ginsudo

Last month, I wrote about why Second Life failed so I didn’t have to write about why Second Life failed. I mean, that post wasn’t about reasons for failure, it was about the fact of failure. My thought was that there are many people who simply assume Second Life failed, and they’re wrong, and there are many who will passionately argue that Second Life has succeeded … and they’re wrong too. Failure can only be judged by the ones who were trying to succeed.

It would be safer for me to say that failure is a matter of perspective, for surely failure passes through the same lens as beauty in the eye of the beholder. I do understand that many SL Residents were on their own journeys, and so of course they are their own best judges of the success of those journeys. But it would be an artful evasion to claim that any of those journeys, or even all of them together, constitute the sum total equation for the success of Second Life. We were trying to do something more – or at least, something else – and we failed. (Of course, I’m talking about the team and the company that I knew, years ago. The team there today is on their own journey, which I know next to nothing about.)

So if I’m willing to be this myopic and insular about judging failure, you can bet I’d be just as parochial in reviewing the reasons. I’ve seen and heard a lot of speculation that I don’t agree with: poor strategy, worse execution; lack of focus, misplaced focus; poor technology, doomed architecture; dumb marketing, uncontrollable PR; niche market, bizarre customers; crazy culture, undisciplined development; bad hiring, bad management; feckless board, dominating board, ignorant board. I’ve heard it all, and while there may be a grain of something like truth here and there, none of these things holds real explanatory power as a reason for why Second Life failed.

We failed as people. We failed as a team. Our failure was intensely personal, particular to each person involved, and ruinous to the overall team.

I’m going to switch now from “we” to “I” but I want to be really clear about why. We Lindens were all in it together, and there is a broad sense in which all credit and blame goes to all of us … but not in this post. Here, I’m talking about maybe half a dozen people, and so it would be too much of a personal attack for me to try to describe the failures of anyone other than myself. I’m willing to attack myself in this forum, but not my former colleagues, all of whom I still respect and a few of whom I love like my own family. But I want you to remember the “we” because otherwise the rest of this post is going to seem incredibly egocentric: there’s a certain kind of self-blame that’s really self-aggrandizement, and though I regard my own failures as critical, even the most deluded version of the story couldn’t claim it was all about me.

So. I failed as a person. I failed the team. I was responsible for many elements of our strategy, execution, culture and management, and those decisions aren’t the ones I regret. What I regret, to the extent that I’m capable of regretting such a rich learning experience for me, is giving up. I don’t mean at the end, when I was tired and disillusioned and looking around at a company I didn’t recognize and a future I didn’t want to live. A lot earlier than that, I gave up on people that we needed, people who were flawed and fragile but necessary. I let people fail, I let people go, I let people hide in their illusions and fears, I let them give up because I’d already given up.

The irony was, when I joined the company, I was supposed to be an experienced hand that would bring some sanity to a crazy world. But I indulged my own worst instincts - throughout the craziest times, when I could’ve done the most good, I just brought more crazy. I was having fun, but I chose my own twisted growth over a higher goal, and at times I was just plain mean or selfish or drunk. I really wasn’t ready for the opportunity that Linden Lab presented to me. I really wasn’t the guy I should’ve been when I got there; I didn’t know what I needed to know until I left.

Too many of the key leaders at the Lab were working through similarly damaging personal limitations. You might ask whether this really points to a failure in culture or hiring or leadership, and that would be a fair question. It’s true that Linden had a way of hiring certain kinds of people and forcing them to confront their own deepest flaws – but I think that’s beautiful, a feature not a bug. What we needed was one or more or all of us to conquer our flaws, to enable the entire team to rise above the limitations of each of us. But none of us defeated our own demons, and so all of us perished.

I’ve been gone from Linden Lab for over two and a half years, and still my failure haunts me. The last day of the year is always a good moment to come to terms with the passage of time, and this New Year’s Eve I’ve decided I should finally accept the fact that I’m never going to let it go. I’ll try to reach peace through the zen realization that peace is unattainable.

This post is about why Second Life failed – but not in the sense of, “here are the reasons why Second Life failed,” but instead, “here is why it is true that Second Life failed.”

