Back in April, ex-Organic CEO Mark Kingdon took the helm of Linden Lab, replacing its charismatic founder, Philip Rosedale, at a time when the company was already struggling in an increasingly competitive market. While Linden claims to be profitable, its market share has plateaued, with scalability and usability woes keeping the number of monthly active users around 550,000 since last summer.

Is Second Life still relevant in this far more dynamic playing field, which now includes Lively, an offering from the Internet’s biggest player? I posed that question to Kingdon a few days ago in an extended conversation at the company’s spacious San Francisco headquarters.

“Anytime Google enters a new market,” Kingdon told me, “people’s reaction is ‘Oh look! Google’s there; they’ll win.’” But he doesn’t even see the search giant as a direct competitor. “I think the thing that most people looking from the outside don’t realize is how diverse the use cases [of content in Second Life] are,” he said, citing everything from art exhibits to a company’s shareholder meeting to a new educational initiative. By comparison Lively, Kingdon said, “…has I guess you could say almost a single-use case, graphical chat.”

As an author and blogger who writes about Second Life, I remain convinced that user-created virtual worlds are a transformative medium. But I’m less clear as to whether or not Kingdon can address the myriad challenges that await Second Life in the post-Rosedale, post-Burning Man era. So I wanted to know how he plans to fix them, especially with the proverbial train already going 60 miles per hour.

The Infrastructure

“We’re working on three things really intently,” he said. The first is “solidifying our proposition for what we’re defining as our core markets.” That includes the traditional personal user of Second Life, which is typically someone in their 30s, as well as the “enterprise segment,” which addresses the many corporations that use Second Life for conferencing, job fairs and other business applications. And finally there are the educators that use the virtual world as a teaching tool. “I think 18 of the top 20 educational institutions in North America are in Second Life and doing wondrous things,” Kingdon said.

The second task, he went on, is improving Second Life’s complex user interface, especially in relation to its confusing first-hour experience, which he admitted prompts many people to give up. “We’re also working very hard to make Second Life intuitively, and maybe even delightfully, usable,” he told me.

The third crucial task relates to what Kingdon called the “stability and scalability of the platform.” The Second Life client and server grid is notoriously crash-prone, but he said they’ve been working on it for months and were showing good progress so far.

The Competition

Linden Lab has also recently added ultra-realistic, 3D graphic enhancements to Second Life. But it remains to be seen if the market will broadly embrace immersive 3-D worlds. As I pointed out to Kingdon, World of Warcraft has cartoonish graphics, while the web-based, teen-oriented virtual world Habbo Hotel, which is just as big, is in 2.5-D.

Kingdon, however, insisted that he was extremely optimistic about the 3-D experience. “The 2-D or 2.5-D experience doesn’t offer you the rich, meaningful, visceral, profound connection that you get in Second Life,” he said. Take an in-world meeting with colleagues; the immersive sense of interacting with them as customized avatars via voice and text chat, he said, “beats a video conference hands down.”

The Money

In the last couple years, several Linden Lab staff have described the private company as profitable; on my Second Life blog, I did some back-of-the-envelope estimates of Linden’s publicly known revenue sources, and it seemed like the company was making $40 million to $60 million dollars in profit. But Kingdon said it wasn’t quite that much.

“I won’t say [how much], but it’s not that high, although we are profitable and generating positive cash flow,” he said. Much of that’s going into “making hardware purchases, improving the experience for users, investing in people, hiring a lot.”

And what about recurring rumors that the company was already preparing to go public?

“Our focus — I can tell you — is very much on the three initiatives I talked about before. That’s what’s occupying the minds of the management team right now,” he said. “It does take some time to get ready for an IPO, so since that’s not on my agenda today you can probably do the math and form your own conclusions about when it might be a possibility.”

The Future

Finally, I brought up the recent joint announcement made by Linden Lab and IBM that they’d managed to move several avatars from Second Life to Open Sim, the open source virtual world. This could eventually create a market for interconnected virtual worlds, but moving mere avatars was a tiny step toward meaningful interoperability, which would also require transporting objects and other virtual assets between worlds — a much more daunting, perhaps insurmountable challenge. Did Linden Lab have a road map for that?

“There is a plan and a timeline,” Kingdon said. And while he acknowledged the interoperability challenges ahead (”it’s an incredibly complex technical issue”), he said progress was imminent. “The next milestone will be between now and the end of the year, but it may not be the milestone you have in mind — so stay tuned!”

Image credit: Kingdon photo from AdWeek.com. Kingdon’s Second Life avatar “M Linden” screenshot by Crap Mariner

Structure 08 is over and folks are already asking us about Structure 09. I’m happy to report that our first official GigaOM conference not only sold out but got a big thumbs-up from attendees. I want to thank a lot of people for making this event a success: The speakers; the sponsors; the attendees; the fine folks at Marketing Alchemist (especially Erin and Stacey); Alistair Croll, our magnificent MC; and of course, the GigaTeam. In particular a big shout out to Surj Patel, Joey Wan, Chancey, Mike & Nick! They worked extremely hard to make my dream into an idea, and then a reality. Here is a list of our live blogging from today.

I have some other good news. We are two years old today (though I got outed by Valleywag a bit earlier than June 25) — so below is a little video that shows how we were then and and how we are now. The lessons I’ve earned in these first two years will turn into a really long post someday.

I am planning to take some time off tomorrow, so no posting! Good night all!

Here’s the metaverse mystery of the week: This strange new private island with a very familiar name recently emerged on the server grid of virtual world Second Life. Spotted yesterday by Second Life blogger Tateru Nino (and confirmed when I checked the world’s dynamic map today), we have to assume it’s an official Nintendo property. When someone buys a virtual island from Linden Lab, they also get to name it. Given Linden’s DMCA enforcement policy, it’s unlikely they’d let just anyone dub an island “Nintendo.”

But that just adds to the puzzle. Unlike console competitors Microsoft and Sony, Nintendo has few properties directly tied to the PC market, and last February, Nintendo President Satoru Iwata said they had no interest in adding an MMO to its Wii system. Nintendo’s U.S. president, Reggie Fils-Aime, said they wanted the Wii to appeal to crossover demographics “very much like the Second Life audience,” so maybe it’s just a virtual marketing site, like Microsoft’s Xbox island.

Here’s a more tantalizing possibility: A German firm has created a Wii-to-SL interface for the treadmill, and developers with Japan’s Softbank have created a Wii-like accelerometer game in Second Life, so maybe Nintendo is cooking up some interesting new product feature. Neither Linden Lab nor Nintendo’s PR firm replied to our queries by publication time, however, and the island’s off-limits to outsiders. For all we know, the Hanso Foundation is involved.