The Rise of Virtual Communities: In Conversation with Virtual World Pioneers 9781484292969, 9781484292976, 1484292960

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THE RISE OF VIRTUAL COMMUNITIES IN CONVERSATION WITH VIRTUAL WORLD PIONEERS

Amber Atherton

The Rise of Virtual Communities: In Conversation with Virtual World Pioneers Amber Atherton San Francisco, CA, USA ISBN-13 (pbk): 978-1-4842-9296-9 https://doi.org/10.1007/978-1-4842-9297-6

ISBN-13 (electronic): 978-1-4842-9297-6

Copyright © 2023 by Amber Atherton This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Trademarked names, logos, and images may appear in this book. Rather than use a trademark symbol with every occurrence of a trademarked name, logo, or image we use the names, logos, and images only in an editorial fashion and to the benefit of the trademark owner, with no intention of infringement of the trademark. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. Managing Director, Apress Media LLC: Welmoed Spahr Acquisitions Editor: James Robinson-Prior Development Editor: James Markham Coordinating Editor: Gryffin Winkler Cover image designed by eStudioCalamar Author photograph taken by Bethany Picone Distributed to the book trade worldwide by Springer Science+Business Media New York, 233 Spring Street, 6th Floor, New  York, NY 10013. Phone 1-800-SPRINGER, fax (201) 348-4505, e-mail [email protected], or visit www.springeronline.com. Apress Media, LLC is a California LLC and the sole member (owner) is Springer Science + Business Media Finance Inc (SSBM Finance Inc). SSBM Finance Inc is a Delaware corporation. For information on translations, please e-mail [email protected]; for reprint, paperback, or audio rights, please e-mail [email protected]. Apress titles may be purchased in bulk for academic, corporate, or promotional use. eBook versions and licenses are also available for most titles. For more information, reference our Print and eBook Bulk Sales web page at http://www.apress.com/bulk-sales. Printed on acid-free paper

Advance Reactions to The Rise of Virtual Communities Lots of people talk about community, but few know how to build it. To understand the history of Internet communities, and be inspired to build your own, this is the book to read. —Mike Butcher, Editor-at-large, TechCrunch Every start-up founder who goes through Y Combinator sees first-hand the power of being part of a community. Atherton's book provides a history of valuable insights for the next generation to build legendary communities upon. —Michael Seibel, Managing Director, Y Combinator This book is an excellent read for any founder or leader looking to learn how to build community from the very best. —Jessica Sibley, CEO, TIME Inc Reading this book is a masterclass in managing and designing communities. —Greg Isenberg, Community Expert

For Wayne, Jane, and my little sister. “Ideas come from curiosity.” —Walt Disney

Contents About the Author

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Acknowledgments

  xi

Introduction

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Chapter 1: Chip Morningstar and Randy Farmer, Cocreators of Lucasfilm Games “Habitat”

Chapter 2: Howard Rheingold, Writer and Lecturer on

“Virtual Communities” and an Original Member of The WELL

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Chapter 3: Stacy Horn, Founder of Echo

 29

Chapter 4: Jim Bumgardner, Creator and CTO of the Palace

 39

Chapter 5: Philip Rosedale, Founder of Second Life

53

Chapter 6: Sampo Karjalainen, Cofounder of Habbo

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Chapter 7: Lance Priebe, Cofounder, CTO, and CCO of Club Penguin

    79

Chapter 8: Angelo Sotira, Cofounder of DeviantART

   89

Chapter 9: Caterina Fake, Cofounder of Flickr

99

Chapter 10: Alexis Ohanian, Cofounder of Reddit

    107

Chapter 11: Kevin Rose, Cofounder of Digg and PROOF Collective

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Chapter 12: Jason Citron, Cofounder and CEO of Discord

129

Chapter 13: Trevor McFedries, Cofounder of Brud and Founder of Friends with Benefits (FWB)

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Chapter 14: Cherie Hu, Founder of Water & Music

149

Chapter 15: Michelle Kennedy, Founder of Peanut

161

Glossary

171

Index

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About the Author Amber Atherton is a British entrepreneur and investor based in Silicon Valley. A community building expert, Atherton began coding as a child, starting various Internet businesses and garnering an online following, before cocreating the hit TV show Made in Chelsea. In 2018, she took part in Y Combinator with her community software startup Zyper, which was later acquired by Discord. Atherton went on to join the earlystage venture capital firm Patron as a Partner in 2023. Alongside investing, her charitable initiative The Atherton Award recognizes entrepreneurial spirit in young women across the UK. Amber frequently appears as an expert on television (BBC, CNBC), radio (Bloomberg), and at global conferences (Davos, Web Summit) and has written for publications including Forbes, Harper’s Bazaar, and Vogue Business. twitter.com/amberatherton

Acknowledgments I’d first like to thank my editor James Robinson-Prior for responding to my proposal, sharing my fervor in online communities, and agreeing to publish this book. He provided a lot of advice that helped make this book better. Thanks to my research and copy editor Chiara Benn who dove down many rabbit holes to uncover the important events in Internet history that helped shape the questions and narrative of this book. Thanks to all the people I interviewed for taking the time to share their incredible stories with me. It was truly an honor to talk to them. I know the nuggets of advice and the sincere nature of their answers will inspire founders and community builders for years to come. Thanks to my friends, fellow founders, and community professionals who offered introductions and insights. Thanks to the former Zyper team and investors who went on a journey with me, especially Lulu Jopp, with whom I have spent endless hours geeking out on community behavior and trends. Thanks to the first #charmgang members and Brand Fans that agreed to spend their time with other strangers online to form friendships and even marriages. Thanks to the Y Combinator community, the Discord team, who are some of the smartest people I’ve ever met, and my incredibly supportive partners, Brian and Jason, at Patron. Special thanks to my sister and parents who I admire greatly and who never seemed to doubt that I could do anything I put my mind to. Whose love, tenacity, and passion for technology let me grow up in an environment full of discovery and possibility. Most of all, thanks to my fiancé Vishal who enthusiastically encouraged me to prioritize writing this book.

Introduction In 2007, when I was 15 years old, my father gave me a book called Founders at Work published by Apress. In a series of interviews with famous founders, the author Jess Livingston (cofounder of the Silicon Valley accelerator program, Y Combinator) rolled back the curtain on building startups to reveal the familiar learnings and similar struggles that every founder faces. In 2018, I joined Y Combinator with my own community software startup, Zyper, moved to Palo Alto, and started to build, fundraise, and grow a team. Four years and an acquisition later, I found myself harboring an insatiable curiosity to look back in history and figure out how virtual communities came to be. What lessons could I learn and share from the first brave founders who started to bring people together on the Internet? How would the patterns from the past, offer hints for what the future of gathering virtually is going to be like? In 2022, Apress agreed to publish this exploration, and I began a fascinating journey, tracking down pioneers and finding out how they ventured into the unknown and built communities online. In this book, you’ll read firsthand the fascinating stories of how some of the most famous virtual communities in history were built. Tracking technological shifts and advancements, from the first bulletin board and Internet relay chat systems, to fully simulated virtual worlds and token gated chat rooms. What surprised me the most in these interviews is how little the fundamentals of online community and world building have changed. You’ll notice recurring problems that still challenge community builders today. From moderation and new member retention, to the importance of in-jokes, lore, and real-life meetups. Today, community building has become inseparable from business building. Most founders and executives are acutely aware of the value of community. In CMX’s 2021 Community Industry Report, 86% of respondents (community managers from 508 different companies) said community was critical to their company’s mission, and more than two-thirds said their company planned to increase their investment in community in the next year. Giving your customers, users, and players a place to hang out and learn together gives businesses a chance to get invaluable insights, but more importantly creates something that every human being needs: a sense of belonging.

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Introduction Between starting and running Zyper, a platform that connected brands with superfans, to leading community acquisition strategy at Discord, I’ve built hundreds of healthy communities for businesses, brands, and creators. Before diving in and hiring a dedicated community team, I’ve learned community builders need to have a strong grasp of two essential concepts: 1) The community quadrant (to understand how community differs from other groups of people who interact with a product) 2) The community funnel (to understand what makes a community compelling to prospective members) I’ll cover both concepts in the next chapter. I’ve also learned that so often the best way to predict the future is to look back and study the lessons of history. My goal with these interviews is to establish a manual of experience that everyone can learn the secrets to community building from. If you’ve picked up this book, you’re likely already excited by the magic that comes with bringing people together, so I hope these stories encourage you to keep at it. Experiment, fail, succeed, but most of all just have fun doing it with great humans (and bots!) along the way.

What a Community Is (and Isn’t) One common misconception, I’ve noticed, is the idea that “community” and “customers” are synonymous terms. They aren’t. Understanding how they differ is critical, so let’s start there. The people who interact with your product generally fall into one of four buckets: • Customers/users buy and/or use your product. • Evangelists tell everyone they know to buy or use your product because they genuinely love it. • Community is the group of people who’ve found belonging and utility through your product. • Ambassadors are incentivized, through payments or rewards, to promote your product. What distinguishes community members from those in other groups is the congregation element: beyond using, liking, or writing glowing reviews of your product, they spend time forming connections with other people based on a shared affinity for it.

