Blogging the SLCC: Entrepreneurship in Second Life

In “Entrepreneurship in Second Life,” Giff Constable (ESC), Simone Stern (ESC/Simone!), Guni Graef (Ansche Chung Studios), Haver Cole(Metaversatility), and Shaun Altman (shaun altman) discussed their history as entrepreneurs, looked at current growth and economic trends, and made a few predictions as well. “The pond is getting bigger and bigger, but there are also more fish,” said Graef. “You don’t just have 10,000 people that are potential buyers. You have hundreds of thousands.”

Entrepreneurship in Second Life
Moderator: Giff Constable (The Electric Sheep Company)
Simone Stern (ESC/Simone!)
Guni Graef (Ansche Chung Studios)
Haver Cole (Metaversatility)
Shaun Altman (shaun altman)

Giff: While there’s been a lot of talk over the last year or so about big business in SL, we want to focus on the practical aspects of being an entrepreneur in SL. I’m joined by some fantastic people. Guni Graef is one of the cofounders of Ansche Chung studios. Next over is Simone Stern who started a few years ago in SL, taught herself, and has built one of the most recognizable brands in SL selling clothes. Next to Simone is Shaun Altman. Shaun is one of the most prolific innovators and creators in SL. He created the first stock exchange. He’s always trying to push the boundaries. Lastly we have Haver Cole. Haver runs two sims, she provides marketing consulting services, she has an avatar customization business, and she’s a community manager for Metaversatility.

I wanted to kick off, and we want to spend time with Q&A, with some questions about the big picture. Guni, what are your feelings about the state of the economy, prospects for growth, and entrepreneurs.

Graef: I think we just saw some interesting challenges hitting the economy over the last few months with casino games being taken away, which kept a lot of businesses profitable. Then we saw the Ginko crash. There were people already asking questions when they had 10-15 million Lindens, but now they held 200 million, I think. We’ve had five or ten sims sold back to us as a result of casinos closing down and people changing their SL plans. IN the grand scale of things, this was very minor. If you look at the statistics over the last few months and then longer over the last few years, you see very stable growth in the number of paying residents through premium accounts, which I think is a good measure of the economy. There’s also land being added, though I’m a little worried about Linden adding too much land right now. We’ve seen a price decline, and I hope that’s going to be stablizied a little bit.

There hasn’t been a slowdown despite a change in the media. We had hype, but if you look at the numbers, the size of the economy, the hype didn’t help SL grow as much as people think. And now the normalizing in the media hasn’t had the effect people think either.

Giff: My impression is we’re in the normal summer slump. Do you guys want to jump in?

Stern: This is a normal cycle. The Ginko mess affected the lindex for one point for one day. That’s nothing. WE’re not looking at any crash or run on the bank. Second Life is going to continue to do extremely well.

Altman: I would echo what everyone else is saying. And on the gambling phenomenon, I hear from a lot of people that the economy vanished by half. That’s just not true. Most of the money on the Lindex was just a round trip through the gambling machines.

Cole: Second Life is always very cyclical. You get the highs and the lows that you have to ride out, but the future looks very bright.

Giff: What are the differences today for an entrepreneur starting in SL from a year ago?

Stern: There are no differeneces. You still have to start from the beginning. You design clothing in the art program--not Second Life--and you’re not going to find your passion looking at the designs of other people. You have to decide what your style is and pursue that. A lot of designers will spend six months talking to other designers, and they don’t learn anything. You cannot learn from another designer in this medium. You must logout. You must hit the art program. You must not give up.

Cole: I disagree a little. I noticed after 2005 a huge change in how people were bringing business, especially small business, into the world. There was an instant gratification. They were younger, faster, and usually knew their programming before they came in. I learned as I went. I hear over and over again that there’s a glut of new people wanting to come into this game and make money.

Graef: I think I agree with some of this. One major change I’ve observed, and this is happening on other platforms like IMVU, as the platform grows, you get a market of scale. A few years ago, you didn’t have to be very focused. You just made some sort of product. Now you really need to make a thorough market analysis and find a niche. You need not just professional products, but a marketing strategy and professional brand. The pond is getting bigger and bigger, but there are also more fish. You don’t just have 10,000 people that are potential buyers. You have hundreds of thousands. You just need to land one hit, but that’s very difficult. There is a higher barrier of entry, but also a higher bounty.

Giff: That ties nicely to the next question. As the noise in the space expands, and it does, and there’s very little market efficiency, there’s a marketing challenge. You can identify an interesting opportunity, but you’ve got to get the word out. HAver, what are some of the bigger marketing mistakes you see?

