METANOMICS: IN CONVERSATION WITH MARK KINGDON

(M. LINDEN), CEO OF LINDEN LAB

MAY 6, 2009

ANNOUNCER: Metanomics is brought to you by Remedy Communications and

Dusan Writer’s Metaverse.

ROBERT BLOOMFIELD: Hi. I’m Robert Bloomfield, professor at Cornell University’s

Johnson Graduate School of Management. Each week I have the honor of hosting a

discussion with the most insightful and the most influential people who are taking Virtual

Worlds seriously. We talk with the developers who are creating these fascinating new

platforms, the executives, entrepreneurs, educators, artists, government officials who are

putting these platforms to use. We talk with the researchers who are watching the whole

process unfold, and we talk with the government officials and policymakers who are taking a

very close look on how what happens in a Virtual World can affect our Real World society.

Now naturally, we hold our discussions about Virtual Worlds in a Virtual World. How else

could we find a very real place where a global community can convene, collaborate and

connect with one another? So, our discussion is about to start. You can join us in any of our

live Virtual World studio audiences. You can join us live on the web. Welcome, because this

is Metanomics.

ANNOUNCER: Metanomics is filmed today in front of a live audience at our studios in

Second Life.

ROBERT BLOOMFIELD: Hi. And welcome again to Metanomics. We have a great show to

kick off our season. Mark Kingdon, CEO of Linden Lab, will be joining us to answer my

questions and yours. We’ll start out the interview with a close look at Linden Lab’s strategic

plans. I’m hoping to get some insight into the motivation behind the nearly 100 percent

turnover of top management over the last year at Linden Lab and learn about Mark’s plans

to provide enterprise solutions while simultaneously driving rapid growth in the active

resident population. Then we’ll move on to matters directly affecting Second Life residents,

from the economy, to the interface, to policies on user content and behavior.

Thanks to all of you who are attending Metanomics today, including those who are viewing

live on the web. Please do join in with your comments and questions.

ANNOUNCER: We are pleased to broadcast weekly, to our event partners, and, to

welcome discussion, we use ChatBridge technology to allow viewers to comment during the

show. Metanomics is sponsored by the Johnson Graduate School of Management at

Cornell University and Immersive Workspaces. Welcome. This is Metanomics.

ROBERT BLOOMFIELD: Before we get to our main guest, I’m delighted to welcome

Tony O’Driscoll back to Metanomics and also introduce him as our new corporate learning

correspondent, which we’re hoping to make a regular feature of the show. With degrees in

both engineering and education, Tony has spent years at the intersection where traditional

training and learning activities meet untraditional technologies. And he’s been studying

Virtual Worlds for some time. He’s studied how playing World of Warcraft and similar games

has affected the leadership skills of IBM employees. And, most recently, he organized last

month’s 3D Training, Learning and Collaboration Conference in Washington, D.C. Today

Tony is here to talk about two challenges in corporate learning: the expectations gap and

the routinization trap. So join us now as we put Tony O’Driscoll in the spotlight.

ROBERT BLOOMFIELD: Yeah, Tony, it’s great to have you back on Metanomics.

TONY O’DRISCOLL: Yeah. A pleasure to be here. I love the new digs. They look

wonderful.

ROBERT BLOOMFIELD: I apologize that my voice can’t be its usual welcoming sound, but

these things happen, and I’m glad I’m not infecting anyone. One of the advantages of Virtual

Worlds.

So, Tony, let’s start with this idea of the expectations gap. You conducted interviews with a

number of chief executives, CEOs, CFOs, COOs, and you asked them what they wanted

from their companies’ learning and training operations. And you asked the same of the

CLOs, the chief learning officers who actually ran the programs. So how did their answers

differ?

TONY O’DRISCOLL: It was very interesting, Beyers. They different significantly in that we

went out to the CXOs and then the CLOs and asked them, “Why do you write the check?”

We asked the senior executives, “Why do you write the check?” they came up with nine

reasons: to build leadership capability, to build skills and knowledge of the workforce, to

enable their business units to succeed, to improve the performance of the organization, to

manage talent. And then they started talking about bigger challenges, like transformation,

strategy enablement, globalization and innovations. So those were the nine core value

propositions of learning.

And the interesting thing, Beyers, in the expectation gap, was that the learning leaders were

focused on leadership development and capability building, while the senior executives

were expecting training, the function to help them with the larger strategic issues of

transformation, strategy enablement, globalization and innovation.

ROBERT BLOOMFIELD: So it’s like the learning officers think they’re being asked to teach

employees to tie their shoes faster, and the CEOs want their employees to be taught how to

invent Velcro?

TONY O’DRISCOLL: Exactly. And therein lies the expectation gap. And the issue now is,

there’s kind of this perfect storm in the learning arena coming out of 3D TLC and others.

The financial crisis led to travel bans, but we still need to train people. And now with the

arrival of the swine flu, I was just in a meeting this morning where we were discussing what

is our backup plan for delivering training at a distance, should we not be able to bring people

together. But I know many corporations are doing the same thing. And the problem with

that, Beyers, is, we tend to then see virtual avatars and virtual classrooms looking at virtual

PowerPoints, where we are automating the classroom paradigm rather than really

leveraging this platform to create truly meaningful contextual learning experiences of the

likes we saw at 3D TLC.

