The following is a guest post by Pooky Amsterdam.

Dear Chip and Dan,

I read, with interest, your article at Slate.com titled “Why Second Life Failed.” Me? I run a successful media enterprise in Second Life and produce award winning videos using the very cost and time effective 360 degree views of this graphical engine. I meet people from all over the globe, work, converse and laugh with them while doing incredible things. I do not have a blue tail (Though some of my best friends have tails) but I have a Chanel style wardrobe to die for.

I’d like to respond to a number of points that you made in your piece. You wrote:

“You—sitting right there, reading this article—you’re an avatar in Second Life. You work a Second Life job, earning Linden dollars. You have blue hair and a serpentine tail, and you’re dating an androgynous digital skateboarder named Rikki. Also, you are a ninja. Life is great.”

So far so good. Next, you wrote:

“At least, that’s the way things were supposed to unfold. In 2006, the future was Second Life. Business Week put Second Life on the cover. American Apparel, Dell, and Reebok, among many others, rushed to build virtual storefronts.”

That a company would build a store and not put anyone in it is bad planning. No company in their right mind would build a store in the physical world and leave it unstaffed. Just as in the physical world, this is a space and location. It’s virtual yes, but to succeed you still must know where and to whom you are selling. That there are businesses which make over a million dollars in Second Life is a testimony to what happens when you know your customers. Stiletto Moody made over a million USD last year selling virtual shoes.

Did Second Life fail – or did the business fail? There is a difference. Failure of the platform this is not, this is a failure of the business to understand their customers, and therefore their business. It was also a fault of consultants who overcharged and gave an incomplete picture of the business model. For in truth, it is how you handle your business after your location is built, no matter where it is, that determines your success or failure.

Let’s say, you went to China, did not speak the language, hired experts who said they would get you a store somewhere and you would make money, but actually no one bought anything (okay you had no Chinese speaking sales help in the store, but these experts said you didn’t need anyone there!) The shop is a failure – is it China’s fault? Did China just fail your business? Or did you have lousy advice and a translator who didn’t really know the language? Oh go ahead and blame China, it will make you feel better.

Knowing your customers and how to service them is critical. Customer support and marketing is the basis of all business.

“Reuters even created a full-time Second Life bureau chief. People rushed to sign up and create their own avatars. Blue hair and Linden dollars were the future.”

Yes there was a lot of hype almost 6 years ago – for good reason, the press and a lot of businesses jumped on the bandwagon, and without the necessary depth of either journalism or market research, were left with some egg on their faces. I guess this still hurts because for some reason, reporters writing about Second Life actually go to lists like “Help A Reporter Out” and ask for people’s negative reactions only, from Second Life, and then write articles. This actually happened two years ago, because I was on this list, saw the post, and read the subsequent BBC article written by Lauren Hansen.

“Looking back, the future didn’t last long. By the end of 2007, Second Life was already losing its fizz. “Businesses are shuttering in Second Life, it seems, because no one is using them,” wrote Morgan Clendaniel in a brutal piece in GOOD magazine.”

Oh for heavens sake, this article is about how the reporter couldn’t find his penis. No wonder the man couldn’t take his head out of his pants. Sex! Penis! 2007! and did I say penis??? All adult and x – rated activity has been moved to an Adult age – verified region called Zindra.

“There were never any employees at stores like Dell and Reebok when I visited, nor were there any customers. But that wasn’t that shocking because, for the most part, there seems to be no one in Second Life at all.”

Is it shocking that the press would feed into a hype cycle?

Below I quote from a January 2007 CNNMONEY.com article written by David Kirkpatrick:

“Linden Lab claimed 2.5 million ‘residents,’ meaning people who have registered for Second Life. But the service has only around 250,000 active members who still sign in more than 30 days after registering. Nonetheless, that group of active users is currently growing at about 15 percent per month.”

Please don’t get all excited about the “10% of registered users.” 10% is pretty much par for the course for virtual worlds. This is a rule of thumb, not gospel like the (sarcasm alert) milk shake test. In 2007 a quarter of a million people was hardly “no one.”

Below is a Linden Lab chart which details information about the Second Life economy.

In 2009 the total size of the Second Life economy grew 65% to US$567 million, about 25% of the entire U.S. virtual goods market. Gross Resident Earnings are $55 million US Dollars in 2009 – 11% growth over 2008.

Second Life provides a brilliant platform for those who take the time (which granted not everyone has, but clearly – which some folk have and benefit greatly from.)

Your purporting of fallacies is self serving, and so I really wonder what is behind this. I am truly surprised most every time I read a reporter or analyst’s overview of Second Life. (Exception of note is Vizworld as the reporter spent time in the field at a variety of places, recently) Most reportage is just bad, a retread of 2006/7. The authors are using a voice of authority, when they really are going after a target for easy pickings.

