Tuesday, October 28, 2008

Linden Lab, meet John Sutter

Portrait of John Sutter by Frank Buchser, Solo...Image via WikipediaI'm sure there will be plenty of JIRA fury, blog posts, open letters, flickr groups, arm bands, berets, protests and micro-hysteria about the latest Linden Lab blog post regarding impending changes to the Open Space sim policies and pricing. However, I'm not sure Linden Lab will read many, if any, of them.

This in fact, is the crux of Linden's on-going problem. They are grokless, generally lacking so much of an inkling of their resident base, their passions, their normally predictably irrational behavior. They continue to miss the obvious, launching missiles at unarmed nations, killing off their own tin soldiers in an on-going series of blundering friendly fire. This general lack of awareness will be the demise of the virtual world of Second Life, not some up-and-comer in the virtual world space, but Linden Lab will in fact run themselves out of business because they have not, or can not, tap into the richness of their standing army of residents.

Linden has (had?) captured that which most fledgling businesses only dream. No, it's not Electric Sheep. I'm referring to a passionate consumer base that is willing to pay shockingly large sums of real cash on a regular basis. We used to call those "subscriptions" but since that's become a forbidden word in the new media vernacular, we pretend like paying tier for virtual land is somehow akin to an investment. In some cases it is an investment, but for the most part it's a payment for the privilege of access to content.

So let's review what Linden has at their disposal: paying, passionate and prolific content consumers and creators.
Isn't that the equivalent of Social Media Nirvana?

What is that you say? Linden Lab is a virtual world builder, not a Social Media company! Oh, that would explain it. Everyone knows there are few easy and vibrant Social Media business models; there's far more gold in those virtual hills!

But we know the end-game here, it is the very same that plagued the California gold rushers intent to find fortune among limited resources. But who profited from the gold rush? Anyone that could leverage the irrationality of those seeking fortune profited mightily. Prostitutes made a healthy wage, as did general store owners, saloons and bankers. However, very few of the one(s) that discovered gold.

I liken Linden Lab to John Sutter. You remember Sutter, right? John Sutter was a wealthy land developer and it was at his mill where James Marshall first discovered gold in 1848. Now Sutter could not immediately profit from the discovery, since he didn't own the mineral rights on the land on which the gold was found. Those rights still belonged to the Culluma Indians and while Sutter fought a losing battle to keep interloping miners off his mill site and obtain the mineral rights, the gold rush boomed and busted and the once wealthy land developer died a poor man. To summarize:
Instead of becoming a wealthy man from the precious gold that was discovered at his mill, Sutter's domain was ruined when the Gold Rush hit. His employees deserted the Fort for riches in the foothills, leaving crops to rot in the field and abandoning businesses. He was swindled by unscrupulous partners. His cattle wandered off or were slaughtered by hungry miners, and squatters took over much of his land. He went broke and ended up near Washington, D.C., trying to convince the government to reimburse him for his losses caused by the Gold Rush. His attempts for compensation failed, and he ironically died a poor man in Pennsylvania. Source
Does this sound vaguely familiar? John Sutter - a man of resources, wealth and business savvy - missed the largest opportunity afforded to him because he lost sight of what was right in front of him. Why? Because he tried to protect his current thinking, his ownership, his existing business model instead of adapting to the situation that was rather difficult to ignore.

Sutter was a real estate developer. Did he erect the boom towns? No.
He had farms, cattle and labor. Did he feed or supply the miners? No.

John Sutter put his time, attention and wealth of resources into that which he was comfortable, and as a result he missed the gold rush, quite possibly the largest financial opportunity for which he was uniquely qualified to leverage.

Ironic, isn't it?

M Linden, meet John Sutter.

UPDATED: Vint's most excellent round up.
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