On Second Thought, Maybe Second Life Does Need A Bailout

from the will-some-VC-play-its-Ben-Bernanke dept

Just a week ago, we were laughing at Second Life's attempt to position its economy as being safe compared to the real economy. That seemed difficult to believe, as a variety of things have been conspiring against Second Life for quite some time, and much of its own economy was based on its own inflated hype-bubble that overstated how many users there were and misled companies concerning what people actually did in Second Life (hint: it wasn't visit virtual clothing stores). With that bubble rapidly deflating, it really was only a matter of time until the wider Second Life economy faced its own crisis, and apparently (despite claims to the contrary) that's manifesting itself in a real estate crash within Second Life. At least in the real world, the property is a physical thing that has some intrinsic value. We've pointed out in the past that betting your business model on an economy made up of virtual goods is quite dangerous, and it appears Second Life is discovering that fact pretty quickly.


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  1.  
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    Lucretious, Oct 30th, 2008 @ 8:59pm

    at one point Second Life did actually have a pretty cool artistically focused community.

     

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  2.  
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    Joe Hunkins, Oct 30th, 2008 @ 10:03pm

    Bailing out SL

    May I be the first to offer them a personal bailout in the amount of 100 Trillion Quatloos, secured by Credit Default Swaps in the amount of 500 Octillion Virtual Euros.

     

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  3.  
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    Bob, Oct 30th, 2008 @ 10:04pm

    The Business Model isn't all that strange

    Of course, if you are only providing items to people in a Virtual World, then yes, it might be a bit shaky.

    What Second Life COULD have been good for was "Virtual 3D Modeling" for all sorts of Industry. Especially useful would have been for the general Mall type application. With a large number of people living in remote locations, it could have been an opportunity for some of these normal REAL STORES to venture into the Virtual World, and for just pennies on the dollar, compared to advertising, could have had a store-front that people in the remotest locations could have visited.

    Now, did Linden Lab falsify their numbers, well, they reported they had 14 million LOGINs, which means nothing, what they failed to report was that they had only about 300K actual individual users. This, along with shoddy management, have brought Linden Lab to the point of going out of business on it's own merit. Even if Linden Lab figures a way out of this latest crisis (that they caused), it's only a matter of time before one of the "Big" boys get into the Virtual World swing, and when that happens, Linden Lab will be behind the 8-ball.

    It's too bad really, Second Life on the face is a great Virtual World with a LOT of potential uses, none of which it seems Linden Lab cared to go after, and that's where they failed as well.

    Virtual Worlds like Second Life will be a mainstay in our society soon enough. Second Life itself was a mix of Social Play for people, Commercial Play for others, and a bit inbetween for a number of them. The problem seems to be that Linden Lab can't figure out if it's going to support the Social Class, the Commercial Class, or what exactly. Instead, they've been caught more then once like "deers in the headlights" and haven't reacted or acted fast enough to take advantage of several good business opportunities. In the end, Linden Lab will go down with the first Virtual World ever, and people will be talking about what killed off Second Life for years, but, one thing is for sure, Virtual Worlds are here to stay, like them or not.

     

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  4.  
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    Kellie, Oct 30th, 2008 @ 10:39pm

    Yes, I can believe the 14 million logins. I know I crash every time I cross from one Sim into another in SecondLife.

    The current world economy will stop real-life businesses from throwing money away on a product that produces little measurable return or benefit. Linden Labs' business practices will stop all the others. I wonder how long they can hold it all together before they disappear into the same virtual wasteland that Hotline Communications disappeared into seven years ago.

    I look forward to the bigger and hopefully more stable options that will replace it.

     

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  5.  
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    Twinrova, Oct 31st, 2008 @ 4:10am

    Um...

    We've pointed out in the past that betting your business model on an economy made up of virtual goods is quite dangerous, and it appears Second Life is discovering that fact pretty quickly.
    So will World of Warcraft need a bailout too? It's a business model supported by virtual goods for damn sure, and it doesn't show any signs of failing.

    I'm still iffy on the whole virtual world concept, but I do see very large potential if the model is built successfully. After all, people spent BILLIONS on DRM music, and that's a virtual good.

    After all, these companies don't really care about the products within the model so long as they generate revenue. By the time the virtual world fails, they'll have laughed themselves all the way to the bank.

