Second Life Profitable Despite Interface Woes

In exclusive interviews with The Industry Standard, Linden Lab's two top executives have confirmed that the company is still profitable and Second Life is continuing to grow users and expand its enterprise services. However, Linden Lab founder and chair Philip Rosedale and CEO Mark Kingdon admitted that the in-world experience still takes too long for new users to master, an issue that will require significant amounts of technological work to rectify.
The two executives spoke to the Standard at the company's headquarters in San Francisco earlier this month (see Interview with Linden Lab CEO Mark Kingdon and Interview with Second Life creator Philip Rosedale for transcripts).
Kingdon acknowledged an "incredible hype phase" that had introduced lots of people to the potential of virtual worlds, but had also put the spotlight on many negative aspects. He said that the company was in a "comfortable place" in terms of growth in active users, usage hours, and Second Life uptime.
Rosedale said that Second Life had moved beyond an emerging application for technology-savvy users. "There is a lot more diversity in use, demographics and behavior in Second Life today than there was, say, at the end of 2003," he said.
Kingdon echoed this assessment. "I think the world has gotten its head around the fact that virtual worlds are here to stay," Kingdon said. "There is a very compelling set of activities that virtual worlds are incredibly powerful for. They erase geographies, they allow for a type of interaction that you can't get in the real world and they bring with them really interesting economic and business opportunities for users."
Kingdon pointed to several localization projects for countries in Europe, Asia, and South America, and cited in-world training and remote meetings as compelling activities for companies. Both he and Rosedale portrayed Second Life as a competitor to enterprise video conferencing, which they believe is unable to match Second Life's ability to make people feel comfortable interacting with other remote users.
As for competing virtual worlds, Kingdon said he and his team tried to keep abreast of trends, but declined to name any current competitors.
Discussing Google's closure of Lively last year, Kingdon said it was a "natural" outcome, considering Google's focus and the state of the economy. "I don't think that Lively's departure is an invalidation of the market. I think, it's just recognition that, yeah, there is promise [and] a lot of hard work," Kingdon explained. "Google made the right decision and said, 'We need to kind of stick to our knitting in this economic downturn, in this climate, and focus our resources on some of our core properties,' which is quite natural."
Rosedale said There.com had some "unique" aspects and had effectively targeted certain vertical markets, but called it "substantially less interesting" in terms of the content that users can create. "The demographic is tighter, narrower, less diverse," he stated.
Linden Lab's CEO said that despite the recession, the company remained profitable. "We have not felt the same in world economic turmoil that the real world has faced," Kingdon said, noting that Second Life was an affordable entertainment alternative to activities such as going to a movie. "Dollar for dollar, it's high-value entertainment for the casual user," he said.
On the enterprise side, he and Rosedale described uptime improvements and new products, including a hosted service and a behind-the-firewall service nicknamed "Nebraska" aimed at companies with stronger security needs.
However, the Linden executives said that a lot of work remained to be done in terms of making the service easier to use. Rosedale singled out search, the user interface and new user orientation as needing major improvements. "We need to collapse the orientation experience on learning the interface down to a 30-minute timeframe," he declared. "We're not there yet."
Rosedale went on to describe the current interface as "overwhelming."
He said, "the basic UI of the software also needs to change. It has too many pixels," referring to the buttons, numbers, and other data presented to users on the screen. "They're all kind of demanding your attention -- your [Linden] dollar balance, your inventory window, all the buttons on the bottom bar, chat and text that are visible in the window, that's asking something of you, blue pop-ups that are coming up."
Rosedale said that while the work required to make the interface less complex was significant, it would have a huge impact on the adoption rate of virtual worlds. Currently, only 15% of the people who tried out Second Life continued to use the virtual world. "I'd like to triple that number," he stated.
Nevertheless, progress has been made in terms of making the technology more appealing to new users. Kingdon described how the old Second Life registration process -- a seven-page form which he likened to a mortgage application -- had been streamlined. "We've very substantially shortened the registration flow," he said. "We shortened it in July to one page and saw a very substantial increase in registration completions."
Kingdon added that the company has also implemented better email management techniques to increase activations, and was also paying attention to SEO, in order to help users get to helpful Second Life resources via Web search engines.