[This article originally appeared on my blog in June 2010. -Ed.]
Word on the street is Linden Lab , makers of the Second Life™ virtual world, is in the process of laying off staff and shuttering remote offices. The few stories have surfaced over the last couple days are fueled by rumor and inductive reasoning. ( See Tateru Nino's story "Linden Lab Laying Off Staff, Closing Singapore Office"  at massively.com for an example. ) Tateru's narrative is well told, but as of yet, Linden hasn't commented publicly regarding staff reductions. Reports of instability in the Linden Dollar exchange, the departure of key employees [*] and a failure to meet resident growth expectations have been feeding rumors of Second Life's demise.
But I'm not ready write off Second Life just quite yet. A lot of cool stuff came out of Linden Lab and even if the rumors of lay-offs are true, there will remain a nucleus of highly competent people delivering innovative new services.
So while we're waiting to hear an official word from Linden about staff changes, let's take a quick look at some of the Linden Lab hits and misses.
Linden didn't invent the concept of "user generated content," but they were one of the first groups to really run with it. While universes like There.Com and ActiveWorlds also allowed UGC, Second Life allowed users to upload textures and build content in-world without prior editorial constraint.
We're in a world of "remix culture" where content innovation is fueled by the never ending stream of ubiquitous, culturally relevant media. In other words, we create meaning by reworking existing context in new and better contexts. Whether it's an artist that places a virtual Gandhi avatar in a virtual jail cell  or simply a group of people gathering in world to discuss ideas , society as a whole benefits from the understanding and insight that comes from placing old media in a new context.
In the future, Second Life will be remembered as the first popular virtual world that understood this interplay between media and context and made it easy for participants to communicate "insight" by means of radical juxtaposition of common, socially relevant symbols.
But it's not all goodness and light out there on the grid. There are serious issues with content theft and misappropriation of digital assets. Linden's process for dealing with IP theft follows guidelines established after passage of the Digital Millennium Copyright Act (DMCA.) While the Linden process appears in accord with US law, it does little (if anything) to prevent IP theft. Instead it provides a mechanism to repair damage already done; it requires IP owners to police the entire virtual world looking for infringers.
UGC is Second Life's "raison d'être." Without it, it would be an exceedingly bland experience. Some would argue that this virtual world is based on a system that ultimately discounts real world IPR by making infringement laughably easy.
The most obvious issue with the lack of prior editorial control on user generated content is the presence of pornography and obscene adult materials on Second Life's main grid. Expression of every carnal delight may be found in second life, ranging from "mildly unusual" to "outright obscene." Second Life is very clearly an "adults only" space; do not leave your children here unattended.
One person's obscenity is another's harmless fantasy. People are sexual creatures and stigmatizing physically pleasurable activities as being "dirty" or "obscene" does little to advance society and culture. Providing a space where individuals may come to terms with potentially embarrassing fantasies in an anonymous manner might actually have mental health benefits. Members of the transgender and fetish communities may experience very real emotional distress that prevents them from exploring taboo subjects in real life. The virtual world provides a safe, anonymous space to develop an understanding of the sexual self. This is in no way a bad thing.
The virtual world can also be a place where the disabled are able to explore their sexual persona. In the west, we sometimes force disabled people into a very non-sexual corner.; sex and disability can be a taboo subject in mainstream culture. For many disabled people, creating a sexually explicitly avatar in a virtual world can be liberating; especially as they have direct control over the degree to which their "real life" disability is expressed in the virtual world.
Most virtual experiences use assets created by a single person on a single desktop machine. Sure, digital assets can be created by groups of talented artists, and I'm guessing that most are. At the end of the day, there's only one person with one mouse altering one copy of the digital asset. Once the change is complete, the asset is saved in a file and distributed to other participants in the creative process.
Second Life's model is different. Building is an inherently social experience. Assets are created in the same virtual world participants inhabit. In fact, it's quite easy to find groups of people collaboratively building virtual things in one of the many "sandboxes" spread throughout SL's main grid.
The Second Life build system is the 3D equivalent of tools like Google Docs or Etherpad, when one person rotates a piece of an object being built, everyone with an avatar in the vicinity immediately sees the result. Everyone can immediately critique (or approve) the change.
To be sure, selling things in Second Life can be a pain. But over the last several years it's gotten increasingly less painful. In many online virtual worlds and MMORPGs, you can only buy content from the company running the experience. Turning the virtual world into a venue for individual-to-individual transactions is a true "hit."
Transactions totaling millions of US Dollars are executed annually. Real people are making real money selling bits; and that's a beautiful thing.
In an ideal (virtual) world, the content you create would stand as an eternal testament to your creative prowess. Sadly, we live in a real world where software bugs, database failures and system crashes conspire to delete the fruits of your online labor. In Second Life, you build on the live system. While there are backups occasionally, it is all to easy for your content to mysteriously disappear.
Products like Second Inventory  allow individual content creators to explicitly save their creations. Linden Lab appears to have an "uneasy truce" with services like Second Inventory. You may find some Lindens privately acknowledge the utility of backing up content, but no one will go on the record publicly praising or damning the service. Second Inventory (and similar utilities in third party viewers) can too easily be corrupted into a tool that could allow unauthorized content copying. Supporting such a tool would not be a move welcomed by Second Life's content creation community.
So a content backup tool, which would be of great utility to content creators, could also be perverted into a weapon that could destroy the livelihood of that same community. Maybe someday there will be a tool that gives people the ability to backup and restore content they own, and only content they own. But until that facility is perfected this feature is probably going to remain too dangerous for general deployment.
A fair amount of attention has been paid to virtual worlds as venues for education and business events. Whether you're talking about using the virtual world to teach classes or meet with your business partners, the experience is still pretty compelling.
A lot of people ask, however, "how is Second Life different than a chat room or a WebEX presentation?" And you'll get a lot of different answers to this question. But I recently had the opportunity to watch new users learn a bit about the virtual world. These were people who were technically savvy, but not "Virtual Worlds People." I was a little surprised to discover that after they learned the interface, they found the experience "reasonably compelling." When asked why, their response was... "it was easy to figure out who was talking."
So... virtual meeting planners take note: real people like it when it's obvious who's avatar is speaking.
Second Life has aspects of other great online systems: it has the social networking of Facebook and Twitter; it has the ability to host content like Flickr; and it has the ability to host group conversations like IRC or Google Chat. But Second Life is not Facebook or Twitter or Flickr or Google Chat. It doesn't do any of these things nearly as well as these sites.
And maybe that's okay. Second Life is about creating immersive 3D experiences. It is not about image hosting or IRC chat sessions. The 3D experience creates an engaging social context that you just can't get from the 2D web. It's okay for Second Life to not be as good as Twitter or Facebook on the whole social networking thing.
But what isn't okay is that I can't link my Second Life identity with my Twitter identity or my LinkedIn identity. My FaceBook friends are not automatically my Second Life friends, and that's a problem. The "friction" involved in engaging my external accounts in the virtual world means it will never have the size and scope Linden's executives keep talking about.
Until Linden breaks down the garden walls and allows virtual land, assets and identities to be hosted by external organizations, Second Life will remain a pleasantly curious island in the sea of internet commerce and communication.
So there we have it, my short list of Second Life's "greatest hits and misses." What are yours?
* In the interest of full-disclosure, I should remind readers that I worked for Linden recently, though my role probably didn't qualify me as a "key" employee.