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  NOTES- ‘How to Be a Virtual World Entrepreneur’ [Updated]  
Posted 2006-03-14 by Tony Walsh
How to Be a Virtual World Entrepreneur
Room 16AB
Tuesday, March 14th 11:30 am - 12:30 pm

Peter Ludlow
Glenn Thomas Dir, Producing Future
Reuben Steiger Platform Evangelist, Linden Lab

Why I chose to attend this panel: I don't expect to learn anything new here, but I'm hoping to heckle the panelists. Actually, I don't have the energy to heckle today. I've got a slight hangover. And by slight, I mean my head feels like it's stuffed with steel wool.

Update: The following notes are not direct quotations of what was said during the panel, except where explicitly marked. Furthermore, the notes do not represent the entirety of what was discussed during the panel, merely what I had the time to record. This means that some portions of the discussion are missing, which is why these are called "notes" and not a "transcription." I have added links in the panel notes to further comments by panelists Steiger and Ludlow.

- Focus of this panel is on worlds with user-created content, copyright/DRM-capabilities, external economic systems [hmm... sounds like Second Life is the obvious choice here]
- Focus on Second Life because it is widely accessible, copyright control, no shards, financial transaction mechanisms

- what people are doing in SL is beginning to have an impact on real life
- Linden Lab didn't expect/predict the business opportunities/usage in SL
- SL was originally devoid of significant content... only a few of the first residents were interested in creating content... word of mouth promoted interest in user creation
- 160,000 residents of SL
- $60M of material is sold annually
- 3,000 people are making about $20k each on average annually
- economic ecosystem at play... people make the most money from organizing and business operation, for example Anshe Chung [SL real estate baron]
- LL wants to lower the barrier to entry so that ordinary people can make and sell content
- LL can't anticipate what users want, gets a lot of criticism and advice from the SL community
- the community fills vacancies in content (for example, digital genitalia produced by community)
- people like Anshe are very good at setting up niche communities to cater to specific needs
- next month LL will allow "anyone to become their own Linden Lab"
- real world businesses can place products in SL
- companies are springing up to service Fortune 500 companies
- Wells Fargo paid $30000 for Stagecoach Island
- more big businesss arrangements will be announced soon

- shows trailer for the upcoming movie "Ideal World," featuring Nephilaine Protagonist
- Neph's business PixelDolls has allowed her make a living with SL
- movie to be released this Fall

- "tabloid economy" of Second Life... "naughty economy"... "underground economy" (extortion)
- shows an example of land griefing
- one of SL's fundamental problems is that there are no enforcement mechanisms... LL operates like Greek Gods intervening when they feel like it... this allows extortion and protection rackets
- a sim-crashing "nuke" sold for $400 USD [it's a weapon that causes a denial of service attack]
- sex industry is an extension of the real world sex business in some cases, SL fees are sometimes close to real world prices
- sex slave auctions (not a huge part of the economy)
- sex industry drives the economy, a lot of content is created to allow people to hook up

Question from Daniel Terdiman:
- How much does a real world recession affect the virtual world?

- no subscription fees, so little drop-off during a recession
- $50 USD can buy an entire SL wardrobe

- roughly 30% of what goes on in SL is comprised of "naughty economy" transactions
- LL measures profit and loss of SL resident businesses
- the number of people making money in Second Life is growing
- money spent in SL is entertainment budget money (disposable income)

- SL feels like Flash before Flash became huge

Question from Audience:
- Can people bring products into SL?

- In the next few months, HTML/web pages will be embedded into the SL client
- LL is in the process of creating a transactional system to facilitate web-based financial transactions
- the amount of buzz and media attention created by bringing RL products into SL is "unbelievable"
- Wells Fargo left SL because they wanted to have a complete "private label" experience

- if you want to take the risk of dealing with foreign currency, you do transactions in Linden Dollars

Question from audience:
- How are services offered in SL? Are there RL learning opportunities available as services?

- we have a very vibrant critic community, as a 70-person company we can't build everything
- Campus Second Life... meetings are held in Second Life
- 25-30 colleges are using SL in education
- roughly 100 businesses offer instructional services

- someone is operating a physical fitness instruction service
- Ludlow doesn't find SL very helpful in education, but thinks others might have better luck

Question from audience:
- How do people take cash out of SL?

- Linden dollars are exchanged through external web sites or via Linden Lab [LindeX]

- the currency exchange matches a buyer and seller
- there is no bank in SL, but what would be useful is a virtual world venture capitalist

- believes LL will need to hire an Allan Greenspan of the virtual world to manage the economy

- LL hired a prominent economist recently
- monitoring exchange rate of Linden Dollars

Question from audience:
- How close does the SL world come to RL? Do avatars have to eat, sleep, etc.?