Slate published an article titled “Why Second Life Failed” that also, like this post, is not an elucidation of reasons why SL failed – but unlike this post, it is not an authentic attempt to support the proposition that SL indeed failed. It is simply an effort to market a new book by posting an article with a catchy headline. There is an unavoidable paradox in that any marketable headline with the structure “Why [X] Failed” must use for X something that has first achieved at least some significant success, otherwise the title would be too obscure to attract readers. I started a company called Bynamite that folded after less than two years – no one writes articles titled “Why Bynamite Failed” because no one’s ever heard of Bynamite.

This mild paradox isn’t sufficient defense for SL’s ardent users and thoughtful critics. As is often the case with posts about SL’s demise, the comments to the Slate article are full of well-informed, intelligent and passionate conversation that puts the original article to shame. At Terra Nova, Greg Lastowka suggests that SL remains fertile ground for study, with the pointed rejoinder that “Second Life never failed – the media reporting on Second Life failed.”

As a former Linden, I appreciate the desire to insist that Second Life hasn’t failed. I joined Linden Lab in 2005, at a time when we had a few dozen employees and registered users in the tens of thousands. By the time I left four years later, we had around 7 times the number of employees, several hundred times as many users, and almost a hundred times the revenue. It certainly felt like success to me. I left sated with a feeling of accomplishment, and great hope for the future of Second Life.

But I also left feeling depleted. We had stumbled our way from obscurity to something like prominence, but I didn’t know how to take it to the next level. We weren’t making progress despite having bountiful talent, desire and resources. We had a beautiful company, a real culture of beauty and love, genuine emotion for each other and for the world we were helping to build. And it wasn’t working, not well enough and not fast enough and not big enough.

Perhaps there never was a next level. Perhaps it was always the destiny of Second Life to be an innovative niche product for a select group of people, a worthy subject of serious study, a constantly evolving emporium of edge cases. Maybe we should have just hunkered down, and focused on maintaining an elaborate playground for only a select audience of passionate and creative people. We could eke out a fine living, and damn the rest of the world who just didn’t get it.

But I couldn’t damn the rest of the world, because dammit, I’m from that rest of the world. I was never a true Resident of Second Life; I was a visitor, an outsider with the good fortune to see the incredible things that people can do in a truly free environment. I was inspired, amazed and delighted by Second Life – as well as occasionally revolted, offended and demoralized – and the diversity and depth of this experience was a revelation to me, one that I believed that everyone can appreciate.

And I still believe that, which is why I have to accept that Second Life has failed (so far, we must always say so far). The reality is that Second Life is still a niche product, and to deny that I wanted it to be something more would dishonor the heartbreaking glory of our ambition. It’s fair to say that Facebook became our second life, but it’s also shortsighted. Not so long ago, people laughed at the proposition that anyone wanted to maintain a virtual presence online that could form the basis of social interaction. Facebook did put an end to the dismissive chuckles on that topic.

But it’s equally laughable to say that this is where we’ll stop, that the final destination of online interaction consists of wall posts and text messages in two dimensions. I still believe that there’s no sensible way to define an impassible boundary between where we are today and a time when people “live” in a three-dimensional virtual environment. I’m still a true believer, an old true Linden in that way. So I have to admit that Second Life has failed.

So far.

Pleased to meet you
Hope you guess my name
But what’s puzzling you
Is the nature of my game

Facebook may be overplaying its hand, but do we really understand the game they are playing?

We’re mad at Facebook because we feel like helpless pawns in an environment we need but don’t control.  Even though I’m included in that “we,” I have some sympathy for Facebook because I was once on the other side of a similar divide between the consumer and the company.

At Second Life, we (this time I mean we-the-company) had a seemingly omnipotent grip on the environment our users needed.  In theory, we knew our users intimately, knew who their friends were, knew where they went and what they did.  We owned their means of payment and communication, we set policy for their leisure and commercial activities.   This is a level of control that Facebook dreams of, not in a virtual world but for the entire Web . . . and it’s scary that they actually seem to be on the path to getting there.

Some of our most devoted customers were also our most vocal critics, because they were so deeply invested in the world they helped create – and every change in the service affected their lives deeply.  A few critics assumed that since our every change seemed to hurt some users, it should be easy to build a competitor that would satisfy all users.  But Second Life “killers” and open-source alternatives never gained traction, while Second Life continues to grow long after the hype cycle forgot about virtual worlds.

One lesson in all of this for me was that most critics and competition never really understood our business.  Our operation was so multifaceted and complex that every competitor only focused on the one or two things that they believed were important, and individually or collectively they never assembled a cohesive whole that could challenge our market dominance.

