Assignment 1
Is Second Life’s Business Dying?
- Benefits and Handicaps for Companies in Second Life -
1. Relation to the module ‘Information Societies’
- current phenomenon of the information age
- is connected to Nick’s talk about Second Life
- refers to the relation of technology, culture and economy
- deals with O’Reilly‘s characteristics of the Web 2.0:
> Lightweight user interfaces, development models, AND business models
> Harness collective intelligence
> Users as co-developers
> Services, not packaged software/products
2. What is Second Life?
According to the official website of Linden Lab Second Life (SL) is a free online virtual world imagined and created by its residents. It is a digital world filled with people, entertainment, experiences and opportunity. Since Second Life was first launched in 2003 15 million users have signed up to date.
3. Benefits for Companies
Large enterprises such as Michelin, IBM, Sun, Dell, Coca Cola, Telekom, CNN and Reuters have established business presences on Second Life Grid. IBM, for example, has invested 10 million dollars in his virtual space so far. The enterprises assumed that Second Life provides great real-world benefits.
Watch the intro to Second Life’s Business by Text100, a PR-company that sustains a real world as well as a virtual world presence.
Basically, companies’ benefits of Second Life can be divided into two categories: internal benefits and external benefits. Although Linden Lab structures the advantages of its virtual world different most of the points following are mentioned somehow on Linden Lab‘s Second Life Grid.
A Internal Benefits
a) Collaboration and Communication
Employees in different locations can collaborate in real time in a private 3D space (immersive workspace). They can hold in-person meetings without leaving the office. Therefore, the idea of immersive workspace matches the current trend of outsourcing. Workspaces in Second Life unite geographically dispersed people.
Moreover, Second Life offers multiple channels of communication, including images, audio, video, voice, public and private text, with both groups or individuals. Channels with multiple languages and real-time text chat translators are available.
b) Productivity
Second Life improves business collaboration and business communication and, therefore, enhances the companies’ productivity. Enterprises can reduce travel costs and downtime by substituting interaction on Second Life for real world events and meetings.
c) Training and Recruting
According to Leominster, News Editor of the Slentrepreneur Magazine, an online-magazine dedicated to Second Life’s business, companies should use the virtual world for training and recruiting. Companies may conduct employee training especially one-on-one training or hold conferences where employers meet and hire prospective workers.
GAX Technologies hosted Working-Worlds conference in Second Life in 2007 and 2008, where European employers met and hired prospective workers. Indeed, 1,000 people visited the first conference and at least 55 ended up with a real life job.
B External Benefits
a) Simulation
Companies may construct product and process simulations so business collaborators from all over the world can test new products. They may also engage with customers and receive product feedback from clients. Enterprises can walk a product team and clients through a prototype to find design problems before committing to real-world construction. Moreover, companies take advantage of the 3D interaction space for focus groups and customer research.
Intel Software Network interacts with developers and the public at the Intel Software Network Dev Zone. Developers get to speak to Intel experts directly and Intel gets to hear suggestions from users and discusses future plans with the public > win-win situation.
b) Promotion
Companies may build a c0mmunity around their brand with Second Life, especially when they are using people’s creativity in the virtual world. Telecom Italia, for example, built a community around fun activities (TIM Soccer Championship) and gives services to the community to make it grow.
CNN, to give another example, relies on Second Life residents to report their own news as citizen journalists for its iReport site.
Coca Cola (watch ‘11’’40 – ‘12’’19) announced a competition that invites people to construct a vending-machine that does not distribute cans of drink but a a vending-machine that produces the essence what coke stands for. Thus, Coca Cola enhances the creativity in Second Life, engages people in their brand and ends up with new ideas.
The Social Research Foundation analysed which forms of engagement with companies customers prefer. The research enables companies to rank external benefits according to their importance. To see preference in brand interaction please click here.
As Linden Lab sums up, Second Life offers reduced operating cost (internal benefit) and improved organization performance (external benefit).
For visual information about companies benefits of Second Life watch Virtual Work by Julia Loughran, a member of bThere. bThere is a research group that contains fifteen researchers divergent in profession who investigate virtual business.
4. Handicaps for Companies
Although companies take advantage of the virtual world they also face difficulties. Currently, some enterprises such as Reuters, CNET and Wired pulled out of Second Life because the benefit seems disproportionate to the cost. According to a report by Gartner, Inc. in May 2008 90 percent of virtual world projects fail within 18 months. That means only 10 percent of real life business succeed in Second Life.
As information technology research and advisory company Gartner, Inc. discloses reasons for the failure in its report. Further explanation are provided by analysts of The Business Insider, a business site with financial, entertainment, green tech and digital industry verticals.
a) Little Research/Unclear Strategy
Most companies did little market research into how Second Life works. They have little knowledge about the demographics, attitudes and expectations of virtual-world communities.
Most companies focus on the technology rather than on user requirements. Gartner VP Steve Prentice said: ‘Realistic graphics and physical behaviour count for little unless the presence is valued by and engaging to a large audience’.
