Linden Lab , the San Francisco-based company that created virtual world Second Life, is in the midst of major restructuring. The vendor has laid off about 30 percent of an estimated 330 employees -- mostly overseas -- and is consolidating operations in its North American offices. Some employees in the firm's Seattle office were also let go.
The largest markets for Second Life are in the US and Germany, but the company has terminated its German presence, though it had no official division there.
Linden Lab announced the restructuring yesterday, but gave only PR spin as an indication of how this would affect Second Life.
Most of those being let go are said to be sales and support staff, though some development staff are also going. The company says the restructuring is required to meet new goals of targeting a browser-based Second Life.
This would appear to mean that their development of the downloadable client version of the virtual world is ceasing as well as their newly launched Enterprise Edition.
How this affects Second Life's enterprise focus is unclear.
Background: Linden Lab has two major target markets with their virtual world -- everyday "real-world" users (called Residents) and enterprise/government users. The everyday users make up the bulk of Second Life's million-plus users, who generate revenue for the company by engaging in virtual transactions, from which Linden Lab receives a cut. Many of these are "real estate purchases" in-game to buy land, buildings, etc., as virtual storefronts or meeting places.
The enterprise and government market uses Second Life for training, virtual conferencing, and similar endeavors. Large corporations such as Kraft and Wells Fargo, and government offices such as the National Oceanographic Atmospheric Administration (NOAA) have used (or are using) Linden's virtual platform.
The company introduced their standalone Enterprise Edition last November and boasted of beta trials with IBM, Northrup Grumman, and the US Navy. Now, changes may be underway in how Linden markets to enterprises. With its new focus on a browser-based offering, they could be moving to a SaaS-only model and away from the combined hosting plus on-site server software and downloadable clients that typified the initial enterprise offerings.
Then again, it might be conjectured that because of Linden's largest user base being everyday people and their new (stated) focus being on producing both a browser-based interaction platform and integration with social media, the company plans to put less focus on sales to enterprises. In a blog post on Linden Lab's official blog for Second Life, the company seems to be promoting this as their plan, though not explicitly.
That said, the restructuring calls into question just how well Second Life has actually sold in the enterprise space.
One US-based client is Children's Memorial Hospital in Chicago, Illinois. They've used Second Life on the Web, along with a custom-made 3D map of their hospital, to create disaster scenarios for employee-readiness training. Mary M. Crulcich, head of emergency response program planning at the hospital, said in a prepared statement last year: "The return on investment is significant. Unlike drills that can not be replicated, our virtual hospital is reusable. It allows us to practice teamwork and decision making in an environment and with challenges that mirror the real world."
The layoffs conflict with this kind of testimonial, and with the fact that the company is still listing employment opportunities on their site. According to NextUp Research, Linden Lab has a current estimated valuation of about $384 million, much of that being venture funding.
The company just released its latest version of the viewer used to access the three-dimensional Second Life world at the end of March, which may have been the last goal before this round of layoffs could begin.
Linden Labs refused further comments beyond their press release.
— Craig Agranoff is an entrepreneur and national social media consultant as well as a published specialist in online reputation management and monitoring.
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