Introduction

The Quadrant, Sequenced Three of these groups reliably emerge in a fixed order: users/customers come first, followed by evangelists, and then community. Ambassadors don’t fit neatly into this sequence, so you’ll need to make a decision about their relationship to the other three groups. Even though ambassador endorsements aren’t organic, they still help spread awareness of your product to new segments and markets. Ambassadors range from nano-influencers and affiliates to well-known celebrities, and they can collectively become a community in their own right, with gamified rankings and events. Generally speaking, my advice is to build an ambassador program that functions separately from the other three groups. The ideal time to launch a community varies, but you should wait until you have confirmed evangelists. People who love your product are your proof point. If self-professed evangelists haven’t announced themselves yet, email a group of your earliest customers (50 is enough) to find out if they love your product. Those who respond enthusiastically are your first evangelists; invite them to join your community. Evangelists don’t automatically become community members, but they’re the most obvious cohort to start with because you know that they like your product and want to talk about it.

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Introduction Next, start a conversation with this founding group in a private space designed for that purpose, such as a Discord server, a Slack channel, a Telegram chat, or even a group DM on Instagram. Some community platforms are designed to be versatile, while others are geared toward specific populations. One thing you shouldn’t do is waste engineering resources on building out your own community infrastructure. At this stage, third-party community platforms will meet all your technical needs. Plus, your target community members might already use them. Meeting people where they are never hurts. The early days of community building should feel like user research. You’re not trying to build an audience or sustain engagement. Instead, you’re experimenting with different offerings to figure out what your evangelists want. Audio? AMAs? IRL meetups? Ask them directly. Not only will you learn what they find valuable, you’ll also give them a sense of belonging. Once you have a handle on the quadrant, the second concept to master is the community funnel.

The Community Funnel: Invited → Invested Communities are primarily valuable to businesses for two reasons:

• They create a built-in source of real-time user feedback, which is critical for building a product people really want. • They foster friendships rooted in an affinity for your product, which drives lifetime value and new customer referrals.

Introduction When it comes to community building, it’s your job to spark the fire. But you can’t keep it burning alone. The key to a thriving community is members who care enough to take initiative – they pose thoughtful questions to the group, introduce new topics to explore, and sometimes even plan events, online or offline, to help people bond. And they’re invested enough in the community to assume some of the responsibility of steering it forward. Early on, think about identifying folks you’d like to see take on more responsibility. But new community members don’t magically turn into devotees. You need to set the stage for that to happen – both by letting early members play a role in shaping and growing the community and also by creating an environment compelling enough to reel in anyone who enters. The community funnel charts a prospective member’s path from receiving an invitation to becoming an invested, active member. It’s important to think about your role in moving members through the funnel. One priority should be optimizing introductions: a member’s first few interactions with the community can have an outsized influence on whether or not they stick around. Consider those early experiences through the eyes of a new member: Is the initial invitation compelling? Does it spark excitement or curiosity or make prospective members feel special? Making invites hard to find makes them fun to discover. This also gives new members something to bond over right away. Do members land in space that’s easy to understand and navigate and also fun to spend time in? Simply numbering channels and visually laying out the first steps a new member should take is a low-lift way to guide people through the onboarding experience. Extra points if the space is beautifully designed. Are members individually welcomed into the space by a human (rather than a bot) and introduced into the conversation? Community managers set the culture from day one. Digital hospitality goes a long way; welcoming new members is essential for retention. Once introduced, do community members feel compelled to participate in the conversation? Participation primes members to become friends, which makes them feel more deeply tied to the community and motivated to contribute to it regularly. Most people who join your community will be evangelists for your product. By the time they reach the end of the funnel, they’ll (also) be evangelists for your community.

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Introduction

Now that you understand these two foundational community building concepts, it’s time to begin architecting your community strategy. Start by clearly articulating why you’re building the community and what the value exchange will be. In other words, what will community members gain from joining and participating, and how does it help your business (now and down the road) to devote resources to communities that could go elsewhere? The value of community isn’t always easy to quantify financially, but there are benefits beyond the bottom line. If you get the basics down and approach community building thoughtfully, your company will become a catalyst for strong relationships that grow alongside it.

CHAPTER

1 Chip Morningstar and Randy Farmer Cocreators of Lucasfilm Games “Habitat” “Habitat” was the first massively multiplayer online game (MMO) and virtual world cocreated by Chip Morningstar and Randy Farmer in 1985 while they were working at Lucasfilm. Interacting through text chat and moving around a graphical environment, users bartered for objects and eventually created self-government – creating rules independent of the server operators – forming the first social virtual world. Morningstar coined the term “avatar” for the online representations of Habitat users. Morningstar and Farmer encouraged innumerable possibilities within

© Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6_1

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Chapter 1 | Chip Morningstar and Randy Farmer,         Cocreators of Lucasfilm Games “Habitat” Habitat, allowing users to drive the direction of design and Lucasfilm to facilitate. “Habitat” ran from 1986 to 1988, eventually closing due to unviable costs. In 1988, a downsized version called Club Caribe was shipped preinstalled on the Commodore 64.1 The software was later licensed and launched in Japan as “Fujitsu Habitat.” “Habitat” is widely acknowledged as foundational to present-day online community design, particularly for immersive, 3D graphical environments. In 2017, the Museum of Art and Digital Entertainment (MADE) supported Farmer in his restoration of “Habitat” (available to play online at neohabitat.org), as part of a playable online video game museum. Aside from “Habitat,” Morningstar and Farmer created what many agree to be the first decentralized metaverse, in the late 1990s, while working at Electric Communities. Along with Doug Crawford, they also created the JSON Protocol. Atherton: Chip, Randy, you’ve built some incredible things together over the years. How did you first meet? Morningstar: I hired Randy to work on the development team for Habitat back at Lucasfilm; I think it was 1985. He had been working for us as a contractor on our games and had done a good job with those and worked quickly. I had finally received the go-ahead to begin hiring for the product team. So I recruited Randy. It turned out he’d already been working on virtual worlds since the dawn of time! Since then, we have worked together a lot over the years, not just at Habitat. We’ve collaborated in many roles and consulted for some of the later communities in this book, including for the Palace and Linden Lab, which owns Second Life. Atherton: Randy, what virtual worlds had you already been working on? What was exciting and emerging in online communities at the time? Farmer: I’ve been working in online communities since the 1970s. I cocreated a game, SPB, where people in high school formed teams and logged in to a server.2 Each team had a text terminal, into which you would type commands. Sadly, the cocreator passed away a couple of years ago – that’s how old this is. Some friends have kept the game alive; the modern version has port views and maps, but at its core, it is still the original game and is playable online. I also have images of the source code for my first Bulletin Board System (BBS), COMUNI, which dates from 1976. Through this BBS, I was connecting high school students to play games. Back then, there was no centralized network like the Internet for talking together. Meanwhile, Richard Bartle in England was creating the first text multiuser game (MUG) in 1978, called MUD1. Simultaneously, the University of Illinois

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 An early and popular home computer, featuring the first affordable color graphics.  SPB was a pseudo-acronym for “A SPace Battle.”

The Rise of Virtual Communities was building PLATO.3 At this time, I was using standard terminals, while the University of Illinois was using plasma screen terminals, an expensive technology that was never widely adopted. All of these developments were happening in parallel. Morningstar: There were also several early online communities which simulated the future through the use of money. PLATO was one of them, alongside what was developed at Xerox PARC.4 Atherton: Before Lucasfilm’s Habitat, had you experienced any need for online community moderation? Farmer: I had a great interest in connecting humans online, to share a game experience or to talk and communicate. At high school, a member of one of my message boards took to trolling me, with what are now laughable insults but hurt a lot back then. He likened me to a peanut butter sandwich… Nothing by comparison to what we suffer today online, but I started learning about the challenges of auditing virtual communities in the late 1970s. I had an idealism then, which I shared with my father, which was that the Internet would connect everyone and that great things would happen. People would cooperate more. There would be fewer wars. Now I’m not sure that throwing everyone into a big pile on the Internet was good design. Over the years, I realized that the best communities are the ones that have shared content, a shared purpose for existing, even if it’s temporary and on a smaller scale. Atherton: How did the idea for Habitat come about as the first MMO? Morningstar: The initial genesis was actually a lunchtime conversation between Noah Falstein (a coworker at Lucasfilm) and I. We were discussing artificial intelligence in games, which had a very different connotation back in those days. AI just meant the computerized opponent that you would play a game against. My take was that we simply didn’t know how to provide an opponent that players could interact with that had the richness, depth, and subtle nuances of an actual human being. AI opponents could not be convincing. So I suggested that we don’t even try. What if we used modems to connect real people, so they could play against each other? That led to the idea which we initially called Lucasfilm’s “Universe.” It was an open world space game, which anybody could connect up to and then interact with each other. We didn’t have a clear concept of what the gameplay would be. I wrote up a two- or three-page project proposal, which was how we pitched our ideas at Lucasfilm Games. The team would discuss the proposal,  A programmed logic for automation of teaching operations on which many concepts such as forums and message boards began. 4  A research and development facility for computer hardware and software – PARC stands for the Palo Alto Research Center. 3