ROBERT BLOOMFIELD: Now is that the routinization trap?

TONY O’DRISCOLL: That’s right. So routinization, Peter Drucker I think popularized it at

least where the printing press was used first to print Bibles, and then somebody had the

bright idea to use it to print other books too. Or, the moving picture camera was used to film

plays for about eight years before The Great Train Robbery movie came along. So we tend

to take a new technology and use it to automate the past, bad assumptions and all. And my

sincere hope is that, with this platform that we have here, we can really leverage it in new

and different ways to enhance learning and training and collaboration.

ROBERT BLOOMFIELD: We have a question from Ricken Flow, “With all of the universities

coming into Second Life, do you see an increase in opportunities for virtual interns?”

TONY O’DRISCOLL: In fact, I’ve had a couple of people request that of me. And more so

than even virtual interns could be virtualized work. One of the things that I’m studying at the

moment is the notion of virtual organizations where these type of platforms can essentially

virtualize the enterprise, but still have the high fidelity personal interaction that we know and

crave from the office, so to speak. So I think that’s entirely legitimate.

ROBERT BLOOMFIELD: So you just got through this conference, 3D TLC, which I was at.

It was great. No doubt that’s where I caught this bug. I should have just gone there virtually.

But what would you say if you had one or two big takeaways from that? What were the

surprises?

TONY O’DRISCOLL: I think the surprises were the thoughtful application of these

technologies. The two that kind of come to mind is the Holocaust Museum example. That

was very experiential. There was no avatar talking to PowerPoints in there. You actually

were taken through the Kristallnacht experience. And I think, even in David Klevan telling us

the story in that room, the room got really quiet. It’s almost like we had that experience

without even physically going through Second Life. And then following the Twitter stream, a

lot of people did actually go and visit that particular place and found it to be very moving.

The second was actually something that I think is really cool, which was, we kind of cut

Twitter loose in the conference, and I know you spent a lot of time on there. And the reason

we did that, or the reason I chose to go for it was, number one, you couldn’t stop people

anyway. But, number two, it’s an affordance that we’ve come to use in the Virtual World,

and, for those of us in the Virtual World, it’s almost like our arm is chopped off in the

physical world if we don’t have that back channel. So we did hash-tag 3D TLC, and I’m

happy to report we had over a hundred pages. And we also trended at 3:00 P.M. on

Tuesday afternoon, a small conference of 300 or so people.

ROBERT BLOOMFIELD: So I have to say, for me, that was a total surprise. I signed up for

Twitter a year ago, did it for three days, and it didn’t seem to fit. I didn’t have a use for it. But

I got to the conference, I saw, you know, you asked people to Twitter. And Christian Renaud

is always asking this question, “Why make a virtual conference almost as good as a real

conference when you can make it so much better?” And we’ve been working on

Metanomics for, what, a year and a half now, and I have to say that it really felt like

Metanomics with that very rich back channel of communication going on so that you had

people sitting in the audience communicating with one another, as well as, of course, with

the people who couldn’t be there.

And I just have to say it was a coincidence that basically the same week of the conference,

a couple mainstream publications that I read a lot, The New Republic, The Atlantic, a bunch

of these types of blogs were really hammering on Twitter as a total waste of time. So

anyone who wants to, you can look at The New Republic. I’ve got a couple comments in

there, talking about the 3D Training, Learning and Collaboration Conference, saying, “Look.

Maybe no one wants to know what type of coffee you’re having at Starbucks, but it does

have real enterprise uses, and I think we saw one at the conference.”

TONY O’DRISCOLL: Yeah. I think the interesting thing, Beyers, you mentioned the

research that we did looking at games, when I was at IBM. One of the things we found was

that the affordances inside those environments could be very helpful for the enterprise, and I

think that was just one proof point there, where the back channel really helped the

physical-meet-space conference have more value.

ROBERT BLOOMFIELD: So I apologize. This opening spotlight segment is always very

brief, and I’m sure there’s a lot more we could talk about, but I’m hoping we’ll have you

back. Actually, I’ve been talking with a number of the people who presented at the

conference. It was a great opportunity for me to identify people who could be guests, and I

hope I’ll have you on in the spotlight again, in advance of those guests.

TONY O’DRISCOLL: Look forward to it, Beyers. Thanks so much for having me.

ROBERT BLOOMFIELD: Thanks for coming on, and I look forward to seeing you again.

Our main guest today is Mark Kingdon, CEO of Linden Lab. Before coming to Linden Lab,

Mark was CEO of Organic, an advertising and communications agency specializing in online

interaction and web design. So, Mark, welcome to Metanomics.

MARK KINGDON: Thank you very much, Robert. It’s a huge pleasure to be here. And the

new facility is fantastic, and it’s great to see such a great audience turnout. Thanks for

having me.

