mADness: Why are SL residents opposed to Linden Lab advertising?

Excerpted from an article by Gwyneth Llewelyn.

So Linden Lab is patiently trying to squeeze some needed cash by placing ads on their websites. Ciaran Laval seemed to have been the first to notice that Google Ads now appear on many of LL’s websites, and Hamlet Au picked up the story, quickly followed by many others. At least two forum threads on the official SL forums are discussing this.

And guess what? Residents, as expected, are not happy. But for all the wrong reasons.

Why are residents unhappy?

Like every change in Second Life, this generated a lot of resident unhappiness. After all, what would Second Life be without the drama? The fun bit is that Second Life, by design, is completely counter-intuitive to mainstream Internet culture of popular social sites:

~~ Instead of focusing on revealing as much as possible about yourself (Facebook, Google+), you reveal as little as possible — we’re all pseudonymous by default, but have the choice to show real names.
~~Instead of being easy to find friends already registered to the system, it’s pretty much impossible — either you know their avatar names, or you have no choice to find them.
~~Instead of having your data harvested to increase the number of ads you get (like on Gmail or Hotmail… or Facebook), your data is secure, protected, and private.
~~Instead of disallowing personalisation, everything (that means your avatar and environment) is user-generated content.
~~Instead of limiting what you can buy and sell with real money (see MMORPGs), everything pretty much can be done and sold — content and services.
~~Instead of having to deal with digital content theft — everything on the Internet can and is routinely copied and disseminated — Second Life implements DRM in the form of the permissions system. It’s not 100% secure, but the truth is that it’s close to 99%.
~~Instead of having ads to support the costs of running the service, everything is free except for hosting content and exchanging virtual money for real money.

And, of course, SL residents are aware of the differences and want SL to continue to be different.

So, from a psychological point of view, these residents — specially the ones most active, and often spending hundreds or thousands of US dollars in SL — don’t want SL to become some kind of “3D Facebook”. They reasonably argue that if they enjoyed the attitude of other social environments, they would be there and not here. The reason why they’re in SL is because it’s different and allows things that are completely impossible or forbidden on other social environments.

For their sake, I hope that they make loads of money out of those ads, and keep investing in Second Life.

They’re also willing to pay for hosting content — and since they already pay (it’s a subscription service) they resent having to see ads on top of their service. This seems to be relatively reasonable: most websites with subscription services don’t use ads, and vice-versa. In fact, we commonly view five types of services available on the Internet:

Paid/subscription-based (say, MMORPGs)
Free, based on donations (Wikipedia)
Free, sponsored by ads (Facebook and pretty much everything else)
Free, revenue coming from elsewhere (pretty much all support websites and even things like Google+, since Google gets revenue from ads elsewhere)
Free, burning venture capital or with an unknown business model (Twitter)

Second Life has a mixed model. It’s mostly a paid service — Premium accounts, virtual land ownership, transaction fees on the SL Marketplace and the LindeX — but perhaps some 90% of all accounts don’t pay anything whatsoever. The few that pay support the costs of running the service for everyone else.

Mixed models are not unusual, and it’s quite common that most services using a mixed model will have a subscription-based “premium” access, and a “free” service where you get ads. For example, many WordPress themes are “freemium” — you can download them for free, but ads will be embedded on the theme template, unless you’re willing to pay for the theme, at which point the ads disappear.

Also, in this case, Linden Lab seems to be targeting ads not on their home page — which would be relatively reasonable to accept, specially if you’re not logged in — but on the dashboard, which is not publicly visible, but only after you log in with your account. This is a bit unusual, specially if you’re a paying customer.

On the other hand, we accept that cable TV — a subscription-based service — will have ads on almost all channels. So obviously there is not a single rule for everything, and we have different expectations regarding different media. We expect paper newspapers and magazines to have ads in them, even though we pay for the cover charge. In-flight magazines have ads, even though we pay for the airline ticket. Hotels might have outdoor advertising, even though we book into rooms. When going to the movies, we usually get some ads between trailers, even though we paid the full price for a ticket (which, in turn, might feature ads on the back). On the other hand, when we buy a car, we don’t expect ads to be featured in them (even though the Smart car brand used to allow you a huge discount if you were willing to buy a car with ads painted on it!).

So we have different expectations regarding where we accept ads to be displayed, and where not. To give a typical example, the cover cost of a paper-based magazine or a newspaper is just a fraction of how much it would cost if there weren’t any ads inside; in fact, that’s the reason why “free” newspapers are increasingly popular (the publisher just needs to sell a few extra ads to compensate for the tiny cover cost which they gladly forfeit). We rather prefer to have a few more ads and get cheaper newspapers and magazines. I think this is pretty much part of the reasoning that Linden Lab is following: with decreasing revenues from tier, and little hopes of increasing the user base, the alternative is to put a few ads here and there to compensate for the loss of revenue. The alternative would be to raise tier — and that’s obviously out of the question!

Personally, I’m so “numbed” by ads that they don’t bother me. But I think it would be reasonable to display ads only to non-paying residents. It would give Premium and land-owning residents a feel that their money is more important than ads. Since only a small fraction of the resident population actually pays anything to Linden Lab, this would not cut much on LL’s overall ad revenue.

So why didn’t they do that? I think that the answer is simple. Linden Lab toyed with the idea of placing ads here and there; we already experienced the drama resulting from the introduction of ads on the in-world search engine first, and later on SL Marketplace. But the truth is, content creators — which are a source of income for Linden Lab, since most of them need to pay tier for their content to be available for sale, or at least pay transaction fees on the SL Marketplace and/or LindeX — demanded mass marketing opportunities to let their customers know where to find them. There was no choice to display those ads to everybody.

What LL is probably thinking is that they can expand those ads on further places. Two years ago, they experimented with their own ad-based system. Even though there are scattered reports that this worked out fine for some beta-testers (who did see an increase in sales), possibly it did not generate enough revenue to be worth the trouble. And of course this would only make sense if everybody — paying and non-paying residents — would see those ads, or else they would be pointless for potential advertisers, specially because it’s Premium and land-owning residents who are more likely to buy content and services in SL. They’re the actual market for advertisers, not free residents without money to spend.

So, well, LL moved on to a professional ad distribution platform — and what could be best but joining the leader in Web-based advertising, Google?

I personally don’t see anything wrong with it. Then again, I’m highly suspect and biased — it’s the few ads on this blog that allow me to pay for the recurring costs of hosting it, and I only wish I could get more revenue out of them, since it would allow me to host it on a better server… oh well. I can totally understand Linden Lab, and, for their sake, I hope that they make loads of money out of those ads, and keep investing in Second Life. Who knows, they might make so much money with ads that they might be able to afford dramatic tier price cuts…

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Read the full article by Gwyneth Llewelyn on her blog.

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