The suits come to Second Life. Now it's dying (The Times Comment page)
By David Rowan
Sky News may have hired a Twitter correspondent, and Reuters a short-lived Second Life reporter, but here is The Times's even more pulse-fingering dispatch from the digital frontier. The mood, we can report, is death-watch snarky: in the fickle realm of online chatter, yesterday's achingly fashionable meeting points are rapidly acquiring the funerary aura of Icelandic bank headquarters.
Twitter is now so celebrity-favoured that the cool kids dismiss it as “tired”, and Second Life is so over-commercialised as to be unrevivably “expired”. Let's gloss over the detail that there remain 8 million Twitter accounts activated and 15 million claimed Second Life members - if the blogosphere says you're history, listen up...
Technically, as a representative of big-bad MSM - that's mainstream media - I should snark back at the online conversation. Yet it's worth listening in for what it teaches about the adoption curve of disruptive new technologies. What begin as much-admired applications favoured by innovation-hungry early adopters can quickly make the leap to be taken up by a mainstream mass of consumers - before, just as speedily, falling so far out of favour as to make the initial fans tut with disgust.
It's a trend beautifully defined by Geoffrey Moore in his 1991 book Crossing the Chasm, which noted that the life cycle for successful technology products moves predictably from groups that he calls innovators, early adopters, early majority, late majority and eventually to laggards. As soon as the buzz of innovation starts to fade, the “cool” but influential people at the start of the cycle move on quicker than you can send a tweet. This explains why Second Life, the virtual online world that was supposed to be the advertising industry's salvation, is facing a backlash from corporate marketers and media commentators alike.
Three years ago corporations such as Coca-Cola, BT and Toyota were setting up virtual shop in the expectation of reaching the next billion consumers. Now, the man from BT says, businesses have “gone cold” on a game which they “can't see how it is possible to make any money out of”.
Deloitte's director of technology research, Paul Lee, adds that the game has been “virtually abandoned” by “normal” people and businesses. Even the Department for Work and Pensions has had to defend publicly its “waste” of tens of thousands of pounds of taxpayers' money in building a government “innovations centre” in this virtual land.
That's really the problem. Once “the man” gatecrashes the party - and governments and corporate marketers are inevitably a long way down the adoption curve - the kudos rapidly evaporates. No matter that Linden Labs, which operates Second Life, controls a virtual currency that appears more stable than that overseen by the Bank of England - for all its insistence that the game is highly profitable, the curve inevitably peters out long before such tech businesses can fulfil their financial expectations.
All this explains why the assumed valuations of social-media companies are often built on greater financial chicanery than Bernie Madoff's tax return. Facebook may have valued itself at almost $20 billion not too long ago, but with little evidence of a profitable business model, don't bet on it being the company that knocks Google off its peg. Twitter may have secured $35 million in investment here and $22 million there, but despite a reported 1,400 per cent annual user growth rate, it will struggle to turn a penny in profit before the online crowd moves elsewhere. Bad news, I'm afraid, if the Sky News Twitter correspondent was making long-term plans.
Besides, in today's market, whatever supposed “next big thing” our digital culture favours in any moment faces an ever more accelerated journey to oblivion. Deloitte recently calculated that the average revenue per user for some of the largest new media sites is measured in pennies per month, compared with tens of dollars for cable subscribers, newspaper buyers or movie-goers. In other words, social networks need more than 100 users to generate the equivalent revenue of every traditional media customer - and in 2009 a fast-growing online business is nothing without that quaint concept called monetisation.
So good luck, ITV, recouping much of the £175 million that you wasted acquiring Friends Reunited. Too bad, eBay, you had to click “Buy it now” when Skype accepted your ill-judged bid of $2.6 billion. It's only by the good fortune of early timing four years ago that News Corporation (parent company of The Times) made what has proved a prudent and prescient investment of just $580 million to acquire the now lucrative MySpace. Otherwise, this Times columnist would have been in the awkward position of berating its parent company for profligacy in the pursuit of the congenitally disloyal digital consumer. And that would have set the Twitterverse alight.
The truth is, most of today's hot social networking businesses will struggle to make a viable business, however confident their founders' pitches to the media. “We will make money, but we can't predict exactly what's going to work,” Evan Williams, one of the team behind Twitter, says unconvincingly in the first UK edition of Wired magazine.
That's not to say that his innovation - as with the unprofitable Facebooks et al - isn't enriching our lives and giving us new choices about how we communicate. In due course, you can assume, a bigger corporation will come along to buy Twitter for its supposed market reach, just as AOL bought the struggling ICQ in 1998, and Google paid $1.65 billion for a cash-draining YouTube three years ago.
By then, of course, the conventional wisdom among newspaper commentators and the more influential bloggers will be that Twitter, just like Second Life, will be so mainstream as to be terminally uncool. They will have long ago moved on to the next next big thing.
