Saturday, April 26, 2008

Web hosting and land ownership--again

Crap Mariner's blog addressed an analogy in my last blog, which I have read thoughtfully, and I have to say, I have to agree with him. Second Life is not like TODAY's web hosting services.

I think Second Life is more like the web hosting services from which they had evolved: frontier family set-ups using crap (sorry--TM) machines in someone's garage. Wise entreprenuers hooked up with these little hardware holders, repackaging and marketing their hosting as affiliates and reselling the hosting to individual users, providing at times, the go-between for the customers and the hardware/software guys.

Now that was in the '90s, when I knew what web hosting meant because someone in my household worked for one of these start-ups. They literally plugged into a main line in downtown Chicago with a bunch of crappy little PCs and hosted people's websites. They were glad to have those middle men for a while because the middle men kept the customers off their backs so they could keep the machines going. They were ostensibly outsourcing their customer service. And did it cost $1000 to set up a web site? No, but it cost considerably more than the nearly free cost that is quoted nowadays, as set up was not automated nor was registering a domain cheap at the time.

That worked great until they automated their web hosting sign up, troubleshooting, etc., and also as technology improved through the data stream. And the market was heating up. Technology was making it so one big ol machine from Cisco could do what their 200 PCs could do and firms were professionalizing their web hosting companies so that they WERE doing "managed application hosting," as Crap names it. They couldn't compete--their cost to run was too high. One big guy could come in and eat them up, and that is what happened. My family member's company closed its doors, not in bankruptcy, but with their customers sold off to the bigger tuna. Could we do anything about it? Nah. We went on.

Compare my knowledge of web hosting from the 90s to today's Second Life. What I describe is what Linden Labs is doing with allowing "land ownership." They allowed land owners to be their middle men for their crappy little machines, while they tried to keep it all together. (We ALL know they are having a hard time keeping it all together right now, but that warrants someone's else blog.) A lot of the decrease in their start-up cost (I refuse to call it "land price") it is due to the same forces experienced by web hosts in the 90s: technology is improving and more companies are entering the market. Something's gotta give, and in this case, it's the cost to set up a website--oops, I mean, a sim.

While I concede to my friend Crap that my analogy was outdated, I won't back off my argument that "land ownership" in Second Life is nothing but a sales tactic by Linden Labs that worked. They got you to be their middlemen by calling you "land owners." And now they are responding to real life market forces that are saying "Your membership is plateauing, you have some 400+ machines sitting around unused (hello, Gaeta!), and you better do something quick to make some bucks because someone's gonna be calling you on that loan soon enough (*cough* Mr. Kapor)." Linden Labs had to risk devaluing current land by flooding the market with new land and pricing it more cheaply to take care of business.

I will reiterate that basing your business model on the arbitrary pricing whims of a private enterprise is risky business. It's called "speculation" for a reason. If you got stuck with land that you paid more for, well, whatcha gonna do? It's a product. It's not "land." Real life land is limited; they put another 400 machines on the grid, and you bet the price should go down. Supply and demand, baby.

And if Linden is not giving you what you need as a provider, go out and find the one that will. Cuz they are out there somewhere. Linden's feeling it--aren't you?

Thanks, Crap, for addressing my blog thoughtfully. I hear what you are saying.

1 comment:

Mister Crap said...

/me salutes

No analogy is perfect in the end.

I was going to toss in something about resellers, but it was getting like those "sphere within a sphere" arrangements that the diehard ptolemaics were building before copernicans wiped them all out.

In the end, LL is LL, and I'm sure whatever path they force, those following them will have an easier time of it ramping up to speed.