Wagner James Leading Second Life Publication, New World Notes, has an article today entitled What Went Wrong with Linden Labs? There are some very good comments over on his blog, please check out the entire article if you want to know more.
Here is that the CEO of Linden Labs,Mark Kingdon had to say earlier this afternoon.
"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."
Here is my response to Mr. Kingdon which I left over at New World Notes.
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.