Cole: This is some of my favorite stuff, but not in a negative way. One of the problems, that you touched on Simone, is not starting out with a singular vision. You need to do the research. I also think clear and concise advertising is really important. There are ad managers out there in Second Life, and you can hire someone to make you this clean, concise advertising. And there are cheaper ways too. In the forums, you can put your stuff out for free, and get the word out. Sometimes the simple stuff is the more effective way to do things.

Having a blog, or some way for your customer to directly connect with you, is important. You are the brand. You’re wearing the clothes. You’re living in the building. Brand management is huge. Really thinking about what you want your brand to mean and how it should make people feel is really important. That ties into your own passion, it’s nice. We’ve all made mistakes, though. Mine, geez, lighting.

Giff: Last year on a similar panel, Justin Bovington took an interesting poll. I thought I’d repeat it. How many people used SL classifieds? How many use services like OnRez? How about forums? Where are you looking to discover new things? How many of you track your favorite designers’ blogs? How many of you are inside of design groups?

Shaun, in terms of getting products out, one of the things I’ve noticed you’ve always focused on is including viral objects. Can you touch on it?

Altman: One of the things I’m exploring is viral. In all of it I put a dialogue box, and the dialogue is something along the lines of “Get one” with a direction to get one. So every piece of content rezzed in the world helps to sell itself.

Giff: As a follow up, there’s been a debate over the years, of multiple stores vs single stores. And then you see the notion of kiosks. What do you see working?

Stern: I think the malls work for beginning designers. It certainly worked for me, to get my stuff seen. Now it’s not the case. It gets lost in the sea. New people aren’t shopping the malls like they used to. You older players will bring the new people to my shop. So it’s not profitable to go to the mall. And you can see that in the profile.

Graef: I think there are basically two strategies as a content creator to get your product sold. How does a musician get his music out there? He either writes a hit that everyone loves to listen to, that’s viral, that gets picked up by the media and word of mouth,  but not everyone is that good purely technically to land a hit. Another strategy is the community approach. You have a small, unknown musician who has a community and regular clubs. He’s not a millionaire, but it’s viable. You can do this in SL. You’re at the center of a community, and you can create a lifestyle.

Cole: I think as it all gets larger, there’s a move toward personalization. The haute couture idea of I’m making this personally for you. Niche marketing is something we all do, but to really connect with the community you’re trying to connect with, going small, is what I’m seeing more of. I’ve just involved a commercial firm. We have three flagship stores that are older, and we also have smaller, newer designers around the flagship, hoping they all work together.

Stern: The technical issues are also a consideration. The lag is a lot worse over the years. And the malls are horrible to shop in. You stand there, and it takes 10-15 minutes to rez a texture.

Giff: Another audience poll. How many of you think lag is worse today than a year ago? Oh, that’s a lot of people. One of the things I’ve been dwelling on is the issue of scale. To make a successful business, you have to team up with people with different skills. One of the challenges I hear from a lot of people in second life is the support problem. It’s hard to do your product and support your customers. Guni, you successfully recruited people out of your Dreamland community. How has that worked?

Graef: We experimented with various different models of how to involve people in our business, and we figured that there are things that work very, very well with people who have been long-time community members. The division, when dealing with a community and selling land, that works well with people from the community. It’s also an interesting task. When you work with people from in SL, the task has to be fun and interesting. Otherwise they walk off. They go into SL to have something interesting to do.

We’re also based in Wuhan, China, and we’re trained a lot of people there. They’re very motivated by having a stable shop and career. That works well for us to have 24-hour technical and product support. We are big in IMVU, and that’s operated from Wuhan and is very well perceived.

Giff: Simone, I know that you over the years have had mixed success hiring people for your shop.

Stern: It almost feels like the minute I start paying someone to work in the shop, they lose a little bit of their mind. You have to look for people who are established and have demonstrated what they are capable of. One of my best assistants was a designer who came and wanted to work there. It was great, she could help my customers while plugging her own stuff. And I’d sit there and teach her a bit as well. The mentor situation was great.

Giff: How do you other guys support your businesses?

Altman: I’ve had a much different experience. I haven’t had too much luck employing people in SL. It’s easy to find help, very hard to find good help. For our stock exchange, there are people who have a vested interest, and we bring them in to work on the project.

Cole: I tend to work with friends a lot, who you don’t have to pay as much, which is nice. Obviously there needs to be a clear first voice in a business. I have an avatar business, and my partner is Australian, so we get to cover a lot of time zones that way. I rely on myself a lot to be there as much as possible. Everyone really wants to be heard. If something bad is happening, you may not need to fix it right away, they just want you to hear about it. As long as I make that effort, I think I get a lot of good response.

