The company behind virtual world Second Life is profitable, expanding fast, and bullish about the future. GrowthBusiness meets new chief executive Mark Kingdon to discuss why online worlds mean real money.
The company behind virtual world Second Life is profitable, expanding fast, and bullish about the future. GrowthBusiness meets chief executive Mark Kingdon.
On the reverse of Mark Kingdon’s business card, a tall, slim figure glides through the air into the sunset, his coat tails flapping behind him. It looks almost like a scene from Harry Potter, but of course it’s Kingdon’s alter-ego in Second Life, doing the sort of thing that people do in a virtual world. Marketing and communications director Catherine Smith has gone for something a bit closer to her actual appearance, though she has a warmer smile than her avatar.
Kingdon became CEO of Linden Lab, the company behind Second Life, earlier this year. Formerly head honcho at a digital communications agency, and before that a partner at PricewaterhouseCoopers, he has thrown himself into the job with gusto, bringing in new executives from companies such as Pixar, Adobe and AOL.
‘It is an incredibly inspiring place to work, with unusually high employee retention,’ he says. ‘People are so committed, so passionate about Second Life… I haven’t seen anything quite like it.’
Linden Lab has more than passion, however. It is profitable, cash flow positive, and boasts a strong balance sheet, according to Kingdon (though as a private company it doesn’t disclose the numbers). There is no downturn or recession in Second Life: in fact, Linden Lab is in the process of ‘investing very heavily in a top-to-bottom renovation’, aiming to make the complex world more accessible to the novice Resident.
Second Life has enjoyed explosive growth since it was founded by chairman Philip Rosedale in 2003. One billion hours have been spent there, and more than one billion dollars transacted by Residents buying virtual goods and services from each other (that’s real US dollars, not Linden dollars, the currency of Second Life). The platform has hosted more than 18 billion minutes of voice chat since the facility was introduced in 2007, while 600 million words are typed by users on an average day.
Some of the most interesting numbers, though, relate to the population of Second Life. There were 741,000 active users of the platform at the end of June, up 24 per cent year on year. Yet there are over 13 million registered users. Does that suggest a lot of people are having a go and then giving up because it’s too complicated?
‘The most important way to boost retention is to make it very easy for people to navigate that first hour,’ says Kingdon. ‘We have a search function but we want to take that to the next level.’
The polar opposite of Twitter, Second Life’s attraction is in its complexity. ‘People are absorbed by Twitter, and there is a very low investment of time required to learn it,’ says Kingdon. ‘What makes Second Life compelling is the ability it gives people to create a virtual identity and connect with people all over the world.’
This is not the domain of the pasty-faced geek, he insists. ‘The typical Resident is likely 30 or above in age, almost equally weighted between male and female, and could be anywhere in the world. This is not a typical tech early adopter – it’s a cross section of society.’
Kingdon points to the example of Anshe Chung, ‘a millionaire several times over’ from her business activities within Second Life, who featured on the cover of Business Week in 2006. Smith refers to another woman who styles herself Stiletto Moody and ‘creates fantastic luxury women’s shoes – and the feet to go in them!’ High heels can, of course, be much higher in Second Life, where gravity and balance are not a problem.
‘The strength of Second Life is its in-world economy’
Whether or not you understand the motivation of someone who uses real money to buy a pair of virtual shoes, there’s no denying Kingdon’s assertion that some businesses in Second Life make ‘serious amounts of money’. He points out that Ebay was first seen as a way to make a little extra cash on the side, before the best traders came to realise they could give up their day jobs and use the platform to run a “proper” business. The difference is, of course, that no physical goods change hands in the fantasy world of Second Life.
‘The strength of Second Life is its in-world economy, because people are connected in the social and economic fabric,’ Kingdon comments, adding that 250,000 items are traded every day.
Given this success, is Kingdon worried that one day cash-strapped governments will see fit to levy tax on property in virtual worlds? ‘We’re in the same boat as other online properties,’ Kingdon says, declining to elaborate further. Perhaps the idea is too dreadful to contemplate.
Back in the physical world, Linden Lab is expanding fast. There are 320 staff, expected to hit 400 in the next few months. Outside its native US, the company has offices in the UK (in Brighton), Singapore, and is about to open another in Amsterdam. If a global recession can’t slow down the Second Life juggernaut, what can?
‘Everyone is competing for share of mind, I suppose,’ says Kingdon. ‘But what makes Second Life unique is the user-generated content. It would be very challenging for anyone to replicate something on that scale.’