Feature: After Tumultuous Month, Developers Remain Optimistic

Earlier this week we reported that The Electric Sheep Company had let go 22 employees, about 1/3 of its workforce. A week before that, we reported that Linden Lab had let go its Chief Technical Officer, Corey Ondrejka. In spite of the tumultuous past few weeks, other developers in the virtual worlds space are still optimistic. "The most tangible evidence of our confidence in the virtual worlds space is the fact that we're actively recruiting for 8 open positions at the moment," said Mat Small of Millions of Us.  "We'd encourage your readers to check our website for details and to apply." David Post of NextPert put out a similar offer with an explicit focus on ex-Sheep.

Other developers, while optimistic, offer alternative explanations. Justin Bovington, CEO Rivers Run Red, says that his company is still seeing a steady increase in new projects and labels the Sheep layoffs as "purely a business model issue rather  than the market."

Aaron Delwiche, the Co-Founder of Elastic Collision, thinks the layoffs could be a sign that participation in virtual worlds hasn't boomed the way investors predicted or that they could be simply a sign of a broader economic slowdown. Either way, though, he believes that virtual worlds applications will remain in demand, if possibly in different ways.

"Businesses, governments, non-governmental organizations and educational institutions around the world are still looking at how to best leverage virtual worlds for collaborative decision making, education and global communication," he explained. "There is plenty of work out there, but the new work may not be in the same areas that saw growth in 2007.  Small to medium-sized organizations who have targeted their strategies should not be too concerned."

Peter Haik, CEO and Co-Founder Metaversatility, and Code4Software's Jared Freeman  both remain optimistic and  unconcerned for their own companies, but believe the layoffs may be indicative of a trend. Freeman says he remains "very bullish on virtual world technology," but he believes the industry is in the first wave of adoption, which is naturally followed by a pullback. He predicts "three more waves of adoption before Virtual World technology is mainstream."

Should Developers  Look Outside Second Life?

While all the developers we asked have a mostly sunny outlook on virtual worlds as a whole, the reaction is more mixed when it comes specifically to Second Life. Only Freeman believes that Second Life is still the only platform worth operating on—it meets his criteria of "user-created content, persistent creations, and convertible economy—though he does add that Code4Software is consistently reviewing other worlds.

That's not a new idea, though, according to Delwiche. While Ondrejka's departure has sparked intense debate over the future of Second Life, he thinks it doesn't change much from a business point of view: "Diversifying across a range of virtual world platforms was a sound strategy three weeks ago, and it remains so today."

Rivers Run Red has been working on alternative platforms and looking at the market as a whole for some time, but Bovington argues against the idea that "one man's departure is a reason for panic and turmoil across the entire virtual world market."

Likewise, Millions of Us and Metaversatility don't believe that Second Life is going anywhere any time soon, but both have diversified their portfolio of work to include other worlds as well, as Small says, "simply because opportunities are presenting themselves across a broad set of these environments."

That's a need that all developers need to recognize, according to Haik: "I do think that other development companies will have to recognize the value in the other worlds, recognize that there isn't a single metaverse, determine whether they are going to expand to work with the other worlds as a long term focus and get started immediately."

How Can Developers Prepare For Change?

With the entire virtual worlds industry still essentially in a startup phase, changes like those at Linden Lab and The Electric Sheep Company are inevitable. That doesn't make them easier, but it does make it worthwhile to look at options. One such option is simply slower growth with a focus on core workers.

"At Elastic Collision, we intend to grow slowly during the coming year," says Delwiche of his newly founded company. "Having survived the first Internet boom and bust, we know full well how fickle commitments to new media can be.  Rather than focusing on the quantitative objective of hiring 'x full-time employees,' we are concerned with making sure that our full-time and contract employees have a meaningful careers."

Code4Software, which has refrained from taking early funding, seems to be following similar lessons learned from the first Dot Com boom and bust. It relies heavily on contract work, though Freeman stresses that he avoids the fickle commitments to payment that seem to pervade metaverse contracting, something he says former Sheep have complained about as they approached him for work.

"Sometimes it's been tight, but we've managed to stay healthy and create two new industry leading products in the meantime," says Freeman. "Straight content creation services will become further cost competitive, and those trying to derive all their revenue from this model will find their profits dwindling.  We believe that providing the tools and projects that prove success with hard facts will help the industry grow."

Metaversatility and Rivers Run Red point to diversification in their portfolios. Bovington, who also notes recent awards as evidence of an increase in recognition for virtual worlds work, says his company has "a varied portfolio of clients and projects; healthcare, co- design/collaboration, change management, brand immersion and brand activation."

Haik adds that Metaversatility has operated in this way for some time, "selecting the most appropriate platform for each project we are presented. We will be building standalone 3d worlds on the Multiverse platform, building and working within more 2d/flash based worlds and keeping on top of what solutions are available. Finally, from a company standpoint we will continue to grow in a predictable, scalable and profit based direction."

And, finally, Millions of Us, whose CEO Reuben Steiger consistently stresses that the Age of the Avatar doesn't just include virtual worlds, has looked at many different platforms.

"We think we are currently well-positioned to take advantage of key trends for 2008, for example the emerging mash-ups between virtual worlds and social networks, and the rapid growth of browser-based worlds for youth," says Small. "We've been very careful about growing incrementally, managing costs, and diversifying the programming we are able to offer to clients. Building on that foundation, we're as bullish as ever."