Saturday, November 1, 2008


Deal with Telefonica enables digital cash issues at phone kiosks

Convenience cash voucher provider Ukash has inked a deal with Spanish telecommunications giant Telefónica which will see the digital money outfit's vouchers available 24 hours a day from 70 000 telephone kiosks across the Spain, a burgeoning online and land gambling market. To buy digital cash at the phone kiosks, users follow simple prompts on-screen and deposit coins for the voucher's value. Customers then receive a unique and security-safe 19-digit code via SMS text message, which can be used to buy goods and services online. Social networking site Habbo is already piloting the service and will accept Ukash vouchers from Telefónica kiosks with initial values of Euro 5 and 10, and online gambling operators are expected to use the service as well.

With mobile penetration at 111 percent in Spain, Telefónica has been seeking to add new features to its public phone terminals. The company first upgraded the booths to send SMS to mobiles and e-mails in 2003 and turned them into points of sale for small payments the following year. Juan Utande Ramiro, marketing director, Telefónica Telecomunicaciones Públicas, says: "Kiosks are hugely widespread, present in the great majority of communities, including rural areas. They allow services such as Ukash to conveniently reach audiences which would be almost impossible to reach otherwise." Ukash spokesmen said a joint marketing and outdoor advertising campaign is imminent to promote the new scheme to Habbo users in Spain.

Friday, October 31, 2008

Real Estate Crashes In Second Life, Too: Linden Lab's Bailout Plan

Eric Krangel | October 28, 2008 10:00 AM
Linden Lab's new-ish CEO Mark Kingdon has been fond of telling reporters "there's no credit crunch in Second Life." We'll see about that. Last night Linden announced it was jacking the prices on its "Openspaces" virtual land by two-thirds, from $75 to $125 a month (that's American dollars, not fantasy game-currency).

Linden Lab has an easy-to-understand business model. The company creates and sells "virtual land," which is essentially dedicated CPU time with which Second Life avatars can build space stations, elven villages, whatever. (Think 3D webhosting.) Linden collects a monthly fee on the land it sells, which is the company's revenue. Unlike many other Web 2.0 companies, Linden's fortunes aren't dependent on selling advertising and the company isn't at the mercy of declining ad rates.

But that doesn't mean Linden is doing well. The base of paying customers is declining, prices in the avatar-to-avatar aftermarket for land have bottomed out, and the company has been unable to introduce new land into Second Life for months amidst the glut. And if Linden isn't introducing new land, it isn't growing its bottom line. So the company came up with a new way to make money -- charging its existing customers more.

In the short term, this was probably a smart move by Linden. The company introduced "Openspaces" months ago as budget option with reduced performance, thinking most of its customers would still prefer the more robust experience of being on Second Life's mainland. Many more users went for the cheap low-performance virtual land than expected, so much so the company can't even sell its more expensive product anymore. (That would be the credit crunch. Or the end of a fad.) Second Life's avatars are already screaming and howling over the price spike, but even if a few customers are lost, the company will most likely score a net positive.

That being said, there's only so much blood that can be squeezed from a stone. For Linden Lab to survive, it can't keep raising usage fees, and it can't try to con business users into teleconferencing in Second Life when the product is so poorly suited to enterprise use. In the end, Linden needs to pull off an image overhaul and make Second Life once again a hip place to be, with a growing population and a steady influx of new land-owners (read: paying customers). If Linden can do that, it prospers. If it can't, it's doomed.

Linden Lab Jacks Land Prices - Residents Pissed

The Virtual World Has Its Own Housing Crisis: Second Life Jacks Up Land Rental Fees
By Tameka Kee - Fri 31 Oct 2008 11:15 AM PST

In an attempt to keep its coffers full, Linden Labs is raising the prices of Openspaces, the cheaper parcels of Second Life land. The setup fee for the virtual space will increase by 50 percent from $250 to $375, and the monthly maintenance fees will increase by 66 percent from $75 to $125. Land manager Jack Linden said the increase is needed because too many Second Lifers are setting up apartments or shops on the land—not using it for “open spaces” like the forests or beaches that it was intended for—and the heavy usage is straining Linden Labs’ network and database infrastructure “at a much higher ratio than is reflected in the current pricing.”

Unlike pricier parcels of “Mainland,” and private islands that typically get their own CPU, up to four Openspaces are connected to a given unit at any time (hence the lower maintenance fees). And the lower fees seemingly attracted users who wanted to maintain their virtual existence and be budget-conscious at the same time. SAI’s Eric Krangel says Linden Labs’ announcement is indicative of larger issues facing Second Life: a declining paid user base, an in-world real-estate market that’s bottoming out, and dwindling demand for the pricier Mainland. New CEO Mark Kingdon may well be wondering what he’s got himself into. After all, if people are having a hard time paying their rent in the real world, how quickly (and easily) do you think they’d default on their virtual mortgages?

