Linden Lab Business Model

See below: I am wondering if LL realizes the impact on their interest in business customers if they do this to their content providers. MarkTwain White and I and others have invested CONSIDERABLE resources into a combination of OS sims and full sims to provide golf and sailing. The new OS policy will potentially KILL what we have worked so long and hard for. Yes we use OS sims for light usage... provide a beautiful environment... I think Kingdon (below) is smoking something funny.

http://news.cnet.com/8301-13772_3-10074637-52.html

Are businesses still investing in Second Life?
Kingdon: Businesses are investing in Second Life real estate and engaging with the Second Life grid more than ever before. Check out what the BBC, BT, Cisco, Diageo, IBM, KPMG, Orange, Unilever, and Vodafone are doing.

What are they using it for?
Kingdon: What I would say is that there has been a real shift in use by businesses. Initially, many businesses saw it as a shop window or a billboard. It was all about the eyeballs. The thinking went, if you've got over 14 million registered residents, it made sense to get your brand in front of those people.

But now businesses are looking to engage, not just display. So we see recruitment fairs taking place, product demonstrations, and companies using Second Life for in-world meetings, training sessions, and collaboration.

We're also seeing real public-sector interest, with universities really buying into the potential to get students meeting, collaborating, and communicating in-world.

Organizations are now really starting to see the full potential of virtual worlds like Second Life.

Eric Krangel | October 28, 2008 10:00 AM
Linden Lab's new-ish CEO Mark Kingdon has been fond of telling reporters "there's no credit crunch in Second Life." We'll see about that. Last night Linden announced it was jacking the prices on its "Openspaces" virtual land by two-thirds, from $75 to $125 a month (that's American dollars, not fantasy game-currency).

Linden Lab has an easy-to-understand business model. The company creates and sells "virtual land," which is essentially dedicated CPU time with which Second Life avatars can build space stations, elven villages, whatever. (Think 3D webhosting.) Linden collects a monthly fee on the land it sells, which is the company's revenue. Unlike many other Web 2.0 companies, Linden's fortunes aren't dependent on selling advertising and the company isn't at the mercy of declining ad rates.

But that doesn't mean Linden is doing well. The base of paying customers is declining, prices in the avatar-to-avatar aftermarket for land have bottomed out, and the company has been unable to introduce new land into Second Life for months amidst the glut. And if Linden isn't introducing new land, it isn't growing its bottom line. So the company came up with a new way to make money -- charging its existing customers more.

In the short term, this was probably a smart move by Linden. The company introduced "Openspaces" months ago as budget option with reduced performance, thinking most of its customers would still prefer the more robust experience of being on Second Life's mainland. Many more users went for the cheap low-performance virtual land than expected, so much so the company can't even sell its more expensive product anymore. (That would be the credit crunch. Or the end of a fad.) Second Life's avatars are already screaming and howling over the price spike, but even if a few customers are lost, the company will most likely score a net positive.

That being said, there's only so much blood that can be squeezed from a stone. For Linden Lab to survive, it can't keep raising usage fees, and it can't try to con business users into teleconferencing in Second Life when the product is so poorly suited to enterprise use. In the end, Linden needs to pull off an image overhaul and make Second Life once again a hip place to be, with a growing population and a steady influx of new land-owners (read: paying customers). If Linden can do that, it prospers. If it can't, it's doomed.