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.

Linden Lab, the parent company of virtual world Second Life, has quietly snapped up two companies that had built e-commerce marketplaces on its platform. The two start-ups, Xstreet SL and OnRez, will be combined into the "Xstreet SL platform," a sort of Craigslist-eBay hybrid for the trade of Second Life virtual goods.

Financial terms of the deals were not disclosed.

It's a revenue stream for Linden Lab, which will take a cut of each sale. And, the company says, virtual goods are a $1.5 billion industry. Though a vicious marketing hype-backlash cycle has painted Second Life as an also-ran, $360 million in Second Life goods were bought and sold in 2008, believe it or not, and there are currently 680,000 items up for sale on Xstreet SL.

Based on the Web rather than in-world, the newly acquired marketplace is part of an ongoing strategy at Linden Lab to recapture mass interest by giving members and prospective members an opportunity to "shop" outside of the Second Life environment.

"Having a Web marketplace to browse and search is a great way to find new designers, keep up with the latest creations, or just find that perfect gift/texture/dress/home/weapon/couch," a post on the Linden Lab blog explained. "Our goal is to make the Web marketplace a wonderful complement to in-world shopping and a great benefit for all residents."

Perhaps part of the thinking is that by giving Second Life more of an official Web-based presence, the marketing will take care of itself. That's possible. But reversals in fortune are rare on the Web, where even a successful product can't stay stagnant for too long before an enterprising rival eclipses it.

Worth noting: virtual goods have been banned from auction giant eBay for nearly two years now, but Second Life goods were exempted because of Linden Lab's argument that the virtual world does not count as a game (and the ban specifically targeted gaming items).

Second Life also has reason to take some of its financial activity out of the virtual world: resident-created banks were effectively banned after a series of scams and scandals last year.

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."

3DConnexion's SpaceNavigator mouse.

(Credit: CNET Networks)

It might not be a Wiimote, but it's still got that whole "immersive" thing going on.

Linden Lab, publisher of virtual world Second Life, announced Thursday that its members can use some officially-sanctioned new toys to navigate the metaverse. Logitech's 3DConnexion line of 3D mice can now navigate through Second Life, as a result of Linden Lab's decision to make its code open-source last year.

Second Life members can now use 3DConnexion's SpaceNavigator ($59, or $99 for a premium edition), SpaceExplorer ($299), and SpacePilot ($399) mice to control their avatars, fly, and build objects in-world. They can, of course, also perform more mundane two-dimensional functions, like tweak settings and preferences.

Both Mac and Windows operating systems will be able to handle the 3D mice, and according to Logitech representatives, Linux users should be able to use them, too.

The devices, the first to be made available to Second Life through a partnership with Linden Lab, are not yet compatible with other virtual worlds and 3D multiplayer games like There.com or World of Warcraft. The Logitech representatives, however, said that they will explore other gaming and virtual world opportunities after using Second Life as a first step.

Currently, the SpaceNavigator and its pricier brethren are used for design and modeling software as well as 3D applications like Google Earth.

This post was updated at 11:51 AM PT in order to correct a misstatement that was made in the announcement. The winning artwork from the Etsy-NASA contest, not the artists, will make a trip into space. Read the correction post here.

NEW YORK--What does a marketplace for handmade crafts have to do with a NASA project in virtual world Second Life?

A lot, apparently, according to a panel at Thursday's PSFK Conference that paired Robert Kalin, founder of the Brooklyn-based handmade goods site Etsy, and Andrew Hoppin, co-founder of NASA Co-Labs at the NASA Ames Research Center. The topic of the panel, which was moderated by futurist consultant Greg Verdino of Crayon, was the collaborative working movement known as "co-working."

"This is no longer a phenomenon that is limited to the one-man shop," Verdino said. "What we're starting to see now is this notion of co-working transcending physical space and blending physical work spaces, digital and virtual."

