The Social

Updated at 6:15 p.m. PDT with correct list of companies that have signed on to test the software.

After it made headlines last week for yet another executive leaving the company, you'd really think things couldn't get much worse for virtual world Second Life and its parent company Linden Lab.

The marketing hype--it's the next Internet!--bottomed out long ago. There was a wave of unflattering press, from virtual terrorism to technical problems to banking scandals. Even the NBC sitcom "The Office" jumped on board, lambasting Second Life with an episode in which Dwight Schrute, the show's archetypal "creepy nerd," professed his addiction.

"I signed up for Second Life about a year ago," Schrute, played by actor Rainn Wilson, explained with his usual dweeby pomposity. "Back then, my life was so great that I literally wanted a second one."

Riding a flying Segway in Second Life.

(Credit: Linden Lab/Screenshot by Caroline McCarthy)

This month's departure of Ginsu Yoon, vice president of corporate development, follows the exits of high-profile executives like chief technology officer Cory Ondrejka and eventually founder and CEO Philip Rosedale. In a post on the Linden Lab blog, Yoon called it "a graduation of sorts for the company and for me...great companies evolve their management around the reality that experienced executives enjoy different stages of company development."

Sunny spin, sure. But this might be one instance where a major executive shake-up could actually be a positive sign.

True to its reputation as a haven for utopian dreamers, Second Life's original executive team wasn't entirely in touch with the business side of things. "I describe it as sort of like being in a Berkeley commune and if the kitchen catches on fire you have to take a vote before you put it out," said Wagner James Au, author of "The Making of Second Life: Notes from the New World," who was employed as a contractor at Linden Lab in 2006.

Philip Rosedale's replacement, announced just over a year ago, was digital-strategies veteran Mark Kingdon. Critics took this as a move that Linden Lab meant business, and the sands shifted internally as well.

"It's got less of that start-up feel," Au said of Linden Lab, which now employs more than 300 people. "The big shift in corporate culture happened after Philip left, and after he stepped down as CEO and then took a chairman role."

Linden Lab representatives do not disclose financials, but they say that Second Life is profitable. Mark Kingdon explained in an interview with CNET News that he estimates user-to-user monetary transactions in Second Life may hit $450 million in 2009, up from $350 million. "(Revenue) comes from land maintenance fees, fees from the 'Lindex,' which is where people trade our micropayment currency, and also from the sales of Linden Dollars themselves," Kingdon said, "and some other sources like in-world advertising and e-commerce, where we recently made a couple of acquisitions."

Herein lies the heart of the matter. Second Life might have earned a reputation as a nexus of odd subcultures, but its primary sources of revenue--a virtual currency, micropayments, an array of virtual goods--fit right into the social Web's business model du jour. Facebook, for example, has been ramping up the focus on its virtual gift application, and is testing a new product in which members can purchase credits simply as street-cred points that they can dole out to their friends.

The system is there in Second Life, and in spite of what the media has concluded, it seems to be alive and humming, even if it's still relying on virtual-world enthusiasts rather than blue-chip marketers. More importantly, what Linden Lab seems to finally be recognizing is that Second Life needs some permanent institutions before it can hope for an influx of people.

Corporate participation is key
The burgeoning space known as "Enterprise 2.0" may turn out to be Second Life's real cash cow. While many marketing campaigns that went into the virtual world have since pulled out or lie fallow, IBM, which has had a presence in Second Life since late 2006, hasn't given up. There are more than 50 IBM regions, or "sims," in Second Life now, including sales and marketing centers, and IBM has been working with Linden Lab to develop and test a behind-the-firewall environment for workplace collaboration and training. Intel, Northrop Grumman, and the U.S. Naval Undersea Warfare Center have also signed on to test the software.

"Businesses are finding great value in collaborative tools and virtual learning, and I think it's going to be an incredibly powerful platform," Kingdon said. Having a more business-savvy executive team--which recently added veterans of Adobe, Pixar, and Intuit to its ranks--is key.

The corporate participation is crucial because you can't just throw individuals into Second Life the way you can into a social network or a role-playing game that has clear aims and instructions.

"It's like trying to learn World of Warcraft and Photoshop at the same time," Wagner James Au said, adding that Second Life's once crash-prone software is "slowly getting better" as new development goes on. "You go in and there's generally a bizarre menagerie of creatures, and it's just kind of overwhelming for people and there's not any specific goal. That's kind of the whole design of Second Life: you want this free-form world where you can do anything. But it's sort of that paralysis of choice that economists talk about. When you have way too many choices, a lot of people just kind of get frozen."

Au, who continues to keep close tabs on Second Life at the blog New World Notes, estimates its current active user count to be 650,000, and said that it's finally starting to grow again after a period of stagnation. Over half of its users are now outside the U.S.

