Analysis: What Went Wrong With Linden Lab? UPDATE: Linden CEO Mark Kingdon Responds

For the longest time, Linden Lab's health as a company seemed certain. Even after the hype wave of 2006-2007 had passed, Linden executives claimed the company was profitable, and said so as recently as last October, doing well at the height of the recession, earning it a spot among Silicon Valley's top 25 start-ups. "We're reinvesting our profits to further enhance the Second Life experience," Linden CEO Mark Kingdon told Computerworld then. "We currently have 330 employees and are actively recruiting for 70 positions over the next 4-6 months."

Eight months later, however, after some ominous hints, 30% of Linden Lab's labor force was suddenly gone.

What went wrong, and where's the company going now? I've talked to a number of inside sources on background, done a lot of research on my own, and a general picture has emerged. Perhaps ironically, no one I've talked to has pointed any blame at Second Life's internal economy, or the state of user-generated content in SL. Second Life's dedicated community of users remains strong, and the best, perhaps last hope for the company that serves it. If Linden Lab is to regain its luster, it will only be through the talent and dedication of the Residents who have made Second Life among the most remarkable and inspiring user-generated content platforms on the entire Internet.

So what brought Linden Lab to this point? I see five key factors, which are actually symptoms of a much larger, overarching problem:

Failure of Viewer 2 to Increase Adoption

While Second Life has grown its userbase since Viewer 2 came out in February, the additions have been extremely modest, perhaps less than 50K active uniques. (And in any case, the Lindens attributed last quarter's growth not to the viewer, but to advertising and James Cameron's Avatar.) This despite what must have been a sizable investment of resources to develop the software (which I admired at launch, but believed would not contribute to mass market adoption.) Probably in direct consequence, Chief Product Officer Tom Hale, who led development on Viewer 2, left the company last week.

Failure of Second Life Enterprise to gain traction

As evidenced by the shuttering of the Enterprise division, sales for a "behind the firewall" Second Life solution have been modest at best. (Many of my readers and I were skeptical a substantial market for that service existed in the first place.)

Probable Loss or Waning of Company Profitability

As journalist Mitch Wagner noted, Linden execs have claimed company profitability for many years, but last week, Kingdon declined to say if that was still the case. In all likelihood, this is because the revenue gone into developing Viewer 2, Second Life Enterprise, and Linden's rapidly expanding labor force have deeply cut into earnings.

Frustration by the Investors (For All of the Above)

Looking at these blows on the company balance sheet, Linden Lab's investors almost certainly clamored for drastic action to staunch the hemorrhaging. Any plans to launch an IPO in the near future (and there are rumors one was originally planned this year) were now off the table, which meant preparing for other alternatives. Which brings us to the final point:

Cost-Cutting Plan Implemented by the New CFO

A new CFO, Bob Komin, was hired in January, roughly nine months after John Zdanowski left that position in March '09. As it became clear that Linden Lab's investments in the new viewer and Enterprise were not yielding great results, the CFO was probably tasked with making drastic cuts to return the company to a more solid revenue base. My sources also believe Linden's management and board is grooming the company for eventual acquisition by another company, which would give Linden Lab's investors a liquidity event that an IPO (now highly unlikely any time soon) would have provided.

I've contacted Linden Lab to get their feedback on all this analysis, by the way, and believe a response from Mark Kingdon, which I'll publish here, is forthcoming. [Update, read it below] In any case, when you consider all the five factors above, what's clear is that Second Life as an internal economic system remains relatively strong, and the shortcomings lie with external company decisions. (It would be ironic if the latter negatively impacted the former.)

But as I said at the start, these are five symptoms of a much deeper, more pervasive problem, one that is not just Linden Lab's alone. I'll talk about that in a follow-up post.

UPDATE, 3:00pm: I sent my analysis to Linden Lab CEO Mark Kingdon yesterday, who just sent this reply in response:

"We too have heard these interpretations but in truth this restructuring was entirely strategic in nature, and was the result of our desire to be more nimble, operate more efficiently and be able to focus on our core consumer business. As we mentioned in the press release, the efficiencies mean consolidating our software development in the U.S., combining product and engineering teams which were previously organized functionally, and streamlining our customer support.

"The fact is our underlying financial health is very strong. We’re on pace this year for record revenue, record user numbers and record user-to-user transactions – among other positive indicators.

"Linden Lab is 100% focused on delivering an extraordinary virtual world experience and all of our work is pointed in that direction."

