Is Amazon Destined to Replace Marketplace and Buy SL?

For years I’ve been predicting that the next wave of Virtual World development would be driven by the inevitable competition of e-commerce, marketing and gaming heavyweights like Google, Amazon & Microsoft.  All of these players have a huge vested interest in capturing the annuity income produced by the rapidly expanding world of Virtual Products and services.

SL Now On AmazonSo imagine my “surprise” when I saw the Second Life Community announcement, about Linden Lab offering Start-up and Enhancement Kits on Amazon!   I believe this is a first step towards the eventual disbanding of the Standalone SL Marketplace, in favor of an Amazon-powered alternative.  If I’m right, SL itself could be an acquisition target for Amazon in the not too distant future.

The early failure of Google’s Lively Virtual 3D World and the lackluster performance of Sony’s PlayStation Home Virtual World offering, should not be used to throw out this line of speculation.  These earlier efforts have one thing in common that Amazon and even SL doesn’t, a lack of profitability.

In addition to an Alpha-level user interface, no realistic profit potential is the main reason Google pulled the plug on Lively.  Interestingly enough, Sony, in response to Microsoft’s hugely successful webstore, has used this years CES show to announce it is bringing its own SEN (Sony Entertainment Network) store to the US and integrate it with the PlayStation Home experience.

Amazon Web ServicesSo why would Linden Lab give up running its own primary revenue source (Marketplace)?  Total Cost of Ownership (TCO) and a potential increase in Net Revenues by outsourcing e-commerce to an organization like Amazon.  Amazon has arguably the most cost-effective and efficient e-commerce platform in the world.  They also have something Linden Lab does not, more than “164 Million paying customers!”  This is a huge potential untapped market for Second Life, that would be almost impossible to reach, without this type of partnership.

Many people, not directly involved with Second Life’s back-end development, might be surprised to learn that since 2006 “Linden Lab has used Amazon Simple Storage Service (Amazon S3) to store elements used in the Second Life world and to distribute the Second Life Viewer to end users.”  In fact, Amazon has featured Linden Lab in a Case Study, from which this quote was taken.

Every company reaches a point where one or more things happen.  They either fail, diversify with new products & markets to sustain growth, go public, acquire additional private capital or are acquired.  Linden Lab has thus far failed to expand its market.  Their attempts to diversify their product via their Enterprise product was, as reported by Hypergrid Business, “a costly mistake.”  Their more recent Time to Sell!Patterns and Creatorverse products seem unlikely to generate the type of revenue or market expansion required to have a measurable impact on their overall business.  Going public is an unlikely option and it is doubtful any more private capital would flow into a stagnant business model.  The only remaining choice for the original investors to cash out, sell Second Life!

Amazon’s Jeff Bezos has proven he is a fierce competitor who is willing to take risks and sacrifice margin to dominate an industry.  In fact, a Jan 8th, 2013 Bloomberg Businessweek story on Amazon was summarized like this: “As long as consumers are consuming and shareholders are buying what Bezos is selling, Amazon looks fairly unbeatable.”

Hang on to your virtual hats ladies and gentlemen, I think 2013 could shape up to be an interesting year.  My advice.  Buy Amazon (AMZN) stock and look forward to a Virtual e-Commerce SL Marketplace experience powered by Amazon in the near future!

3 Responses to “Is Amazon Destined to Replace Marketplace and Buy SL?”

  1. Love this post and couldn’t agree more that Virtual Goods are going to grow and hugely. Virtual items are aspirational in nature and will reflect consumers inability to purchase the real thing. Just as Mercedes advertizes on TV, while a very small fraction of the population can actually buy a Mercedes – the Aspirational virtual good will fill a place we need – and lets face it, you don’t need a large parking spot. I even think that a V-Bay where people will trade Virtual goods and realize a profit for them is possible – traded AS virtual items as well. Thanks Val, as usual very cogent thinking & for heck sake we need more of these!
    Just not completely sure about Virtul Lie Insurance but that might come off as well…

  2. If it requires exposing my real world info to Amazon and linking it to my SL identity, then no thanks, no way, ho wow. I’ll delete first.

  3. An interesting theory. I don’t follow your blog so I’m not sure, but I seem to remember that you been predicting the demise of SL for some time now, right? I’m not sure about your groupings, though. SL isn’t a “game” like what you will find on “gaming platforms.” Second Life is a place to spend time, meet people, build and create things, like, for instance, games. A place to explore and see what somebody else created. A living, ever changing museum.

    If you want to be told what to do, led through a sequence and nudged when you take a wrong turn, try WoW, Assassin’s Creed, Halo or one of those other games with a decided point. Many people don’t “get” SL because the point is to do what you want to do, not what the developer wants you to do. It seems to me that you fit this category since you want it to be another xbox game. Rod seems to want it there as well which I find sad.

    It is possible that the current investors may want to cash out at some point, hopefully to be replaced by investors that can see the potential of an open environment where people can meet in a relatively safe way and be who they want to be. The current drive by LL to make it another bling-laden game platform is causing tension with the long time SLers, so many of whom are moving to other VW platforms which are based on the came basic codebase as the original SL. This change seems to be driven by apparently well meaning people like you that just don’t see what SL was designed to allow.

    Some games have created ways to import user created content as a way to bring new life to their lacking worlds. But, what would the average WoW player do if they could suddenly find themselves in an OpenSim meeting room where people from all over the world are talking about technology in education and best practices for education in virtual worlds? Would they just keep up the plot and try to kill everybody? Would they send Leroy Jenkins in first to disrupt the conversation and calculate the probability of being able to successfully change the agenda for teaching map reading skills to elementary school children in the Philippines?

    Please stop going on and on about gaming platforms and what SL needs to do so they can become one. It isn’t one. The current crew in LL may want to make it one, but that is their loss. And, as LL tries to transform SL into something it isn’t and move from community members that were active and interested and loyal to users that will move on to the next platform when it has new shiney bli–

    — SQUIRREL !! —

    Oh, sorry, got distracted.

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