"We had really terrific active user growth that started nicely in the middle of last year," CEO Mark Kingdon said. "In the last week of March, users spent more than ten million hours in Second Life, and that's up from six and a half million in the same week a year ago."

The organized groups slowly gravitating toward Second Life as a platform aren't restricted to companies, though. "There's a mini-MMO within Second Life called Bloodlines that's like a vampire role-playing game. It's got, like, 40 to 60,000 users in it," Au said. "It's gotten complaints, because to advance as a vampire you have to infect other people so they've been showing up in (virtual) shopping malls and fashion shows and started biting people."

Dwight Schrute had better watch his back--or neck.

Second Life creator Linden Lab has selected digital-strategy veteran Mark Kingdon as its new CEO, following Philip Rosedale's resignation from the post last month. Rosedale will remain chairman of the company's board.

"Our search for the leader of Linden Lab demanded both tremendous business skills and a deep understanding and passion for Second Life and where it is going. Mark is the perfect choice," Rosedale said in a statement, acknowledging that Linden Lab's new chief needed to know how to run a business, not just come up with cool ideas.

Kingdon comes equipped with an MBA from the University of Pennsylvania's Wharton School of Business, as well as more than a half decade's worth of experience running digital-ad agency Organic.

Kingdon will take over the CEO post on May 15.

Hiring a "business guy" to helm Linden Lab, rather than someone with a background in social networking or gaming, may be a sign that the company wants to achieve some corporate momentum and eventually go public.

But before that, the company needs to get its act together. Second Life hasn't lived up to the breathless marketing hype of a year or two ago, and its chief technology officer left in December amid reported disputes.

Linden Lab's management is likely counting on Kingdon to sort things out.

"His management style, unwavering leadership in the face of great challenges, and approach to team-building exactly matches Linden's needs," Rosedale said in the release. "He is a passionate believer in the potential of virtual worlds to change the world, and I look forward to working by his side while we watch it happen."

Philip Rosedale, CEO of Second Life creator Linden Lab and founder of the virtual world, announced Friday that he will step down from his post.

He assured Second Life enthusiasts that he would remain on full-time at the company as chairman of the board.

Rosedale, known in Second Life by his avatar's name Philip Linden, did not provide a concrete date for his change in role, only saying that the company has "decided to search for a new CEO."

(Credit: James Martin/CNET News.com)

He continued: "This is a decision driven by my desire to best grow SL and match my job to both our needs and my passions. We don't have a specific timeline, and I don't expect my job to change while we are looking for someone."

It sounds like the company is looking for a veteran business professional rather than a futurist visionary. "I feel that the most important contributions I have made and will continue to make to Second Life are related to building both the product and the company through my direct contributions to vision, strategy, and design," Rosedale wrote in a post on the official Second Life blog.

"As we grow, the role of our CEO will increasingly be to hire and grow the right team--to lead and help the company scale--to thousands of people and tens of millions of users of Second Life."

Corporate upheaval at Linden Lab has been going on for some time now. In December, Chief Technology Officer Cory Ondrejka left the company, and leaked e-mails seemed to indicate that Rosedale had fired him over creative differences.

Second Life, meanwhile, has been going through some rough patches outside of the boardroom. A series of banking scandals earlier this year led the virtual world to effectively ban in-world banks. Issues with vandalism and political radicalism briefly shook the community, and it has still failed to rebound from the backlash that followed in the wake of breathless media hype about virtual worlds.

These days, when you hear about Second Life in the mainstream media, it's coming from dweeby Dwight Schrute on The Office. Linden Lab likely hopes to pull in a CEO who can change that.

Griefing, like this prankster's 'Super Mario' barrage, is one of the reasons behind 'Second Life's' more-than-occasional server problems. To be fair, this Mario army did not crash the virtual world.

(Credit: Caroline McCarthy/CNET News.com)

Virtual world Second Life, the centerpiece of this weekend's Second Life Community Convention in Chicago, has occasionally come under fire for its outages. Scheduled downtime, unpredicted outages, server crashes due to onslaughts of thousands of Super Mario graphics flooding the tubes (those are from griefers, natch)--it's a headache for newbies and avid residents alike.

But in his keynote at the convention on Saturday morning, Philip Rosedale, the founder and CEO of Second Life parent company Linden Lab, suggested that we all look on the bright side. The virtual world is active about 90 percent of the time, he said.

"If you look at our overall service performance lately, we're sort of somewhere above 90 percent availability once you include the planned downtimes for updates and you include the unplanned stuff that we seem to be doing to ourselves," he said self-deprecatingly. Then he added, "That's one nine, and it's better to have one nine than not any nines at all."