Philip Rosedale helped kick-off the SL7B celebrations with an address to residents. In it, he touched just what an incredibly complex achievement Second Life is – and listed some of the well-known and not-so-well known accomplishments Linden Lab have made around the product – including the major efforts into improving the reliability of the supporting hardware and infrastructure, into making the SL experience more intuitive for non-English speakers etc.
Of course, some of the achievements he listed are going to be viewed differently by different people – things like the TPVP and Linden Homes are going to be a source of grumbles, upsets and annoyance for some time to come – and some of it may well be justified.
What interested me however, was his frank admission around the recently layoffs: essentially confirming, as I’ve previously mentioned, that Linden Lab has come to far to fast, and the restructuring was a vital precursor to the company putting itself back on a solid financial footing:
I wanted to speak for a couple of minutes and touch a little bit — obviously — on the layoffs we just did. We sadly reduced the size of the company by about a third — by about 100 people a week ago, and that’s a big deal and a huge change. But I wanted to say that standing here today in the midst of such a rich world and such continued creative — and for some people, financial — success that’s here makes me realize that, that choice is the right choice and one that though it is hard to make, is definitely correct and obvious. We’re never going to — as a company — risk the world and the businesses and the livelihoods of the thousands of people who make money working here by growing too quickly ahead of profits. By doing the difficult process of restructuring the company and making layoffs, we’ll return ourselves to solid, very solid levels of profitability.
The interesting word in this statement is return. While Linden Lab may not have been losing money hand-over-fist as some have implied in the forum discussion on Phil’s talk, “return” does tend to indicate – again, despite those graced with Hubble vision among us who seem to think Linden Lab is invulnerable to fault – that the company has been in some financial difficulty.
In many respects this is unsurprising: we’re in a global economic recession; it would be pretty amazing if a company the size of LL and with the same reliance on consumer spending hasn’t experienced financial hardships. In LL’s case the situation is somewhat worse because – as many of us are only too aware through our own practical experience – the in-world economy has been stagnating for a goodly while now.
However, the use of “return” in Philip’s comment does, to a degree, shine a different light on the recent spin of quarterly performance reports from LL, in which we’ve tended to be given (and have openly questioned) the by-line that LL is doing “great” and is “avoiding” downturn. It also tends to confirm suspicions that LL have been “papering over” some of the cracks around the situation by re-introducing things like user-to-user transactions as a measure of economic “growth” (given the sheer diversity of such transactions, and the fact that there can be a chain of several such transactions that actually represent a single dollar amount, but which have each individual transaction counted as a “dollar amount”, user–to-user is a far from accurate measure).
Philip’s follow-on comments are equally revealing – and demonstrate that someone is evaluating recent trends and trying to determine a sensible way forward for Second Life:
We’re safe, the world is safe. As smart as we may think we are, we are not always going to be able to predict Second Life’s rate of growth and hiring is something that you tend to do something in a linear way, but the growth that company goes through — especially something as amazing and phenomenal as Second Life — tends to be punctuated, that is, you’re gonna have periods. And we’ve been in one of those periods now for the last year or so, where the world grows very little because we’re trying figure out together — you and us — what to do next, how to make it better. The growth, when it comes, is typically non-linear. Growth happens very fast. A company, of course — and we’ve been through these days as well — reels as it tries to provide a solid service offering for everybody as that growth occurs. And then in other times, you know, you have to hire with the anticipation that there are things you can do that are gonna drive growth. And sometimes that doesn’t happen. So I think this combat between linear company growth and sort of non-linear world growth is, again, one of the big problems that we face. And so, to be safe, we have stepped back — reduced the size of the company — and kept everything safe
The first part of this comment pretty much confirms what Tateru Nino speculated in her comments on this blog the other day – that LL themselves don’t actually understand what fuels SL’s growth. It is also a tacit admission that traditional means of projecting growth (which I fear are the mechanisms by which the LL’s Executive Team have tended to operate over the last couple of years) break down when applied to something as unique as Second Life.
As Philip states, SL is marked not by a linear, market-driven / predictable growth, but rather by peaks and troughs. When this happens, identifying what creates the peaks – the sudden bursts of expansion & increased revenue – and what causes the troughs – a sudden reduction in growth or a fall-back to previous levels of turnover – is as much about alchemy or pinning the tail on the donkey as it is about good business sense. Get it right, and you’re a business genius. Get it wrong and everybody hates you.
Given the plethora of things that go into Second Life – not the least of which are the most unpredictable elements of all – you and me and every woman and man on the street, all of us driven by a myriad of desires, needs and wants, some of which are congruent, others of which sit in direct opposition to one another – it is all to easy to get things wrong; to see some events in entirely the wrong light and as a result base your business strategy on suspect data. You’ve effectively pinned the tail not so much on end of the donkey’s spine, just above its rear end, but rather in the empty space a foot behind the donkey….
This is perhaps the most tacit admission from anyone in LL that they have gotten things wrong – and certainly for me, it demonstrates that Rosedale still cares enough about the platform to be open and honest in matters where others will continue to try and paper over the cracks.
So, what of the future? Here Rosedale is a little more reticent; a lot of positive-sounding words are used, but the detail is scant. Certainly, some among us will be upset at his use of metaphors relating to the tearing-down of walls and filling-in of moats as they will see it as a further move towards “opensource technocommunism” (although I’m personally of the opinion that is not what Rosedale is alluding to). There is also a hint that the various messages about LL needing to play its part in keeping SL compelling in order to help drive user retention may well be falling on ears that are no longer deaf. It is important that, in getting back to basics, LL don’t lose sight of this once more.
It is equally important that in getting back to basics, LL start taking the time to listen to and actively engage with its resident users. Whether they like it or not, we are the people who are potentially best placed to help shape and develop the tactical needs that are faced within Second Life, with LL demonstrating it can weave such tactical needs into a cohesive, reality-based strategic plan that will potentially get us out of the rinse-dry-repeat cycle that has in so many ways marked the first 7 years of SL’s commercial existence.
Tateru published a considered argument on the subject of faith over on Massively last week. As she points out, LL came through a very rough period not so long after it’s formal launch, with wholesale lay-offs in 2003. They survived then largely because of the faith their resident users demonstrated towards them.
Faith in Linden lab is something that is in very short supply right now. The track record of blunders and ill-considered actions on LL’s part over the last three years have not only eroded our faith – they have in many ways built walls and moats that leave many of us somewhat unwilling to trust Linden Lab further than next week’s tier.
If things are going to improve, and leaving aside all of the glossy words, it is our faith in Linden Lab that really needs to be restored; it is the walls and moats that LL have themselves created and which now limit our ability to trust them with our faith and belief that really need to be torn down and filled in. I get the impression that Philip realises this, and that, as much as he openly talk about reaching out to people beyond Second Life, his words at the opening of SL7B are also about reaching in to those of us already here. That in itself is a sign of hope.
What remains to be seen is whether the rest of the executive management team and the board are as equally contrite, as equally positive and as equally willing to hold out a hand to their resident users.
Inara Pey: Living in a Modemworld 