ROBERT BLOOMFIELD: Well, Remedy has been fantastic to work with. They really pulled

together not just, of course, the financial resources it takes, but amazing people like

Keystone Bouchard, who made this build. And I guess now I can call him award winning

architect twice over because he got a real life award and just recently a Linden Lab award.

So a shout-out to Keystone on that.

MARK KINGDON: Absolutely beautiful work. I bumped into Keystone yesterday when I was

taking a sneak peak at the venue.

ROBERT BLOOMFIELD: It’s great stuff. Now you became CEO of Organic in 2001, just in

time to rebuild after the dot-com crash. And now you come to Linden Lab, and there’s I

would say even broader economic turmoil. How would you compare those two experiences?

MARK KINGDON: Well, I guess the best point of comparison is the fact that, when I joined

Organic, our revenue was dropping in an alarming rate, and so it was very much a

turnaround situation. And, at Linden Lab, it’s quite the opposite. We’re growing as a

company. Our revenue is growing, and it’s more about renovation of the platform and user

experience than it is a business turnaround. So those are the two probably most marked

differences.

ROBERT BLOOMFIELD: Okay. Now this has been a real year of change for Linden Lab,

especially among top management. We’ve just recently seen the departure of Gene Yoon,

of Robin Harper and John Zdanowski. And then you’ve brought in a number of new people

over the last year: Judy Wade, Frank Ambrose, Tom Hale, Howard Look, Brian Michon. I’m

not sure if I’m pronouncing that last one correctly. And then you’ve promoted a number of

other people up into top management. And so I’m just wondering: How should observers be

interpreting this fairly comprehensive overhaul in Linden Lab’s leadership?

MARK KINGDON: Well, I think I characterized as a natural evolution. The company’s ten

years old. Second Life will celebrate its sixth birthday very shortly, and we’ve had pretty

extraordinary continuity in our staff, very low turnover, and, really for the history of the

company, also the management team level. And as we’re growing, we’ve needed to add

new skills to the management team. In each of the cases of folks that you mentioned, those

were really all additions to the leadership team and are separate and apart from the three

folks who left. And certainly for Robin and Gene, I think those were natural graduations for

both of them. Gene’s role we’re not going to be filling, certainly in the short term. Tom Hale’s

going to pick up some of that corporate business development work. Judy Wade will pick up

the rest. But, by the end of the year, we will need to find a head of marketing because that’s

an important vacancy that Robin left.

ROBERT BLOOMFIELD: And now I’m an accountant so I have to ask. You lost

John Zdanowski, your CFO. That’s on the list too for replacement?

MARK KINGDON: Most definitely. We’re in the midst of a search for that role now.

ROBERT BLOOMFIELD: Okay. Great. Actually, we have a question from Tizzy Teardrop,

“The idea [AUDIO GLITCH] comes up anytime you see major management changes. Does

Linden Lab have future plans for an IPO?”

MARK KINGDON: Well, we don’t have an IPO planned, as I sit here. At some point in the

future, because we have investors in the company, they’ll look for a return in their

investment. But right now, in this year, our focus is very much on renovating the platform

and the user experience.

ROBERT BLOOMFIELD: And with all of these changes--and additions as you

mentioned--how has that affected the culture of Linden Lab management and employees. I

mean you had the Tao of Linden and the Love Machine and all of these things that have

been described in Hamlet Au’s book is the one people know now. And actually

Thomas Malaby is coming out with another book sort of behind the scenes of Linden Lab.

They give us a very good look at what it’s like to work there. Has the company become

more traditional or more hierarchical?

MARK KINGDON: One of the amazing gifts that Philip gave me, and believe me, he gave

me many when I started at Linden Lab, one of the amazing gifts he gave me was the

culture. The company has an extraordinarily strong culture and a highly devoted staff. When

I started, it was very clear to me I was being hired because the company needed to go

through its next stage of evolution, and that’s one that Philip didn’t want to, as CEO, take the

company through. So I think everybody was very, very primed for a new CEO. And my

approach has been very much to evolve the culture rather than to use an extraordinarily

heavy hand to get change. So I think the changes that we’re going through, within the

culture, are natural, they’re organic and their evolutionary. And the same is true with the Tao

of Linden.

Each year we look at the Tao--the company did before I joined--and think about how to

re-express it. And we’ve been doing those same things since I joined. I would say most of

the changes that we’re making as a company are to add probably more connective process

than we had in the past. But we’ve added more than a hundred people in the last 12

months, and that’s all part of growing the business.

ROBERT BLOOMFIELD: And now, as you grow the business and you have all

these--actually how many people does that give you total?

MARK KINGDON: I think we have about 308 or 310 now, and we’re in the process of hiring

another 25.

ROBERT BLOOMFIELD: And that includes the satellite offices?

MARK KINGDON: Yes. That’s all our offices, as well as our remote employees.

ROBERT BLOOMFIELD: Okay. So now I understand that, with all these new people you

have around, you are also engaging in some high-level strategic planning. And, before we

get into the substance, I’m just interested in the planning process. We actually just went

through one of these here at the Johnson School at Cornell, so I’m more interested than I

normally am. How do you go about it, given your culture?