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Chapter 1 | Chip Morningstar and Randy Farmer,         Cocreators of Lucasfilm Games “Habitat” and then it would be filed away in the General Manager Steve Arnold’s filing cabinet. Then when clients approached Lucasfilm, shopping for projects, Arnold would gauge the client’s brief and match it up against the catalogue of ideas in his filing cabinet. He’d pull out a couple of these proposals and pitch them. One of the driving constraints at Lucasfilm Games was that our mission statement was, “stay small, be the best and don’t lose any money.” George Lucas, the founder of Lucasfilm and creator of the Star Wars and Indiana Jones franchises, was clear on this. The result was that we could build what we wanted, but we had to get somebody else to pay for it. One day, Clive Smith, the VP for strategic planning at Commodore International, came in.5 Commodore’s big initiative that year was going to be cheap modems for Commodore 64s. As part of that, Commodore made a strategic investment in a company called Quantum Link, which was a consumer-oriented online service. That in itself was pretty radical because it was cheap, targeted at consumers, and used a client-server architecture which kept their costs down. Commodore approached Lucasfilm asking if we had any ideas for what they could do in the game space. Steve pulled the “Universe” proposal out and I pitched it, which led to an extended negotiation. After months of discussion, they funded what became known as Habitat, and Lucasfilm mostly executed the project. It took months for the lawyers to settle on the terms of the deal. In the meantime, I produced innumerable design documents. At one point, I had a three-inch ring binder full of specifications and design material, a lot of which was not used in the end. But it meant that we had thought through the ins and outs of Habitat ahead of time. When issues came up in development, we had often already thought about that and so had a leg up in solving whatever the problem was. We didn’t have a grand vision that magically unfolded, we were making it up as we went along. Atherton: How did the community begin to form in the early days around Habitat? Farmer: Habitat went through some testing phases. It was initially internal, mostly employees and a few companies. Then it went into alpha and paid beta. We invited a curated group from existing Quantum Link users, who were interested. This led to some great community formation. Habitat then went into wider beta testing around 1986. We touch on this in our publications: Lessons of Lucasfilm’s Habitat and Habitat Anecdotes. We discuss that in a virtual world, where there is no strict “winner” or “rules,” we did need some areas that were safe – that you could retreat  Commodore International was a home computer manufacturer that launched the bestselling Commodore 64. 5

The Rise of Virtual Communities from the threat of being killed – while other areas were wild. We did several experiments on what worked best. When you’re pioneering something – and none of these features existed in 1986  – that something doesn’t even have a name yet. One of our biggest problems with Quantum Link was that they couldn’t wrap their head around what we were building. They wanted to know how you win the game. We kept responding that you play Habitat, you don’t win overall, though there are some games within the game. The idea of a virtual environment, a virtual reality, an MMO, was novel and disruptive. Quantum Link wouldn’t accept a description of less than 25 words. The Habitat promotional video was eight and a half minutes long, attempting to describe what a virtual world is! Morningstar: There was a lot of stuff that nobody had the vocabulary for yet. Some of it we tried to explain and demonstrate. Elsewhere, we made vocabulary up. The most notable example was the term “avatar.” Avatars sparked widespread debate. Are they you? Is it a representation of how you’d like to be portrayed? Is it some other character that you control? The answer was all of the above. Atherton: Chip, you’re credited with coining the term “avatar.” How did avatars change how people were interacting online? Unlike traditional textbased Bulletin Board Systems (BBSs), users now had an avatar that they could connect with the community through. Morningstar: It was all new. It signaled that you were in this virtual world. Your presence was designated through avatars, a visual metaphor that you are there. It also created a notion of place. There were other people and various objects in this virtual world that you could interact with, pick up, and move around. People fell into it pretty naturally because they had already been playing single-person computer games which had a world model in them. Habitat was a radical departure though, because some of the other entities users interacted with were wired back through the network to other actual human beings elsewhere in the real world. Quantum Link did a lot of thrashing around, trying to explain Habitat, which turned out to be completely irrelevant because people intuitively grasped it right out of the box. Rather than explaining for ages prior, they should have let users play it, and it would click within minutes. Atherton: Was there any accompanying social phenomena to these innovations that took you by surprise? Farmer: So many things! Some had to do with mechanics of the game, which we would fix in later versions. For example, users would steal from each other. I know it seems obvious now, but when you do it the first time, it’s new. The very nature of how crude the interface was meant that if you wanted to trade with people, you had to trust them. You would put something on the

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Chapter 1 | Chip Morningstar and Randy Farmer,         Cocreators of Lucasfilm Games “Habitat” ground and expect they would give you something in return. But, they could put whatever they had offered you back in their pocket, grab your item, and run away. So we had to establish a few rules. We made changes so that when you went into your house – every avatar had a house – you could control who came in. That way, you could then build trust. Also early on, people were trying to figure out the divide between the virtual and real world. In a virtual society, your avatar existed in a different context from real life. Even the promotional video explains that your avatar is not you, Habitat is just a place to have fun. But being stolen from in the game affected real-life emotions. Users would then meet in real life, and some got married. There was an intersection. Habitat only continued until the end of paid beta in 1988. It was then transformed into Club Caribe, which was run by different people. The “world” became a beach resort with all the fantasy elements stripped out – all those things that had emerged as we were experimenting were removed. Over the years, they readded those features, which they could do without changing the front end as it was already there. The Habitat software was then licensed to Fujitsu in Japan. It was the first virtual world and MMO in Japan when it launched. Some of the developers at Habitat went on to create WorldsAway, another multiplayer community with avatars, in 1995. There were some shared social challenges between all of these projects. One common aspect was that users would find bugs in the software that generated money. In Lucasfilm’s Habitat, Club Caribe, Fujitsu Habitat, and other virtual worlds since  – this has continued to occur for generations  – there would be bugs where the internal currency could be generated arbitrarily. If there’s a bug, people will find it. We were fortunate, at least during the testing phases, that Habitat users would take this money and then figure out how to redistribute it in the game, by financing mini games they ran inside Habitat. WorldsAway created APIs for users to run games on top of the game, so that users could create social context and value.6 Habitat and its successors were modeled upon a fact that paved the way for NFTs: scarcity becomes the thing of value. In the original Habitat, users could buy heads in vending machines, which were a unique way of styling your avatar. Heads were purchased with the coins that users had earned in-game. Some heads were scarce. Many could be purchased easily. Heads could be colored or redecorated a little, but as in WorldsAway now, there were some heads that were given out that could not be purchased. This gave those heads huge value. People treasured having the only munchkin head that was stripey, for example. Scarce items were valuable; that’s why people would be so upset if their items were stolen – they might be irreplaceable. 6

 APIs are application programming interfaces, in other words, software developments.

The Rise of Virtual Communities Atherton: Did you find that BBSs were popping up around the game, or was most of the interaction happening in-world? Morningstar: A bit of both. We had a guy who started publishing a newspaper within Habitat. Every few days, he’d produce 20–30 pages about funny or interesting things that had happened, the “news” of the community. He did that for quite some time. It was spontaneous and community generated. We were constantly building tools that would permit users to create. For example, we had single sheets of paper that users could write text and graphics on. We also had a book which had multiple pages, but you couldn’t edit the order of those pages. There was demand for more flexibility, so we created a machine that could take several disparate pages and bind them together into a book. We also allowed users to stock their own vending machines. The feedback cycle of users wanting something and us figuring out how to enable it happened quite a lot. Atherton: How did you go about moderating Habitat? Morningstar: There’s an interesting distinction between the rules which we enforced technologically and the rules we enforced socially. To prevent stealing in later systems, we created an automated trading machine to let people swap items back and forth – an example of technological rules. But up until then, we had to rely on social rules. There was controversy surrounding people stealing things. The users wanted a sheriff to crack down on that. We weren’t sure how to do that, but we were able to create a voting machine so users could have an election. They selforganized election campaigns for two or three candidates to be sheriff. They held a candidates debate where other users could ask them questions. Then one person got elected sheriff, and we gave him a special avatar head that had a cowboy hat with a star on the top. Because of the collective approval of the community, he carried with him a lot of moral authority. So if somebody did something which wasn’t the Habitat culture, like stealing, and he suggested they return what they had stolen, people took that seriously and were more inclined to respond in a constructive way. Of course, we could have manipulated that – gone into the database and restored items to their original owners – but we didn’t want to have a dictatorial rule over the community when they were able to develop their own set of norms that were mostly enforced by a consensus model. Atherton: The principle of allowing the community to vote on who they want to be the moderators is not that dissimilar from how DAO communities are structured today: they are governed by its members.7