Comments

[soror nishi]

" Second Life as an internal economic system remains relatively strong, and the shortcomings lie with external company decisions. (It would be ironic if the latter negatively impacted the former.)"

If?? IF?? ....just read the blogs.....

Another PR disaster.

[Bob L]

It is coming across like LL is a victim of their own success. One way of looking at it is SL was going good, so LL decided they had the magic touch, blew the money they made on self indulgent projects, bloated their staff and lost tract of the ball. The whole LL hired 100 people in one year and then had to laid off 100 sums it up. SL certainly didn't grow by 30% last year.

Pride goeth before the fall, as they say.

[Honour McMillan]

I worked for a RL Corp that went through a major restructuring...wanted to focus on it's core operations, cost cutting, downsizing etc. Worked great for a while til the proverbial stuff hit the fan.

In reality what the Executive had done was remove all the outward facing parts of the organization. The people that worked on the closest level with the customers. It was a huge error and resulted in major issues and the need to quickly fill in all those old organizational slots that had been emptied.

Restructuring is a fine idea. It's good every now and then to rethink how you're doing things. Just don't lose sight of the reason those job titles existed in the first place. I'm not saying that LL is making the same mistake my old company did. But step back and think about it - that's all I ask.

[Valentina Kendal]

" If Linden Lab is to regain its luster, it will only be through the talent and dedication of the Residents who have made Second Life among the most remarkable and inspiring user-generated content platforms on the entire Internet."

I'm sorry, first, that's *not* our job - we are the customers - and no matter how much we create stunning content, gather round in a circle and sing 'Kumbaya', it's not gonna save LL if they screw up. Second, over the recent years you get the feeling that LL feels the user-generated, free-wheeling aspect of SL is one of their problems in 'selling' it. Third, Viewer Two is atrocious IMHO, and if they sunk a lot of resources into it, they need to rethink that approach.

[Ann Otoole]

Show me how residents/customers are closely consulted with as to how best to grow the offering. There is no feedback channel. It shows. LL can fix gap this easily. There are plenty of viable ideas and opportunities and some even mesh with the dreaded facebook concept. There is simply nowhere, no place, and no way to communicate with Linden Lab. LL was uninterested in feedback about the SLv2 viewer and everyone knows it. Heck they would not even listen to the alpha testers. And then a Linden leaked the dirt. And others have begun to discuss it openly.

But it is nice to know LL is just becoming more "nimble". Not sure what that means. I just hope all the time and money we all poured in was not for nothing because some rich guys that don't care about the human cost want their money now and are willing to kill it off.

Here is hoping for the best.

[matt]

You really think that second life as UGC is more remarkable than facebook or twitter?

[Jovin]

They took the money content creators and their customers were generating and threw it away trying to get other users - any other users EXCEPT the kind they already had. They took us for-granted, squandered our money, didn't listen - and now they're back, neko-tail between their legs, hoping we'll keep them in business? You need a lot of faith in SL right now to keep from telling them where to shove it.

Anyone else notice the Lindex exchange rate is currently tanking? Did they fire all the guys keeping that under control too?

[Wizard Gynoid]

Nice summation Hamlet. Ok, we've all hashed it out over and over now. They screwed up and now they're cleaning up. Let's hope that The Boys get the message now and LISTEN TO US. Main thing I think is that they need to accept that the 3rd Parties are creating far superior viewers to their own. Emerald is so clearly superior to their viewers, with all of the clever added features, that there really is little comparison. LL's big strategic error was purposely designing the SL2 viewer to NOT be compatible with Emerald. Whatever advantages that SL2 had were clearly outweighed by the disadvantages involved in going back and forth between Emerald and SL2. The Emerald developers obviously monitor the JIRA bug reports and they fix the stuff that needs fixing. At this point, I would venture to suggest that LL just get out of the viewer business and leave it to the experts, mainly because the experts design the viewer for what the users want. Emerald implemented my old JIRA bug report suggesting that inventory be searchable by creator. https://jira.secondlife.com/browse/MISC-2717 Why couldn't LL have done that? Perhaps because they can't see the forest for the trees?

[Lap Liberty]

I have to agree with Valentina.
"Linden Lab is 100% focused on delivering an extraordinary virtual world experience and all of our work is pointed in that direction."
This was never their work.