I’m seeing the same thing today with Facebook’s critics.  Competitors who think an open (source or otherwise) alternative to Facebook will bring down the giant simply fail to understand the business they are competing against.  Open identity, open interests and open social graphs are very difficult to grow and support without an overriding service reason to spur adoption and use:  People have an online identity and social graph because of the services they use, not the other way around.

I try to avoid drawing parallels between trendy tech issues of the day and my own past experiences – generally I believe that to move forward you have to treat most of your past as irrelevant.

But the parallels are too strong in watching Twitter make a controversial attempt to trademark the term “tweet,” bringing them into a cycle of uncomfortable conflict and limited accommodation with their own developers.

Second Life faced exactly the same issues – a passionate and well-meaning developer community using many terms associated with Second Life that the company hoped to protect as trademarks.  We ultimately came up with a comprehensive policy that was and remains a subject of derision in the SL community (see comments to the linked blog post).

It can be very difficult to engage in a productive conversation about trademark law, because even the basics are hard for nonlawyers (and some lawyers) to absorb, and yet because we’re just talking about using the English language, it seems like anyone who speaks English good should be able to comment intelligibly.  [Yes, the usage error in that sentence was intentionally ironic.]

I think everyone – the company and the commentators – could make better progress by ignoring the legal issues, and just focusing on the marketing questions.  Now, marketing is another one of those disciplines that requires a lot of expertise, and is nonetheless discussed with fervor by anyone who has a couple of IQ points to rub together.  But I think the marketing questions here are simple enough even for me to understand.

1st question:  Is there a name for the product or service that the company should be able to control?  The answer to this question is almost always yes for at least one name – companies are generally better off when they control the primary name for their offering.  Once you reach that answer, following trademark law in order to implement that answer is a straightforward process, and having good customer communication around that process is a requirement.

2nd question:  When there are words associated with the product or service that facilitate the use or adoption of the service, is that facilitation improved or hindered with greater company control over those words?  Marketers and lawyers almost always have the same bias for control (though for different reasons).  The bias itself is always wrong – I don’t mean that it’s always wrong to have that control, I mean that it’s always wrong to approach this question with bias.

Does it really do any good for Twitter to own the word tweet?  Some brand marketers and lawyers will raise the specter of genercide (basically, losing control over your brand name), but this fear should not be the primary analysis unless we are talking about the primary name.  When we are talking about those strongly associated words that help spread the gospel of the company, the analysis should not be of the law and certainly should not come from a place of fear.

The analysis should dispassionately examine whether unrestricted use of the words will help spread that gospel.  And it will often make sense to have less control over these words, not more.  If religion were a business, it would probably make sense to trademark “The Holy Bible” – but trademarking “Christ” would probably make for a lot fewer Christians.

The acquisition of SuperRewards by Adknowledge is a notable milestone in the evolution of virtual currency business models. This is the first time an independent virtual currency platform has been acquired by a company outside of the virtual goods category, and so the first time that a virtual currency has achieved monetization for someone other than its creators and users. We’ve moved into the peak of the third phase of business models for virtual currency.

The first phase was a sort of prehistory where virtual currency was a gameplay feature of massively multiplayer online games – points that players could gain through the completion of tasks, and use to acquire in-game items that were valuable for further progress in the game. Although points have been a feature of most videogames since the inception of the medium, the relevant new thing about MMOGs was the operation of a “persistent” online economic environment. That meant that even when particular players weren’t online, the service constantly maintained an environment where items of value could be acquired and traded. Much of the trading of items for value was “off-service” – often against the game rules – but this was the first step in virtual currencies breaking free of gameplay rules.

The second phase started when online services that were not solely game-oriented used virtual currencies to encourage trading of service assets – this time trading currency for service items wasn’t against the rules, but specifically designed to encourage sales within the service. Korea’s Cyworld was a pioneer in this use, with “Cyholics” using “acorns” as a medium of exchange for digital presents that users could buy for themselves and each other. Chinese Internet portal Tencent built QQ coins into a $900 million economy, while in the U.S., Second Life users are heading towards $450 million (in U.S. Dollars) of Linden Dollar transactions. The authorized use of virtual currency within these services led naturally to implicitly or explicitly authorized use of their virtual currencies outside of the traditional boundaries of the service, demonstrated by Chinese users buying real-world items for QQ coins and Second Life users setting up 3rd-party currency exchanges and virtual goods stores. (As an illustration of the differences in culture, it’s interesting to note that the Chinese government eventually banned the use of virtual currency for “real” items, and that Linden Lab rebuilt or acquired the third party services.)