- LL hasn't imposed those kinds of burdens on people

Question from Mark Wallace:
- Why would people not be comfortable leaving their money in SL?

- preceived currency fluctuations cause some people to cash out

- when will you (Linden Lab) change the TOS so you can't wipe out people's bank accounts?

- how do we punish griefers if we can't take away their money
- we can't be the central government

- why does Linden Lab care if people obtain ill-gotten gains?

- there is no binding legal arbitration in SL

Q from Daniel Terdiman:
- What happened with the Gaming Open Market leaving SL?

[Update: Steiger's clarification on the following notes can be found here. Ludlow's response to Steiger's comments can be found here.]

- much of what happens in SL happens by emergence, such as currency exchanges
- LL has a few cardinal rules. one is that we will not compete with our residents. Gaming Open Market (GOM) was a case where they were taking a 3% cut of transactions. when they started, transactions were infrequent and in small amounts... late last year the volume was $100k per day... the bind we were in was that these two guys (GOM) weren't making the service trustworthy and work well... we tried to buy them... our final recourse was to introduce a competing product
- "GOMming" became a verb to describe LL blowing away a resident-run operations

- there was a conference in NYC for Second Life residents... GOM didn't process transactions... some people were left with no money to spend at the conference
- GOM could have stayed, they didn't have to leave
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Comment posted by Gwyneth Llewelyn
March 14, 2006 @ 8:00 pm
Very interesting panel, it seems :) I keep looking at 'next month LL will allow "anyone to become their own Linden Lab"' and trying to understand what that means (I think they mean the introduction of the new estate tools on 1.9, tied to the new auctioning system for sims). And I keep laughing at "In the next few months, HTML/web pages will be embedded into the SL client". The key word that makes me laugh is few. As far as I can understand, HTML in SL will go the way Havok 2/3 and the 2.0 renderer: when finally the uBrowser project is finished (allowing a Mozilla Gecko-based engine to draw pages on OpenGL meshes/objects), LL will find out that "the new code is impossible to integrate into the current client" and we'll have another 2-3 years of waiting...
Comment posted by csven
March 14, 2006 @ 8:27 pm
Between the rumors and the promises, it's hard to make any sense of what's coming. But thanks for adding fuel to the fire.
Comment posted by Tony Walsh
March 14, 2006 @ 8:37 pm
It was definitely an interesting panel. Ludlow and Steiger exchanged a few amusing jabs. Bear in mind that my notes are pretty rough, so the "few" months mentioned might have been "a couple." Reuben seemed pretty convinced we'd be seeing HTML in-world very soon as part of this new transactional system they're working on.
Comment posted by Urizenus
March 14, 2006 @ 9:35 pm
It was a fun session; Reuben brings a good energy level. Glenn commented afterwards that the panel may have been a year too early -- even the SXSW crowd could not wrap their mind around the idea of virtual entrepreneurs in the relevant sense, and I'm not sure how many people followed certain details of the discussion - GOM etc. - but that's life on the bleeding edge for you. It's a lonely little circle jerk.
Comment posted by Prokofy Neva
March 14, 2006 @ 11:13 pm
Now wait JUST a minute here. What's all this dissing of GOM that is going on here? I used GOM for more than a year and found them absolutely reliable. The one time I lost money because LL itself messed up and lost my funds on their end as it came out of LL to GOM (there was some kind of server crash), GOM worked efficiently and diligently to help me recover my funds by proving to LL that it wasn't on their end, and then I had to keep wrestling LL way longer to finally get it put back in my account.

GOM was far, far faster in getting cashouts through PayPal than LL ever is, and in fact the schedule for LL's PayPal cashouts remains a mystery to many today. I never lost money on GOM, but I lost it on LindEX due to an utterly stupid feature of LindEX -- they forcibly, as if you were a child, automatically pump into a template on your computer what their system says is "the best selling rate". This is an absurdity as even the most casual user knows, because that number is in fact merely the lowest value which is of advantage to *buyers* NOT sellers. If you happen to be looking at the advanced version for "experts" and studying the market and wishing to park your packet to sell better in 24 hours or 7 days or whatever, you have to override the childish LL system that tries to hold your hand. Worst of all, as you refresh to page, thinking you are dealing with a number like 280 in the market, it will refresh it with whatever lowest number pops in -- so you can get someone making a mistake on the other end, or dumping, and suddenly a hugely low number, half what you were prepared to sell your packet at, pops automatically into the template, even as you are clicking through the pages to try to complete the transaction. The WHOOOPS you just sold your Lindens for half their value you could have sold them for. Nice!