[Skate Foss]

What is done is over, people speak of the creativity and dynamics of the residents who make SL what it is. And the fact that now the company is gearing up for a sale...But is anyone stopping to think about or consider the plight of the Linden employees that were let go? Maybe we should.
Thank you

[Eddi Haskell]

To begin with, the only economic realities that matter are what 51% of the controlling interests of the board of Linden Labs sees beneficial to themselves. Economics for tightly held start-ups are subject to huge volatility. My guess is that the board feels Linden Labs must show paper profit now, since additional investment (or an outright sale to a company like Microsoft) is the boards medium-term financial strategy. Neither will come with lack of paper profit.

Second Life is a business disaster for one reason and one reason only - it is not growing in terms of concurrent usership, and has only grown about 30% in the past three years (my estimate). In the age of Facebook, growth like this is considered a Web 2.0 failure.

Second Life has not grown, in my opinion, because it is simply too difficult for the novice to use easily, and too full of security flaws and sex for businesses to take it seriously. In addition, technical problems that relate mostly to server non-scalability are causing massive problems -- lag gets worst, and the customer experience declines.

The only way for Second Life to get out of this mess is, as someone has pointed out here, to actively engage the 200,000 or so individuals who have several accounts and are spending upwards of $500 US dollars a year inworld on their "hobby". Second Life must reconnect with its base and figure out a way of avoiding the arrogance and irrational expectations which have plagued it in the past. In addition, its base, if properly handled, will bring in new users once they are convinced the company is set on a right direction.

[Robert Graf]

SL has never had a level playing field business wise. Insiders get special deals on land purchases and tier. This is not a new phenom but has existed for years in SL. LL markets SL to Joe Noob as a great place to start a business to make RL money. Joe Noob starts his business unaware that his competition is getting a minimum 33.3% advantage on Tier Fees. After doing oppo research he is surprised that they are able to price their rentals much lower than his despite similar land and builds. Then he learns the truth the hard way. Joe realizes that even with a better build and better customer service he will never make it business wise because of the manipulated land prices and tier. He shuts down, sells out, and refuses to participate in the SL economy in any form. No rentals, no purchases inworld. Nada. Nothing… And goes on to a better “second life” on OSGrid. LOL How many times has this story been repeated in SL? LL participates in this insider corruption/manipulation thinking that they will benefit from this. Just keep it on the lowdown please…. ; ) Most people are honest, decent, and fair minded. They just want to compete on a level playing field. LL makes sure they never will and that stinks like BP oil on a Louisiana beach at noon. ; )_~~~

[Ciaran Laval]

You don't layoff 30% of your staff in a healthy position, it just doesn't add up.

They also don't seem to realise that a bird in the hand is worth two in the bush.

[Robert Graf]

LL needs to end reduced pricing for land and tier. Put everyone on an equal footing and end the nonsense. LL should stop catering to the 1% of landowners that benefit from this rigged system and start looking after the 99% of landowners that don’t. Almost 4 years have passed since grandfathered tier was brought in. End it. The wants of the 1% have dominated LL’s policies for years. The strategy worked as long as loads of noobs were coming in, SL was the only game in town, and knowledge of reduced land costs for competitors was not widely known. The “dirty little secret” is out, LL and the 1% need to accept the new reality. ;)_~~~

[Little Lost Linden]

"They also don't seem to realise that a bird in the hand is worth two in the bush."

How many Linden dollars does that equal?

"Second Life is a business disaster for one reason and one reason only - it is not growing in terms of concurrent usership"

It is growing in terms of concurrent bot usership. :)

"Second Life must reconnect with its base and figure out a way of avoiding the arrogance and irrational expectations which have plagued it in the past."

I wish they would listen to me. We would be living in a Neuromancer style world by now if they had listened to me. :)

-Little Lost Linden
http://www.thebotzone.net

[Alberik Rotaru]

LL needs to unblock its decision-making. There are a number of issues where residents have been asking for change for years and nothing has happened. Two that are close to my hear are megaprims and the group limit. If LL wants to show us, rather than tell us, that they are going to be more nimble in future, movement on those issues might be a start.

In the medium term, LL should give serious consideration to acquiring Emerald (and not then messing it up). There are other longer term usability problems, but they are hard-coded into SL and will take a major effort to change.

The very best thing M could do, and I think he is both genuine and capable, is to sit down with the mess that is JIRA and start reading it, all of it, for himself.

[brinda allen]

Worry about the poor people that lost their jobs! You have to be joking!! Those people had a great gravy ride...as professionals they will find jobs...if they are good.
I spend in excess of $6,000 USD a year in Secondlife...I still come and I still believe even after The Benovolent Monarchy has screwed me. I still come and believe after they never listen to what any of us say.
Here it comes again...
Linden Lab DID NOT CREATE SECONDLIFE.
Linden Lab created a platform, an idea, servers, code to make it all work.
The residents created Secondlife as we know it...sometimes in spoite of Linden lab.

