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Financial Times, September 16, 2015 12:39 pm

Second Life eyes second act as virtual reality matures

Tim Bradshaw and Emma Jacobs

Ten years after they were published, the magazine covers hailing Second Life as the future of the digital economy still hang on the walls of its creator, Linden Lab.

The hype faded long ago from the user-generated virtual world, however. Visitors can still wander around a reconstruction of St Paul’s Cathedral, go line dancing at a country and western club, watch planes land at an imaginary airport - or get their pixelated kicks at adult venues.

But while Linden says there are still almost 1m regular users, the niche feel is a far cry from the headline-grabbing days when Reuters thought it necessary to open a virtual bureau to report on the goings-on of players and their “avatars”, or digitised representatives.

Now though, the people behind Second Life are gearing up for a second act, thanks to the advent of virtual reality headsets such as Oculus Rift.

As Facebook-owned Oculus, Sony’s PlayStation, smartphone makers HTC and Samsung, and games publisher Valve all ready virtual reality headsets for launch in the coming months, Second Life is serving as inspiration - and cautionary tale - for a new generation of virtual-world companies.

This summer, San Francisco-based Linden Lab began testing a new virtual world dubbed Project Sansar, with updated 3D graphics and an entirely new business model.

“Second Life is obviously the thing that we and everyone else can learn the most from as it’s the most successful virtual world, through until today,” says Ebbe Altberg, Linden Lab’s chief executive.

Across town, Philip Rosedale, Linden Lab’s founder and former chief executive, is trying to bring to life the sci-fi vision of the “metaverse” - a whole universe of virtual worlds - with his latest start-up, High Fidelity.

And down the highway in Silicon Valley, AltspaceVR is working on a new VR-based communication platform of its own.

Mr Rosedale, who has devoted his career to virtual worlds, is convinced that their moment has finally arrived. “Why all the hype around Second Life and why now the hype around Oculus? It’s because this is going to happen,” he says. “These projects are driven by inevitable changes in human behaviour and communication.”

But Mr Altberg, a former Yahoo executive who joined Linden Lab in 2014, believes Sansar must overhaul not just the graphics and design of Second Life but its entire business model to succeed.

Economic activity within Second Life is based on property. Some participants have bought swaths of virtual land from Linden Lab, developed it into a resort and then sublet it to casual users, turning a real-world profit in the process.

Sansar replaces that with a transaction-based business model. Linden Lab will take a cut of any payments made between its community members, similar to Apple’s 30 per cent commission in the iPhone’s App Store.

Put simply, Sansar will have “lower property tax, higher sales tax”, Mr Altberg says. “Unless you monetise it, land in Second Life is too expensive.”

Wagner James Au, author of virtual reality blog New World Notes, says virtual fashion entrepreneurs form a second category of users who have made money from Second Life: creating boots, clothes and hats for avatars.

“Judging by the popularity of adult-rated areas in Second Life, virtual porn is probably the third category,” Mr Au adds.


So why am I here?

Sibley Simon believes few tech products were “as perfect for a boom-and-bust cycle as Second Life”. Mr Simon founded The Electric Sheep Company, which created software and content for virtual worlds; he is now working for a housing group in California.

What fuelled the cycle, he says, was that it made a great news story, people could understand the technology and believed that “tens of thousands” were making money from it. As well as hype, clunky and unintuitive software was an impediment.

Eric Romo, founder of AltspaceVR, says he has absorbed the lessons as he develops its avatar-based communications software. “One of the big pieces of feedback is people got [to Second Life] and didn’t know what to do.

“We want to show people what you do with the products and give them exciting ideas


While Mr Altberg says freedom and openness was what made Second Life a success, he concedes that it “didn’t do enough early enough to separate out certain types of content” - a delicate balance it is “still dealing with today”.

“That’s something we’ll sort out from the beginning in Sansar: to ensure certain kinds of content have metadata that can be sorted and filtered,” he says.

The risk of encountering flying genitalia did not deter many big companies from setting out their stalls in Second Life back in the mid-2000s.

PA Consulting got involved in the early days, running a conference in the virtual world, inviting clients to explore how they could use the technology and also doing training for an oil and gas client there. Five years ago, it wound up its Second Life office.

Dan Rossner, a digital expert at the consultancy, says it was a useful learning experience but “not from a revenue perspective”. Rob Gear, PA Consulting “futurist”, makes the point that Second Life was never “the only game in town” and that other platforms were experimented with.

Justin Bovington created a Second Life concert with 1980s pop band, Duran Duran, as well as providing content for IBM and Adidas.

“The recession hit and budgets for experimentation were scrapped. The big problem in corporate use was that there was an initial steep learning curve and only then was there a good experience,” he recalls.

For many companies, it was a brilliant public relations exercise at first, says Mr Bovington, now a creative industries strategist at the UK’s Plymouth University. “With the Duran Duran concert it got great PR. I was on television programmes. But you can’t do that continually.”

Since Second Life’s launch, social media has sprung up, he points out, giving a fresh way of sharing content generated in a virtual world: “We’ve moved very fast in the past five years.”

Mr Au believes that large companies are about to repeat the same mistakes they made during Second Life’s hype period, investing in VR projects “in an attempt to seem cutting edge, with little or no understanding of the actual market for VR, or its prospects of becoming an actual mass market product”.

With Second Life, they mistook breathless media coverage for actual users and actual user growth, when in fact, Second Life was “during its hype period and still is, a midsized MMO [massively multiplayer online game] at best”.

There is nothing more embarrassing, he says, than a company attempting to seem forward-thinking, only to conspicuously embarrass itself. It is, he says, “the corporate equivalent of a man in the midst of a mid-life crisis inviting hundreds of twentysomethings to a nightclub he bought, only to have none of them show”.

Unless a company has a direct relation with the actual, existing VR market - hardcore gamers - it should keep its involvement with virtual reality modest, low-key, and exploratory at best, he believes.

For those that do want to experiment, Linden Lab, AltspaceVR and High Fidelity are all working to ensure that doing so is much simpler - and cheaper - than it was in Second Life.

“We are attempting to democratise the creation of virtual experiences,” Mr Altberg says. “We do have an unfair advantage in what it takes to do these kinds of things . . . Through a lot of positives and through a lot of pain, we have learnt a tremendous amount.”

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