Hookers! Sex! Blue tailed Avatars! 2006!! Read what I’m writing! Buy my free book! Please!

“Today, Second Life limps along. In the first half of 2011, the company reported that an average of about 1 million users logged in every month—which, you have to admit, is about 999,990 more than you expected.”

I hope that you didn’t have your heart broken in Second Life, for I cannot imagine why you would say something like that. Is part of the milkshake test telling someone they shouldn’t like strawberry? Why would you not expect it? Who made you a platform god? Second Life has been around for almost 10 years. That is an achievement. Almost a million visits a month is impressive, so I don’t know what you mean by limps along.

The platform continues to enthuse and nourish many. I can give you a few first hand examples of a kind of experience very hard to find elsewhere. At a mixed reality event in 2009, I saw veteran journalists Helen Thomas and Bob Schieffer, in Second Life. They were receiving the Edward R. Murrow Lifetime Achievement award. She took questions from the virtual audience and I was able through my avatar, to ask Ms. Thomas a question. She responded with an amazing answer about the press, 9/11 and the Bush administration. I really don’t think that is going to happen at IMVU.

When I interviewed Holocaust Survivor Fanny Starr, for the documentary “Why Now?“, a Catholic High School many miles away brought her class of 14 – 16 year olds also into Second Girls. In real time, these young girls talked with this 87 year old woman who had survived 6 years in ghettos and concentration camps. They asked and learned what her life was like at their age. These stunning examples of what is happening on the Second Life grid are not going to happen on Facebook.

More? I interviewed a cancer survivor for treet.tv who started Relay For Life in Second Life. This year over $330,000USD was raised. It went directly to the American Cancer Society, and ACS put the live weekend’s events from Second Life on their home page while it was running inworld. The commitment and the amount of money raised is phenomenal. Even more importantly, those in our extended virtual community who have experience with this life threatening disease are literally helping to save the lives of others, as they communicate with each other in real time. This isn’t going to happen on Twitter.

Under the brand Virtually Speaking, Jay Ackroyd and Widget Whiteberry produce 5 weekly public affairs programs in Second Life and on the web.

One of my favorites is Virtually Speaking Science, hosted by the Meta Institute for Computational Astrophysics (MICA) whose Scientists work at premier institution like CalTech. VS Science hosts are MSNBC.com’s Science editor Alan Boyle – author of The Case for Pluto – and Thomas Levenson, who, in addition to being the author of Newton and the Counterfeiter and Einstein in Berlin heads up MIT’s Program in Writing and Humanistic Studies and the Graduate Program in Science Writing.

I have been part of the listening, commenting and questioning studio audience for Jay’s interviews with Daniel Ellsberg, Gloria Feldt, and Dahlia Lithwick.

This might not be for all, but it is incredible activity by anyone’s standards. Nourishing beyond belief, if this is your interest, and indicative of what can be.

This has enabled bright and even brilliant people to keep advancing their intelligence while looking better than they ever have before.

There is, additionally, an incredibly vibrant artistic and powerful performance community who raise their voice every time something like this comes out. I don’t have time to list all the incredible artists, musicians, performers, comics (Okay, Lauren Weyland) and others who play nightly to an international audience that assembles very locally – at their computers. Your arrow sorely misses the target. In fact you are wrong to set your sights on Second Life for anything but a remarkable phenomenon, one that people are truly a part of, yes admittedly in ways you have no idea about. Because of the wide variety of activity from advanced topics to just hanging out and listening to some amazing music, it does have something for everyone.

And Will Wright of The Sims, (yes The Will Wright) just joined the board. I would say the future looks incredibly exciting here. Is Second Life a bit of a challenge? Yes, it is, and so it isn’t for everyone. It is for a better educated number of people who have disposable income and spend an ARPU greater than other virtual world sites (some estimates, like Nick Yee, have it at almost 10 times other VW ARPU, the population is older as well. It’s a great demographic). Virtual goods are a huge and growing market and some estimates reach $12 billion by 2015. The recent introduction on Second Life of building mesh makes for greater graphics (and lower lag). This is a profound platform for virtual asset creation

“But during this same period, Facebook averaged roughly 500 million logins per month.”

Please compare ANYTHING to Facebook – I think you would find many businesses, social networks, video companies, traditional media offerings such as Television shows, etc. fall a lot short of Facebook monthly logins. Oh let’s use your favorite term – FAIL. What TV show has 500 monthly views? Does the Superbowl even get 500 million people watching it? The Oscars? And these are events judged by viewership. Second Life is certainly a form of social network – but it is really not the same as Facebook. What is?