Sometimes companies start projects only for the ‘cool factor’ or because competitors are doing it. They have high expectations but unclear objectives.
b) Small Market
According to a press release by Gartner, Inc. in April 2007 the overall population of Second Life is still small compared to massively multi-user online games and the totality of community-oriented and niche-targeted environments.
As Andy Mallon, researcher at the Social Research Foundation reported in his annual survey comprising 10,000 Second Life users there are between 60 and 75 thousand users inworld at any moment. 31 percent spend an average of two hours a day in Second Life – two-thirds spend at least one hour a day.
According to Leominster, News Editor of the Slentrepreneur Magazine, the Second Life market is not only small but also demographically varied. The only generalization to make is that the population (a) uses computers and (b) are not teenagers. Depending on the target group of a product the market might even be smaller for the producing company. Therefore, commercial opportunities are limited to niche areas.
Moreover, Second Life is growing much more slowly than during its heyday in 2006 and the amount of money changed into Linden Dollar (L$) declines.
source: http://www.second-life-info.de
Hence, there are only a few new customers for companies and traditional users are less engaged in Second Life. Reasons are: (a) boredom and (b) increasing costs.
(a) Eric Krangel who spent a year and a half in Second Life as reporter for Reuters said: ‘The very things that most appeal to Second Life’s hardcore enthusiasts are either boring or creepy for most people […].’ For many residents it has become tedious, repetitive, and punctunated by occasional fun things.
(b) The prices for land have bottomed out and Linden Lab has been unable to introduce new land for several times. Since Linden Lab is not growing its bottom line without new land it came up with the idea to charge customers more.
c) Technical Problems
Basically, Second Life has two technical problems: (a) a messy user interface and (b) a terrible reliability of the service.
(a) The user interface is in a mess. It remains too hard for new business men to learn fundamental things such as how to walk, how to communicate and how to log chat require.
(b) Software crash rates hover around 20 percent. And since Linden Lab is not liable for goods and capital in Second Life companies lose all virtual material in case of a serious software crash.
Servers deliver poor performance four percent of the time. Especially at business meetings where lots of people are at one region at the same time the performance is worse.
Morevover, Griefers showed up in the past to crash business meetings. Although Linden Lab has reacted with immersive workspaces that are isolated from the Second Life population companies have lost patience with Second Life already.
d) Little Value
Second Life has little value beyond existing, proven, cheap and easy-to-use technologies. Even if desktop collaboration is needed there are more reliable tools like Cisco or WebEx who compete against Second Life.
The Register, for example, calls Second Life ‘Sadville’. In other publications Second Life merely stands for shopping and cybersex. Even virtual rape is possible: in the past some users hacked the system and took control of other avatars and abused them. Companies do not want to be implicated in that and keep away/quitted their existence in the virtual world.
5. Conclusion
Companies in Second Life face both benefits and handicaps. Since one after the other enterprise shuts down its virtual presence it seems that handicaps dominate at least. Nevertheless, Gartner, Inc. and The Business Insider forecast different fates for virtual business.
Although Gartner, Inc. disclosed serious problems for companies in Second Life today it takes an optimistic view over the long term. By 2012 Gartner, Inc. estimates that 70 percent of organisations will have established a ‘second life’, but not necessarily in Second Life. Similarly, Tateru Nino claims at Massively in December 2008 that ‘at the present it appears that more businesses are coming in than going out’.
Trading the benefits against the handicaps of virtual business Gartner, Inc. advises enterprises to experiment with Second Life, but limit substantial financial investments until the environ-ments stabilize and mature. Moreover, Gartner, Inc. advises enterprises to look for community benefits rather than commerce in Second Life.
Gary Hayes, director of the Australian Laboratory for Advanced Media Production and Head of Virtual World Development for the UK based Project Factory, represents Gartner, Inc.’s optimism via a hype cycle. He shows the initially over-enthusiasm and subsequent disappointment that typically happen with the introduction of new technologies like Second Life. Moreover, he demonstrates how and when technologies move beyond the hype, offer practical benefits and become widely accepted.
According to Hayes we are probably at the lowest ebb for brands in Second Life. With regard to the Second Life brand stats published at The Project Factory Hayes found out that the dwell traffics for most brands outside the top ten are exceedingly low. However, he is sure that companies have learned their lessons and get it right within the next years.
On the contrary, The Business Insider takes a rather pessimistic view of companies‘ businesses in Second Life. Eric Krangel posted on November 21, 2008 that either Linden Lab should abandon the idea that Second Life is a business application or it should get rid of all the bugs that make companies’ lives hard. Moreover, according to Carlo Longino at techdirt.com, Second Life’s small market, its little value for business and its shaky in-game economics are serious reasons to keep away from virtual presences.
So, is Second Life’s business dying? – We will see. The buzz is gone and benefits and handicaps of virtual business seem out of balance. Certainly, companies will survive in a 3D space but only in one that is better suited to business interaction. Linden Lab can’t sit back – it has to eliminate the failures that bother virtual work most.
To see how companies use other virtual worlds please read the Q2 edition of Clever Zebra’s Virtual Worlds for Business 2009. It highlights benefits and problems for business in each virtual world and features overviews of all the major enterprise virtual world technologies. Moreover, twelve case studies of companies who are living a ‘second life’ are provided.