In the third phase, we have businesses that were natively built as a platform for virtual currency to be used on other services (rather than a feature of an economy within a more comprehensive service). Some have stayed closer to virtual currency’s MMOG roots, like PlaySpan and LiveGamer, while others have tried to ride the wave of social media apps platforms, like TwoFish and SocialGold. SuperRewards and OfferPal brought a new twist by using marketing offers as the underlying value to the virtual currency.

This part takes a little bit of explaining. For any currency to gain favor with a user base, there must be some underlying value to the medium of exchange – from a consumer point of view, this is sometimes expressed as a demand that the currency be “backed” by something of value. In ye olden days, governmental currency was backed by precious metal; in theory you could turn in your dollars to the government in return for equivalent value in gold. Most governmental currencies came off the gold standard decades ago, and are now backed by the declaration of the government that the currency is legal tender. The meaning of this declaration is a little murky both in theory and in practice.

Suffice to say that there are virtual currencies that emulate most of the historical models of real governmental currencies. e-Gold tried the gold-backed model, to disastrous result. Some virtual currencies are run as essentially stored value systems for governmental currency, so ultimately they are backed by the same declaration of the government. QQ coins to some extent, and Linden Dollars to a greater extent, are free-floating media of exchange that are backed by the commercial viability of their operators – a private rather than governmental declaration of value (this is not as revolutionary as it may seem, since in many ways it’s similar to airline miles and other customer loyalty programs).

By using marketing offers as the underlying value, virtual currency operators can sidestep some of the difficulties involved in demonstrating that a currency is sufficiently “backed” to satisfy customer demand for stable value. This technique introduces significant complexity and cost by introducing many additional parties to the value chain, but now SuperRewards has demonstrated (to its investors if not yet a skeptical public) that this kind of backing does create a valuable virtual currency. OfferPal is not far behind, and of course is now far ahead in terms of its ability to maintain an independent business.

So what’s coming for the fourth phase of virtual currency business models? That’ll have to be the subject of another post. But for now the developments to watch are the competition between Facebook and MySpace in their own virtual currencies, app developer currencies from companies like Zynga, and the continued progress of OfferPal.

The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.

F. Scott Fitzgerald, “The Crack-Up” (1936)

I love Linden Lab.  Over the past four years, I’ve poured everything I had into the company.  Leaving was a tough decision.  But at the same time, it was easy to see that it was time for me to go.

Departure missives are a tricky thing.  This is actually my third for this same departure:  I said goodbye to the company internally, I posted to the company blog, and now here’s one for my own blog.  Why so many?

I’ve studied the art of the departure memo, it’s really quite interesting.  The business world sees many comings and goings, and in certain companies, internal communications are destined to get leaked – and you can see that the authors know this.  Compare two examples from the same company, Yahoo:

• Stewart Butterfield’s resignation was bizarre, funny, and ultimately a scathing indictment of a place that overdiversified and lost the love of innovation.
• Sue Decker was more restrained, with a classic and classy goodbye that nevertheless could be read as a defensive listing of all the progress made under her watch.

In their own way, each goodbye note took pains to remind people of the author’s special qualities and accomplishments.  I avoided doing that in my earlier announcements.  It’s not that I’m especially modest –  I just didn’t want to muck up messages to colleagues, customers and company commentators with shameless self-promotion.  There’s a time and place for self-promotion.  Like right here, on my own damn blog.

Ah, but I’ve never been great at claiming credit.  I’m struck by the wisdom that one mentor told me earlier in my career, which I’ll paraphrase as:

Success has many fathers, and even more virgins trying to claim paternity.  No one who wasn’t there can really understand the full story, and even the ones who were there didn’t see everything.  But you’ll know what you did, and so will the people that matter.  Let the others play their guessing games.

So then here’s a game to play.  When success really does have many fathers, how do people claim any successes for their own?  I thought about what successes I’d want to highlight from my time at Linden, and I realized that any of them could have at least two opposing interpretations.

Can I claim any of these successes as wholly my own? Where does the truth lie? Would the modesty of my saying that all opposed ideas could be true be undercut by the implication that I would then be claiming a first-rate intelligence?

Ah well, that’s about the best I can do for self-promotion.