MARK KINGDON: Well, the strategy planning process actually started before I joined. The

company hired Judy Wade, who has subsequently joined us full time, to lead the

management team through a strategy exercise to think about business focus. I think that

was a fairly traditional process, a lot of market data, talk to people inside of the company,

talk to folks outside of the company, looked at each of our major markets, and asked us

some hard questions about focus and capability. And that strategy exercise was ongoing

through the end of last year, and it really produced the roadmap that we’re working on this

year in 2009.

Now we’ve just started another planning exercise, which is to develop a three-year plan for

2010, ’11 and ’12. And I have to tell you it sounds bizarre to be saying 2010 because,

obviously, time has flown. But that’s the next stage of planning. That’s very much, again,

about looking at our markets, looking at how they’re changing and looking at how the

experience, the platform and our portfolio of businesses needs to change and also our

orientation to our international markets.

ROBERT BLOOMFIELD: Yeah, I definitely want to explore all of those in sort of where

you’re looking ahead with your strategic plan, but we’ve gotten a whole bunch of questions

about where you are now and where you’ve been that I’d like to take. One of them is from

Mitch Wagner, “Is Second Life profitable? Can you quantify the revenue and the profits?”

And then a follow-up from Ordinal Malaprop, which just refining that a little, “Which parts of

the business are profitable, and which are not? And what might we expect to see close

down?”

MARK KINGDON: That’s an excellent question. We don’t release our revenue, and we

don’t release our profitability because we’re a private company. But I will tell you this: Our

revenue is growing, and we are comfortably profitable. And we have a very sound balance

sheet. We don’t break out profits internally or different business lines because we’ve never

really thought of them as different business lines. Meaning it would be hard to think of our

land business as separate from the Second Life economy. So we don’t really look at it on

the basis of profitability by business line. We may evolve toward something like that in the

future, but today we look at the business more holistically.

ROBERT BLOOMFIELD: Thank you for not saying you take an organic view of the

business. But, on that point actually, Grace McDunnough has a question for you. She notes

that, “There was once an Organic build, your company, on a Millions of Us Island. Were you

the sponsor? What happened to that build? Can you tell us what the intent was?”

MARK KINGDON: Sure. We started at my old company a couple of years ago in Second

Life, and that was really my introduction to Second Life before I met Philip and well before I

considered coming onboard. And it was in the midst of the cycle where a lot of marketers

were looking at Second Life as a place to share their brands and as a place where

companies might recruit new employees. And so we did a build with Millions of Us so that

we could see firsthand what Second Life offered. We had a lot of fun with it. We did some

recruiting events in Second Life, and it was a great kind of orientation to the Virtual World for

our people.

ROBERT BLOOMFIELD: Although it was in the early days, I mean that was really during

the time that there was so much hype followed by disappointment, you feel that that was a

success?

MARK KINGDON: I do. It’s really interesting because a lot of the companies that went into

Second Life, looking at it as a marketing channel, there were some that had great

successes and there were some that didn’t. The amusing thing is that there’s been a huge

amount of press about how there were abject failures. Well, I ran an interactive agency and

a web development firm for seven years, and I can tell you the Second Life budgets, on the

marketing budgets of large companies, were a rounding error, and there were probably far

more 30-second spots that failed, with huge production budgets that would dwarf whatever

was done in Second Life. So Second Life didn’t put any marketers out of business and

probably didn’t cause any to lose their jobs, unlike other more traditional marketing

campaigns might. So just a bit of perspective from a marketer.

ROBERT BLOOMFIELD: Well, I suppose the difference is, you rarely see an article in the

New York Times or the Wall Street Journal saying, “This big Fortune 500 Company is going

to have a 30-second spot.” Unless, of course, it’s in the Superbowl, when it’s no longer a

rounding error. So yeah, the press certainly played a big part in that.

MARK KINGDON: Well, I think also companies’ perspectives on the possibilities for Second

Life have matured a lot, and we see a great deal of activity around collaboration and

learning now, which is obviously very powerful.

ROBERT BLOOMFIELD: Yeah. Actually I wanted to talk with you about that because it’s

kind of an irony that, you know, here Linden Lab brings in a CEO with experience in brand

promotion and online environments, with your work with Organic, but then last month in an

interview with the Guardian in the UK, you said, and this is a quote, “What has changed in

my perception between 2006 and ’07 and now is that I see Second Life more as a tool for

collaboration and virtual meeting and less of a large-scale branding tool.” So coming from

an expert in large-scale branding, that view carries quite a bit of weight. Are you just looking

at the market and the demand, in concluding this, or is this something that you’re concluding

from your own observations, having gone through it?

MARK KINGDON: Well, I think it’s more the stage of development of the platform and the

size of the audience. So a lot of big brands look at a social media property or a place where

they can engage with their consumers through the lens of traditional media, where they’re

looking for reach, enormous reach. And, today, Second Life is not really a reach medium.

