[Editor's Note: Contributing writer Simon Newstead is CEO and Co-Founder of Frenzoo, a 3D Fashion startup and the writer of the VR Fashion blog. He can be contacted at: simon at frenzoo dot com.]
The consensus, as Google themselves explained, was a need to "focus more on our core search, ads and apps business".
Most observers viewed the cancellation as a tough but correct decision during a major slowdown in its core online advertising market. Many questioned the launch of the service in the first place. A search company moving into 3D cartoon chat and online gaming without a clear business model seemed a bit of a stretch.
Even Lively engineering manager Niniane Wang admitted at Virtual Worlds London last month there was still no internal decision on Lively's virtual economy model - not a great sign for a public service several months after launch.
However there were other factors that also helped contribute to the demise of the Lively service. These may not have grabbed as many headlines, but they had an impact, and not in a good way:
1. Rarity (or lack thereof)
Why do World of Warcraft players grind for hours and hours on end to level up or gain a new weapon or skill? Why do millions of Stardoll fans log in every day just to get their daily StarDollar allowance? Why do Gaia Online users save for months (or plead total strangers) to buy that one special item at the top of their wishlist?
The cardinal rule: make items rare. I.e. require effort and/or money to acquire items, and those items become highly sought after. Desire breeds addiction, addiction plus good, fun gameplay = many repeat visitors.
Yet the day Lively opened its doors, all items in their catalog were free. With that precedent set, nothing "felt" valuable. With that, there was no "desire" factor or goal to strive for - and far less motivation to keep coming back.
This design decision made Lively feel like a "throw away" environment, and users responded in turn.
2. Too powerful and complex an interface
As Ars Technica observed in its launch review, the user interface was difficult.
Unlike Second Life, Lively was designed to be a casual "pick up and go" experience for the mainstream - yet the UI wasn't designed that way.
For example, many users (myself included) didn't know how to make our avatars walk around a room.
Frustrated right clicking, left clicking, and hitting arrow keys yielded nothing. It turned out that the way to walk was to hover the mouse over your avatar, then drag and move the mouse to cause your avatar to walk around. Not intuitive.
You might think that the way to solve that was to use a more standard control, for example left click on a place and avatar walks towards it. However this brings up a higher order question: Why was walking even allowed in the first place?
Walking didn't add anything to the social chat experience except complexity and confusion.
Lively's competitor and 3D chat leader IMVU recognized this fact and even years after their launch, IMVU doesn't support avatar walking.
It doesn't need to.
3. Too rough, too early
Unlike an unknown startup, anything Google launches to the public is going to attract a day one audience of millions.
That's what happens when you are the most visited web company in the world. You had better make sure that it's ready. In Lively's case, it wasn't just the lack of Mac support that caused fits among its early user base (although that didn't help).
It was other issues such as lack of an open content program, leading to a dearth of selections in the store on the first day. A few months would have made all the difference as Google had truly promising and unique content ecosystem in development which could have been a game changer.
It was also many little things:
Anger and confusion greeted a friend who had spent an hour decorating her room, yet returned a few hours later to find strangers had put sofas on the ceiling, tipped over chairs and rearranged plants into a jumbled mess.
All because at launch it was too easy to unknowingly allow others to edit your public room. This and many other small, yet very frustrating user experience issues surely would have been cleaned up with more time in a closed beta.
First impressions count even more in a spotlight.
4. Audience and art
Lively tried to be everything to everyone right from day 1.
Unlike other games based around a theme - be it anime lifestyle in Gaia Online, music in vSide or 3D Avatar Fashion in Frenzoo (disclosure: this is my product) - Google went for an audience of everyone. Or, as Google put it themselves, "Be who you want to be on the web pages you visit."
This was always going to be an ambitious goal, but it was very difficult to create a cohesive experience with a mix of radically different art styles for the avatars.
In successful services such with Nintendo Mii or Habbo Hotel, there can be plenty of diversity in look but yet a single unmistakable avatar style glues the whole experience together.
However in Lively, you had tiny bears hugging tall skinny cartoon girls, while pigs walked around in circles.
The goal - total freedom of art style - may have been worthy, but put them all together in a chaotic 3D chat environment and the net effect was chaotic and off-putting for users.
5. No profile to call home
It's an irony that a service that pushed the outer limits of web technology, the most basic social web features such as a profile page, were conspicuously absent.
Nearly every successful online game or web community has a profile page or home screen, as the center of the social experience and to build your own virtual identity - be it for role playing or just making friends.
IMVU's profile pages are buzzing with user expression and customization, MySpace and Facebook have built their social businesses entirely around profile pages. Yet surprisingly, Lively, which billed itself as the next step in the "social web," didn't support web profile pages at launch.
Does the demise of Lively spell the deathknell for virtual worlds?
I don't believe so. Whilst there has been some excess in hype in parts of the industry, for many players abundant opportunity is still there. The rapid growth of other virtual worlds from IMVU through to Buddypoke and Stardoll and growing revenues seem to bear that out. Not to mention the massive growth in MMO revenues in the past three years.
However in Lively's case, Google made several big and small mistakes. Combined with a confused business model and no long-term commitment from the Google mothership, this ultimately doomed the otherwise promising service to brief and inglorious lifespan.
The problems could have been fixed and focus found for Lively. IMVU's first year was plagued with bugs and issues; but as Silicon Alley Insider put it succinctly, in Google's case they didn't even try.