I don't know how Glenn Thomas is, but he is giving a very biased account here. This absolute tripe being spoken about people "not having money to spend when they reached SLCC" overlooks a really glaring obvious fact: GOM was forced to close its doors October 2, some two weeks after the SLCC conference took place in September. They cashed out everyone's account, but there was a huge rush, and it took some time. They paid every penny. I'm not sure why a person would be *cough* waiting for a game-related site to cash out their game-related monopoly money to have travel money to New York City to a RL meet-up (!) but let's say some big makker who had all his cash tied up in GOM was delayed a week...wouldn't that kind of person have a credit card or other cash from RL to go to a conference? And if they were some poor seamstress, her fingers worn bare from slavering over a hot PSP all night for her $60 LL dresses, who saved up $27,527. LL to get the bus from Albequerque to be at SLCC but GOM screwed her over and didn't cash her funds out on time...well wouldn't said seamstress know that GOM was in its final days and not hinge a trip to New York on such a thing and borrow from friends or something? I'm not getting this.

To say that GOM is unreliable is to betray the the reality of the actual functionality and viability of this virtual world that *residents themselves created*.

NONE of us would be even HAVING a panel about entrpreneurs in virtual worlds without GOM!

Furthermore, to first kick GOM in the teeth, unnecessarily take over their business in whole (when the ostensible need for newbie cash to buy content could have been met as just a niche market, while leaving other types of business to GOM) then expect them to remain in the field after having been coopted -- well, it leaves one breathless.

Reuben may print out his server statistics mechanically and get each avatars pluses and minuses off their account showing their income and expenses. What he can't factor in, however is PayPal payments people make to each other in US dollars and Euros that happen completely outside the game -- like money that rentals agents take in from tenants or pay out to builders. He isn't factoring in tier donations as currency, nor accounting for barter.
Comment posted by Prokofy Neva
March 15, 2006 @ 12:08 am
Tony, is this an accurate quote from Reuben Steiger, "the bind we were in was that these two guys (GOM) weren't making the service trustworth and work well..."

The LL forums are going nuts over this claim. Many believe it to be false and vindictive.

Reuben? Why did you say this when we all used GOM reliably, and you *know that* -- it's what enabled YOU at LL to claim you didn't have a game, but a monetarizing platform...even a country!

So what's up with this?!
Comment posted by nimrod yaffle
March 15, 2006 @ 1:17 am
Prok, you know I don't like you, but I agree 100% with what you just said... all of it! <3
Comment posted by Urizenus
March 15, 2006 @ 1:26 am
Those are pretty accurate quotes, but Tony omits the testimonial I gave on behalf of GOM, to the effect that they had earned trust from a lot of people and had bailed me out when I was banned from TSO. Reuben did seem reasonably apologetic about LL having GOMed GOM -- or at least as pained as one could expect from the company Evangelist. I was a little surprised to see where Glenn was falling on the issue, however.
Comment posted by Reuben Steiger
March 15, 2006 @ 1:55 am

The Q&A;after this panel was a good, free-flowing discussion, and I haven't reviewed a transcript of what everybody said. However, I've received a question about whether I made statements disparaging the professionalism of Gaming Open Marketand its operators.

This came up in the context of explaining virtual currency to a general audience I was speaking off the cuff about both real and hypothetical examples. I'd like to
state very clearly that I had no intention of disparaging Gaming Open Market or the guys behind it, Jamie and Tom, and I am sorry if my
comments could be interpreted otherwise. Again, I deeply and personally apologize to Jamie and Tom.

Overall it was a wonderful panel that focused on the bright future of Second Life. I had a lot of fun and look forward to more of these.
Comment posted by Prokofy Neva
March 15, 2006 @ 2:03 am
"Overall it was a wonderful panel that focused on the bright future of Second Life. I had a lot of fun and look forward to more of these.

*puts down glass of Kool-Aid*.

*doesn't drink*
Comment posted by Tony Walsh
March 15, 2006 @ 5:40 am
I've updated the entry to include links to the relevant comments in this thread by Steiger and Ludlow, as well as added a note about the notes.

I would be happy to print a verbatim transcript of the panel if one is made available to me.

If there are any errors or additional ommissions in the notes, please let me know so that I can correct them. Ludlow's response to the GOM issue was left out because I failed to capture it during the panel, not as an editorial choice. My intention in taking notes was to record as much of what was said as possible, but I am not an expert typist. I regret missing Ludlow's response to the GOM issue.
Comment posted by csven
March 15, 2006 @ 4:06 pm
I guess alcohol-based fuels burn best ;)
Comment posted by Francis
March 25, 2006 @ 6:25 am
I'm familiar with the story that Thomas is recounting, and he is factually incorrect. It was IGE's transaction mismanagement, not GOM's that resulted in 'some people were left with no money to spend at the conference'

In fact, the people involved were quite happy with GOM's service before it closed.
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