 DAO stands for decentralized autonomous organizations. An organization on the blockchain that is governed by the votes of its token holders, rather than a centralized authority. 7

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Chapter 1 | Chip Morningstar and Randy Farmer,         Cocreators of Lucasfilm Games “Habitat” I’m curious how you have seen moderation evolve in online communities and how you would advise approaching virtual governance? Farmer: Let me first distinguish social media from online communities. We’ve conflated those words over the years. I try not to, but a lot of people say “the Twitter community” or “the Facebook community.” There’s no community there. You don’t take big piles of people and call them a community just because they use an application; that is a shared tool. It’s like saying I use a hammer, I’m part of the hammer-using community! An online community requires a shared context, something that is valuable to its users. For example, a cancer survival support site. Social media involves moderating everyone in the world to speak the same exact words. When I worked at Google, specifically on YouTube, I came to realize that. YouTube hosts videos, and most videos have a comment section, which requires moderation. But the same word in different contexts can have different meanings. The word “queer,” for example, is often a term of endearment and membership that the community support, but in other contexts, that word can be hate speech. How do you universally tell? You can’t tell without the context. That’s why moderation on a global scale is unsolvable, unless solved locally. When I was at YouTube, I suggested you should only allow comments to be turned on if the video creators moderate those comments. They have to decide what’s good and what’s bad, and if they refuse to do that, they shouldn’t have comments. Otherwise, comments become garbage. Online communities differ. They can be moderated by their members, because they care about the platform. I have been a member of numerous online message boards since the first one was created in the 1970s, and they’re great because the topics are limited and specific. For example, a forum on paper craft is not going to accept posts on politics or the price of oil. If someone comes in and doesn’t behave, they are kicked out, no big deal. Online communities define their own rules. If you don’t like the rules, you can form a new community. Atherton: I wanted to ask you both about the nature of trust in online communities. In your experience, do real-life interactions, meeting the person behind the avatar, reinforce this trust? Morningstar: Trust is a very slippery thing. You have to define what that trust is for. I know people who I would trust to manage my money who I would not trust to do a good job looking after my children! Farmer: I coauthored a book called Building Web Reputation Systems in which I talk about trust in virtual communities. Communities meeting in real life does not necessarily create trust. I am part of virtual communities in which I share values with people that I have never

The Rise of Virtual Communities met and have no reason to ever meet. But I trust them. I send them money when they can’t pay for the servers. All kinds of trust, but not all trust. Trust is hard to measure. Five-star ratings and reviews are among the most dumb reputation systems in existence today, because of the collapsed context. I wrote a paper when I was working at Google, outlining the reasons you should not use those scores. Firstly, they’re sexist. Consider movie reviews on IMDb. Did you know that movies focused on women are more than one star lower on average rating on IMDb than movies focused on men? That’s because more men give ratings on IMDb. So why would a woman trust IMDb ratings? Five-star ratings are also racist and subject to inflation. Even the same products rated in different virtual locations (IMDb vs. Rotten Tomatoes) have different scores. Additionally, this system is designed for abuse. If you have a new object in this database, you need reviews. So you ask people to write reviews, which is against the policy. Why would you have a mechanism that requires a bootstrap, which you cannot get without abusing the system? Reviews contain social data which is unrelated to content or product quality. For example, when Donald Trump was elected president of the United States, all of his property ratings dropped two stars on average. People who had never been to those places, who hated him, rated them badly. Businesses shut down because of social data influencing these ratings. I’m not going to say whether social justice is a good thing, I’m just saying that the resulting reviews are out of context. Varying factors are folded into ratings and yet are indecipherable, so why would you average those numbers? What a customer needs is the opinions of people who are like them. Turning to trust in Web 3, DAOs are complex. They often use token ownership as a marker of trust, rather than earning trust. With DAOs, trust is founded in the ability to buy tokens early and cheaply, which suggests that money is trust, and I reject that. I think distributed systems are trying to reject that also, so I’m confused how DAOs have moved to the forefront in so many cases. Atherton: Is contribution not also a factor influencing trust in DAOs and Web 3 communities? It’s not just about buying in through tokens, but then how you contribute to the community and how that contribution is incentivized, no? Farmer: It’s hard to measure quality of contribution, so it ends up being measured in numbers. People in message boards threw this out a long time ago; they stopped displaying post counters for people, because people started jacking up their numbers by posting pointless content. Another example is Instagram: girls suffer horrible psychological effects from the number of likes on their posts, because these are public value scores that they are trying to increase.

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Chapter 1 | Chip Morningstar and Randy Farmer,         Cocreators of Lucasfilm Games “Habitat” Morningstar: Every time you have a number which is a measure of something, people will start layering interpretations on it. You can’t necessarily control what they layer. A great example was Orkut, an early social network experiment that came out of Google in 2004. Orkut had a facts page, and one figure mentioned how many market users there were in different countries. Some of the countries that were disproportionately represented started treating this as a leaderboard. As a result, Brazil became the number one country on Orkut, mostly because the Portuguese language community challenged themselves to get to number one. Orkut became a Portuguese-only site by default, just because somebody decided to post the number of users in each country. What Orkut saw as a page of amusing information was understood by other users as a leaderboard. Atherton: For a text-based community, is the level of active participation by members a good indicator of community health? Farmer: This is known as the engagement trap. The reason YouTube, Facebook, and Twitter have a fundamental problem is because engagement is their revenue model. They sell advertisements, so they need you online more. This led to teaching algorithms to highlight anything that was highly engaging because it meant more revenue. This cycle is well documented. Even Jack Dorsey, cofounder and former CEO of Twitter, knows about it. Controversial content is exaggerated, because controversy generates revenue. Another problem with engagement metrics is that they often reduce the quality of content in message boards. Those who have the most time are not necessarily the best people for your community. When I post on message boards, I spend a lot of time crafting thoughtful responses. Others might have time during the day for chatter. Once others log on in the evening, it might have 500 back messages, which I’m not going to read. Engagement metrics reinforce chat and shut out long form. Morningstar: You can have a group of 1000 people in an online environment, in which 20 of them are having a sophisticated, nuanced conversation among themselves, and the other 980 people are watching it because it’s interesting and informative. You can also have a group of 1000 people who are all constantly nattering to each other, and its content is trivial. Activity metrics are going to suggest that this second group is the one you want as everyone is engaged, when in fact the first one was better. The second is a different form of entertainment, with a lot of noise, but it’s not a driver for deep psychological satisfaction or progress in the world or anything that you might attach value to. The shape of the interaction is more important than the size of it.

The Rise of Virtual Communities Atherton: Looking at virtual community architecture, you’ve both seen everything from virtual worlds, message boards, asynchronous chat… Are certain architectures preferable for deep engagement? Farmer: I’ve consulted for a lot of virtual communities, and really that question is “what helps the community?” It’s not a list of features that it has to have: chat, message boards, email relay. At one point, I created a community around a podcast. When we moved from message boards to Discord, which values engagement metrics, the community lost its value, as thoughtful posts were lost among chatter. In fact, chatter was promoted as it was produced by “more engaged users.” It creates brain drain. When people think about community design, you literally have to start with “what does the community need?” That could even be utilizing email or SMS relay. The original Habitat had internal mail; you could send messages to other avatars and never know who was behind them. So my answer would be that you should architect the community to serve the community. Morningstar: On a related note, one of our long-term collaborators Doug Crawford has a saying: “media has biases.” I don’t mean biases as in left wing or right wing, pro-this or anti-that; rather, that with any given medium, there are certain messages that get through that medium more easily than others. Features filter the experience, which is why Twitter is different from Facebook, Discord, and Reddit. They are effective at transmitting different kinds of messages, information, and emotional effects. Having different media does not necessarily make companies more flexible or powerful, which is a misconception that I hear a lot. Any combination of media will create a different set of biases. Whatever you’re trying to accomplish, there are features which will be more or less effective at achieving what you’re trying to do, whether that’s chat or video conference, they’re just different. Somehow we’ve absorbed this idea that you want all possible tools. In reality, you want to make design choices that will aid what you’re trying to construct. We don’t have a body of theory on what design choices are going to work better as a mailing list or a chat service yet though. Farmer: Chat services are febrile: if you aren’t there, you miss the conversation. So if everyone in your community is supposed to be on the same page, a message board won’t work so well. Even if it’s archived, because now you’re reading a conversation that somebody else had, you’re not participating. Only recently have chat platforms allowed you to edit posts. For a long time, you weren’t allowed to, so posts might be outdated by the time you read it, even on the same day. For example, “car repair” is a common search term online. You wouldn’t want the information of your company to be on a message board – the information would get lost – you want it in a place that is persistent and curated. These things can be features or bugs, depending on what you want from your community.