It’s much more of an engagement medium. And, as a company, and there are companies in

Second Life that do a lot to engage with their customer base in a very powerful way. If

you’re coming to engage in a much more intimate way with your customer, you’re going to

be successful here. And there are plenty of companies that are doing that in Second Life, as

well as what I talk about from a learning and collaboration perspective. As our user base

grows, and we have great plans for growing our user base, then I think brands will take a

second look when they’re looking to move beyond engagement or broaden their definition of

engagement and reach. So I think it’s more just a question of evolution and change, rather

than kind of a “black and white” perspective, that it’s good for this and not good for that.

ROBERT BLOOMFIELD: I guess this goes to some of the key points in your strategic plan.

You’ve mentioned before moving from 600,000 or so active users up to about 6,000,000.

How do you do that?

MARK KINGDON: Well, you do it by breaking the problem down. So rather than going from

600,000 to 6,000,000 overnight, our next stage is to go from 600,000 to 1,000,000. And I

know you’re going to ask me in a moment for a date projection, which, of course, I’m not

going to give you. But what we’re doing is first looking at the platform very, very closely and

working on scalability of the platform. And I think one thing that our residents have seen in

the last year is that we’ve substantially improved the reliability of the platform. It’s actually

been quite remarkable. Our hours lost to downtime in the first quarter were lower than they

were in any of the last five quarters. And the second half of last year was particularly fruitful

for us. We reduced hours lost to downtime by 50 percent over the first half of the year.

The first thing we’re looking at is let’s make sure that the platform can scale with the growth

that we’ve planned. And, if you look at the executives that I brought in, they’re very, very

experienced with scaling platforms. We have a first-class technical leadership team, very

capable of addressing that side. The other side is the user experience. Second Life will

scale much further when we simplify the first-hour experience, starting from the first

web-touch point and going through the full first hour in-world. And it’ll also grow faster when

we add more social tools to the Second Life experience. So far I’ve only found one kind of

viral component inside the viewer, really, and that is your ability to email a postcard to a

friend.

So as we amplify our efforts on the web and our redesign of the viewer, you’ll see a lot more

social tools that can help us expand. The conversation opened with a dialogue about Twitter

and look how quickly Twitter has managed to grow, as has Facebook, in very viral ways. All

of our growth has been achieved through no marketing because we haven’t historically

spent money on marketing, and it has been achieved without working the social graph in a

way that other social media companies do. Interesting.

ROBERT BLOOMFIELD: The other thing is just that, with Twitter or Facebook, the hurdle to

entry is very low for a user.

MARK KINGDON: Exactly.

ROBERT BLOOMFIELD: Whereas, in Second Life, it’s quite high. And we’ve got a couple

questions just regarding, I guess, let’s just talk about the client as opposed to the user.

Mitch Wagner is asking, “Are we going to see this ever as a web plug-in or something like

that?” And Valiant Westland asks, “Are we ever going to see this in Best Buy, like the

Sims?” Do you see anything like that?

MARK KINGDON: Well, I think you’re more likely to see it in Best Buy as a package piece

of software maybe with a headset included in a really, really good how-to book, before you

see it as a web plug-in because that’s much easier. We’ve had conversations, certainly,

about packaging up and making it available.

As for making it a web plug-in, our strategy is somewhat different. With respect to the

viewer, we’re really trying to create a 2.0 experience that’s much more intuitive, much more

natural and much more easy for the new user to adopt, and that will be a downloadable

client in the short term.

ROBERT BLOOMFIELD: Let me ask. When you say 2.0, you just mean a complete

overhaul. You’re not using a Web 2.0 buzzword. Is that right?

MARK KINGDON: Yes. I’m talking about it in terms of an overhaul or renovation of the

current viewer. But, there are a lot of Web 2.0 tools and approaches that we want to

introduce to the Second Life experiences. Those will be very much web-based. Next month

we’re going to launch kind of the first rev of our new website which starts to move in that

direction or build a platform for further extensions, later in the year, out to the web. Social

tools are really, really powerful, and we want to be able to extend the Second Life

experience out to social media properties that people enjoy today. You can find a lot of

photographs on Flickr. Plurk has a lot of activity. Second Lifers are definitely tweeting

because I see them on TweetDeck every morning, but there’s a lot more opportunity for us

there that we haven’t developed. So we have the viewer, but, in parallel, we’ve started quite

a lot of work on the web side of the business.

ROBERT BLOOMFIELD: So the web side, it sounds like the viewer, you have to get them

in with a simpler viewer, and then you have to keep them. And actually Prokofy Neva has a

question first about the current stats, the retention rate of newbies, new users, since you

changed the website and info hubs and the gateways. And I guess I’m also interested in

hearing you expand on that and talk about how you see these changes affecting not just the

draw to get people in, but the ability to keep them.

MARK KINGDON: Yes. They go hand in hand. When we look at it, we don’t separate sort

of customer acquisition from retention. And that’s why I talked about it as the first-hour

experience, which is a euphemism really for probably the first three hours upwards over the

first three months, but it spans--the first touchpoint on the web it goes through the viewer

and orientation with the viewer. It goes through the first landing experience, and then it goes

through people’s discovery process of communities, people and friends.

