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Linden Lab’s Virtual Second Life Eyes Second Life

(Corrects user statistics in fifth paragraph of story that ran June 24.)

June 24 (Bloomberg) -- Linden Lab’s virtual world called Second Life was seen as the Web’s next big thing following its 2003 debut.

Investors including Amazon.com Inc. Chief Executive Officer Jeff Bezos and EBay Inc. founder Pierre Omidyar poured millions of dollars into the project, where 3-D avatars sunbathe on virtual islands and operate virtual companies. Businessweek featured Second Life on a 2006 cover, and Reuters opened a virtual bureau. Coca-Cola Co. held a virtual contest.

Philip Rosedale, who founded San Francisco-based Linden Lab, said Second Life has yet to reach its potential. He was named interim CEO today, replacing Mark Kingdon, who stepped down. In 2008, Rosedale predicted that virtual worlds will become “bigger in total usage than the Web itself.”

Fast-forward two years. While 1,400 real-life companies still use it, Coca-Cola hasn’t returned since 2007. Reuters shuttered its bureau last year. Longtime backer International Business Machines Corp. is exploring competing services, such as unity3D, now that Linden Lab has refocused on consumers, says Francoise Legoues, a vice president at IBM, where more than 10,000 employees use Second Life for meetings.

The virtual world’s once explosive growth has slowed. About 1.38 million residents logged into the virtual world in the past 60 days, little changed from a year ago, according to independent surveyor GridSurvey.com.

In a “strategic restructuring” this month, Linden fired 30 percent of its staff. Over the past few months, executives including Chief Product Officer Tom Hale and Lead Evangelist John Lester have departed.

‘Less Better’

“The overall trend for Second Life is stagnation,” said Philippe Kerremans, who helps virtual shops track visitors on the site.

Rosedale, 41, seeks to change that. “I want these metrics to improve significantly,” he said today in an interview, referring to the hours users spend in the virtual world and to the addition of new users.

He plans to enhance a user’s experience in Second Life, so that it takes minutes instead of hours for new users to get up to speed. That will mean changes to everything from servers to the software tool participants use to navigate the virtual world, he said.

“We want to simplify the core consumer experience, Rosedale said. “We are going to do less better.”

The strategy may mean that Second Life will become accessible through a Web browser rather than a software download later than previously expected.

“We don’t think it’s a game-changer in the next year,” Rosedale said. “More tactical changes to the product can get us to impressive levels of growth.”

Slower Growth

Second Life’s economy is still expanding, though at a slower pace. User-to-user transactions rose 30 percent year-over-year to $160 million in the first quarter. That’s down from 65 percent growth a year ago. Closely held Linden doesn’t disclose its sales or whether it’s profitable.

Like popular games “FarmVille” and “Mafia Wars,” Second Life may also appear through Facebook Inc., Kingdon said last week.

Rosedale says he’ll continue working on his other start-up, LoveMachine, which is developing several projects including artificial intelligence and virtual replacement of world currencies.

“My first priority right now is helping Second Life,” he said.

To contact the reporter on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net

To contact the editor responsible for this story: Thomas Giles at tgiles5@bloomberg.net

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