Second Life, the virtual reality site, is reaching out to a new audience: businesses. SL is seeing an uptick in traffic for business meetings, conference calls and classes — and that’s welcome news for a site that has long struggled to retain users.

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How much of your traffic is business and education users? Our estimate is it’s in the 15 to 20 percent range right now of overall usage. But it’s very hard to say because the world is this very open environment and it’s difficult for us to survey it. Second Life right now is just a little under a million hours of use per day and a little bit more than 200,000 different people using it. When we talk about those percentages, I guess that means tens of thousands of people using it for business and education. Which companies are using it? IBM and Cisco are both heavy users or virtual worlds, and specifically Second Life. IBM in particular has been a real innovation leader, using Second Life aggressively for a couple of years now. On the order of a thousand people came to a multi day virtual event in which Sam Palmisano, their CEO, spoke from a recreation of the Forbidden City in Beijing. Obviously, with the concern about the ecological impact of business travel today, as well as increasing fuel costs, the savings are very substantial for businesses to have meetings in Second Life. What makes the virtual world attractive to business users? There are two features we’ve added in the last year that has made Second Life attractive to both business and education. The first one was the ability to use 3D voice. If someone is on your left and someone else is on your right, you hear them on your left and on your right. You can’t do this with a speakerphone, you can’t do it with most videoconferencing systems and you can’t do it with Skype.

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The second thing we did is add richer features that enables people to browse the Web. You can sit around the table in Second Life with a bunch of colleagues from remote offices and one of you can show a presentation, a PowerPoint or a Web page, up on the wall in the virtual meeting room. The virtual world creates a sense of realism that’s way beyond what you can do with two-dimensional whiteboarding or a Web conferencing application. Admittedly, it’s a little harder to get set up, and that’s our challenge. One of the criticisms of Second Life is that people visit out of curiosity, get bored and go away. Is this a way to draw more users? We are still very early in the functionality and adoption of virtual environments in general. The majority of people who try out virtual worlds — and Second Life is definitely the leader in that overall category — don’t stay. They try it for a short time and they’re either unable to get started, or they don’t find the kind of experiences they’re interested in and they don’t come back. But that’s the same thing that happened with the Internet during its early years when, for example, search didn’t work as well as it does today. People would give up before they found the content they were looking for. What we tend to see in Second Life is a very small number of people staying. But when they find something interesting — like for example they’re able to use it for business meetings — they really enjoy what they’re doing and tend to aggressively stay. What is the percentage that actually stays?

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Less than 10 percent of the people who sign up are sticking around and participating in the virtual world. There’s lots we can do about it but it takes time. We have to evolve the market as it evolves. The good news is this is such a global phenomenon and there’s such a large number of people signing up in the aggregate that it still nets out to be a profitable and growing business for us, and also for the people using it. In June, there were 59,000 people who appeared to be cash flow positive, meaning they’re doing something in Second Life that allows them to make money rather than pay money. Is attracting small and medium businesses (SMBs) one of things you can do to increase retention? We’re really thinking about how to aggressively present Second Life to SMBs so they can effectively use it at a higher rate of participation. We’re working on that quietly right now and thinking about what kind of things we can do to support that use. The SMB use of Second Life thus far has been organic. It’s been more user-driven. We’re taking a look at it and saying, “Ok, how can we organize ourselves and how can we change the product to really support that use?” That’s been our strategy. Imagine we’re business colleagues. How would this interview be different in the virtual world? We could have had three or four people on the call without having to use a 1-800 number. We’d just show up at a park somewhere in Second Life. Audio quality would be better than the telephone and you would hear the nuances of the voice better. If I wanted to show you a prototype of a new product, I’d just pull it out of my pocket and rez it — meaning it would just show up and float in front of you. If we were working on cellphones, I could show you a big 3D model of our newest cellphone and we could play with it. If you put people in an immersive space that’s also somewhat novel — in Second Life you can actually rent tiki huts on a beach — I guarantee you that you would remember the content of this conversation better than you would driving in your car and talking on the phone. I guarantee you would have laughed once or twice when I put on a funny hat or changed clothes with my avatar.

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The applications just make it more fun to do business. We’re in a creative economy now and people have choices about where they work and how they work. Being able to do your work in a virtual workspace that makes it fun and reduces your travel time is a tremendous benefit to a company. Here at Linden lab, obviously we’re eaters of our own dog food, I’m literally looking around my office right now and I can see several people who are in meetings with other Linden team members in world. We do virtually all our meetings in world — in many cases we do an in world meeting even when we all are located in the same building. How does the relationship change? Anecdotally, the virtual meeting space allows people to establish friendships in business context and get closer to one another. You don’t have real eye contact. And meetings are significantly less threatening. The sense of threat we have in real world meetings just isn’t there in the virtual environment. Earlier this year, you stepped down as CEO. Why? I am fundamentally a product and design guy and technology is my background. We’re a profitable company, growing quickly and closing in on 300 people. That’s a big business and I didn’t feel I could do it better than anyone in the world. If you looked at my contributions to designing virtual worlds, I think they’re second to none. I’m one of the best guys on the planet to help a company do that. But if you look at the kind of organizational leadership you need going from 300 to 3,000 people, I don’t think I’d be in the top 100. We’re a very unique, well- positioned, interesting and compelling company that deserves to have the best people in the world in every role.

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I’ve been leading this company as CEO since it began in 1999. I think I’ve done a good job but I’m ready to change and get myself more focused on product design technology. We have to do a tremendous amount of innovation and product work and technology work to grow beyond where we are now. I think it’s best for the company if I reserve a large amount of my time to contribute there. What’s your next big idea? There are a couple of things that need to become radically different about virtual worlds and specifically Second Life. One is usability. No one has figured out an easy way to use a virtual world, to make the software intuitive, and make the experience fast and fun and appealing to everyone. I think it’s doable. There are incremental changes that we can make to the technology to make it as palatable as a Web browser — perhaps even more so. We’ve got issues around scalability. I think this whole thing is going to grow by about two orders of magnitude, a factor of 100, in the next 10 years. A lot of architecture is going to have to work right to make that happen. Second Life needs an intuitive interface and good search and discovery. When you try to browse the virtual world today, it still takes a bunch of time to find live music, a classroom or a teacher. Google figured out how to organize information on the Web and we need to figure out how to do the same thing in the virtual world. I think that’s a worthy challenge to take on as a technologist. I love it.