Stern: As far as finding assistance for business and partners, it’s also important to decide whether you’re playing in SL or working in SL. The players will play, and they won’t take the effort seriously.

Giff: I particularly liked what you were saying Haver, getting close to your customer is so important. I really want to shift to questions now.

Q&A:
Q: I’ve been watching this TV show on CNBC, The Big Idea. They keep pitching the idea to do something for your community and passion, and everyone got started just knocking on doors. Does that work to just go to existing businesses?
Giff: Is your question does direct selling work?
Q: Yes. Does going door-to-door work?
Stern: I think it used to. When I started out, SL was a small community, and there were a few clubs that were populated. I’d walk through and pass out my clothes. Now if you do it, you’re likely to get banned. No matter how good your stuff is, they don’t want you passing out items, because they have their own vendors.
Altman: It worked better in the days of old.
Cole: I think you can spin it in a PR way. It’s effective to look through blogs and groups and find people who are in a group you’re interested in and send your stuff to them. Maybe they’ll wear it and tell their friends. It’s like getting your clothes on Justin Timberlake.
GIff: That’s always been the case in SL. Word of mouth is so important, you have to be willing to give away some items strategically. The grid’s so big now, it’s challenging to scale.

Q:Back in January, concurrency rates were around 30k, they’re still around 30-35k. It peaked a couple weeks ago at 45k. Do you have any insight on how that translates to sales?
Stern: I’m the wrong person to ask. After my first year, it’s been a continuous uphill ride for me. I don’t believe in the huge dips people experience.
Graef: I think January was a hype month. That whole period was characterized by a lot of media. And people would show up in the concurrency trying to make an account and then leaving. Maybe only 20k were really using SL. Now if you have 35k, that might still be a significant growth in economically significant users. Other figures have been gradually and still increasing, with user hours spent in world.

Q:In 2004 or earl 2005, malls, clubs, and shops were few. A lot of people didn’t even know what a skin was. As SL progresses from small shops and small numbers  to a more corporate and commercialized community, how will that affect up-and-coming as well as established designers?
Stern: Quality is always going to rise to the top. You get to be a quality creator by focusing on your passion. The difference between SL when I started in 2004 was that perhaps there were a number of designers and content creators who didn’t know what they were doing. Now they’ve had time to practice, and there are incredibly polished pieces of work now. It doesn’t necessarily mean professional graphics artists are doing it. I see professionals all of the time come into my shop and tell me they’re going to do what I’m doing, and then I never hear from them again.
Graef: I think you should keep in mind that the metaverse is conceptually indefinite, but the amount of memory people have in their minds is limited. The amount they can perceive and take in is limited. It’s harder and harder to be successful as there’s more content, but some will be very successful.
Cole: Three words: community, community, community. That’s the most important part t me. It’s larger, so you need smaller community.
Giff: And flexibility and speed is important. Big companies just can’t be as flexible. They’re not on the ground to the same level as any of these people on the panel are. Even Ansche Chung studios is quite large, but they’re committed to the space.

Q from in-world: This question comes from Vivian Draper. My question is about a comment on not having to pay someone a whole lot if they were a friend. HAver. I know many people make upwards of a few 1000s of dollars and pay a few dollars a week for someone to stand around in the shop. If you complain about not getting good help, don’t you get what you pay for?
Cole: I absolutely believe in that, and I absolutely believe in paying extremely well. I also believe in fostering a community that supports each other. My friend makes shapes, I make skins, let’s get together. I remember being helped out tremendously when I was new. And what Simone said about trades,  that works tremendously well. I want that communal feeling back. And when you pay someone, you have an expectation of service. When I get paid, I want to do well.
Giff: On OnRez island we’re going to start a networking group for designers and entrepreneurs the first Wednesday of every month at Noon SL time.

Q: Something I’ve been waiting for for a while, and I’m wondering why I haven’t seen, you’ve spoken about where did you get that moment. Why aren’t creators taking that content directly to the customers, and enabling them to sell your goods?
Stern: I think to a certain extent, I’ve done that. My yard sales sell everything for 100 lindens a piece, and people make a profit reselling it. The SL community doesn’t necessarily realize that resellers make a profit but help your brand. Give them some transferable content.
Graef: We’re doing that in IMVU. They have a cool feature that you can derive from another person’s product. The original creator gets a share of money, and it creates a community of people who are fans of products. I’d like to pass that to the Lindens to consider adding derivation, especially as SL is growing. It’s a very valid way to give small entrepreneurs a way to break through.

