Interview with Linden Lab CEO Mark Kingdon

Kingdon: What we're doing is our focus for the company from a management perspective, is to achieve a very specific set of goals around user experience and platform stability. And, we've been doing some very deliberate investment hiring in order to deliver on this.

So, we're managing to deliverables. This is a company that generates positive cash flow and is in a very good financial situation. We probably have more cash in the balance sheet than we've ever raised from investors.

Industry Standard: Really?

Kingdon: Yes. This is a company with a very comfortable cash position and a very strong economic model.

Industry Standard: Despite the fact that there's a deep recession taking place right now?

Kingdon: We have not felt the same in world economic turmoil that the real world has faced. We haven't seen the same pain.

Industry Standard: [Yoon] said in some articles or research that he'd seen about the video game industry saying that recessions can actually be a boost because more people are, instead of going on vacation or speeding $50 going out to the movies with their family, they can stay home in front of the computer and do something that's either free or low cost. Do you think there's an effect like that for Second Life?

Kingdon: I think there is, and I think it's great entertainment. Basic accounts are free. So you can go in, startup at Second Life, explore things, and there's a lot of free content that people give away. You can even go to Freebee Island and get great things for your avatar that costs nothing.

I think you can have a great experience in Second Life without spending money, but then you want to create content. You probably need to buy some land or rent some, you really want push out on this level where you can spend some money.

I haven't done any analysis, but I have to imagine that the cost to attend the movies today, it's almost $10. At least in the bigger metropolitan area, unless it's Benjamin Button which is a three hour movie. Most are two hours, right? So you're spending $5 an hour before you buy popcorn and snacks.

You could easily spend $10 in two hours in Second Life. If you weren't buying land you'd have to work hard to get around to spend that kind of money. That's a lot of Linden dollars, right, $10? You could do it in two hours, but you'd have a lot of fun.

So I think dollar for dollar, it's high-value entertainment for the casual user.

Industry Standard: Are there big spenders in there that go on sprees or are people usually very targeted and thoughtful about what they're buying?

Kingdon: I haven't actually looked at the individual market basket. A market basket analysis would be really interesting. What we usually look at are independent businesses that are generating a lot of Linden cash flow.

There's some really great businesses in Second Life. You can own land, which Second Life is pretty well known for. Making hair, making make-up, clothing, animations so that people have cool enhanced moves. Those are really substantial businesses in Second Life.

Industry Standard: I've noticed that in the past two years of observing Second Life that sometimes business-related issues are the third rail of the community and when Linden Lab messes with something, whether it be the way that gambling works, advertising works, or land sales, there can be huge outcries in the community.

You have to do some of these things sometimes, obviously. You have to tweak the way things work or change them outright. How do you interact with the community? How do you prepare this? Does it make changing Second Life a difficult thing for Linden Lab?

Kingdon: The last eight months have been an incredible learning experience for me because there are very few businesses where you find a community that is as active and engaged as you have in Second Life. Really, I think they're very few corollaries to Second Life.

No matter how prepared you are, it's still an incredible learning experience. I learned a lot about the community, how to engage with them, what they're specific pain points are, what the right form or approach is.

I think we, as a company, are working hard to getting better at finding a way to proactively get feedback and input, and then how to ensure we have a good conversation when we're in the rollout phase. I think we'll continue to get better at it.

The thing that's really important is ensuring that we don't lose sight of our strategic objectives for the platform and the fact that we have an incredibly widespread audience. So things that are good for some are not good for others. Making sure that you take the entire picture into account when making decisions is something that we're really, really conscious of.

We made a change last year around ad farming on the mainland, which was something that residents, there was a lot of discussion and debate about. There was a discussion before we implemented our policy change. That's an example of a policy change that we made that's had a net positive impact on the mainland experience and was welcomed by residents.

So there are changes that we're going to make to the business in the way that people engage in the economy, but our objective is to make the net impact a positive one.

Industry Standard: Let's talk a little bit about strategic objectives. What are they, short term?