinking about virtual worlds a lot here at Uthango Social Investments. Much changed at Linden Lab during this time, like Philip Rosedale who returned as CEO and in Second Life, a new viewer was introduced and is still enduring its growing pains. Some flaws remained exactly the same, like live music/entertainment still not getting the prominent place it deserves, and emerging markets still being overlooked in terms of experimentation with virtual worlds.
Similarly, change and consistency are also true for our project on the platform – and yes, we still DO think of it as a platform and not a social network, although the debate lingers. Virtual Africa remains in Second Life and gets about 3000 visits a month, but by firm resolution of Directors, we reduced our footprint and decided to pour less energy into the initiative, and focus our limited resources on building capacity of organisations that work directly in communities in South Africa. During this process we engaged several civil society organisations on their needs to be effective and confirmed our belief that advocacy in terms of community radio, mobile and social media tied to direct beneficiaries is a priority – as it should be.
The latest good news shared among long-term SL fans in the metaverse, is that Linden Lab is returning to basics to fix what is not working, and introduced Mesh with great potential for creative content-creators. It is certainly worth exploring. Let us stick to the disturbing news for now: No more special discounts to educational institutions and non-profits from January 2011 (which is really bad news for any organisation from this side of the world that was planning to join). The latter was promptly announced by Nelson Linden on the 4th of October, and the comments are even more telling than the ‘ugly truth’ itself:
We have been asked in private by quite a few long-time users of Second Life how the LL decision will affect our project. So here is the deal: Uthango made a decision to invest less in Second Life after it became clear to us that Linden Lab’s business model does not have sufficient room for mutual benefit in terms of applying virtual worlds for/in Africa. Apart from Philip Rosedale’s visit to Virtual Africa in 2007 and declaring on two occasions that there is potential in virtual worlds to provide income to grass roots entrepreneurs in Africa!, it was clear to us in mid-2009 that Linden Lab’s strategic team did not debate – nor ‘google’ – how “doing good is good for business” – because if they did, they would have:
- had a more solid Corporate Social Responsibility’ strategy in place by now, to ensure that their business decision-making is based on shared ethical values and benefit beyond profit to the state, country or the world (even) in which they position their service;
- made a bigger effort to work in partnership with educational institutions and non-profits on various fronts, least of it being research into the application of virtual technologies to improve quality of life;
- understood that the reputation of Second Life has been held in tact by an active educational community that have implemented extraordinary initiatives and promoted it in their respective reputable networks; and
- implemented a more structured client support programme aimed to verify qualifying non-profits and institutions worldwide.
Linden Lab CEO, Philip Rosedale was quoted in the CSR Digest, “’You can argue with a mentor, but you can’t argue with the crowd… When every third person says you’re too scattered, it’s the truth.’” The context here was an employee peer-assessment, but surely the same principle holds true for other parts of the business. Isn’t it ironic that it seems that truly innovative, and forward-thinking business people and their enterprises are increasingly seeing the value of social investment, of doing business or being in business with societal change-makers (non-profits, librarians, educators and social entrepreneurs) and yet, Linden Lab takes a step backwards in October and alienates the very groups that the company courted before when hype was high and a good reputation was needed. Or should we interpret the innovative edge of Linden Lab merely in terms of technology and not broader business practice? In a recent post, Gwen Llwellyn points out that Linden Lab is merely turning “residential (with) OpenSim embracing education and business”. She paints it as an opportunity of sorts and this is the motivation she suggests – when it comes to Linden Lab’s strategy:
I know that Philip has repeatedly said that Linden Lab would still support business and educators on Second Life. Nevertheless, I would say that actions speak louder than words…I’m not blaming Linden Lab. Business and education where good for PR — back in 2006/7. But, in truth, LL is not really a non-profit foundation. After all, they make money from leasing server space for hosting 3D content. The over 1400 organisations in Second Life are not exceptionally good customers: most have, at most (and on average), just one sim. They contribute little (if at all) to the SL economy.
Agreed. Linden Lab is not a non-profit and should provide value for money to shareholders. Period. However, the world has changed in the economic downturn, and the way we are doing business is fundamentally shifting. Although I am also not blaming Linden Lab, business and education is not only ‘good for PR’ – but it is good for business itself, and Linden Lab is making a judgement call that will shape its business for the future.
I also think Gwyn’s statement that educational institutions or non-profits do not contribute much to the SL economy is a bit harsh. Ask “How does education affect the economy?” in Answers.com and it spits out: “Education directly affects the level of human capital (skill and knowledge we acquire), which is an input in economic production. Human capital increases economic growth by decreasing the costs of production and therefore increasing cost efficiency“.
