Wow.  Talk about the two ends of the techno-food chain coming together!

Earlier this week, several tech/MMO news outlets including ITProPortal, TechEye, and Massively reported on a rumor that Linden Labs, creators of the virtual world of Second Life, were quietly considering purchase offers, and that they had an offer on the table from Microsoft.

At this point, I am calling it a rumor only, because as far as I can tell, both sides are staying mum about it (which of course seems to give the rumor that much more validity). However, what we do know as fact is that Linden Labs has been on shaky ground lately, both the virtual kind and the financial kind.  The past year has not been kind to SecondLife, which for a long time was regarded as THE virtual world for choice for both business and entertainment.

While trying to fend off lower-cost competitors like ReactionGrid, which has a similar user interface, the company has also gone through some corporate shake-ups recently. A massive layoff in June was followed closely by the departure of CEO Mark Kingdon.  In August LL announced a planned shut-down of their teens-only grid and less than two weeks ago they closed up shop on their Avatars United, an virtual-worlds version of Facebook.  News of the Microsoft offer also came with info that LL quietly closed down their UK offices several months ago, making them more agile (and primed for an acquisition?)

Technical issues have also plagued the company as of late.  Their latest sponsored viewer has been out for several months yet still only has a lukewarm reception in the user community.  And on top of that, the most popular third-party viewer, Emerald, has been completely neutralized as a sanctioned-viewer option with Linden Labs shutting it down due to concerns over hackability.

And finally, Linden Labs has suffered from a market that has grown cold to the allure first promised by virtual worlds several years ago.  At the beginning, many thought that they were going to be “the next big thing”, and for many, they were…at least for a few minutes.  But the steep learning curve, objectionable content and a general lack of understanding in the overall computing population has relegated it to an area of business reserved for technophiles, dreamers and geeks (I happily count myself in each of these groups).  It still remains popular as an entertainment outlet for those seeking fun and conversation, but it stands among many competitors now in that regard.

I still strongly believe in the power of virtual worlds.  They can bridge gaps of time and distance.  They can provide safe and cost-effective opportunities for idea sharing, training and dialog.  But now LL faces financial issues, technical issues and marketability issues.  They need to be more stable in every sense of the word.  They need to have cash-flow.  And they need to have a global reach.  Microsoft could provide all of that for them.  But it would come at a price.  Creativity might be stifled, deployment of solid revisions could be slow, etc.

But overall, if it was to happen, I think it ultimately could be the life-preserver LL needs to survive in this economy.  I consider myself cautiously optimistic that overall, it would be a positive move for bringing the value of virtual worlds to the general population.  I’ll definitely be staying tuned for more info!

10/5/10 UPDATE – Wow, and now as of October 4, Linden Labs announced that they will no longer be offering discounts to education and non-profit entities: “All  education and non-profit private regions of any type, purchased after Dec. 31, 2010, will be invoiced at standard (i.e. non-discounted) pricing.  All currently discounted renewals which occur after Dec. 31, 2010, will be  adjusted to the new price at that time.” Nice job guys – as if it wasn’t hard enough already for us in the public sector to get traction for virtual worlds, you’ve gone and doubled the pricing with three month’s notice. Time to fire up the OpenSim account!