[Rob Knop]

I do not believe M's response.

Sure, there may be a way he can cook the books to that technically he's not lying. Sure, "consolidation in the US" is a great excuse. Sure, because of the downsizing they're probably going to have something positive on a balance sheet somewhere.

But you don't suddenly lay of 30% of people, completely undermining the morale of the people left behind, as part of a strategic refocusing. You don't lay off *those* people to make your operations better and more streamlined. You do that because you need massive cost-cutting.

I call BS on it. And it's pretty insulting BS, insulting that he expects us to believe it, and insulting to the people he's just thrown out into the cold.

[Lili]

First off, Linden Lab, listen to your customers! Most of the people who are PAYING to keep Second Life going, are geeks. We're lovable and cute, but still geeks. Listen to our needs. We want to build, experiment, play and occasionally share (but mostly it's about us). Fix the problems in Second Life, don't make new ones.

Second thing, ADVERTISE to GEEKs; not to social networking people, not schools, not corporations. Lets see some ads out there about the things you can make here. The art, the architecture, the landscapes. Show people the awesome builds and fabulous clothes, incredible vehicles and weapons. I came to Second Life because of a Torley video I saw about making tiny prims. But does Linden Lab ever tell anyone about what is possible in Second Life? No, they are marketing to facebook, college and business people who are never going to stay even if they do come.

Second life is a great place to meet people you would never meet otherwise. There are no points to build up. You don't win by having the most friends and if you follow me you'll probably get slapped. But I've made some incredible friends and have never once felt the need to start a facebook or twitter account to add these people to. Social networks are for people who are not creative but want to associate with people who are, and creative people who want to get more attention. Yes, I know there are also just friends in these networks, but the preceding sentence is the overwhelming rule.

Linden Lab's failure, was to never take "us" seriously. Like many liberals, they are sure they just know more than we do. That their ideas are so much better for us, because we are really too dumb to know better.

It's the geeks, stupid! They pay the bills.

[Ziki Questi]

Such a complicated issue, and with valid perspectives from many angles.

@Ham nice summary of issues. I still think the concise and well done writeup by Tateru Nino on Massively is key to understanding LL's cash flow issues (lack of growth in Supply Linden). As a senior communications professional having worked in and consulted for corporations and organizations going through major restructurings, I would say that M Linden is at this point beginning to sound like 100% bullshit (which, sadly, he shouldn't) ... his communications (which I assume were not written by him but rather for him by senior communications staff) smack of ineptitude, a disconnect from perceptions ... you can't continually refute, or, in his case, completely ignore, all of the statistical evidence that's being presented by third parties that suggests there is a very serious problem afoot. His stance is beginning to look absurdly somewhere between an ostrich with its head in the sand and just complete ignorance or arrogance. Not the image for a CEO to convey. @soror: yeppers.

(Note: before someone gets on my case, when I say M shouldn't be sounding like bullshit I'm just saying his staff should be guiding him and it appears that they're not, that's all. That's their job as communications professionals. Just sayin'. And maybe he is full of it, but keep in mind that being CEO of a corporation can be just about the most thankless job you could imagine.)

Now, a new CFO -- that says a lot, and certainly Bob Komin is the unknown factor in much of this. It's his job, certainly, to manage the value engineering process and to ensure the company's profitability. Let's hope he and the senior management team *really* looked at what they were cutting -- and were not slashing with a machete but were cutting with a scalpel.

@Honour: right -- the client base is key.

@Valentina: agreed, Viewer 2 is a complete disaster. Unbelievable. New Coke x 2.

[EnCore Mayne]

SL has been dying for over a year now. the loss of Philip signalled a death M has never been able to recover from. every change made to the web channels (website redesign, Xstreet redesign, and the blog/forum integration has resulted in a complete and utter disaster.

the oldbie userbase who had quietly built the buzz with their impassioned literate and artistic input have totally abandoned maintaining the game. their enthusiasm was killed with every change made to a system that WAS dynamic and mutable (with due consideration to the demands of the userbase).

there has been a loss of the tao within the Lab. it's now being worked like a corporation with excuses and statistical changes made without ANY regard to direct "consumer" (haha) impact. we WERE once what made this game. now we are merely churn.

if this sounds depressing, it is! but, there will be a day when money won't drive the next CEO. SL will survive, and will GRADUALLY improve the technical means for creation as organically as before when a heart with passion steered our world.