    I've never visited Second Life but hear about it often, mostly due to bad press. If given the right management, it could easily turn around to be profitable.

    One thing to note: Virtual goods are no different than the microtransactions sweeping the gaming industry. People are spending money on this.

    So where's the "failure" in this business model again?

     

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  6.  
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    Mike (profile), Oct 31st, 2008 @ 4:28am

    Re: Um...

    So will World of Warcraft need a bailout too? It's a business model supported by virtual goods for damn sure, and it doesn't show any signs of failing.

    Actually, WoW's business model is based on a *service*, which is different.

    One thing to note: Virtual goods are no different than the microtransactions sweeping the gaming industry. People are spending money on this.

    So where's the "failure" in this business model again?


    Huge differences between virtual goods and micro transactions. But the problem is in the sustainability of the model. It's a bubble and it will collapse.

    Just like derivatives built off of subprime mortgages. A year ago you'd have been saying that those were great too.

     

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  7.  
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    TheZorch, Oct 31st, 2008 @ 4:40am

    Repercussions of the Online Gambling Ban

    I knew that Second Life was going to have a very hard time staying alive after online gambling was banned in the US.

    From what I understand the ban is causing quite a bit of chaos in the world economy, not just in Second Life but in the real world. The US cannot ignore the problem for much longer. The Right Wing Christian Fascists who run the country right now could find themselves out of a job come November 4th when Obama wins. I'm certain he'll have the ban reversed when the World Trade Organization brings it up again. The US is not long the world power it used to be, other nations that were once below us are starting to rise up and gain power and wealth. Its a new reality, we aren't the center of the world anymore and its high time Washington finally woke up and realized it.

     

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  8.  
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    Anonymous Coward, Oct 31st, 2008 @ 6:04am

    Re: Repercussions of the Online Gambling Ban

    "The Right Wing Christian Fascists" are ELECTED officials. They didn't just magically find their way into position with power. Stupid votes put them there. ;)

     

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  9.  
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    CastorTroy-Libertarian, Lover, General Annoyance f, Oct 31st, 2008 @ 6:09am

    Re: Repercussions of the Online Gambling Ban

    I WONDERED WHEN A OBAMA FASCIST WOULD FIND AWAY TO MAKE HIM THE MESSIAH OF SECOND LIFE AND ALL VIRTUAL WORLDS...UNFORTUNATELY I THINK I BET THE UNDER ON WHEN IT WOULD HAPPEN.

     

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  10.  
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    Chuck Norris' Enemy (deceased), Oct 31st, 2008 @ 6:28am

    Re: Repercussions of the Online Gambling Ban

    Like Obama is really gonna change a thing. Taxes will stay the same. Your freedoms will continue to be reduced. eVoting machines will not work. You might see some stupid anti-bullying laws that do nothing but look good. I can guarantee we will see no change. This also includes the slight chance that McCain is elected. Business owns this county. Is it gonna be AT&T, WalMart, Big Oil, Citigroup, Archer Daniels Midland, or Wall Street? That is what you are voting on Tuesday.

     

    reply to this | link to this | view in thread ]

  11.  
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    Anonymous Coward, Oct 31st, 2008 @ 10:10am

    Re: Repercussions of the Online Gambling Ban

    I'm curious why you think Obama would have any interest in reversing the Online Gambling ban. It's not a part of any agenda he's set, it won't support any of the programs he means to put in place, and it's unlikely to have any net affect on public opinion.

     

    reply to this | link to this | view in thread ]

  12.  
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    Anonymous Coward, Oct 31st, 2008 @ 10:33am

    Re: Re: Repercussions of the Online Gambling Ban

    Unless he can tax the living sh*t out of it.

    The only reason online gambling isn't legal in the US is because they haven't figured out a good way to extract tax revenue for it.

     

    reply to this | link to this | view in thread ]

  13.  
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    Anonymous Coward, Oct 31st, 2008 @ 2:17pm

    Re: Re: Repercussions of the Online Gambling Ban

    Ooh, you're confused. The Democrats are socialists and the Republicans are fascists. Obama is not the messiah, but McGramps is definitely the second coming of Methuselah.

     

    reply to this | link to this | view in thread ]


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