“How did we misread the future so badly? Mind you, this Second Life hype didn’t involve distant, sci-fi predictions about the future. (“Someday we’ll all commute to the moon using unisex RocketCrocs!”) This was just five years ago. We were just months away from the iPhone.”

And don’t forget $580 million for MySpace!

“After enduring a lifetime of mega-fads that flame out—Apple Newton and PointCast and the Segway—why are we so quick to extrapolate a few data points into a Dramatic New Future? Well, here’s the frustrating part: Sometimes the Dramatic New Future arrives, exactly as promised. The mega-hyped Internet? Yep, worked out OK. Ditto Google and Facebook and iPods and iPhones.”

Blue Mars did not really survive. And let’s be realistic, though valuation is intense on companies such as Twitter, YouTube and LinkedIn, what are the real numbers behind their profitability? How many years did it take YouTube to finally begin to turn a profit? Second Life is profitable for Linden Lab, and for many who understand the platform. It has a clear business model, and does not survive on advertising alone.

And now, let’ go to this video – which I think is a good example of hubris, and true irresponsibility because the video while salacious does very little if nothing to prove any point at all.

Second Life Vice Capades: Virtual Hooker (VIDEO)

I can not stop laughing at this video from I think 2007 or 2006 (again?) – it’s priceless – Did it take this woman three weeks to fail at becoming a prostitute? She was not able despite her best efforts at tarting herself up and trying her best, to find someone to pay for sex. Despite Second Life’s reputation for sex, often presumed, then highlighted, by the media, (sex sells?) it’s not easy to find random people for sex. In the entire film there was one place that people went to – yes that happens with people – there is porn on the Internet (it was in fact a driver for The Internet). It depends where you go and what you look for, yes?

Of course she was looking to be a hooker, yet couldn’t find a client. She bought into the hype that you could just go and start any kind of a business, anywhere. Even being a successful hooker might entail some business planning.

Also please note the adult region has been separated in an area known as Zindra for over a year. Now a fledgling prostitute would have to go there to ply her trade. The main grid has severe restrictions on X–rated businesses. These exist only in Zindra, in an age-verified region removed from the general population. So this video is quite outdated.

And sex might not be that easy to find, as that people develop relationships in Second Life with like minded people. You find others with common interests. Second Life racks up over a billion voice minutes a month, which is what former CEO Mark Kingdon told Robert Scoble when the Scobleizer interviewed him last year.

Would this woman possibly, if she found an outlet for herself and her creativity find someone who also was interested and interesting, and might they start becoming romantically involved? Possibly yes. She had 3 weeks to turn in a sex tape…… It’s very cute though, and not scary, hard-core or really well much of anything. I think she was brave and it was kind of funny. It tried a bit too hard, as did she. And maybe people go to Second Life to look for sex because they are lonely or horny or both, but come out with a whole lot more. I know this is true, and I also know many stories about Marriage 3.0 where Second Life has saved couples.

I will grant that the learning curve is tough, it is. It takes some dedication to master it, believe me I still move like a noob, and it takes that thing we just don’t have much of, time. It also takes patience and being able to laugh at yourself, which are not bad qualities to possess. And it takes a kind of humanity to reach out to others in this world, a curiosity. You kind of have to be a special person to really get it. Second Life offers the kind of premier experience you can’t get anywhere else. You must be able to understand it though, and when you do, you feel incredibly empowered and connected. Yes, it takes time and is not easy, it is worthwhile. And let me say this again – it isn’t for everyone, yet.

I don’t like cheeseburgers, but I don’t spend my time writing about why no one else should like them. I would never presume to dictate to someone else what to like, or what to do. I can’t imagine being Mayor on FourSquare, but obviously others enjoy this. Good on them.

“Christensen asks us to imagine a group of marketers at a fast-food restaurant who want to sell more shakes. As they comb the customer data for insight, they discover something interesting: Most milkshakes are sold to early-morning commuters who buy a single milkshake and nothing else. Why milkshakes?”

That inworld businesses generate millions of dollars, reflects the wealth of the Second Nation. Second Life provides great opportunities for business, virtual enterprise, shopping, social engagement and much more. It is a great platform for prototyping, there are inworld TV stations, there are Film Festivals, and real time discussion amongst groups or individuals who can chose how they wish to present themselves. What can be done on Second Life has only just been scratched. There isn’t much that can’t be done – except eat – no one has really invented virtual food you can eat yet. Whoever does wins, I’m convinced of this. My money is on the 3D Printer.

