PDF Metanomics Trasnscript May 06 09

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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

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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

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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.

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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

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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

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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

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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.

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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.

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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

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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

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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

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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.

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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

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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

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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

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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

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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?”

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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

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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

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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

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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.

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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.

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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

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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,

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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

26

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

27

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?

28

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

29

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,

30

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

31

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,

32

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

33

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

34

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

35

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?

36

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

37

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

38

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

39

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

40

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