Second Life uproar over high "taxes"

A quick note to virtual gods: If you create a virtual world, you're probably going to wind up with virtually everything that occurs in the real world, and that includes crime, sex, economic upheaval and so on. No one knows that better than Linden Labs, the creators of Second Life, which has seen a variety of such behaviour over the years.

This time, the virtual proletariat are up in arms about an increase in what might be called virtual taxes -- the fees that Linden Labs charges for various features inside the world/game. In this case, it's a fee increase for what are called "Openspaces." Here's a description from the Second Life blog:

"An Openspace is a type of private island that we made available for light use countryside or ocean ... but Openspaces differ from normal regions in one particularly significant way; unlike normal regions that effectively get a CPU to themselves on the server, there can be up to four Openspaces on a single CPU (so 16 on a quad core machine), sharing the resource (hence them being ‘light use')."

The issue, Linden says, is that people are using the Openspaces for things that they weren't intended to support, and that is putting a strain on the company's infrastructure. Just as cities and states raise taxes to pay for repairs to highways and so on, Linden clearly feels that it needs to charge more to offset the cost of maintaining these private islands. Sensible enough, yes? Not if you're a Second Lifer. Or rather, not if you are a Second Lifer who has built a business based on the services and features that are attached to that Openspace. Here's the problem as one person sees it:

"There is demand for the 'original' OpenSpace 'void sim' application: lower primcount, very few scripts, very few avatars–just very light load, and only in areas surrounding other, full-primmed sims. There is also a clear demand for heavier use OpenSpaces–still much lower density than full-primmed sims, but posing much more demand on the backend services than does the 'void sim' application. These need to be separated into two distinct products with different fee schedules; let's call them 'Void' and 'Low-Density' sims."

Don't feel badly if none of this makes any sense to you. I'm pretty familiar with Second Life, and a lot of it makes my head hurt too. It's a little like reading a science-fiction book, in which the author has made up new words for everything, and you have constantly flip to the index to figure out what everyone is talking about. The issue is whether Linden underestimated what people were going to do with Openspaces and priced them too low, or whether people are misusing the world somehow and should therefore be expected to pay more. Regardless, people are upset. As Wagner James Au notes in his piece for GigaOm, the problem for Second Life is that there is an open-source version of the game/world called OpenSim that has been attracting more users as a result of the changes at Linden Labs. It's hard to maintain a half-decent world when people who don't like the way things work can just move to the one next door.

Linden Lab Burns Second Life Residents

Virtual Protest Threatens Linden Lab's Profitability
By Wagner James Au
October 30, 2008: 03:47 PM ET

( -- The denizens of Linden Lab's virtual world Second Life are a passionate lot, so when the San Francisco company recently announced a steep purchase and maintenance fee increase on popular regions of their virtual land, sign-waving avatars were soon gathered outside Linden's SL office, in protest. Some even set themselves on fire.

There have been protests like this throughout the world's five-year history, but without a competing virtual world offering all the unique features of Second Life, angry customers have largely stayed put, despite their grumblings. Now, however, there is an increasingly viable alternative: OpenSim, an open-source platform for developing virtual worlds, that was, ironically, made possible after Linden Lab released its viewer code. Though still in beta mode, OpenSim has attracted developers with IBM (IBM), Microsoft (MSFT), and numerous startups, so it's bound to rapidly improve.

Within 24 hours of the price hike announcement, more than 800 frustrated SL users, including influential members of the community, had registered with an attractive OpenSim variation. That might not seem like much, but Linden Lab is profitable primarily through virtual land sales, and less than 17 percent of its 507,000 active users are premium subscribers who can own SL real estate. (Economic stats here, SL reg. req.) That number has been slowly but steadily decreasing -- there were 93,000 premium subscribers in December 2007, but in August 2008, the last published figure, less than 85,000. So if a few thousand of its land-owning users quit SL for OpenSim, accelerating this slide, the company will likely feel the pressure.

I contacted freshly minted Linden CEO Mark Kingdon for his comments about the protest. In a statement provided by his publicist, Kingdon told me, "We understand that this price adjustment will affect businesses and other projects of some our Second Life Residents," and emphasized the cost increases were only directed at select landowners, who have until January 2009 to adjust themselves to the new rates. "To be clear," Kingdon continued, "this price adjustment affects only a portion of land in Second Life; it does not apply to private islands or regular mainland property. We made this change to ensure an optimal Second Life experience for all Residents."

That may be, but anger over this increase (which many consider unfair) and concern over future price hikes have become added incentives for users to consider OpenSim grids that charge less for virtual land. Second Life does retain a lot of goodwill among its supporters (including me), which will dampen any calls for a general exodus. Still, one thing remains clear: "I'm moving to OpenSim!" has already become the metaverse version of the "I'm moving to Canada!" threat we hear every U.S. Presidential election.