[randoym]

Protip: Don't put all of your eggs into one creaky decade-old basket. There are a limited number of warning lights that can possibly go off before a larger, catastrophic failure occurs. You can't control what LL does, only what you do. Diversify. There are newer, remarkably better mechanisms coming out of beta through a cloud near you.

[Robustus Hax]

You have to look at it like this folks, Linden Lab had 330 employees working full time, and someones got to ask themselves what have they been doing this whole time? You've got little independent developers working for free building third party clients that are more loved than the one coming from the people getting paid big bucks to do the same thing. Shared media was great but it came with a cost, they shoved that god awful 2.0 interface in with it, without even an option to use the old viewer with shared media. 330 people everyday getting paid big bucks and you look back 2 years 3 years and you say what has really changed? Concurrency hasn't changed, the economy is not booming for the residents. Its nice to hear M saying revenue will be highest ever, but those of us who own land and do pay for Lindens huge revenue, need to see improvement. If you're going to charge me 295 a month for a sim plus premium membership, I want to see you doing something everyday. I want to see # of avatars on a sim get better, I want to see people be able to walk from sim to sim without floating 20 feet, I want more then 25 groups, I want a global instant messaging clients, I want 3d inventory preview, I want to be able to store my favorite sims in cache so it doesnt take 20 minutes to load everytime I show up, I can go on and on and it feels to me they are not doing enough, nor fixing enough and at some point those loads of people that are not getting the job done and I do feel bad for everyone that got axed, I'm sure not all of them fit under this category, but you got to cut the dead weight. I can only see this as good right now, because the direction before this, the progress before this was questionable. They can't get any slower IMO.

[A1A]

And the sad truth is, with all of the heart felt wishes from all of us, hoping that LL improves itself, being written in millions of words, the management of LL never makes a statement they read what we write, or even acknowledges they hear us. So many great people in SL, so many smart business people are residents in SL, and so disconnected is the management from us.

[LF]

There was only one employee to fire : M Linden.

[IYan Writer]

So, does M have a buzzword generator or what? Next up - synergistic proactive lean refocusing.

[Gwyneth Llewelyn]

I have to say that I agree with @Ziki: no matter what the real reason is, LL has to learn to communicate better with their customers and with the general audience. That's something they never learned to do.

Personally, and since LL is supposed to be a hippy Californian company, I'd adopt a hilarious style like Dreamhost. Dreamhost is a popular web hosting service provider. They're not perfect. In fact, they're the only hosting provider I know that deliberately doesn't sign Service-Level Agreements and give absolutely no guarantees on the performance of their infrastructure. And things at Dreamhost fail. Sometimes, they fail catastrophically. But after reading a thorough explanation on http://blog.dreamhost.com/2010/05/21/yeah-about-that-downtime/>how they failed you can't stop laughing — and that's the kind of communication that keeps DH's customers very, very happy even though they get (sometimes) poor performance...

Dreamhost used to be on an office across the street to Linden Lab. They're full of that irreverent Californian spirit that makes technology be seen as fun. Second Life used to be like that... in 2002.

Now, Linden Lab takes itself far too seriously ;) And sincerely, after so many years, one would expect that they would have developed some communication skills, but they haven't. As to their listening skills... they do listen... the problem is that they seldom act upon what they're hearing.

This is a typical human trait. We are supposed to have this amazing organic machinery we call "brain" that, among all sentient beings on Earth, has this unique ability to "walk in other people's shoes", i.e., try to think the way others are thinking, and act upon that. No other being can do that. Sadly, at LL, they have deliberately switched off that ability, probably as far back as June 2003. That is quite sad to see.

Instead, what LL has always done was to project what they think their customers ought to be thinking, and work towards that goal instead. In some very rare cases, this goal sometimes is aligned with customers' needs (statistically, one will be right sometimes... one cannot be always wrong), but it happens more by chance than by design. LL's best moments of growth and success have been when they stopped interfering in the virtual world for a while. Sadly, the tendency to interfere is too deeply ingrained. Shareholders demand interference. Learning to "interfere" so that the company is lead to a future where it is aligned with customers' wishes is hard (but not too hard; most companies, after all, manage to do so) but one has to make a serious attempt to do so... LL is fond of "after-the-fact" discussions with their customers. First they make a decision, then they show what they've done and expect encouraging comments... when they fail to receive them, they get hardened, and the next time, the decision will be made several months before it is implemented, and backed up by poor communication and misleading information. This, sadly, is part of LL's "corporate culture" and is rather hard to change — but that's what M Linden is being paid to change.

