Feb 6, 2013

Game Theory

Everything except the blatantly obvious in #SecondLife


I’m not entirely sure I get the point of the strategy for Linden Lab lately. On the one hand, they want to focus on mobile games and offer starter/upgrade packs on Amazon for sale, but then you look at the strategy and wonder if they’re really thinking clearly in the bigger picture.






Take for instance the Amazon packages available. What we have are pre-packaged bundles which are essentially no better than had the person just made a free account and bought the equivalent L$ to go with it. After all, $9.95 in L$ equates to about 1000L in-world at any given time. I suppose this leaves the added value model with the vehicles to justify the purchase, but even then I’m not convinced it is worth the money.


After all, there are far better Hoverboards available as an incentive, and vehicles on the whole to be honest. Just a cursory search in marketplace will tell you that the residents are doing a far better job putting the best foot forward in showing what Second Life is capable of than Linden Lab themselves.


After all, the bigger question is that once you have your hoverboard from Linden Lab, what exactly where you going to do with it? Sure it’s fun to ride around, but there is no added purpose, incentive or community to support having it. Of course, then we enter into the equation the Vetox CS Simboard, which is free, comes with a sport designed around it called Simball, and an active community. If Linden Lab wanted to impress new users with a hoverboard, they screwed up out of the gate.


Adding a “Turbo Mode” version for $12.95 and throwing in a pair of knee guards and a helmet is just adding insult to injury.


This is what they should have been offering/showing the public instead -



Better Hoverboards, Better Community. Vetox delivers.




Then, there is the other vehicle pack on Amazon which offers what I can only surmise is a near freebie of a Dune Buggy as if it is premium content.


Albeit, the specific Dune Buggy in the pack may not be the same, but the bigger question to be asked at this point is “Just how incredibly pissed off is a new user going to be when they find out they just paid 25 bucks for three vehicles they could have found on Marketplace for cheaper or free, and better quality?”



I think the answer to that question would be “Incomprehensibly.”


So why the hell is Linden Lab doing this to themselves? I mean, they can’t possibly be so naïve that they are unable to find products in their own community which would put their best foot forward to the public and make them look good, can they?








After all, what’s the point of offering a vehicle pack if you know a cursory search on your own marketplace is going to show those new users that you essentially just hoodwinked them?


In the bigger picture, we have to take into account the target audience and reach for those promotions. After all, a cursory glance at the reviews will tell you that a lot of those purchases (if any) are coming from long time residents. People leaving reviews talking up Second Life, but then saying they’ve been a resident for years now…


If the point of this strategy was to introduce Second Life to a larger audience and bring in new (potentially premium) users, I’m pretty sure this is not the way to go.


Let’s say, for the sake of reason, the intended audience for these promotions was to entice casual gamers, maybe in the demographic of 30-50 and female. Essentially, we’re talking bored housewives here – and we have to admit that’s a huge demographic in SL if the in-world dating circuit has anything to tell.


Let’s go one further and add the 18-30 casual gamer demographic who may also already play other games online like Perfect World. I’ll even give the benefit of the doubt and say male and female subcategory combined, and disposable income.


One thing these two demographics are already accustomed to if they already play other games casually, happens to be the one thing Linden Lab doesn’t apparently have available for them.


Game Cards


Like I said in the beginning, I was out doing some shopping at the supermarket and there was a wall of game cards on display. Everything from Farmville to Perfect World and all manner of games in between. Each of these games has a lot in common with Second Life in that the premise of in-game tokens and items is a big cash cow. Micro transactions fuel their business model and they know it.


This is why you’ll find at most supermarkets a sort of kiosk for these game cards. Ability to pre-purchase, at the point of sale, tokens in-game or upgrades with extra items as bonuses. This sounds eerily familiar to what Linden Lab is attempting to offer on Amazon.


The irony (I suppose) is that even Amazon itself has a host of these gift cards available at point of sale in the real world, alongside Facebook cards for their online games. GameStop is there as well, and on the other two sides of the kiosk were all manner of specific cards for games and services.


Standing there at this kiosk, I was completely baffled that pretty much everything except Second Life was represented. So I did the obvious thing and pulled out my cell phone, taking a picture.



Game Cards



One of the most common things I’ve heard from new users of Second Life who have come from other games is that they ask why Linden Lab doesn’t have those cards available at the stores (GameStop, Supermarkets, etc) when they could buy them for every other game they’ve played so far. Why do they have to buy L$ with a credit card or Paypal and hook up their account to it when they shouldn’t have to?


I agree with this sentiment wholeheartedly.