Hoppin and Kalin announced as part of the panel that Etsy and NASA would actually be doing some co-working on their own. "Etsy and NASA are partnering on a program that we're calling Space Craft," Kalin explained. Space Craft will be a contest in which Etsy members create products inspired by NASA's logo; finalists' work will wind up in the NASA gift shop, and two piece of winning artwork will get to go into space. The audience seemed a bit taken aback, possibly due to the incorrect assumption that Kalin meant the artists would be the ones to go into space. "This is all sort of in the planning phase," Kalin added.

Sounds like more concrete information will be forthcoming.

Aside from the plan to put crafty hipsters in space, the panel mostly touched upon the two speakers' rationales for their support of collaborative working. Hoppin explained that the Ames Research Center, located in Silicon Valley, originally opened a virtual co-working space in Second Life because there was too much governmental red tape to open a physical one. In the Co-Labs work space, there are virtual lectures, 3D replications of the planets, and in-world projects that both NASA employees and outsiders can work on. "People can dress up as penguins," he said. "This is not really where you'd expect, as a NASA bureaucrat, to find NASA."

He added that the space agency is still working on opening a physical work-space in the Valley and is in talks with Yahoo.

Kalin, who says he "doesn't get" Second Life, was asked by Verdino about Etsy's "spirit of collaboration between buyer and seller." Etsy uses chat rooms, wikis, and other various social tools so that it's a bit more interactive than, say, eBay and its feedback ratings.

"There's something magical about the item that you get," Kalin explained. "It comes from this connection that you made online, but (then) you get the physical item."

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.

AUSTIN, Texas--If you run a social media site, from a blog to a virtual world to a network like Facebook, you're going to have to deal with angry users, and that's a fact of life.

Such was the theme of the discussion at a South by Southwest Interactive panel on Saturday afternoon called "Social Network Coups: The Users are Revolting."

The all-female panel (a rarity in the tech world!) was moderated by Annalee Newitz, editor of the Gawker Media-owned science fiction blog IO9.com, and consisted of Jessamyn West of MetaFilter, Gina Trapani of fellow Gawker Media blog Lifehacker, and Jeska Dzwigalski of Linden Labs, creator of virtual world Second Life.

"What happens when people on a social network or who are part of some kind of Web service become disgruntled or pissed off with the people who are running that service, and how can they make themselves heard in a way that is effective and nondestructive?" Newitz asked semi-rhetorically. The hour-long panel aimed to touch upon both how users can effectively mobilize and how online community organizers can deal with it. Ultimately, it focused primarily on the latter.

Newitz explained that there are at least three very separate kinds of users revolts on social-media sites. First, she said, there are "anarchist-style pranks" like the one she once rigged on social news site Digg as fodder for a Wired magazine story. "I wanted to find out if I could buy votes on Digg and get something really stupid on the front page," she related, talking about how she paid a shady company to power a fake blog she created to the front page of Digg "to show how easy it would be to buy votes on Digg."

She also talked about "grassroots rebellions," like the mass chaos that ensued when Digg users posted the crack key for high-definition DVDs' digital rights management technology and the site's executives pulled it down. They then retracted their decision in the wake of user protests that crippled the site's servers. "I would call that a genuine grassroots result," Newitz said.

Finally, there are "high-profile people claiming to speak for a larger community in a public forum," like the open letter that a small group of Digg users posted to criticize new changes to the site and ultimately was part of the reason why executives Jay Adelson and Kevin Rose kicked off a series of "town hall" discussions with users. Alternately, there's the controversy over Facebook's Beacon advertisements that resulted in loads of high-profile press on behalf of liberal activist group MoveOn.org but ultimately flew under the radar of many of the huge social network's users.

"Second Life is kind of built for user revolts," Dzwigalski said, explaining that there are all kinds of rebellions in the virtual world, but that the most visible are the ideology-fueled demands like the "revolts" that took place in 2003 when Linden Labs attempted to tax Second Life users and the 2006 controversies over a piece of software called CopyBot in which many in-world retailers shut down their businesses for a day.