Anyway, from the comments here, it clearly shows that everybody has different expectations both from LL and from SL. Shareholders, employees, land managers, content creators, event hosters, and pure consumers — all of them have different needs, different expectations, and contradictory wishes. It's hard to say "what is to be done", since the answer depends on whom you ask... and that means that every decision made will find someone vocal enough to disagree with.

There are no unanimous wishes for Second Life except that it "thrives" and that is way too vague to establish a strategy upon.

I can only wish M Linden all the best of luck. He most certainly will need it.

[Ignatius Onomatopoeia]

@LittleLost Linden, who wrote: "I wish they would listen to me. We would be living in a Neuromancer style world by now if they had listened to me. :)"

Go back and read Gibson again, LittleLost: maybe too good a virtual world would be too much for our species to handle?

NM features a wrecked global ecosystem, governments powerless before rapacious megacorps, and a descent into what Bruce Sterling called Cyberpunk's new Victorian Age of inequity.

Great future! Gibson has said, repeatedly, that he was trying to write a warning about the power of media. He got surprised by how folks wanted to *build* that world. I cannot guess what Stephenson has said about Snow Crash, since it's much more a satire than a jeremiad.

Neuromancer future? I'd rather live in the real world and use SL as both an entertainment and a platform for learning.

[spyvspyaeon]

is it second life only about economics? Should ask this to Mark. Layoff, webthings, Grid in a mess already might give some tips for the economy refrain. But "IF"? As someone told before, there is more blogs/sites than ever talking about M. Linden picks and what he is doing wrong. Second life really need to gain trust with the existing residents (to latter jump on new features). But anyway he will only do whatever he wants to do. So short prediction, second life will refrain until most of us forget about this platform. Best action is to fire : M Linden

[Nuno McCullough]

Quoting M: "We’re on pace this year for record revenue" I really don't care for record revenue, what I would like to know is that does the expenses are more or less than the revenue? Is LL still profitable? A record revenue doesn't mean that LL is generating profits...

[Pyewacket Bellman]

Simple. John Sculley / Steve Jobs. The script's already written. Just follow it.

[Ignatius Onomatopoeia]

Gwyn wrote:

"Dreamhost used to be on an office across the street to Linden Lab. They're full of that irreverent Californian spirit that makes technology be seen as fun. Second Life used to be like that... in 2002."

I came aboard the troubled ship Linden in January 2007, but I fondly remember the image LL ran, those gorillas and the monolith, with the words "The Grid is Down While We Bang on Stuff?"

That was the spirit that attracted me to SL, but it was hardly a recipe for mainstream success, if that is what the company wanted :(

[spyvspyaeon]

@Gwyneth Quote:"Anyway, from the comments here, it clearly shows that everybody has different expectations both from LL and from SL."

the expectation that common thread is clear, despite some minor differences, but all share the same principle. The SL needs practical innovations, promises and poor communications (as I mentioned two weeks ago) dont feed the market, nor the investors nor the residents are willing to swallow this "frog" (lol). Just to have that idea, this attention is not practical, but rather a reflection of and hear several different opinions, even after being sick of seeing so much "bla bla bla talking" and the FAIL! causing residents swallowing "words" and then not seeing results , Maybe it is not incompetence, but arrogance is with 100% certainty.

@Ignatius lmao

[Arcadia Codesmith]

"...streamlining our customer support"

Such a beautiful word, "streamlining". Much nicer than "downsizing", "offshoring", or "trashing". And easier to type than, "we'll pay lip service to you our customers because you give us money, but we're getting rid of the people who actually listen to you, because frankly you all are a major pain in my ass."

"[Neuromancer] features a wrecked global ecosystem, governments powerless before rapacious megacorps, and a descent into what Bruce Sterling called Cyberpunk's new Victorian Age of inequity."

Visit the Gulf of Mexico. And read the blogs claiming everything's going to be fine because the American Petroleum Institute said so.

Mission Accomplished.

"blah blah blah evil liberals yada yada yada".

See above.

[Crap Mariner]

The streamlining apparently involves a new ticket system that's... um... well... so, how about those Mets?

-ls/cm

[Nexus Burbclave]

Wow, not one of the points in your analysis was covered in the "response", which was pretty much just a rehashing of the original press release.

My scorecard reads:
Hamlet Au analysis - 1
Mark Kingdon spin - 0

[Hiri Nurmi]

Unfortunately SL is now tipping into the death spiral. There really is no way back from this and it's only going to be a matter of time.

