Monday, May 14, 2007

Linden Lab is now profitable

Linden Lab is now profitable

In an unexpected side remark, Jeska dropped the hint that Linden Lab is now a profitable company, and has been as much for quite some time. No, they're not making billions; but finally they're able to rely on their income to plod through the next stages, without relying upon external sources of investment.

Will this make them more attractive for a potential buyer? Hardly likely. The business model will not allow anyone to "make money fast"; now they have an even better incentive not to consider the buy-out option; and open sourcing the technology makes Linden Lab uninteresting to potential buyers (would, say, Microsoft buy a company with an open source product? Never!).

This means that Linden Lab will not disappear shortly, as people have been predicting for, oh, perhaps three years now :) — but will continue to grow and expand their operations. Slowly, of course, but on a solid and positive cash flow, a good income, and a marginal profit. Just what it takes to continue the Road to the Metaverse.

Resident Validation

The hottest issue in SL since the prim taxes were abolished. Linden Lab has thought it the following way: if a Windows user downloads Internet Explorer from Microsoft and connects to a site running Microsoft's IIS, and views child porn, who is responsible — Microsoft?

Of course not. Internet users are responsible for what they watch, and content producers are responsible for what they put on the Web. Microsoft, in fact, warns on their Terms of Services that their products are not to be used for illegitimate means.

And so does Linden Lab . But to go a step further in forcing residents of SL to accept that now they're responsible for what they do, they're introducing (probably also in May 23) a new, opt-in, validation system. You'll be able to send your real life data — name, address, and an ID card, depending on where you live in the world — to a third party company, Integrity Services, and through an API established with Linden Lab, they will validate your real identity, and LL will be able to flag your avatar as "validated adult".

In return, you'll be forced to flag all your content and your parcels as being adult or not. Only validated avatars will be able to hold adult content in their inventories, and enter (or own/rent) adult parcels. No more fear of teenagers seeing those naughty sexy ankles.

LL will rely on the community for flagging content that is mislabeled, and abuse-report it — just like it happens in, say, YouTube or MySpace. So most legitimate users will flag as much content as mature as quickly as possible to avoid being shut out of SL — and expect their close friends to do the same.

The issue is polemic at several levels. Many residents have established a relationship of trust with Linden Lab — and their laissez faire mentality — and are positively uncomfortable with third party companies validating their real life data. In the past, companies providing validation systems used by popular pornography sites have been targeted by the FBI as potential sources of many sorts of frauds and of "leaking" information to spammers (emails), marketing agencies, and even US government agencies. Speculation or fact? It depends on what newspapers, e-zines, or blogs you read. A better approach would have been to give residents a choice of company to work with.

So, what will this impact SL? Sure, a few will leave — so what? There are always people leaving — SL has as low as 10% of retention rate, and that is not an issue for LL.

The impact, however, will not be in how many people will leave (my estimate: about a million in a month, but we will hardly notice that, since SL almost grows by the same amount… it'll just be a "flatter growth curve" for a while), but how they use content. The 'adult' market in SL — specially the one pursued by amateurs — is huge. How many percent of all transactions in SL — items, land, services — is on adult content? We don't know the exact data. We only know that itmust be huge, or the landscape would not be crammed full with shops offering all sort of kinky clothes, escort clubs, casinos, and all types of very mature items, animations, and attachments. They're so ubiquous as to come to us as "second nature" — they're part of the landscape, like the Linden trees.

They will not disappear overnight — but their customers will. To enter these shops, you'll have to be validated, and this means sending your data to a company most don't trust. Even if the fuss of going through that process is not much, many will never bother with it, and leave a "puritan" SL for something else… well, mostly, pronography on YouTube or MySpace, which is easily accessible and doesn't require even a credit card.