We’ve done a lot of research, and we know why new users leave Second Life, and it’s

because they can’t find the people, places and things that are relevant to them. And, believe

me, a good number do. That’s why we’re able to grow our active user base. But there’s

huge potential there because it’s very hard to find the content and the experiences, the

groups, the people, that you might want to participate in as a new user. Those things we’re

hard at work on making much easier. The find-and-discovery process is a whole work effort

in its own right and I think will be one of the biggest drivers to retention thus far.

ROBERT BLOOMFIELD: Well, I know many more people need to hear about Metanomics.

MARK KINGDON: Exactly. And then we’re doing just some business basics. Interestingly,

when you are a new user and you sign up for Second Life, you get one email for activation,

and then you don’t hear from us again. That’s been kind of the historic practice. We just

launched something very simple, which is a welcome email that follows the activation email,

at a very high click-through rate. And the things that people click on showed us that they

want tools and tutorials to guide them through their first experiences in Second Life. So as

we build kind of that what I would call activation and retention infrastructure, I think that’ll be

a further boost to our growth. We add the social tools that I talked a little bit about. We

improve find and discover. We continue to make the platform more stable and more reliable.

And I think you will see a big uptick in growth.

ROBERT BLOOMFIELD: When we talked, whenever it was, a week or so ago, you

mentioned that there were going to be some changes to support live music more effectively

in Second Life. Can you talk a little about that?

MARK KINGDON: Yeah. One of the things that we’re hard at work scoping out is--and you

can see the beginning of it, the very beginning of it on the home page that we launched in

December and that we’re refining in our next evolution. If you look at kind of the verbs on

the home page, like learn and teach, might be listen to live music, those are use cases or

experiences that are very compelling to users. We’re using those as a lens to look at our

product features and the technology behind them, to make sure that they’re highly

supportive of those really attractive use cases, those compelling use cases for people. Live

music is an area that we think is really, really vibrant. We’re not going to be making any

major changes in the remainder of this year, but live music is one of the first things that

we’re going to pick up and develop as one of those use cases.

ROBERT BLOOMFIELD: Okay. Now how about international growth? I understand you get

about half of your revenue is already from outside the U.S. How do you see that proportion

changing over the next year or three?

MARK KINGDON: Well, the international population is a really, really big part of the Second

Life resident base, as you’ve said. And the remarkable thing is that many of those

international users have come when our website client and our support materials are in

English. So those are people who have had to work extra hard to be part of the Second Life

community, and that’s incredibly impressive. But, around the time I joined, we started

working really hard to internationalize the technology and also to localize the content.

Through the hard work of hundreds of resident volunteers, we’ve been localizing our viewer

in the major languages and also website and the support materials you find in Knowledge

Base and on the Wiki. So we’ve been doing a lot to make it easier for our international

residents.

I want to point out one thing about international, which is really, really a wonderful thing. If

you’re a big social media property, particularly one that’s reliant on advertising for its primary

revenue stream, and that’s not Linden Lab or Second Life, but, if you’re one of those

properties and you start rolling out servers to serve people in far-off markets, the only way

you’re going to monetize those users in a traditional sense is by hiring an ad sales forces,

which means it’s very hard for social media properties to monetize international users and to

make a business of it. The beauty of Second Life, and it was a stroke of genius, not a stroke

of genius for me, but from Philip and the leadership team, was to make the Second Life

economy an integral part of the user experience. And because of that, we’ve been able to

grow our international revenues very, very substantially, without having to make an

investment in staff.

Now one thing that’s going to change next year is that the lion’s share of our hiring will be

outside the United States, and we will begin to move our infrastructure so that it’s closer to

our end user. The first place that’ll happen probably is Europe.

ROBERT BLOOMFIELD: When you say infrastructure, you’re talking about servers,

satellite offices? Both?

MARK KINGDON: That’s right. We already have an office in Brighton, England, with a

really, really terrific team, but we see continued expansion internationally. We also have an

office in Singapore, a really great group of folks. I was in-world with them night before last.

They’re very smart, very passionate, high committed Second Life folks. So we’ll amplify our

focus on our international markets next year, and the same is true for infrastructure. Right

now our servers are in the United States, yet 50 percent of our user base, or more, actually

is outside the United States.

The last thing I’ll say about international is, we’ve asked Judy Wade, who joined us

permanently, to focus on international, work with the team that’s localizing content and

experience, but also really work on international market development. I’m really excited

about the things that that team has on their roadmap.

ROBERT BLOOMFIELD: I have a question on another aspect of the international. You said

it was the last thing you’d say, but I hope you’ll answer this from Dorette Steenkamp

(Alanagh Recreant), who says, “Philip Rosedale has referred many times to the possibilities

of using Second Life in developing countries for enterprise development. Does Linden Lab

have any plans to include Africa specifically and other developing economies in their

strategy?”

MARK KINGDON: Well, the interesting thing about Second Life and our international

expansion is that developing countries are adopting Second Life at an extraordinary clip.