NCSoft the MMO giant has credits that include the massively popular Lineage, Lineage II, Guild Wars, City of Villains/Heroes and the upcoming Tabula Rasa. But Dungeon Runners, one of only two free-to-play games from NCsoft, is unlike most of their other products. DR is based on a tiered subscription model, where users can play for free, or opt to pay a monthly subscription ($4.95) to access upper level content.
Free To Play spent an hour with Dallas Snell, NCsoft's Director of Business Development, discussing Dungeon Runners, the free to play model and the future of NCsoft. Dallas has been a prominent figure in the games industry since 1983 having to contributed to over 20 titles during his time at Origin and EA. After a short sabbatical from gaming, Dallas returned to the industry in his current role based in Austin, Texas.
The earliest version of Dungeon Runners began as a different project entirely back in 2001, before being put on the back burner, where it remained until 2002 when it was dusted off to be a game titled Exarch. That too was eventually put to rest until Dungeon Runners was resurrected in its current incarnation about 18 months ago. Today the team consists of over a dozen internal employees with a heavy contingent of art outsourcing.
The decision to resurrect Dungeon Runners and make it a free to play game (versus a full retail MMO) came from NCsoft CEO Robert Garriott and Chris Chung, the former ArenaNet General Manager, who operated out of Korea at the time and therefore had early exposure to the free to play model. Chris is back in Austin now and looking to push NCSoft further into casual MMO development, replicating the success of Korean companies like Nexon.
There's been speculation that NCsoft chose subscriptions as the primary revenue model in Dungeon Runners due to a belief that North American players preferred that model to microtransactions. However, that was not the rationale for the subscription decision. Instead, Dungeon Runners' optional subscription fee was chosen simply because a microtransactional model wasn’t yet set up in the Dungeon Runners code base. To remedy that, the team is currently working on getting microtransactions running within Dungeon Runners before the game is launched in Korea.
Dallas made frequent mention of NCSoft's embrace of "Web 2.0" development philosophies. In particular, NCsoft's use of the free to play model, Dungeon Runners as a testing ground for future products and the company's strong commitment to reducing barriers to entry for all NCsoft products were all offered as proof of the company's Web 2.0-ness.
Dallas often referred to Dungeon Runners as an experiment, saying that although Dungeon Runners currently utilizes subscriptions, within a couple of months in-game advertising will become a part of DR. In fact, the ads are already in the world, but visible only to testers, NCsoft and Double Fusion (the in-game ad provider). F2P.biz was asked not to reveal how the ads will be implemented, but expect an announcement from NCsoft soon. If all goes well with the ad experiment, Dallas says NCSoft will consider the possibility of scrapping Dungeon Runners' subscription fee all together.
On the other hand, by their own account NCSoft is seeing higher than normal conversion rates with their current subscription set up, so perhaps Dallas won't be so quick to abandon it.
What are those great numbers?
Among active users (online within the last month), Dungeon Runners has a high free:paid ratio - i.e. there's a larger proportion of paid to free users than among most f2p games. Dallas cites Runescape with a 5:1 ratio (free to paid, online at any given time), and says that DR is hitting 3:1, or after content updates, as high as 2:1.
Additionally, NCsoft expected a monetization rate of 1-3%, but their numbers are reportedly "significantly higher" [Dallas declined to give a specific number]. Dallas claimed not to know the cause of the higher monetization rate, but one contributing factor may be that the large majority of in-game activities or items are available only to paid users. Dallas acknowledged this and went on to say that the dev team is strongly considering raising the ceiling for free users as currently only 1-2 hours of free play will result in players hitting the ceiling with respect to what they can get for free.
Further to NCSoft's recently announced plans to release free to play content on the Sony network, Dallas talked about his company's goal of becoming "device agnostic" in order to break down the segregation of gamers between platforms. NCsoft plans to build their own cross-platform community service, with friends lists, inter-game messaging, and other features similar to Xbox Live. NCsoft also intends to release desktop, facebook and mobile widgets to extend gamers' experience.
According to Dallas, NCSoft thinks of Dungeon Runners as a "MMO light" or a game that straddles the gap between casual and core gamers. In Dallas' opinion, the success of products like Runescape makes it likely NCSoft will develop even more accessible games - perhaps even browser-based - to further minimize the barriers to entry.
With 40+ data probes plugged into Dungeon Runners, NCsoft approaches the product as a testing ground for ideas to be built into other games. The probes measure everything from time played, rewards frequency, item usage, leveling curves and dozens of other useful metrics. Outside of the game, account-level metrics are tracked in a publisher module that will allow NCsoft to track and analyze a single player's activities across all their products.
In Dallas' eyes, retail may soon become "extinct" with digitally delivered gaming ruling the day. He spoke candidly about the struggles facing music and film and how games are uniquely structured to develop their own delivery solutions. To that end, products like Guild Wars and Dungeon Runners are blazing trails for NCsoft.
Finally, as already mentioned, a recurring theme from Dallas was his commitment to lowering the barrier to entry in all NCsoft products. As evidenced by their free to play experiment, NCSoft strategy is to grow their customer base as widely as possible, then monetize the largest possible proportion. Most flatteringly, Dallas said his officemates all had printouts of F2P's article, Top 10 Ways to Reduce Barriers to Entry, and were treating it as a white paper of sorts.
Thanks to Dallas Snell for his time and to Opal Lertutai, NCsoft PR, for setting us up.