The role played by educators and non-profits to enable users to use the platform productively may very well be overlooked by Linden Lab in their calculation of land fees. Intangible value added by (unpaid-for) services of training avatars, creating communities and sharing content-creation skills is not being brought into the equation. Linden Lab seems to have blinkers on in terms of trends internationally – where relationships with community builders are treasured like fine gold in a very competitive business environment. Ironically, a few days apart from the announcement, Voigt Linden states as a high-level goal: “(to) leverage industry best practices, and our own hard-earned lessons, to create a comprehensive customer service offering”. In this case, industry best practice would suggest to build on those elements that are successful when wanting to grow and consolidate a business model – which is (certainly) the educational component of Second Life. After all, at a recent Virtual Worlds Education Roundtable on the 9th of September Ignatius Onomatopoeia (SL) stated:
- 800 educational institutions, 550-600 of them colleges or universities, currently in SL.
- of all land owned by organizations and not indviduals, 50% is owned by education, a figure that does not include museums or libraries. No one comes close to education, with non profits coming next.
- Edu growth more than 10% since last year.
Yes, the reality is that only about 10% of the avatars in Second Life is associated with education. If numbers are counted, one could be deceived to think that it would not make such difference to lose the support of the sector, and a shift to ‘residential’ and social users is a good call. In our opinion, the educators and non-profit leaders (together with the live performers) make up the greater percentage of community builders – the influencers, and the glue that holds networks together. It is simply short-sighted to sacrifice high-level widespread public relations for narrow bottom-line profits. In the long-run the lack of ‘doing good’ may hurt the business of Linden Lab as they wave many early adopters, community builders and innovators farewell.
All of us yearn to see that Linden Lab has a long-term view and vision for Second Life, one that is inclusive and takes more than its own agenda into consideration. At the SLCC2010 we heard some tones of this, but action will speak loudly to rebuild our confidence in the leadership at Linden Lab. If not, the alternative is too obvious: It is about short-term profits and creating value for a few shareholders and investors (which is not entirely bad!). Interestingly, Linden Lab offered an explanation, which is captured and discussed in the blog of Tateru Nino and their reasoning is apparently unrelated to profit (not entirely believable) and based on the principle of ‘fairness':
Ultimately, we made the business decision that as we focus on improving Second Life for all users, we will no longer provide the level of special treatment previously offered to educators and nonprofits, which includes ending the 50% discount these organizations have received.
It is a strange and fascinating logic, suggesting that Second Life will improve because it is more fair (e.g. no special treatment). For the record, one thing we DO know is that Linden Lab never offered our non-profit special treatment in any form. In fact, we have been disadvantaged in quite few ways, with the currency exchange the least of our challenges. In terms of the real reason behind the decision, we can only speculate, that Linden Lab’s inability or unwillingness to verify the status of those that qualify for a discount, made the decision easier to get rid of some that misuse the flawed system: Since we registered for Second Life in 2007, we have always recognised how vulnerable the platform was for exploitation related to a non-profit or educational status. After all, our first telephone conversation with a Linden Lab manager was about our desire to verify our status and align our auditing processes with record-keeping systems. (A lot of good work was done in terms of a database of nonprofits by the Non Profit Commons). We are a registered Non-Profit Company (NPC) in terms of the South African Companies Act of 2007, amended 2010 with internationally recognised auditors, lawyers and paying VAT at the same rate as any other company. Yet, we were not asked our registration number on purchasing land at a discount and we offered it in an unsolicited letter to Linden Lab to make a case for international verification based on our own need for compliance. (And again, it is not Linden Lab’s responsibility to ensure compliance, but if discounts are offered to a sector, it makes good business sense to get checks and balances in place – and certainly before pulling the plug and losing the baby with the bathwater).
Important! It is not all doom and gloom for non-profits – in fact, Linden Lab announced a ‘lock-in’ on current prices for tier if these entities show commitment over a long period in the future. This has been received positively by the community after an initial outcry. We are also relieved and will take it into consideration when we decide next steps. Entries by BetterVerse and bloggers such as Silver Telling reflect some of the sentiments of the community when Linden Lab responded cautiously to the non-profits. However, for some, the trust damage has been done, and they are cutting their losses and planning exit strategies….
Much is happening in the virtual worlds’ space and innovative platforms are seeing the light every year. One thing is sure: Linden Lab needs a savvy strategy and some businesses and organisations will exit. The question is whether the company is building doors, pushing clients through them, or standing on the outside themselves already…. with Microsoft (rumour?) putting in new carpets…