Standing in the supermarket and staring at this wall of game cards, I asked the same exact question. I didn’t know about the Amazon package online until existing residents of Second Life started blogging, posting on social media, and tweeting about it. But here I was in the one place where the average casual gamer would actually be likely to find out about Second Life if they hadn’t heard about it before and didn’t have the benefit of having “somebody in the know” to tell them about it. Those same cards also exist at point of sale elsewhere in more specific shops like GameStop, and even Wal-Mart.


Essentially, the exact place most likely to reach new people and get them interested, legitimately, for the first time. People who play other games or use other services casually, or hardcore, and would see a Second Life card next to their game of choice and think “Hey, that looks interesting… Let’s give that a try.”






I’m not exactly in the mindset to say Second Life is a game, but it shares enough in common with games (at least in fundamentals) that it makes no sense not to play in the same arena. After all, Linden Lab already is busy on that path with their mobile games… or I guess whatever they want to bill them as. So I’ll concede at least on that level that if they want to align it side by side with games, but then call it “a different kind of game experience”, then that’s fine. I’ll compromise on that topic, even though I wholeheartedly don’t believe Second Life is a game (which if you read the reviews on Amazon, most of those long time users are saying exactly the same thing).


But in doing so, they are going to have to explore the common sense of that path which wouldn’t be a second thought to a game developer today. Even EA has game cards, and Zynga, and PlayFish, and pretty much any hardcore or casual online enabled game or social environment.


The underlying premise of all of these companies is that they already acknowledge the one thing that Linden Lab is fighting tooth and nail to ignore. The business model is in micro transactions and virtual items, and less about premium memberships. The business model includes sponsored items from companies for their virtual population in-game.


Essentially, there is far more to be made from the “Freemium” model than by attempting to sell Premium accounts or sell the game itself. World of Warcraft is a full MMO, and thrives on Premium Memberships, but Second Life isn’t World of Warcraft… Therein is the difference between a game in the stricter sense and a sandbox virtual environment. World of Warcraft is a game in that a majority of the content and game world are created by the developers. In Second Life, a majority of the content and world are created by the “players”.


That’s why the motto of Second Life was “Your world, Your imagination.”


Domino Dancing


I used to say there are three dominos to how we can go about making money from a virtual world or a game. Somebody needs to pay the bills, of course, and so we explore where we can add a charge to offset those costs and make a profit. The first domino is the end-user, the second domino is the content creator, and the third is corporate involvement (advertising). In a game, that second domino exists as “in-house developers” whereas Linden Lab has the distinct advantage of outsourcing the entire world and content by default to the users/players. A games developer today would kill to have that situation, and yet Linden Lab apparently squanders that advantage. The reason WoW has premium membership and subscription is because their model is linear whereas Second Life benefits from a non-linear model.


When we look at this set of dominos, they line up from left to right, and knocking one down goes to the left. So if we knock down the first domino, the end-user, it falls to the left and hits nothing else. This leaves the other two dominos untouched (and untapped) as legitimate revenue sources. If we hit the second domino, it falls to the left and takes with it the end-user as well – this is better but leaves out a very big revenue source untapped, that being the corporate involvement who effectively have the most money to spend.


When we take out a domino in that chain, everything to the left of it is automatically covered (or is included) by the domino to the right. So if we focused on the second domino in the chain (the content creator), the end-user is covered freely (or purely through transactions or just using the system). If we concentrated on the Corporate domino, the content creator and end-user is covered freely or at a minimum barrier.


Ultimately, our solution exists in a delicate combination of the three dominos, with the biggest burden on the third (metaphorically), less burden on the second and (if possible) little to no barrier of use to the end-user, save spending their disposable income on what the content creators are making, which in turn could (and should) also include Intellectual Property from the third domino which is our Corporate Sponsors.


Making Dollars (and Sense)


Right now, what Linden Lab has is a scenario where they are trying to independently knock down the first and second domino while ignoring the third entirely. But even then, they are using a rocket propelled grenade launcher on the first domino and a pillow on the second.


Focusing on the Premium accounts and Simulator Sales, while not being entirely sure what the hell to do with Marketplace. In the bigger picture, since it seems like some sort of clusterfsk to them, the strategy is more about making new games and promoting them, along with acquisition of other companies and technologies which support their new games.


In essence, they are trying to recapture the underlying creation aspect of Second Life but this time keep it under tighter lock and key as a game environment so they can have better control. Keeping the genie locked up tight, so to speak.


It seems like the sort of strategy that says: “We have no idea what to do with Second Life, so we’re going to try and recapture that thunder in another game and move on. Try to rebrand the company as something else.”


Essentially, this is the equivalent of quietly getting into the lifeboats without alerting the passengers that the ship is going to sink.