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Chapter 1 | Chip Morningstar and Randy Farmer,         Cocreators of Lucasfilm Games “Habitat” Morningstar: There’s also what I call the fundamental paradox of the Internet, which is that nothing lasts, yet nothing ever goes away… Atherton: Can we touch on your work on communities in the metaverse and the implications of these? Farmer: At present, I am the executive director of the Spritely Networked Communities Institute, which is working to build technology to remove servers from communities. It’s working toward an environment where anyone can create communities with whomever they want, with no centralized server. On this project, I haven’t worked with Chip, but we tried to do something like this before when we were working at Electric Communities, an Internet application developer. Everyone focuses on the virtual worlds that we worked on at the firm, but our ultimate success was that we removed the necessity for a central server, in that case implemented on top of a virtual world. In doing so, we made the first fully decentralized metaverse in the late 1990s! Morningstar: One contributor to the demise of Electric Communities was that there wasn’t great demand for decentralized, secure, virtual world infrastructure at the time, even though it solves important coordination problems, as Randy was just explaining. An unintended but fantastic consequence of framing a decentralized, secure metaverse in a graphical environment was that the metaverse and its implications were visualized in a virtual world, which gave them the same moral intuitions as if it were the real, physical world. It helped your brain understand the problems with the metaverse in a way that you could make sense of them and come up with possible solutions. So human engineers were able to think about the underlying technical problems of decentralization. Farmer: Through the lens of a decentralized, secure virtual world – the first metaverse – it’s easy to say who should be allowed to turn the light off at my house or take the head off my avatar’s body. We think of that not as data, but as behavior, so it’s easier to consider rationally. With data alone, there is no context. So when someone says nowadays, let’s take your social network graph and put it on the blockchain, that is morally wrong, but they’re thinking of it as a contextless object. Morningstar: There’s a lot of confusion about ownership of data, particularly medical data or financial data. Some believe you should own your own data. To me, there’s a fundamental confusion rooted in that, which is that people know things about their acquaintances and the companies they interact with. What you know about them is stored inside your brain. When somebody says they should own their own data and you know something about them, are they saying that they own part of the contents of your brain? Because that doesn’t make sense.

The Rise of Virtual Communities The real question is what is done with your data. If a robot knows your deepest, darkest secrets and never does anything with that information other than while it’s interacting with you, has your privacy been violated? Our society is still grappling with these questions. Atherton: Randy, what have you been working on with the Museum of Art and Digital Entertainment (MADE)? Farmer: I have been working on two projects with MADE. One is a restoration of Lucasfilm’s Habitat as it was on its beta test in 1986, for their playable online video game museum and exhibit. We reinstated the database, rebuilt the server, and it’s using the original software. MADE even has Commodore 64 emulators, which are astonishingly accurate to the original technology… pitifully slow! It is available online at NeoHabitat.org, and there are people who log in every day! Separately, we’re working to restore the work of Electric Communities, most notably the history of decentralized systems, which foreshadowed the blockchain. Out of Electric Communities came some developments that nobody else has ever done since, and we’d love to see those make it out into the world. Atherton: You both seem to have found yourself at the forefront of every major technological and cultural shift! Morningstar: Yes, we often laugh that we have started several industries in which other people have made billions of dollars!

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2 Howard Rheingold Writer and Lecturer on “Virtual Communities” and an Original Member of The WELL The WELL was a dial-up Bulletin Board System (BBS) that stood for the “Whole Earth ’Lectronic Link.” It was the earliest affordable multiline chat-based forum. Founded in 1985 by Stewart Brand and Larry Brilliant, it was an electronic offshoot of Stewart Brand’s Whole Earth Catalogue (1968), a how-to guide for building your own off-grid civilization. The WELL featured message board–style discussions, divided by topic. Writing about The WELL in 1993, Rheingold popularized the term “virtual community” with his article The Virtual Community: Homesteading on the Electronic Frontier. Rheingold has since lectured at Stanford on community and become a leading commentator and advisor for technology companies. The MIT Press has referred to Rheingold as the “First Citizen of the Internet.”1

 Howard Rheingold, The Virtual Community: Homesteading on the Electronic Frontier, Cambridge: MIT Press, 2000. 1

© Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6_2

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Atherton: Can you take me back to the early days of The WELL and how the community differed from the other Bulletin Board Systems (BBSs)? Rheingold: The WELL started in 1985, and for a year or two before that, I had been exploring BBSs. There were tens of thousands of BBSs before there was an Internet or Usenet, and so a lot of people, like myself, who later became involved with systems like The WELL, started on other BBSs. The problem with BBSs is they were usually a PC in some teenage boy’s bedroom that was connected to a phone line, and only one person could log on at a time. So you had to wait your turn. There was one thread. It doesn’t sound like a lot to be excited about these days, but it was interesting. You met people who shared your interests who you may never have known otherwise. Aside from The WELL, there were a couple of other online systems. ARPANET was one, but you really had to be a computer scientist to participate in that. The Source and CompuServe were also big commercial services in the early 1980s. The Source in particular had something called Participate, which was similar to forum software today. So it was on these platforms where I got involved in multithreaded discussions that went on for days. But it was expensive and I was a struggling freelance writer, so I couldn’t spend too many hours on any of these BBSs. The WELL had a couple of technical advantages. Mainly that it had 30 or 40 phone lines coming into it. In fact, The WELL office used to have this room full of phone lines and modems. The WELL was based on Unix (pre-Internet), so it had a forum software that was overlaid, which allowed the kind of asynchronous text conversations that you see today. Unix had a couple of utilities: you could see somebody’s profile by entering a command, and you could send them a private message. So The WELL was a combination of public forum posts and private messaging. We were excited about the possibilities of doing both of those things. Another important innovation was that The WELL was relatively inexpensive. I think the Source and CompuServe cost about $10–$15 per hour, whereas The WELL cost around $3. I immediately became very involved in The WELL. My wife became concerned about all the time I was spending online, and my daughter actually said, “was that daddy laughing at his computer again?” As a writer, I started producing content about the platform because it fascinated me. It also gave me an excuse to be online a lot. Living in the San Francisco Bay area, The WELL was an offshoot of Stewart Brand’s Whole Earth Catalogue (1968). The WELL’s office was just on the other side of the Golden Gate Bridge from San Francisco. One day, I visited their office and talked to the manager of The WELL. He told me that if you host a conference, The WELL is free.2 So I started the “mind” conference, 2

 A conference on The WELL was a collection of conversations about a particular topic.

The Rise of Virtual Communities hosted it, and spent a lot of time online. That was the start and the basis for the piece I wrote about hosting online conversations in 1998. By then, I had been using BBSs for over a decade. Atherton: Do you think that the formula for healthy online communities = hosts + moderators + rules? Rheingold: I’m not saying that you can’t have a healthy community without a host, but I believe that the chances of it being successful are multiplied manifold by having someone that cares. When I advise people about building online communities, I said that in addition to having an experienced facilitator from the beginning, you should identify the people in the community who are the most eager contributors and enlist them in helping as you scale up. Your hosts, your facilitators, should really come from the most enthusiastic members of the community. Obviously, these are people who have a stake in the community, but also it signals to everyone else that we, the community participants, are the owners of this virtual space. It is not some distant company who hires people to corral us. That feeling of ownership is key to feel they can participate and take responsibility for the health of the space. From my research, the main takeaway was that the success of an online group, whether it becomes a community or not, has a great deal to do with the way it is facilitated. To describe that, I borrow the term that The WELL used, which is to “host.” A lot of people use the word moderation. Moderators back in the days of Usenet were really gatekeepers. Moderated newsgroups meant you sent your message to the newsgroup and the moderator decided whether to send it on to everybody else. A host isn’t a gatekeeper or a sensor, but is rather more like a host at a party. You don’t just invite people, buy beer, and rent a room to have a party, you need to greet your guests at the door. You need to invite an interesting crowd. You need to introduce people to each other. You try to break up the fights or at least move it away from the punch bowl. That is key to successful online communities. As I wrote in The Virtual Community, the host should also demonstrate the behavior that they would like to see. Another important aspect is to have rules of behavior clearly set out at the beginning. By that I mean you need to agree to them before you join. The rules might differ in content and how they are enforced in different places. Rules should not be decided online with the group once it’s going, it needs to be decided before you start; otherwise, it’s an endless rathole. I’ve been in many discussions about what people call censorship. If somebody is driving people away with their behavior, censoring their behavior signals to people who might not otherwise have participated that it’s okay for them to participate. If those people see users getting away with attacking others, a lot of people will not participate for fear of sticking their head up and getting shot at.