(The Times, April 2 2009)
Sky News may have hired a Twitter correspondent, and Reuters a short-lived Second Life reporter, but here is The Times's even more pulse-fingering dispatch from the digital frontier. The mood, we can report, is death-watch snarky: in the fickle realm of online chatter, yesterday's achingly fashionable meeting points are rapidly acquiring the funerary aura of Icelandic bank headquarters.
Twitter is now so celebrity-favoured that the cool kids dismiss it as “tired”, and Second Life is so over-commercialised as to be unrevivably “expired”. Let's gloss over the detail that there remain 8 million Twitter accounts activated and 15 million claimed Second Life members - if the blogosphere says you're history, listen up...
Technically, as a representative of big-bad MSM - that's mainstream media - I should snark back at the online conversation. Yet it's worth listening in for what it teaches about the adoption curve of disruptive new technologies. What begin as much-admired applications favoured by innovation-hungry early adopters can quickly make the leap to be taken up by a mainstream mass of consumers - before, just as speedily, falling so far out of favour as to make the initial fans tut with disgust.
It's a trend beautifully defined by Geoffrey Moore in his 1991 book Crossing the Chasm, which noted that the life cycle for successful technology products moves predictably from groups that he calls innovators, early adopters, early majority, late majority and eventually to laggards. As soon as the buzz of innovation starts to fade, the “cool” but influential people at the start of the cycle move on quicker than you can send a tweet. This explains why Second Life, the virtual online world that was supposed to be the advertising industry's salvation, is facing a backlash from corporate marketers and media commentators alike.
Three years ago corporations such as Coca-Cola, BT and Toyota were setting up virtual shop in the expectation of reaching the next billion consumers. Now, the man from BT says, businesses have “gone cold” on a game which they “can't see how it is possible to make any money out of”.
Deloitte's director of technology research, Paul Lee, adds that the game has been “virtually abandoned” by “normal” people and businesses. Even the Department for Work and Pensions has had to defend publicly its “waste” of tens of thousands of pounds of taxpayers' money in building a government “innovations centre” in this virtual land.
That's really the problem. Once “the man” gatecrashes the party - and governments and corporate marketers are inevitably a long way down the adoption curve - the kudos rapidly evaporates. No matter that Linden Labs, which operates Second Life, controls a virtual currency that appears more stable than that overseen by the Bank of England - for all its insistence that the game is highly profitable, the curve inevitably peters out long before such tech businesses can fulfil their financial expectations.
All this explains why the assumed valuations of social-media companies are often built on greater financial chicanery than Bernie Madoff's tax return. Facebook may have valued itself at almost $20 billion not too long ago, but with little evidence of a profitable business model, don't bet on it being the company that knocks Google off its peg. Twitter may have secured $35 million in investment here and $22 million there, but despite a reported 1,400 per cent annual user growth rate, it will struggle to turn a penny in profit before the online crowd moves elsewhere. Bad news, I'm afraid, if the Sky News Twitter correspondent was making long-term plans.
Besides, in today's market, whatever supposed “next big thing” our digital culture favours in any moment faces an ever more accelerated journey to oblivion. Deloitte recently calculated that the average revenue per user for some of the largest new media sites is measured in pennies per month, compared with tens of dollars for cable subscribers, newspaper buyers or movie-goers. In other words, social networks need more than 100 users to generate the equivalent revenue of every traditional media customer - and in 2009 a fast-growing online business is nothing without that quaint concept called monetisation.
So good luck, ITV, recouping much of the £175 million that you wasted acquiring Friends Reunited. Too bad, eBay, you had to click “Buy it now” when Skype accepted your ill-judged bid of $2.6 billion. It's only by the good fortune of early timing four years ago that News Corporation (parent company of The Times) made what has proved a prudent and prescient investment of just $580 million to acquire the now lucrative MySpace. Otherwise, this Times columnist would have been in the awkward position of berating its parent company for profligacy in the pursuit of the congenitally disloyal digital consumer. And that would have set the Twitterverse alight.
The truth is, most of today's hot social networking businesses will struggle to make a viable business, however confident their founders' pitches to the media. “We will make money, but we can't predict exactly what's going to work,” Evan Williams, one of the team behind Twitter, says unconvincingly in the first UK edition of Wired magazine.
That's not to say that his innovation - as with the unprofitable Facebooks et al - isn't enriching our lives and giving us new choices about how we communicate. In due course, you can assume, a bigger corporation will come along to buy Twitter for its supposed market reach, just as AOL bought the struggling ICQ in 1998, and Google paid $1.65 billion for a cash-draining YouTube three years ago.
By then, of course, the conventional wisdom among newspaper commentators and the more influential bloggers will be that Twitter, just like Second Life, will be so mainstream as to be terminally uncool. They will have long ago moved on to the next next big thing.
David Rowan is editor of Wired magazine, which launches today in the UK
(The Times, April 2 2009)
posted by David Rowan at Thursday, April 02, 2009
<< Home