Back three years ago SL was growing and the potential to reach 5 million active users and beyond seemed plausible. It seemed worthwhile spending the time learning the tools to create and it was a new and exciting place to develop in - with the potential for profit when it broke into the mainstream. It looked like SL really could be the next phase in the development of the net.

Roll on to today and SL has stalled. We now know it's never going to go mainstream in this format. Active user numbers have effectively peaked - there's not enough new users to keep designers interested in working, the software is looking real old and innovations are few, slow, and piecemeal.

So actively creating in what from here on in is never going to be more than a declining niche market is not attractive. Personally I've largely stopped except making the occasional piece, I've sold my islands and just staying around on an occasional basis to benefit from past work. Virtually every other designer I know is in a similar state of ennui. *Nothing* the Lindens have announced in the last year offers any promise - even mesh imports looks real hacky with few prospects of doing anything much new over sculpties.

Like Everquest before it, there is no way back from here and we're in Cash Cow phase. IMHO the only way forward for LL would be to go back to the drawing board and create SL2 pretty much from scratch, this time fixing the fundamentals that have always been wrong - a much near state of the art graphics environment, a realistic (1000+) limit on simultaneous avatars in one place, a viewer that actually works (V2 is a disaster), and much else that we all can recognize here.

If LL doesn't do it, and frankly the management now seems one intent on profitably managing decline rather than moving forward with any vision, someone else will. LL would have a good run at it - there's probably 5,000 good content providers it could bring across to populate a brand new world and create excitement again. The bar would be high - this time LL would need to blow everyone's expectations completely out of the water but it could be done.

Except they won't. Probably.

[Nexus Burbclave]

Wow, looks like the other shoe has already dropped:
http://blogs.secondlife.com/community/features/blog/2010/06/16/an-update-on-the-linden-dollar

[Victor]

LL take my money in 5 minuts = yes.. (good economy)
and 2 week for reply my ticket = no efficiently( consumer is clown for wait )

M Linden Really have reason
"operate more efficiently and be able to focus on our core consumer business"

Not is fun wait 2 week for a reply

[Bob L]

So they looking for a buyer for Linden Labs. Who would that be?

[Les]

"So they looking for a buyer for Linden Labs. Who would that be?"

Given that Opensimulators code is not far behind SL now (and in several respects in advance of it), the main value of the company is in it's userbase and hardware.
With IBM, Microsoft, and Intel contributing code patches to the open source version, any buyer is at the mercy of those three should they decide to put in a little more investment ;-)

[Nalates Urriah]

I keep hearing that SL is too complex and that is why the user base is not increasing. But, OpenSim (OS) has amazing growth with more and more regions.

If one thinks the viewer is too complex try setting up a sim. OS is growing like SL did in 2006. SL's growth is much flatter then OS's. Both are growing, so it is not just people leaving SL and moving to OS.They are both growing with healthy growth in OS and weak growth in SL.

Blue Mars certainly does not seem to be growing like OS is. BM is a prettier but more complex. Growing from a simple consumer in BM to a creator/merchant is a steep learning curve. A resident in BM has much less opportunity to change their world. Both SL and OS have BM beat in that regard.

A recent study shows social networks make it very easy to find RL friends and connect. Even the most novice Facebook user can find their friends. However, it is hard to casually meet new people. The ability to connect and share with friends seems to be the single most important factor in any social network's success.

In SL/OS it is easy to meet new people. Because of anonymity it is also safer. But, it is extremely hard to find RL friends within SL. A novice needs outside help from a friend to figure out how to find people. If LL can figure out how to blend the two concepts, finding RL friends and meeting new people, SL could be much more popular.

Time will tell.

[www.facebook.com/profile.php?id=1667958176]