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Those are really the basics. Have a simple set of rules that everybody agrees to beforehand and have someone who is not just a moderator or a police of behavior but somebody who’s actively engaged in catalyzing community. I often use that analogy of a host at a house party. You need to greet the guests, introduce them, and welcome them; direct them as to where they might go based on their interests and who they might enjoy speaking to. The first impression that you get when you enter a party or online community, I think, dictates how engaged those users will go on to be. Atherton: To what extent were the online forums of The WELL and other communities you played a key role in powered by real-life connections? What overlap was there between the real life and the virtual at The WELL? Rheingold: In the early days of The WELL, you had to dial up to log in, which meant you paid phone charges. So it was less expensive for people in the San Francisco Bay area, although there were people who paid long-distance charges to get into The WELL from elsewhere. Therefore, most of the participants online were in the same geographic area. The community crossed into real life when one of the people running The WELL had a birthday, and some WELL users suggested we show up at The WELL office with some beer to give him a birthday party. For many of us, this was the first time that we saw people face to face that we had communicated with for hours online. People just talked and talked, as we did online. It was a great success, so we decided to have a regular monthly WELL party. I remember one WELL party that was held at a beach. When it got dark, we had no lights, but people stood in the dark and continued to talk. People felt this commitment or need or want to communicate with each other. From there developed a series. In the parenting conference, where we talked about our kids, we decided to have a softball game and bring our kids. In another conference, somebody started an argument about who made the best chilli, so we decided to have a chilli cook-off. By that time, we had moved the parties to a larger place that had a kitchen, and so the chilli cook-off became an annual event! To many communities, having face-to-face gatherings was important. Bear in mind that Usenet has existed since 1980, and there were Usenet groups worldwide before the Internet. When I was researching The Virtual Community, I came across the Harley-Davidson motorcycle Usenet group. It had users from all over the world, and they organized meetups, for which people would travel halfway across the globe to attend. People were reporting that they met their spouses online. There seemed a desire to move toward face-to-face communication. But of course, there are many online communities in which people are scattered around the world that don’t often have a chance to get together.

The Rise of Virtual Communities I started a group in 1998 called Brainstorms that I have written a little bit about. We had face-to-face gatherings where people came from the Netherlands and Australia and all across the US.  I think they help to build trust, but it is not necessary. Trust however is somewhat transitive in that I may not know person A, but we have a mutual friend. This often translates to trust, until proven otherwise. I think that the number of those transitive trust relationships can help catalyze a sense of community. A certain amount of trust is required to open up to the community in a public thread. Online groups are not necessarily communities, if  people don’t have relationships with each other. If they don’t necessarily care enough about each other to rescue somebody who’s in trouble. But they do exchange information. For example, in Silicon Valley, at one point almost all the engineers were on Usenet, and they were exchanging information with other engineers around the world. “I have x problem. Do you know how to solve it?” Had their bosses known that they were communicating with engineers from competing companies, they probably would have shut it down, and we would not have seen the growth that entailed. In some cases, exchanging information might create a commitment to that particular group, but not to individuals within it. By contrast, there are online communities for sufferers of rare diseases. If you have a disease that one in a million people have, there are 2000 people like you on the Internet. Those groups have very strong relationships with each other, but may never meet face to face. So I think it’s a mix. Atherton: If not a crossover with real-life interactions, what do you believe is needed to start a community? Rheingold: One of the things you need is a strong center of gravity, something that’s going to attract people to your online community, say, Harley-Davidson motorcycles or a rare disease. The WELL had a number of conferences; some people were just in the books conferences or the politics conference. The real core members of the community were in a number of different conferences. Now we have Reddit, which has thousands of subreddits, some of which may be communities and some of them may just be for exchanging information. Atherton: Do you think there is a limit to how many virtual communities you can be a part of as a user? Rheingold: That’s a tricky question. Because I was writing about online communities, I spent a lot of time exploring different ones, in the early 1990s, before the Internet. Around this time, I went to England, and there was a WELL community there. There was another one in Paris, and I went to a

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meetup in the outskirts. People all around the world were doing this as the Internet began to open up these opportunities. The WELL was no longer a San Francisco Bay area platform, people could go there through the Internet. If it’s for your job, then how many hours does your boss allow you to use BBSs? But there’s a lot of online fatigue going on now, and I think that using Zoom so much during the COVID-19 pandemic has really affected people’s tolerance for how much online communication they can do. Atherton: What shift is required to turn an online discussion into a community? Rheingold: One is to have people actively facilitating community and welcoming people. In my experience, the one factor that most affects whether someone who participates for the first time will return and continue to participate is whether anybody acknowledges their participation by name. There’s nothing like having someone say they read your post. I can remember the first response that I had to my first post on The WELL. I said I wanted to talk about a certain topic, and someone said, “oh goodie”; I just felt acknowledged and welcome. A good host or facilitator will look at a person’s profile and try to direct them to places where they might be interested. Then your chances of having a community grow out of that increase. I told a story in The Virtual Community about a fellow parent that started the softball tradition at The WELL’s parenting conference. His son was diagnosed with leukemia, and of course medical support groups are commonplace today, but back then our parenting conference had doctors and nurses in it. We created a topic thread and raised about $15–20,000 to help out with expenses. The WELL became an online support network for them. There was another woman whose circumstances caught her very sick in Asia, and the people in The WELL figured out how to get her home and raise money to do that. There was a woman who was dying, and people took turns sitting with her. I think when you begin doing those things for each other, it’s proof of a true sense of community. There’s an expression that it’s really not a community until it’s had a funeral. Indeed, weddings, breakups, rites of passage that occur in face-to-face communities are also important milestones online. Another way of shifting discussions to communities is the presence of rituals. The rituals that work best are when they just emerge naturally. When someone says, “what does it look like where you’re sitting?” Or “what did you have for breakfast today?” Anything that catches people’s interest and that they then turn into a regular event. Atherton: Looking back to The WELL and Usenet, what were the scale of these communities?

The Rise of Virtual Communities Rheingold: Usenet was all over the world in about 100 countries, and it had hundreds if not thousands of newsgroups, so I would guess between tens and hundreds of thousands of users. The number of people online was then hugely multiplied when the Internet came along. Atherton: In your experience of the communities that you’ve been a part of, is there an optimum number of people for a healthy community? Rheingold: I’m sure you’ve heard of Dunbar’s number, which suggests a healthy community is around 150 people.3 Sociologist Barry Wellman has suggested that the Dunbar number may be flexible online.4 If you look at The WELL or at Reddit, they are an overarching community platform with subcommunities. In The WELL, each conference had probably around 150 people, maybe more. With the exception of the news conference that everybody participated in, most conferences like the science fiction conference or the books or media conferences were around 150 members. So I think that online groups kind of naturally spin off into subgroups that are more of a manageable size. I know that Facebook groups, which I no longer participate in, can have hundreds of thousands of people. I have a complaint about that. In fact, I’ve spoken to the social scientists at Meta, because a Facebook group is a bad affordance for a large number of people in which to discuss a large number of topics over a longer period of time. The thread that has been most recently posted goes to the top. And everything else gets buried. For a group with say 5000 people, if a discussion starts on something that interests you, if you log in an hour later, you might not even be aware of that. This was a technical problem that forums solved in the 1980s, whereby the system knows what you read, what you ignore, and the last thing you posted; it was solved by showing you everything that’s been posted since then. To me it’s important for a forum to keep track of posts for you. There are a lot of bad forums in which you see links and then you have to click on the link to get to the discussion, and then you have to figure out which was the last response that you read. That should all be taken care of for you. That’s really the advantage of asynchronous text. Atherton: How do you go about attracting new members to a community? Rheingold: It’s a lot harder now because people are spending 150% of their available time online, and they’re already participating in other venues, so that’s an issue that didn’t exist before. Somewhere in the 2000s, around the tenth anniversary of Facebook when the online social population became very  Robin Dunbar, a British anthropologist, has suggested in his publication “Neocortex Size as a Constraint on Group Size in Primates” (1992) that cognitively humans are able to sustain relationships with up to 150 people. 4  Barry Wellman, “Is the Dunbar Number Up?” British Journal of Psychology, May, 2012. 3

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Chapter 2 | Howard Rheingold, Writer and Lecturer on “Virtual Communities”           and an Original Member of The WELL

large, word of mouth became very important. If someone participates in a forum and is enthusiastic about it, that attracts people and they are more likely to stick. I think there are two key ways to attract new members: Firstly, do your participants have a sufficient feeling of ownership that they themselves want to grow the community? Secondly, you need to know your target market. That’s marketing 101. Who do you want to join, an engineer or a mother? What distinguishes that person? What are their interests? What attracts them? Where do you find them? How do you get them to try your platform? And to come back again? This is the way you market any product. The other key attraction of your community is specialist knowledge. I use the example of Patreon because its users have an art form or podcast or videos around a particular theme, and people who are interested will find their way to it. They might then spend five or ten bucks a month to support that person to continue producing content and to participate, say, in their Discord. I think cross-medium is important. For example, if people from your community make videos and YouTube promotes those videos and you’re inviting these new viewers to your community, you can be using other platforms to promote your own. Atherton: From your time in text-based communities vs. avatar-based communities, did you feel there was any difference in the community connections? Were connections deeper in text-based communities? Rheingold: Connections had to do with the quality of the interaction rather than the environment the interaction occurred in. In a very visual virtual world with fantastic avatars, if the conversations were mundane, community was less likely to grow. Atherton: In a virtual world environment that is more visual, how can you encourage more meaningful conversations? I’m curious whether we will have the same level of meaningful interactions and connections as we spend more time in the metaverse, as we have had thus far in text-based worlds? Rheingold: Well some of the rituals I have highlighted in text-based virtual communities do not occur in more visual virtual worlds, like Second Life, because there’s an element of escapism. Users role-play a perhaps slightly different version of themselves, a more playful, fictional version; so they’re not necessarily sharing the person behind the User ID, sending pictures of where they’re reading this or topics they’re concerned about. At the same time, especially for females, being able to disguise your gender has advantages. One of the experiments I have done for research involved me logging in to different online communities with a male-presenting name and asking for advice, then logging on with a female-presenting name and asking