“These commuters, according to Christensen, are “hiring” milkshakes to do a job for them: to supply a breakfast that is filling and non-messy and cupholder-compatible. So to sell more milkshakes, the marketers don’t need to create a more delicious milkshake. Deliciousness isn’t really in the job description”

Second Life is affordable, easy to get to, filled with interesting things to do and people to talk to. It is pretty cool home entertainment.

“So when you evaluate the next big thing, ask the Christensen question: What job is it designed to do? Most successful innovations perform a clear duty. When we craved on-the-go access to our music collections, we hired the iPod. When we needed quick and effective searches, we hired Google.”

And it became apparent that there was gold in them there searches, and now we have Bing. That it isn’t as big as Google does not mean it is irrelevant. I don’t know if it passes your Facebook test of 500 million hits a month. No industry that is successful has zero competition.

“And looking ahead, it’s easy to see the job that Square will perform: giving people an easy, inexpensive way to collect money in the offline world.”

Square takes a 2.75 percentage of the sale price for its service. At 800,000 merchants, they were wise to drop user limits from $1,000 / week, and should see business grow. That is until someone charges a 2.25% on a similar service, which if it is successful, will happen.

“But what “job” did Second Life perform? It was like a job candidate with a fascinating résumé—fluent in Finnish, with stints in spelunking and trapeze—but no actual labor skills. The same was true with the Segway. No one was interested in employing a $5,000 walk-accelerator. (Though, to be fair, Segway eventually got a part-time job saving tourists from exercise.)”

Actually it is like a job candidate with fluency in all major and most minor world languages, and expertise in everything from Rocket Science to fashion design. In other words, smarter than most employers and here is the rub, also somewhat intimidating. The Labor Skills though have created a platform which is robust and dynamic while turning a profit for it’s parent company. Labor also delivered Open Source code which is the basis of new grids forming all the time. Labor is creating right this moment.

Second Life has performed the job of building the most exciting user created content platform in the world. You can make virtually anything, any place, any time, broadcast events, stream productions and find a remarkable wealth of opportunities. I am sorry that you couldn’t find the chunky bits in this milkshake – others have.

One complaint is “everyone is beautiful,” but do you know what that really means? We are not judged, as we are in the physical world by how we look, and the sometimes shallow reactions that affect our confidence and therefore our abilities. Here, in Second Life, the way you look doesn’t matter. There is no better looking member of the family so to speak. What defines you is your character, and what you do inworld, what you say and what you really represent. Again not for everyone….

“What about the Apple Newton, the first widely hyped PDA back in the 1990s? It was clearly applying for the right job—to give us mobile access to our calendars and to-do lists and such. But it was a lousy employee, with notoriously poor handwriting recognition and a limited attention span (from low battery life). PalmPilot got the job a few years later.”

What about Prodigy? Prodigy was far ahead of it’s time.

Second Life hasn’t failed anything as it serves its user base well, and turns a profit for it’s parent company. The limitations as I see are that it was so far ahead of the curve. The rest of the universe needs to catch up, and I am confident that it is doing so as I type. Second Life will be here 20 years from now.

“If the Christensen test alone could predict the future, then the two of us (along with Christensen) would be the richest venture capitalists of all time. It’s not a perfect predictor. But by our count, Christensen’s test calls correctly about a half-dozen of the big technology hype cycles of the last 20 years.”

Hmmmm……that is true! However it isn’t, but let’s just talk about the successful parts of the 6 technologies they called correctly, because it serves your purpose, as your writing similarly picks out the “flaws” of Second Life to support your case. If the Christensen test looked at 10 cases and predicted 6 right that is a huge difference than if 120 or even 1200 technologies were tested. You do not give an adequate frame of reference to judge your proclamation of victory. Any more than you give relevant data in your prediction of failure. (“….which is 999,990 more than you would expect” whoa can I pay you to come up with an analytic like that?)

“At a minimum, it provides some protection against over-optimism. Think of it as a tinfoil hat to insulate you from the nuttiest predictions.”

I need tinfoil glasses to protect me from the erroneous and self aggrandizing reportage of those who can’t even be bothered to use a video or figures from this decade.

New user logins went to over 20,000 a day this week. This week……November 2011, not 2006. Why must the press bring up the questionable business practices of American Apparel from 2006 every time there is an article on Second Life? Please find something new, it is almost 2012. I beg you, I can’t keep stopping everything I’m doing from my incredibly vibrant and productive work inworld, to keep writing these wake up and dress your avatar replies.

For excellent reporting on Second Life, I would suggest Tateru Nino. She has a tremendous grasp of what is happening.

The Author: Pooky Amsterdam

Please feel free to contact Pooky Amsterdam at info@pookymedia.com.