The overall gist of the panel seemed to indicate that user revolts can be extremely annoying and difficult to manage, but ultimately an important part of a social-media site's evolution. Dwsigalski said the CopyBot controversy "led to greater transparency from the company to the community because people were demanding to know how changes impacted the (Second Life) economy."

"We have this kind of hippie trust thing going on," Jessamyn West said of MetaFilter, a moderated group blog with 35,000 users that lets anyone contribute for a $5 registration fee. Since the community is overwhelmingly made up of young white males, sexism issues have become high-profile, from "I'd hit it" remarks about pictures of female users to more serious harassment issues that have caused some users to ditch the site entirely. "I wake up every morning and I tell boys on the Internet to stop calling each other names," West joked.

Most of the time, these user revolts never really go away. Sexism on MetaFilter, for example, remains controversial. "I have enemies on MetaFilter," West explained and said that she'd made a promise to change her MetaFilter username to the racy slang term "cooter" if the site went a month without any "I'd hit it" remarks. "That's been in place since November and I'm not worried," she said.

Trapani's account of a user revolt was a bit different; she talked about what happened when a toiled company bought ad space on Lifehacker. "Their ad campaign involved butts. Smiling butts," Trapani said bluntly, and said that she received several dozen e-mails from readers who weren't particularly happy about seeing, um, naked behinds. Many were concerned about what might happen if the ads showed up at the workplace or if readers' children happened to be within viewing distance.

Then discussion of the "smiling butts" started to overtake comment threads, and Trapani finally negotiated to have the ads removed from Lifehacker--though they remained on Gawker Media's racier sites. "We didn't feel good about mooning our readers all day long," Trapani commented.

Discussion briefly touched the debate surrounding the Anonymous hacker group, which has used many social media sites to promote an agenda critical of Scientology. West talked about that sort of debate on MetaFilter, and said that debate was welcome but that zealots who couldn't talk about anything else were not. "We had Tom Cruise's lawyers after once us," she said.

See more stories in CNET News.com's coverage of SXSWi (click here).

(Credit: NBC TV)

On Thursday night's episode of The Office on NBC, dweeby Dwight Schrute (played by Rainn Wilson) revealed himself to be a Second Life addict--something that doesn't require any suspension of disbelief.

The Second Life banter began when Dwight's notably less nerdy co-worker, Jim (played by John Krasinski), asked Dwight if he was "playing that game again."

"Second Life is not a game," Dwight replied authoritatively. "It is a multi-user virtual environment. It doesn't have points or scores; it doesn't have winners or losers."

With all the deadpan wit that's made The Office the hit that it is, Jim fixed his glance on Dwight and commented, "Oh, it has losers."

Dwight, who said that his "life is so great that (he) literally wanted a second one," is known as Dwight Shelford in-world. Just in case you see him flying around.

(Link via Valleywag, which has a video.)

CHICAGO--In Second Life, avatars can fly with the push of a button. Maybe that's why it seems like the virtual world's enthusiasts sometimes have trouble staying grounded.

At this weekend's Second Life Community Convention, Philip Rosedale--founder of Second Life creator Linden Lab--ambitiously declared as he often does that "this is something that everybody on Earth is going to use," that the virtual world will be "bigger than the Web."

But minutes earlier, Rosedale had been jokingly boasting over PowerPoint graphs showing the extent of Second Life's with server lag time, maintenance both planned and unplanned, and glitches that occasionally make users' virtual inventories disappear. "Second Life is still very early and very small," he said, hinting at his disapproval of the media buzz that swarmed the virtual world several months ago. "Everyone in the media (jumps ahead) a lot more than the people here," he said, gesturing to the audience of loyal metaverse residents. "Everybody wants to jump ahead and say, 'Oh my God, the future's alive!'...It's the natural myopia of emerging systems like this."

Read the rest of the CNET News.com story here.