The management would like to inform you that everything is perfectly fine.



What they should be doing, logically, is using the rocket propelled grenade launcher to knock down the third domino, marry the content creator aspect to it in a symbiotic nature, and work on eliminating the premium accounts as we know them, instead rebranding the premium accounts as “Professional Accounts”.


Problem solved. Mostly.


Statement of Vision


If I were to get into more detail about strategy, it would be stunningly simple. The ship is sinking, I agree, but it is premature to write it off and get into the lifeboats.


Let’s take a look at how the domino theory applies in this situation.


I think Linden Lab actually had a great idea with their idea of business accounts and Gold Partners. In-world content creators or service providers that could apply for that level of involvement. The problem wasn’t the idea (as Mark Kingdon came up with) but instead it was the poor execution. So, let’s say we bring that back but this time we marry it to the idea of evolving the Premium Account into a Professional Account to be eligible.


Starting on the third domino this time, which is corporate involvement, we’re not looking to sell them simulators but instead in-world content opportunities as marketing on their end. They can still purchase simulators if they wanted, but we’d deter them and try to make a compelling case for the marketing instead.


The Professional Accounts who are certified through Linden Lab become part of the pool of content creators which are eligible for applying for and winning the right to create the content on behalf of those corporate intellectual properties.


Therein, the best content creators who are involved professionally would be vying for the right to represent and create the content for those corporate names in-world. The incentive for those content creators becomes legitimate brand name merchandise in their stores and on marketplace, and the incentive for corporate involvement is that brand names likely sell better than non-brand names, so the propagation of their brand name in a viral fashion and presented in a natural setting of involvement in-world counts as self-sufficient marketing.


This sort of marketing/advertising does not break the metaphor of involvement in-world, and thus there is no metaphor shear as we (should have) expected from outright selling simulators for brands. In the latter case, it was no different than intrusive and independent banner advertising in a virtual world. Who the hell wants to visit the misguided attempt at a corporate theme park known as Dell Island? Nobody… that’s who.


But a cursory search on marketplace will show you that there are quite a lot of people interested in functional laptops and digital gadgets. So, why not have Professional Accounts who are vying for the opportunity to build those brand name laptops and gadgets in-world on behalf of Dell to put on Marketplace?


All Dell as a company would have to do is authorize it, and the professional Account (content creator) that wins the bid would handle everything else according to the terms set by Dell. Which is to say, a percentage of sales goes to Dell automatically on a split profit, the existing tax goes to Linden Lab on transaction fee, and the content creator is responsible for promoting, presenting and selling the items in question.


Which really shouldn’t be a stretch since it’s a hell of a lot easier to do that with a brand name item than an item that has to make a name for itself.


In the same manner, we utilize the organic nature of content creators as a supplement in that when a brand name (intellectual property) is involved under this premise, other content creators may not be building what Dell may have asked for, but we shouldn’t outright penalize them by default. If there exists other products on marketplace which are covered by an existing IP relationship (corporate account) – for instance, let’s say a third party content creator goes ahead and makes Alienware laptops in-world instead of XPS like Dell would get from the content creator that won the original bid, then the option is up to Dell whether they want to cease and desist that item… but here’s the alternative that didn't exist a moment ago: Dell has the option of authorizing it retroactively, and tagging a profit split to that item.


Now we’re onto something…


If the content creator had sold that item in advance of the profit split, then Dell gets 100% of profits until such time as the difference is made up for what they would have made until that point, and when they make up the difference, the profit split goes back to a normal percentage (15-20%) going forward.


So yes, there is a penalty for abusing intellectual property and content creators would have to pay the piper. But the penalty isn’t an all or nothing scenario, and actually works with the content creator for a good outcome on both parties involved without the nasty DMCA and such involved.


Content creators wishing to create content that isn’t requested from corporate sponsors could go ahead and create the content in advance, and instead of putting it for sale on marketplace, there would be an option for them to leave it unlisted and submit it for review to the owner of the IP if they are on the list already. Once that item is reviewed and cleared, they get an email stating so and their item goes on sale with the typical 15-20% split to the IP holder.


If the item is not cleared, the email should state the reason and what steps the content creator could take in order to resubmit successfully. Maybe a simple “We’d like to see a higher quality or [such and such] ability in the product before we can clear it.”


Apply this scenario to potentially every corporate entity on earth, and now we’re doing something that Morningstar and Farmer stated in 1991 when they said


Work within the system


We’re now utilizing our greatest asset in Second Life to the advantage of all parties involved, and treating it like an ecosystem which should be respected.


Everybody wins with this situation. The content creators now have added incentive to create high quality, brand name virtual products, corporate entities have a zero footprint and high yield entry into Second Life, and the end-users (players) will see a flood of brand names in the virtual environment which they will likely purchase.