The Rise of Virtual Communities for the same advice. I got greater responses to my female-presenting persona, all from men. I think that women can use that ability to disguise gender to their advantage. Atherton: Do you think whether a virtual world is in 2D or 3D impacts the community interactions? 2D BBSs like the Palace perhaps heighten the text interactions vs. in a fully 3D virtual world you’re immersed. I wonder if there might be a resurgence in 2D.  If you look at the rise of Webtoons, VTubers, and the anime community, they’re largely 2D.  More teenagers in America and the Western world are now spending time in 2D interactions, which feels nostalgic given that VR headsets now make 3D more accessible. Rheingold: I wrote about virtual reality in 1990, and its technicalities have come a long way since then. But I think the same fundamental remains, which is that in VR you feel cut off from the world. An immersive 3D environment, which is the attraction of VR, simultaneously contributes to a distancing from other people in the real world. In VR, you are disengaged from society in a different way than when you’re in a text-based virtual community. Traditionally, text-based communities have been asynchronous, so you could read it a week later. Discord and Slack are now semi-synchronous. Virtual worlds and VR are ephemeral and not recorded, so you have to be present online, which can take you away from the real world. Atherton: Sometimes, it’s intimidating when you join a new community, and there are elements of language and lore that you don’t understand. Contrastingly, many community founders cite funny inside jokes and memes as critical to community building. Do you have any examples of other communities where inside jokes are key, and do you see them as important to the platform’s success? Rheingold: To me, there’s a collision involved here. If the community has developed its own kind of language and its own events that people refer to, it creates a sense of unity. Yet the other side of that is that every person who joins a community feels like an outsider. To a newcomer, people you may feel are embedded in the group may only have joined an hour before you, so that’s also partly the nature of being a newcomer. More fundamental is that there are people welcoming and explaining the community traditions to newbies. People use abbreviations like “Lmk” for “let me know,” and you can search to find out what they mean, so slang is a little bit different in the larger scale. I think every community has to balance their emergent norms with the necessity to not make people feel like outsiders.

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Chapter 2 | Howard Rheingold, Writer and Lecturer on “Virtual Communities”           and an Original Member of The WELL

Atherton: Touching on rituals and community events, I read that at Electric Minds, the online magazine + community you founded in 1996, you hosted an infamous discussion about the chess rematch between the Grand Master and Deep Blue, IBM’s chess playing system. Was hosting discussions on real-life events key to the success of the community? Rheingold: People that may not have been interested in participating in our forum, but were fanatic about chess, joined our platform specifically to come to that event. In some ways, it was inventing a ritual that would attract people with a particular interest; they would spread the word, and then some may stick around. So you might be able to cross-pollinate different communities with a big event and then hopefully convert some of those guests to become community members. Atherton: Philip Rosedale, founder of the virtual world Second Life, is also interviewed in this book. Can you tell me about how you have used Second Life in novel ways for teaching? Rheingold: I have been invited to Second Life frequently to do lectures and have discussions. I had participated in multiuser dungeons (MUDs) before that, in which you could create objects that had behaviors with a little code.5 For example, in some MUDs you could have a permanent residence which you could decorate; you could enter doors and even make a camera to put in your room, so you could see who had visited while you were gone. The ability to shape your environment, I found extremely interesting. Of course, in Second Life you could shape your avatar and your environment. There were and still are some really dedicated communities in Second Life. A lot of companies built real estate in Second Life and spent a lot of money on it, though nothing really came from that. Interestingly in the educational sphere, nobody has really taken advantage of online environments like Second Life. In my lectures, I would be in Second Life, floating in the air and others would be floating around me, but other than that, it was a normal lecture. There are real advantages to having an immersive 3D environment in education. You could take people through a model of the Great Pyramids or Notre Dame. You could have students manipulate molecules with their hands or crawl inside of a plant cell. I’m not seeing that happening; I would love to see that.

 MUDs are a virtual world in which users are represented by avatars and interact with others. 5

The Rise of Virtual Communities The frustrating aspect was griefers that would interrupt lectures, showing up as squadrons of flying penises.6 Facebook is already having tremendous problems trying to moderate at its scale. I don’t know how they are going to do this. Griefers will always come up with new ways of making people’s lives miserable. Atherton: The term “virtual community” was popularized by your article The Virtual Community: Homesteading on the Electronic Frontier about The WELL and Usenet. I read that you wrote this to counter the idea that there was something dystopian about virtual communities. Is that right? Rheingold: I tried to get that book project going in the late 1980s, and I was told by my agent and editors that only electrical engineers want to communicate through computer networks. It wasn’t until the New  Yorker cartoon was published in 1993, “on the Internet, nobody knows you’re a dog,” that people began to accept online communication. At the time, it was deemed peculiar, even pathological, for people to spend a lot of time talking to strangers online. I didn’t think so. Atherton: You revisited this idea of the positive and darker sides of online communities in your book Netsmart. How have your ideas changed with the emergence of the loneliness epidemic and online communities influencing voting and so on? Rheingold: Now a significant percentage of the human race is online. If you count Facebook, a significant percentage of those participate in social communications online. With that, we get  all that comes with the human race. Put it this way, if a rising tide lifts all boats, then it lifts the hospital ships along with the pirate ships. A lot of good things have been happening alongside bad. I wrote Netsmart in 2012 because I felt that the way to improve the virtual public sphere and individuals’ experience of it was for them to gain literacy in this new medium. Ten years have since passed, and I still have not seen educational institutions teaching kids how to search and differentiate facts from misinformation. I’m now much less sanguine about virtual literacy, as it’s not spreading. Our educational institutions are very conservative and slow moving. They have not proved themselves up to the task. But even worse is that we now have computational microtargeted propaganda, so you can gather a huge amount of information on a huge number of individuals, and you can target not only advertising toward them but political persuasion. You can exacerbate differences in a society and spread misinformation about vaccines, racism, antisemitism. Facebook is particularly guilty of this. The more money and technology that goes into deceiving people, the more education is required to help people avoid being deceived. I’m concerned about that.  Griefers refers to people in online environments who deliberately trouble other community members. 6

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People that for whatever reason gain pleasure from making other people miserable online, they’re called griefers or trolls. Sophisticated misinformation that has entered the public sphere online, which has exacerbated conspiracy theories and bigotry. These have poisoned the atmosphere of virtual communities for a lot of people. On Twitter, you can have complete control over your experience. You should have people whose opinions and intelligence you have some respect for, but with whom you disagree as part of the mix. I think that’s all part of having a good experience. But you can also block people, make accounts private, and control who you follow and who follows you. People complain about their horrible experience even though they have the tools to prevent that. Again, Twitter’s not educating you about it. Knowing how to use a medium and how not to be misled online are huge issues and critical uncertainties about the future of online communication. If platforms become mistrusted, then people stop using them. Atherton: So you think the usage might decline if we don’t tackle this problem of platforms providing minimal education on how to not be deceived? Rheingold: Yes, or even worse usage might not decline, and people would just be credulous… Atherton: What virtual communities are you most excited about now? Do you feel there are any pioneering platforms? Rheingold: Well, back in the days of The WELL, we knew that there would be greater bandwidth and that computers would have greater capabilities someday. It wouldn’t just be words on a screen, there would be images, sound, and video. What nobody foresaw was that amateurs would upload more video in a few minutes than the entire history of broadcast television, so the scope and scale of what happened, for example, when YouTube came about, was not really anticipated. I participate in a couple of communities that have forum software that enable you to embed video players and drag and drop images. On those platforms, we have traditions; one week every year, people upload photographs of their food in their backyard and their hometown. A long time ago, a fellow at a newsletter asked his recipients, “where are you reading this and what does it look like?” People sent in pictures of their offices and homes. That’s something that I’ve done with a number of different communities. It really gives you a sense of other people’s space. So I’m all for videos, images, and links that create these rituals within the community. People can take photos of their coffee and participate in a way that lowers the barriers to entry.

