Having held off blogging anything about the purchase so that I could get a feel for how people are responding, I'm unable to hold back any longer. It seems that everyone and his dog has spilt blood over this so it's my turn to open my veins.
Before starting on the essay (Oh yes, there will be ink!) let me just toss out a perspective that may serve to frame my comments.
It’s a curious phenomenon that many of the people who are involved with Second Life become tremendously emotionally vested in all aspects of its operation. There is an almost religious fervor generated when LL does something - as if the Olympians had decided to interfere, once again, in the affairs of mortals. You only need to stop over at the officially Linden forums to sample the raw passion and violence of the average Second Lifer. And this is no "Dear Sir, do you think you could...?" environment; this is bloodbath of epic proportions. It's a serious vampire fest.
But there are two things that stand out like nipples in a wet shirt in Alaska - Linden Lab is a very open company and it is perceived as being hopelessly decadent. Like End Times prophets, the scribbling banshees of the forum and the blogs scream about the impending death of Second Life over and over again. And like the End Times prognosticators, does the continued existence of Second Life change their minds? Hell no! Maybe the grid didn't close its doors today, but tomorrow... just you wait and see!
Linden Lab release so much information about what they are doing to their customers that I am stunned anyone has the time to keep up with it. You'd actually learn less about the company if you were to have an actual desk there! They are - whatever people believe - a privately-owned company and have no legal need to release as many details as they do. None. When they go public (oh yes, there will be shares!) it'll be different. I bet they'll clam up!
This glut of information encourages a feeding frenzy. Pundits and Prophets circle the boat waiting for a piece of information to flop into the water where they can tear it apart, word by bloody word, to satiate their bloated egos.
And it is always bad news. Always. Even good news is bad news because bad news is better. Bads news sells. Bad news feeds the soul and anger makes people happy.
Price changes? Bad. Policy change? Bad. Free accounts? bad. Paid accounts? Bad? Growth by acquisition? Bad. See what I mean.
There is NO company on the planet that is perfect. Everyone fucks up and Linden Lab is no different. But I suggest that the emotional ties that are almost engrained in many SL residents means that they (a) feel they own the company and (b) are unable to objectively handle change - good or bad.
That's why the XStreet/OnRez acquisition is causing so much chatter: many folks can't be objective about it. So let me move on to the business of Business.
The over-arching aim of SL is for Linden Lab to make money, and if a small number of others can profit from the platform, then that’s great. Of course, in order to do this you have to offer a product that people want and that can be sustainable. But from the business perspective, you have to satisfy the big shareholders.
Individual customers are NOT shareholders. I read sometimes in blogs and comments that "we own part of the company," but "we" don't. The money you send to LL for tier fees or whatever do not buy you a piece of the company; they buy you the right to use the product - Second Life. The feeling of entitlement in SL residents appears to be very strong - much stronger than for other companies. I drive a Jeep but don't feel I own a piece of Chrysler. I eat Heinz baked beans but don't expect a dividend check every year. I bought Bret Easton Ellis's Lunar Park but I can't call him up with an outline for the next novel I want him to write for me.
So when LL make a business decision as a corporate entity, they have a duty to their shareholders, the venture capitalists who put money into the business, and not directly to their customers.
I know, some of you are thinking that this is preposterous and wrong: the customer is King, always right, and the whole point of doing business, yes?
Er, well... no! Scary as it seems, few of any of us do something for nothing. We want a paycheck. But, you scream, I give freely of my time to the local soup kitchen, and I don't get paid for that. No, you don't. But the only reason you have the spare time to do that is because you have a job that pays you enough to HAVE spare time. Without the job that pays you cash, you'd be back at the soup kitchen - but on the other side of the counter.
Enough. I've bludgeoned this dead horse into a bloody pulp. The point is that LL can acquire just about who the hell they can afford without having the permission of customers. Period.
And it's not like we didn't know this sort of thing was on the agenda. When Mark Kingdon took over the helm at LL last year, one of things he pledged to do was to expand the company. When you have venture capital cash to spend, one of the fastest ways to grow is through acquisitions. If the figures are correct - and there is no reason to assume they are not - SL residents traded $360 million in virtual goods and it doesn’t take a Warren Buffet to see that snagging a percentage of that is a good thing!
But, you may be wondering, if XStreet and OnRez were so profitable, why did they sell to LL? Well, individually, the margins for each company may suck, but the margins for the two - along with some savings (for “savings” read “redundancies”) - may be much better. You can buy two or three under-performing companies and combine the best bits to make one good enterprise.
Another reason for selling may be that the respective companies need to raise capital for other ventures they want to pursue; ones that they feel are more profitable. So you sell your assets and use the cash generated to buy your new stuff. Happens all the time.
The second point, therefore, is that acquisition of related companies is a good move. There is risk involved, but then again that's part of doing business. If you want a risk-free job, good luck with that!
The majority of other posts currently being tossed around are pretty negative, but it's much harder to find a sober assessment because for the Second Life blogging pundits, the affect clouds the analysis.