EverestPiek first off: relatively strong is an expression as expandable or compressable as rubber. this might mean, that with cutting off and outsourcing complete departments they might cut costs, but my experience in such things like outsourcing is, that companies lose the direct communication with customers. let's see what happened to a referrable car company in my country: the company had been outsourcing a major part of their car parts production and a company taking over a major part of the production went bancrupt. direct result was, that they were not able to fulfill their contracts with car dealers and garages and, in the end, were forced to announce insolvency themselves. as a result of this chain reaction, other car part producers, contracted car dealers and garages lost a huge amount of income and partially had to quit as well. at the end of this chain though stood the customers with their cars, almost unable to get their EUR 30000,- expensive cars repaired although if they had even a guarantee still running - EUR 30000,- of scrap metal and pending compensation law suits that probably will take the insolvency officer decades to fulfill. Philip Rosedale had a dream, when he founded Linden Research Inc., and evryone who joined SL for seriously seeing a possibility to realise his ideas - i am sure - was sharing this dream. If someone tries to crap your dream, what would you do? Communication with the (customer) base is what does not only keep companies together and in the race, but countries, too! i remember 20 years ago when the so called turn flushed the communist governments in central and eastern europe. there was a huge awakening and questions about the big WHY: easy enough. the idea of communism wasnt too bad, but those governments lost their communication to the base - the people on the street. some road worker who had only an 8th grade school education pretty much brought it to a point: if you cap the lines, dont be surprised if you cant talk to anyone and people are doing what they want! If you guys at Linden Labs are capping the lines now, I give you 2, maximal 3 years more to exist, not to talk about decades of compensation charges after the end.

[www.facebook.com/profile.php?id=1667958176]

whats that bull about removing comments?
did i say some truthes some bot doesnt wanna hear??
ty...wont write again. if you wanna read my comment, ask me inworld for a notecard.
Everest Piek

[Arcadia Codesmith]

"There really is no way back from this."

Sure there is. Don't "streamline" customer support. Balloon it. Junk all the class warfare crap inherent in Basic, Premium and Concierge service, put everybody in the same queue, and then service the queue like ferrets on speed. Hire people with a passion for making things right, and give them all the tools and access they need to do it.

A complete reboot would break everything. Even certain minor alterations (like a new avatar base model) would make millions of items useless. But... if the alternatives are a slow decline to closing the world, or a quick sale to some megacorp whose first order of business will be to impose Disney-style fascism, screw it. Let's start from scratch. And if LL won't, there are plenty of places that will.

[Ari Blackthorne]

If I made $99 last year and I make $100 this year, is it not a "record-breaking" year?

the issue is that Linden Lab has slowly disregarded their core customer: the user base. Hopefully returning this focus on them isn't too little, too late.

Your analysis versus Kingdon's response make for an interesting contrast. I genuinely believe you bot hare correct. Albeit, with your version being more correct than the official version. Kingdon's is a professional CEO. Which requires professional "spin" in all his public communication.

Just a politician by another name.

[Bob L]

LiL @"Linden Lab's failure, was to never take "us" seriously. Like many liberals, they are sure they just know more than we do. That their ideas are so much better for us, because we are really too dumb to know better."

The irony overload in this one paragraph is breath taking. A corporation that runs a game based on a libertarian fantasy is being accused of being a pack of liberals because they won't put put their businesses decisions up to popular vote from the general public. bahahahaha

[ToyKey]

I realize Linden is a private company and is not required to disclose much, but in that we continue to hear that they are doing great it is time they ponied up some numbers.

[Maggie Darwin (@MaggieL)]

One does have to note that M's response does not actually *say* anything about profitability.

Certainly the costs of development projects that have turned out to be ratholes (SLE, V2) must have had an impact.

"We're changing our focus and our strategy" can mean "the board said no more marketing wet-dream projects, fire until you're back to your original staffing level where we were profitable".

[Marie Resch]

M Linden WAS fired, it's official:

http://blogs.secondlife.com/community/features/blog/2010/06/24/returning-to-the-lab

[Foxxe Wilder]

I do appreciate the honesty of this blog, Gods know we could USE a bit of honesty from the LL execs as of late. But WHY oh WHY do you guys STILL insist that the grid is still on the upswing? I've run clothing and other types of shops on SL since mid 2007 and sales have been steadily plummeting, to the point that I joined the many many thousands of other builders/shopkeepers and had to CLOSE due to, what could only be referred to in RL as BANKRUPTCY.
LL has been concentrating too much on the corporate level and has been abusively stomping all over the bread and butter of the grid... THE USERBASE! Try turning back to the userbase and try LISTENING to US for a change. You WILL NOT like what you hear at first, (a lot of bitching) but you WILL get a CLEARER idea on what direction to take to HONESTLY build up the business again.

[Chrome Underwood]

Linden Lab has something that most companies can only wish they had: a vast pool of tech-savvy, fully-engaged and devoted creative thinkers and doers, willing and able to collaborate on a massive scale, contribute freely to the development of the company from the ground up, and then voice their hard-won and well-considered opinions. Talk about a natural resource! It boggles the mind to think that a company that created an entire metaverse cannot see the virtual diamonds glittering all around them.

[windmillchaser]

Wow.

[Hermes Birkin]

So cute! I already like you on FB and also get your posts on Google Reader. :)