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.

Thomas:
- 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

Steiger:
- 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

Thomas:
- 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

Ludlow:
- "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?

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

Steiger:
- 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)

Thomas:
- SL feels like Flash before Flash became huge

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

Steiger:
- 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

Thomas:
- 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?

Steiger:
- 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

Ludlow:
- 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?

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

Steiger:
- 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

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

Steiger:
- 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.?

Steiger:
- 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?

Steiger:
- preceived currency fluctuations cause some people to cash out

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

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

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

Thomas:
- 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.]

Steiger:
- 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

Thomas:
- 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