Just the other day, we saw a pickup in Thailand, in Second Life usage. And I saw a great

website somebody had put up and asked our team. We didn’t do anything to promote

Second Life there, but because of the power of the brand and this incredibly vibrant and

powerful community, people in Thailand were starting to take an interest. And that’s true in

pretty much every country in the world, except for a small handful. I think we have users

who are even in Antarctica. Although they’ve registered as though they’re in Antarctica, who

knows whether they’re really there.

ROBERT BLOOMFIELD: That’s our topic for next week, when we hear all about security

and trust. Let’s see, I’d like to, if we could, I’m conscious that we only have about

15 minutes left, I would like to move on to some of the resident issues that are so important

to, of course, the many people who I’m seeing chatting, in the audience. And let’s start with

the economy. You recently provided a fairly detailed report on the first quarter in-world

economy. What do you see as being the most important statistics from a strategic

perspective for Linden Lab?

MARK KINGDON: That’s a great question. We have incredibly rich data inside the

company. As a matter of fact, we have a company-wide dashboard that’s accessible to

everybody in the company, and it has 371 different metrics that are updated by the minute,

by the week, by the month and by the quarter. There are a couple that I have my eye on

literally all the time because there are screens about 20 feet away that I can see, that Philip

can see, that anyone in the Lab can see. And those screens have a couple of really

important metrics. One is concurrency. Another is resident satisfaction because, as you

know, for every endth customer, we pop up a simple survey and ask them whether their

experience is better or worse. And we can immediately tell when something is amiss

because we’ll see a change in the [satisfaction?] curve, and it’s absolutely astounding how

quickly that happens, and it can be a leading indicator for us if there are other problems. So

we watch those two carefully. They’re less about the economy, and they’re more about

platform stability and resident satisfaction.

But the ones that I regularly look at are monthly active users, returning active users. Both of

those we’ve been sharing. New registrations. Monthly unique repeat logins, which I talked a

lot about on Hamlet’s blog. It’s a really important statistic if you’re trying to look at our

ongoing growth. We also look at Sim crash rate, and I want to come back to that in just a

second. Viewer crash rate. User-user transactions. LindeX volume. Land sales. Average

price per land in the secondary market. Those are some of the ones that I make sue that I

look at on my dashboard all the time.

When you look at the Second Life economy, it’s been wonderfully resilient to some of the

Real World economic challenges that we’re seeing around the world, which is why our

revenue is growing and why we’ve been able to hire and invest our profits back in the

business.

ROBERT BLOOMFIELD: Fleep Tuque has a question, which is, well, actually, it’s more of a

comment, “How do I get a job in Second Life?” is still the top question she gets from

newbies. So let me put that in the form of a question: Are there things that you think you

could do and that you plan to do, to make it easier for people to come in to Second Life and

actually find it an economically productive experience for them?

MARK KINGDON: Well, that’s a great question. One of the things that we’re trying to do in

the business, in a major way, we’ve started to introduce product management to the

business. We’ve hired Tom Hale, who was a senior executive at Adobe and before that

Macromedia, and he has been bringing in a team of people so that we have folks devoted to

each aspect of the business, whether it’s the commerce part of our business, whether it’s

land. And, in the future, it will be very much around content developers, scripters, coders,

in-world businesses. It’s definitely on the roadmap. It’s probably something we’re going to

develop more next year, but our intent is very much to put a focus on each of those things.

Just as we need to clear the path for new users, we also need to clear the path for new

businesses to form in Second Life. In our next rev of our website, we’re starting, just

starting, and what you’ll see is just a beginning of improvements to the land store, to make it

easier for people who are first-time land buyers to buy land in Second Life and understand

the product more easily.

ROBERT BLOOMFIELD: Let’s see. Let’s move on to adult content, another in-world issue.

So you recently announced a policy of essentially sequestering adult content, and I’m

wondering can you talk about how that fits in, again, to the overall Linden Lab strategy?

MARK KINGDON: Sure. Well, we have 650,000 active users, and they’re all looking for

different kinds of experiences in Second Life. We’re not prohibiting adult content in Second

Life, by any stretch of the imagination. What we’re doing instead is, we’re trying to create a

more predictable experience by improving and changing our search tools in a way that

content is surfaced so that, if there are people who don’t want to access that content, they’re

not required to access it because it’s fully visable to them. At the same time, if there are

people who want to access that content, we’re making it certainly possible for them to do so

as well.

The thing about Second Life that’s really, really important, because it’s been something I’ve

spent a fair amount of time learning about this past year, and that is that it’s an incredibly

diverse user base. That 650,000 active user count has very different needs and very

different desires, and it’s evolving over time. All we’re trying to do is make the platform

accessible to people who want to access it in a certain way, and we’re simply calibrating our

tools and experience paths to fit that.

ROBERT BLOOMFIELD: Dusan Writer asked a question at the recent PR Conference on

adult content, and the gist of his question was really that you can view Second Life as a

World with a real geography, or you can view it as any other type of web application, use

terms like “use-case, in-filtering” and so on. And so, just to paraphrase his question, when

you make policies like this, do you view Second Life as a World and try to think like an

urban planner, or do you view it as a web application and think like a programmer?