Higher volume of sales on Marketplace equals higher profits for Linden Lab, in conjunction with additional fees taken from the corporate entities for marketing.


After all, what the hell is Dell going to do with 15-20% of the profits from virtual items in Second Life? It’s negligible at best to them in the grand scheme, but what if I said the percentage was actually going to Linden Lab as profit?


Instead of charging Dell outright for marketing fees, Linden Lab just says “Let us take the 15-20% automatically and you don’t owe us a dime. You get Scott-free marketing and all you have to do is authorize it. It literally will pay for itself and you get all the benefit.”


Do you know what’s cooler than offering a free generic hoverboard or dune buggy with a new account? Offering brand name virtual items.


Screw the dune buggy… How about a free Aston Martin, Lamborghini, or Bugatti Veyron? Then you set up race tracks on those Premium Sims which have less lag (apparently). All while they’re wearing real world styles, a pair of Rayban Sunglasses, and slamming back a Coca-Cola. Instead of making a walled garden out of “Premium Sims” just make them official Linden Lab sims which are subsidized by the sales of those branded items to begin with.


Know what’s better than that?


Killing three birds with one stone, and making money from every angle while making everyone happy at the same time. For instance, let’s try the following scenario:


Arcade Legends Starter Pack: $9.95

Includes 1,000L$ and playable Pac-Man Arcade Machine






Who benefits from this starter pack?


Let’s trace the logic…


NAMCO authorizes it to Linden Lab, a content creator makes it and agrees to 20% of sales to NAMCO/Linden Lab. NAMCO gets zero footprint high volume marketing for free, content creator gets paid for the work (sales), Linden Lab now has a recognizable asset to offer in start packs, which in turn is more enticing than a generic virtual item on a Game Card or in Amazon.com, and the end-users in-world now have something they wanted all along. In turn, a brand item that now would sell like wildfire on Marketplace, earning Linden Lab (and the content creator) money, and giving Linden Lab a 20% cut, while giving NAMCO the marketing.


Rinse and repeat. I’ve literally just solved every single problem in the food chain.


And now you understand the gold-mine that is Second Life.


I could continue on like this much longer, but this post is long enough as-is. The point overall is that all the things Linden Lab could be doing to turn Second Life around they are neglecting, instead jumping in the lifeboats and arguably firing cannons at the damned ship on the way out. Which is a shame, because they’re arbitrarily taking a short sighted approach in the face of a long-term possible cash cow. A multi-stream revenue model that has the best interest of everyone in mind and still pays the bills.


But hey… who am I to criticize? I guess Premium accounts are doing well and so are simulator sales. They have nothing to worry about, right? It’s not like they’ve lost nearly all corporate involvement from brands, squandered worldwide good-will and press, or driven off the educational sector en-mass….


I do have to say this about the educational aspect: Even Apple Computer is smart enough (or was) to give discounts or educational donations of their computers to get them into classrooms. Maybe it’s a write off (charitable donation?) but in the end the worst you do is write it off as re-investment or marketing. I’d be bringing back those educational discounts, and working with classrooms and universities again.


It only makes sense to work with universities. It’s Business 101.


I know I’m one of the biggest critics of Second Life and Linden Lab. But that’s the underlying point. I’m willing to take an honest look and say we can do better than where it’s at today, for the benefit of all involved, because at the end of the day I’m also their biggest fan and I want nothing more than for them to succeed.


So long as Linden Lab is quietly boarding the lifeboats, it pains me. For every year I watch yet another virtual environment snatch defeat from the jaws of victory after 16 years in this industry, it hurts me to witness it. Each and every time I see a company that doesn’t understand the dynamics of their flagship product and community, and actively works against it or ignores it, when simply enabling them to thrive and grow would benefit the company ten-fold or more, it bothers me to no end.


I want to yell and scream at the top of my lungs – WAKE UP! It’s not over! Get the hell up from the mat and fight like you mean it! It’s not impossible! It’s dead simple! It always has been dead simple.


And yet, each and every time, that voice goes unheard and unheeded. As small as the text that comprises this sentence.


I’ve watched companies come and go, and I’ve raised the flags and told them it was coming from Active Worlds to Atari. I’ve watched them bury themselves time and again… because they thought they understood. Watched them squander good will, a dedicated community, and countless opportunities to reap the rewards…


It’s always been simple. I’ve been saying this to deaf ears since 1998.


But apparently common sense is a super power these days.







  1. outrageously well written article and an eye opener for me (since i haven't been inSL for a long time)

    1. Thank you for the kind words :) Glad you enjoyed it!