Q: Eric Reuters: We heard Philip yesterday talk a lot about grid reliability, how does that affect retailers? If it goes down on a customer, are they gone forever?
Stern: It’s a mix. I’ve seen grid failures cost a lot of money, and just the time I spend in customer service. It used to not be that big of an issue. Maybe once or twice a week, someone would have an issue. Now I can look forward to it every day.
Graef: I estimate we have three people working full-time to deal with those problems.

Q: There’s a much larger number of people who don’t speak English now. How does that affect support?
A: Babbler rocks. It’s not a precise translator, but it works well enough.

Q: What customer relation tools do you use to track sales, request, trouble tickets, etc. How do you train your employees on these tools that are displaced geographically.
Stern: I don’t have any employees, but I use the metrics available on OnRez. I find those a lot more informative than those I’m getting in my account history. There’s some misunderstanding that the Lindens show preference, but they don’t.
Graef: We use vendors. Our management system for dealing with land sales, we get some statistics from a web-based exchange. ON the international issue, we approached people from in-world and started hiring internationally very early on.
Altman: At Cyberland, we develop pretty much a complete automation system. We have a prim that scans the parcels and tells us if the same person still owns it. If they don’t, it automatically contacts them.
Cole: I just think automation’s nice because it gives you a little break.
Giff: I’d wager that the vast majority of people are still just downloading their account history into a spreadsheet.

Q: Last year I was running a mall, and I was obssessd with traffic. I did camping for a while, but it was costing me all my extremeties. How do you feel about the future of camping?
Graef: We had an interesting situation in China. We had people calling us up and asking if they could buy 1, 5, or 10 million Lindens. We figured out they were running server farms. Instead of running WoW gold farms, they were camping farms. I’m not optimistic about camping.
Cole: I believe in interactivity. Even if it’s just taking a picture with something behind you. The way to incorporate camping is to build it into your story. My theme is a zoo, so maybe they get a free outfit and become zoo keepers. It is appealing to people new to the game, and there’s a way to do them with fun, interactivity, and creativity.

Q: Looking at the panel, I’m a little disappointed. Everyone is content based, but I expected to see some service people. Me being a bank owner, I lost contracts because of Ginko. As content-based entrepreneurs, what can you give to service-based entrepreneurs?
Stern: Ginko wasn’t a bank. I think we all know that. It was a ponzi scam. I warned every person I talked to over the past 2.5 years about it and encouraged other businesses to spread the word about their own good services. That’s what I provide.
Cole: I think being proactive as well. If you’re interested, approach a content creator and ask “What can we do to work together?” We all want each other to be successful. And we are using each other’s services. If you feel like you’re not getting what you want, ask for it.
Altman: I’d like to bounce a question back. As a service provider, what kind of reciprocal relationships are you looking for.
Q: I was wanting to know from your experience about being longer in the game. What can you say to people to help maintain their businesses.
Altman: I’d love to see some sort of BBB, community recognition services.

Comments

[drOffset Cortes]

This was great, thank you.

For small designers starting out, I think it's easy (for new-ish residents who like to build) to get caught up in the idea of getting more land to have more prims to build, then take on shop rentals to help with tier, then becoming obsessed with traffic, which disappears the next day anyway. Then the person who just wanted to build has a lot more on their plate. My point is that new designers might want to be wary of losing focus on what makes SL fun and interesting for them, which will show in their products.

Thanks,
drO

[drOffset Cortes]

This was great, thank you.

For small designers starting out, I think it's easy (for new-ish residents who like to build) to get caught up in the idea of getting more land to have more prims to build, then take on shop rentals to help with tier, then becoming obsessed with traffic, which disappears the next day anyway. Then the person who just wanted to build has a lot more on their plate. My point is that new designers might want to be wary of losing focus on what makes SL fun and interesting for them, which will show in their products.

Thanks,
drO

[Giff / Forseti]

Thanks for posting this up VWN! During the event I didn't pick up the last questioner's comment about the panel makeup.

I would like to point out that there was quite a lot of "service business" represented on the panel, with Guni Graef's business running land rental and sales and currency exchange businesses, Shaun Altman running a land business and a stock exchange, and Haver Cole engaged in in-world marketing consulting, event and community management, and more.

I would have liked to spend more time on service businesses, especially the inworld music business. People can learn a lot watching how savvy SL musicians like Paisley Beebe manage their virtual presences.

Time was limited but I hope everyone found it interesting and helpful.