MARK KINGDON: That’s a really wonderful way to frame the issue, in the form of a

question. That’s a wonderful way of thinking about it, and I’m going to use that when I talk

about adult content in the future because I think it’s a combination of both. I mean we have

some really powerful Real World metaphors in Second Life. Land is one. We have a sense

of geography and presence here. The map is getting better as a tool to navigate Second

Life, and you haven’t even seen what we have up our sleeve for maps. So geography is

important.

So I would say it’s very much kind of the set of concerns that an urban planner might have,

but with tools that are web-based. It’s a combination of both. There’s no doubt though that

we are participating more than we have in the past, in the experience, which is why we have

a Department of Public Works that’s been working on making improvements to the

mainland. We take those things seriously.

ROBERT BLOOMFIELD: Well, we’re almost out of time. The last couple questions I’d like

to ask are really to ask essentially for elevator pitches. I’m just wondering, if you look ahead

to where you’ll be in a year or so when you’ve made these changes, and let’s just assume

they all work out, what’s the elevator pitch? Let’s start for the residents. What is it you’re

going to say to get the residents to come in, as opposed to doing other things that they

could do with their time, whether it’s watching TV or going outside? What’s the pitch?

MARK KINGDON: Well, Second Life is really like no other experience. It’s rich. It’s

immersive. It’s very social. It’s highly creative. It’s an enormous element of surprise because

the content is user-generated. So I think the elevator pitch is really, really, simple. This is a

phenomenal World, and it’s only limited by your imagination. The promise behind the

scenes that we’ll be delivering on--it’s not part of the elevator pitch--it’s just going to be a

heck of a lot easier, and it’s going to be enabled by tools, like social tools that people are

accustomed to in other web properties.

ROBERT BLOOMFIELD: And how about the pitch that you would give to enterprise

adopters, who are looking to use something like in immersive workspaces or some other

Second Life product for serious “behind the firewall” collaboration?

MARK KINGDON: Sure. One thing I do is, I point them--and this isn’t said as a pitch--but I’d

point them to the case studies that we’re starting to develop and put up on Secondlife.com,

that very much speak to all of the use cases for enterprise. I’m surprised and excited by

enterprise interest in the Second Life platform as a place for collaboration and learning

because there are a lot of budget cutbacks that companies are making in the enterprise

software space and in technology spending, and we had no problem filling up our alpha

release of our “behind the firewall” solution. The interest is staggering for both the Second

Life grid, which is where we are today, and for a “behind the firewall” solution.

ROBERT BLOOMFIELD: I guess the last question I’ve got is, actually I’m surprised we

didn’t see in the audience chat anything about OpenSim. So you now have what seems to

me to be a very close competitor with other people creating products that are very similar to

Second Life, but they’re adding lots of different features, ability to have their own

customizable physics engines. They’re doing all sorts of things. How do these sort of Open

Source solutions play in your strategy for Linden Lab?

MARK KINGDON: First on the point of competition, if that’s what you’re suggesting, there

are dozens, if not hundreds, of competitors for people’s time out there. Half a billion dollars

in a short period of time poured into Virtual Worlds, partially because of Second Life’s

success, but also things like Club Penguin. So there are many, many alternatives out there,

and we monitor those. With respect to Open Source, Open Source has been a part of the

Second Life ecosystem for some time, and Philip Rosedale, our founder, recently took over

responsibility for that initiative. I’m really, really excited to see how we’re going to further

develop the great base of Open Source developers that are working on Second Life today. I

think that’s going to be a really exciting new area of innovation or renewed area of

innovation for us.

ROBERT BLOOMFIELD: Great. Well, thank you, Mark Kingdon, for joining us for this

opening session of Metanomics for the season. It’s really been a fascinating conversation.

We’ve had a lot of good audience backchat. I apologize for not having been able to keep up

with all of that and get to all of your questions. I do hope that those of you who are out there

listening will post your questions and comments on the brand new metanomics.net website,

which also reflects a lot of the sensibilities you see in Keystone’s build. So, again, Mark,

thanks for joining us, and I hope I’ll see you back on Metanomics sometime soon.

MARK KINGDON: Thank you very much for having me. It’s been a great pleasure. And

thanks to everyone here who attended and folks who followed along on the web. It’s been a

pleasure. Thank you.

ROBERT BLOOMFIELD: Okay. Well, that’s all we have for this week. Join us next week

when we take a look at some policy issues surrounding Virtual Worlds. We will be hearing

from two representatives from National Defense University: Assistant dean

Paulette Robinson and security expert Rocky Young. Paulette directs the Federal

Consortium of Virtual Worlds, which has been helping countless federal agencies explore

this new technology, and she led a conference that took place at Fort McNair in

Washington, D.C. late last month. And Rocky has loads of fascinating and honestly

frightening stories about the security challenges, not only of Virtual Worlds, but of the many

other technologies that we all rely on.

So thanks to all of our staff members and volunteers who help pull this off every week. And

thanks to you our audience for joining us and participating in a very active chat session. This

is Robert Bloomfield signing off. Take care. And I’ll see you next Wednesday.

Document: cor1057.doc Transcribed by: http://www.hiredhand.com

Second Life Avatar: Transcriptionist Writer