The Bad Analogy that Wouldn’t Die

Dandelion

It’s like this dandelion in the sidewalk. How does it live?

Wagner James Au / Hamlet Au recently wrote a blog post comparing Linden Lab to AOL, again. It’s such an old and tired meme, I though it was dead, but I was wrong. I commented there, but thought it could bear repeating:

I’m tired of the the comparison between AOL and Linden Lab. It’s lazy. Linden Lab isn’t an Internet Service Provider, nor are they a content-production company.

What does Linden Lab provide?

  • Hosted online services, paid for by recurring subscription fees. Compare to Salesforce.com, Google Apps for Business, Flickr Pro, World of Warcraft
  • Online “virtual” (non-physical) goods marketplace. Compare to the iTunes Store, Netflix, Steam
  • A virtual currency marketplace. Compare to VirWoX, or the markets for WoW gold
  • Advertising sales (e.g. SL classified ads, SL Marketplace ads and promotions). Compare to Google AdWords, Amazon Affiliate Ads, Yahoo Advertising Solutions

Update:

Hamlet replied, “The comparison isn’t in the services each company provides. The comparison is with their main revenue streams — both of them are out of date and cannot be replenished.”

“… The point of this post is to show that fairly drastic changes ARE needed, because Second Life cannot remain profitable with its existing revenue model.”

Hamlet is talking about how AOL still (in 2011) gets a majority of its revenue from dial-up subscriptions, subscriptions which most people don’t need. It’s true that should be a concern for AOL, because those people probably also have a (non-AOL) broadband connection as well: they have another, better alternative way of connecting to the internet.

That’s where the analogy with Linden Lab breaks down. Right now, there’s only one way to buy/rent land in Second Life: you must pay Linden Lab (or a middle man, who then pays Linden Lab). There’s no other way, no alternative. Sure, you can get a cheap OpenSim, but OpenSim is still a pathetic experiment, with around 10,000 active users, compared to SL’s 1,000,000 or so (i.e. two orders of magnitude more). [You can argue about the exact numbers, but you can’t argue that there are two orders of magnitude difference between them.]

Photo Credit: sign of spring by bee wolf ray on Flickr. Licensed under a Creative Comons Attribution 2.0 License.