I expect a "transition" period where people will offer to buy 'adult' items, unflag them, and give them to friends (thus making transferrable items fashionable again, hooray!); and others who will validate themselves, flag a whole sim as adult, and then allow people to rent plots nearby and allow them to use their cameras to close in to the desired adult content. Residents of SL are very creative in bending the rules to make a profit out of it — but this will be mostly a transition phase. At the end of the day, we'll have a mostly Disneylandish landscape, all PG and politically correct, and "ghettos" where the few validated adults will enjoy themselves to the fullest.

For companies coming in to Second Life, this will be a boon. The landscape will be stripped down of prnography, illegal gambling, prostitution and even probably violence — the perfect environment to show off your corporate exec that this "metaverse thingy" is what your business has to be in.

Also, professional content creators who do not fear the conspiration theories will now have a huge advantage in the adult content production — the competition from amateurs that pop in under different alts every day will simply disappear. So, in a sense, the market will shrink, but the quality will increase, and probably the ones that are willing to get validated will be available to pay much more for high-quality adult content.

So it's not "a huge loss". It just means things will change a lot.

"Governance Tools"

At the beginning, this will be something quite simple: the ability to "subscribe to ban lists" directly from a tab on the "About Land" parcel dialogue box. What will this provide? Well, a BanLink "clone" that does not require in-world scripts/prims on your parcels, and that will be easy to operate. Just like BanLink, once LL releases the protocol (ie. what an external webserver needs to provide — probably just a simple yes/no query if an avatar is banned), this will be opt-in, and anyone will be able to create their own ban list systems, and subscribe to any list they want. Linden Lab will also have their own.

What this means is that Abuse Reports will be quite differently handled. First, they will go to Estate Owners (LL on the mainland), and Estate Owners will do whatever they please with an Abuse Report. They might simply add the offending resident to any lists they'll subscribe — and this will propagate instantly to all parcels which subscribe to the same list. So, all you need is to subscribe to lists being run by people you trust, and you'll be safe from griefers forever.

Obviously, this also means — no appeal and no recourse. LL will do nothing about that. If Rude Avatar hates your guts and places Jane Doe on a ban list that blocks her out of half of the world, that's it. Jane has no way to appeal that decision. It's done. She can obviously complain to the list owner, but very likely get no satisfaction there. A very few lists will have attached a whole judiciary system, but very likely they won't be popular — people in SL want the immediate exercise of personal power (or trust friends), not complex systems.

Actually, this is not fundamentally different from world-wide anti-spam and anti-hacker lists; they work under the same assumptions, perhaps with a single difference — they usually are incompatible among themselves and require different software. In Second Life, there will be a single mechanism that will work for all lists.

Although this will make griefers in SL very short-lived, the question that is always raised is how you'll get fairness and justice — how can you prevent one person from destroying your enjoyment of Second Life by placing your name on all lists, thus effectively banishing you out of SL except for your parcel? Without appeal and recourse, and LL effectively out of the loop, ostracism will reign supreme in this libertarian world — not justice nor democracy or the right to a fair trial.

It worries me, although I expect that most "unjust" cases will simply be wiped out of existence. Let's be fair: if you're ostracised in SL, you won't log any more, ever again, and not waste time with SL any more. You're out. And the number of the ones who will never log in again will never raise a huge drama, simply because they won't be around to raise it.

It'll be a huge change of mentality in SL, since, after all, people hate others for all possible reasons, and now they're able to exterminate others with a click on a website. Give atom bombs to children and see how long they can refrain from pressing the button. Again, a blessing for the ones surviving the "nuclear winter" — no griefers, only happy people around — but at the expense of justice, fairness, and a violation of your human rights. I definitely have some issues with this — the idea is good from a technical point of view, but I fear the social consequences, and would have preferred to have LL as a "last court of appeal" in every case. Like on "abusing" Abuse Reports, people that abuse the system should, in turn, be subject to sanctions by LL themselves.

However, LL has stated very clearly that they wish to have as little as possible with resident arbitration and moderation — for legal issues mostly, but also to allow international growth under different laws — so I guess this step was unavoidable.

For myself, you'll be certain to always get a fair trial from the list that eventually will be run by the Confederation of Demcoratic Simulators :)

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