What Second Life business exodus?

Earlier in the summer, Second Life took several hits in the mainstream business press, which just last year was ga-ga over the virtual world and the potential for business activities. Pointing to negative articles in Forbes and Fortune, I concluded that "the honeymoon is over."

A few readers agreed. One, identifying herself has "Shannon," proclaimed that the "Second Life bubble has burst," and described what she said was her own company's experience:

There are people logged on, but you won't see them in your place. Most are either sitting on "camping" platforms up in the clouds trying to earn a few Linden Dollars or hustling tricks in one of the "escort" houses. People aren't logged in to buy and explore your brand, they are there trying themselves to make money. "Too many cowboys and no Indians" sums the situation up well.

Back in November I was one of those who took my real life company into Second Life after reading the hype. My company spent thousands of dollars and I, personally, lived in Second Life for all of my days and plenty of nights working to get things going and ensuring that there was a "knowledgeable sales person, who could explain the virtues of the brand" readily available. My company was one of the first to bring real life goods into the virtual world.

We are still there, only we've since sold off our island sim and moved onto a smaller parcel of mainland. The fact of the matter is, the results simply can't support the cost of owning a sim. It is nothing personal, I hold no grudge, and having sunk thousands of dollars and thousands of hours into it, I wish more than anyone that the promise of Second Life had worked out. At the end of the day though, I run a business, and anyone that runs a business can tell you that it would be foolish to continue to invest in something that isn't benefiting your bottom line. In this case in fact, not only didn't it recoup the expenses, but it actually started draining the coffers.

My corporation's experience is obviously not unique as you can see by the news headlines. I recently checked out the Nissan and Mercedes sims. Both expensive builds, both ghost towns. I stopped by the Playboy sim which only just recently opened with much hype. They were having a scheduled event/party and had several employees present. Total avatars present including myself? A grand total of five.

On Terra Nova, Mike Sellers started a thread entitled "Second Life Business Exodus?" which drew scores of comments. Several of the commenters (including myself) piled on the "exodus" theme. But I was forced to reconsider my position after reading what Aaron Delwiche had to say about the controversy:   

Just wanted to point out that many of the recent comments seem to be assuming that there is, in fact, a corporate exodus from Second Life and other virtual worlds.  

With all due respect to Mike's well-written post, the Forbes article did not claim that there was an exodus. It provided anecdotal evidence from a handful of corporations who were disappointed with their experiences, and it included words of advice from agencies that continue to work with Second Life.

Delwiche had a point. A few high-profile failures does not equal an exodus. Moreover, what is the definition of a business exodus in a virtual space like Second Life? Most people would agree that a company closing its sim or island could be described as being part of an "exodus." But what about an abandoned sim, or one that has not been updated for x number of weeks or months? It may look like the company has given up or moved out, but they technically still have a presence and may even return at some later date to update the campaign.

Additionally, there is a strong body of anecdotal evidence suggesting that the opposite is happening -- that is, the business influx continues, outpacing the number of companies that are leaving Second Life. Companies continue to set up shop in Second Life, and companies with existing presences are expanding. In recent months, I have received several pitches to attend corporate events or openings there (including Manpower Island, a Microsoft forum for Visual Studio software developers, a Social Media Club get-together, and a virtual IBM Business Center), and theSLAgency says it has hired more staff, and Electric Sheep has job listings for "Second Life Builders and Texturers," a software engineer, and a Web developer. Linden Lab itself has dozens of openings.

But what do the numbers say? I am a proponent of quantitative research, and am interested in some of the statistics coming out of Linden Lab and other sources. Sure, the data is often misinterpreted (see my earlier comments about Second Life "residents"). Others have looked at the data, and made dire predictions concerning the virtual economy. Regardless, I believe these figures they can still help answer the question about whether or not SL is experiencing a business exodus.

Linden Lab, to its credit, is relatively open about Second Life usage statistics and other indicators, and there are several metrics that could support the idea that business activities are increasing in Second Life. For instance, the number of owned islands continues to rise (9,364 as of this writing, with 859 added in July). These are relatively expensive, but have qualities which appeal to corporate customers -- no neighbors, the potential for restricted access, lots of room to expand, and lots of creative possibilities. Another piece of Linden data worth noting: In the chart titled "Estimated In World Business Owners", the number of Total Unique Users with "Positive Monthly Linden Dollar Flow" has increased from 42,597 in June to 45,367 in July -- although most of the increase comes from users with less than US$100.

On the other hand, a lot of the corporate efforts I have seen are not aimed at generating cash flow, but rather at reaching out to customers -- the Microsoft Visual Studio event listed above, as well as the Reuters sim, fall into this category. There are no Linden Lab data about such activities that I am aware of, but Wagner James Au's New World Notes has attempted to count the number of people visiting corporate sites in Second Life. Check out his rundown of the corporate top ten in Second Life. Far from being abandoned, many of these sites -- including IBM, Pontiac, and Microsoft -- are getting thousands of visits per week, according to Au's estimates. That may seem encouraging, but when measured on an hourly basis, there are seldom more than a few dozen avatars coming to these sims. Moreover, the methodology seems weak. It is based on four fixed samples per day per site. It assumes each visitor will spend 30 minutes at each site. The headcount doesn't take into account returning visitors, or visitors who are working for the corporation or agency that created the sim. Sites with "consistent low traffic" (500 or less weekly) are dropped in the headcounts, and sites which shut down or are abandoned are not recorded. 

So, is there a business exodus from Second Life? The data is inconclusive, but I will take an educated guess. Even if one counts abandoned corporate sims in the list of departed companies, I would say "no." Some companies may have been turned off by their SL experiences, and others have been scared away by the negative press, but I believe there are more companies that are interested in experimenting in Second Life (and increasingly, other virtual worlds) and are consequently setting up Second Life outposts. A few dozen visits per hour doesn't seem compelling to me, but many brands say that they are taking a long-term view of activities in 3D worlds.

Copyright © 2007 IDG Communications, Inc.

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