The Rise of Virtual Communities Atherton: How do you feel about virtual communities today, like Discord or Reddit? Discord’s layout recalls IRC; avatars have not developed dramatically since the Palace. I’m curious to know what you think about that?7 Rheingold: In 1997, I had a company called Electric Minds, and we had a Palace. That was great fun and a type of graphical environment that we don’t see a lot of these days. People have said that Discord is a modernized version of what had been going on in IRC for a long time, so I think if you take an old medium and put it in a new bottle, that offers you some better affordances, and it’s going to be even more popular. IRC was a little esoteric: you had to join a server, et cetera, so it was the domain of more tech-oriented people. Reddit, I have not explored very much, but I think that the great advantage of Reddit is its multiplicity, that there are so many different forums that you can participate in and the people who run those forums really help determine the atmosphere in them. Lately, I’ve been seeing that people doing Google searches can get better information by specifying “Reddit” in their search terms. Atherton: What thoughts would you like to leave our reader with? Do you have any parting advice for future community builders or perhaps some predictions? Rheingold: There used to be this legend that you build the community and people will come. That has long since ceased to be true. There is so much happening now in people’s lives competing for their attention. In the early 2000s, I had a consultancy, and there was a period where every startup, every company felt that they had to have a community. The first thing I would ask those people is, do you really need to have a community? Have you thought about what its downsides might be? For example, if you are a company that offers a technical product, if you start an online forum around that product, if people just complain or recommend and nothing ever happens, then that’s really a negative for your company. Again, it’s back to marketing 101. Who are the people that you want to attract? Why do you want them? What is your value proposition? What are you giving them in exchange for their attention? Another issue that I think still persists is that companies rarely budget for having a full-time community manager. No matter how many facilitators you have, your community may get out of hand without a plan. A lot of planning is required for a community to have a good chance at success: How will you market your community? Who will your members be? What kind of technology

 IRC stood for Internet Relay Chat and was a protocol that offered instant messaging in 1988. The Palace was a virtual world, which launched in 1981. 7

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will you use? What will the information infrastructure be? What are your norms and rules? People who want to start a community should question why they want to build one and whether they have the resources to do it successfully. That was true 20 years ago, but infinitely more so today. Community manager is a role that is now understood. Pay attention to your members at the beginning and draw them into your planning. I used to say something which perhaps doesn’t hold up as well today: do an experiment before you invite 10,000 people. Invite 100 people and let them know that it’s an experiment and that you want their feedback. That you’re going to change what you do according to their feedback. If you change things without telling people you’re going to change things, they get upset, because they feel ownership of the platform too. So do an experiment before this stage and see what you learn. Scale it from there. Don’t try to have the grand opening with 100,000 people invited before you see what happens. At the end of the day, you would do product testing before launching, why not with a community?

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3 Stacy Horn Founder of Echo Echo is a text-based platform intended to be “the virtual salon of New York” that comprises a Bulletin Board System and personal messaging, known as “yo’s.” Founded in 1989 by Stacy Horn, Echo was one of the earliest social networks to emerge in New York. At its peak, Echo was used by tens of thousands of people, maxing out New York phone lines. Echo stands for East Coast Hang Out, a small but vibrant collective of people, known as “Echoids,” who discuss arts and culture in its conferences. Echo pioneered online media, hosting the first interactive TV show and went on to be described as “a cultural icon of the online community” by The New  York Times. Horn has subsequently taught Virtual Culture at NYU and published Cyberville: Clicks, Culture, and the Creation of an Online Town. Horn turned down offers to acquire Echo, and it remains active today at EchoNyc.com. Atherton: Can you take me back to how Echo started in your student days? I would have liked to have sent a “yo” and been the host of a conference! Horn: I had been working as a telecommunications analyst for a few years, and my job was connecting people around the country to each other in a work environment. I was working for Mobil Oil at the time, and one of the higher-ups came into my office one day, and he said, “you’re never going to move up the corporate ladder if you don’t get a graduate degree.”

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Chapter 3 | Stacy Horn, Founder of Echo I didn’t want to move up the corporate ladder. I’d always wanted to be a writer. I fell into telecommunications somewhat by accident. I was trying to decide what to do with the rest of my life, and graduate school just sounded like fun while I made up my mind and came up with a plan. I picked the interactive telecommunications program at NYU only because it had telecoms in the name. I had no idea what went on there. I applied, I got in, and discovered that it was a playground. People were experimenting with all these new technologies. Remember, this was 1986 when I started graduate school. Everyone was having a ball. I would work all day at Mobil Oil, and then at night I would go to NYU and play. At NYU, I had an assignment in my very first year to call up The WELL and just try it out. I just loved it. It was a glance into what we’re used to today. I had instant communication with people in California except this was 1986, and there was nothing else like it at the time. Doing something like this was new and unheard of. I was thrilled. Atherton: When you say you called up The WELL, could you clarify what you mean? Horn: You had to buy something called a modem, connect your phone line to the modem, literally dial up a phone number, and pay long-distance phone charges to participate in The WELL, a forum in California. Mobil Oil was spinning the bill so I could do that. Long after that assignment was over, I continued to call up The WELL. In my last year of graduate school, I was logged in to The WELL, and somebody said, “we heard you were starting an East Coast version of The WELL.” I don’t remember ever saying that, but as soon as someone said it to me, I thought that’s a great idea! I dropped a class that I was taking at the time and signed up for a class called Writing a Business Plan. I thought I would start what we called a “virtual community” at the time; a social network was not a label that was used then. I never liked the term “virtual community,” but I couldn’t come up with anything better. I wrote a business plan and tried to raise some money. But everyone would laugh me out of the office for even thinking that people would want to socialize through their computers. Not only did they think that “virtual communities” would never become widely used, they thought there was something a little pathetic about me, that only losers and nerds would want to do this! Atherton: Were you pitching to VC investors? Horn: Yes, but I only tried a couple of times; I got the idea that nobody was going to give me money. I came to this conclusion quickly because of a prior experience at Mobil Oil. As soon as I had discovered this way of communicating,

The Rise of Virtual Communities I pitched it to Mobil Oil. I suggested that we start a virtual community like The WELL. At the time, my job in telecoms was to set up Mobil Oil buoys all around the country to our main networks in Princeton and Dallas. To do this, I was shipping equipment to all these different locations and sending installers from the phone company and from the modem company. I was sending a lot of people very complicated installations, and things were always falling through the cracks and going wrong. I thought it would be great to have a place where people at every stage of these installations could check in and update what they had managed to get done, so that I would know exactly what was going on, and determine if I needed to send more people to fix something. With a virtual community, I could address problems as they arose. I pitched a computer conference system, a virtual community for Mobil. I was the only woman in the office working in telecoms at that time. Every week, at our long conference table, I would stand up and tell them about these new, cool things called virtual communities and how we could utilize them. They would shoot me down, and every week I would come up with another reason why they would be helpful. Eventually, I went to the head of Corporate Telecoms and told them, “I know with every fiber of my being that virtual communities are a good thing. It could be very effective and save us a lot of money in terms of communications. It’s going to take over the Internet and the world.” He didn’t believe me. I suggested we do a pilot, set it up, and see how it works. He agreed. I set up something called Monet, an amalgamation of mobile and network, though in my mind I was pronouncing it like the artist! It failed miserably. I later learned that the other people in my department had quietly agreed that they weren’t going to allow it to succeed; they wouldn’t use it as intended or check in regularly. A very important lesson for me was to consider alternative perspectives: while I saw it as a way of knowing what everyone was doing so I could fix problems, others thought it exposed problems and highlighted what installers had not achieved. After that experience, when I approached VCs and received the same response that I got at Mobil, I thought I’d better do this on my own. I lucked out because around the time that I finished graduate school, Mobil announced that they were moving to Virginia and closing the NYC office. I was entitled to severance pay, and I used that to fund my startup. Atherton: When you started Echo, what was your business plan? How were you going to monetize the platform? Horn: Through monthly subscriptions. When I took that course, How to Write a Business Plan, and then wrote my own business plan, I learned that you can make those initial financials say whatever you want. Early-stage funding

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Chapter 3 | Stacy Horn, Founder of Echo is like sticking a finger in the air, but I figured members paying a monthly fee made the most sense. Atherton: With your severance pay, you set up Echo in your apartment and just started coding it yourself? Horn: I bought this software that already existed called Caucus, a text-based computer conferencing software which Echo uses to this day. The WELL used PicoSpan, and structurally it’s entirely the same, it just has slightly different commands. I had to learn Unix to troubleshoot problems, but I wasn’t very good at it, and things were always going wrong! One day, I was talking on a computer radio show, Off the Hook, about how much trouble I was having with the software end of the system and that I needed some help. Echo would go down, and I’d have to figure out how to bring it back up. I wasn’t a Unix programmer, I had learned enough to get by, but I couldn’t deal with these complicated problems. Off the Hook told me that on air next was the well-known hacker Mark Abene, who went by the name Phiber Optik. When I came off air, he introduced himself. I was looking at one of the most famous hackers in the world, and he was telling me he can fix all my problems. But in order to fix them, I would have to give him access to Echo, the keys to the castle. What a dilemma. But I looked at him, and he seemed sincere, not that you can tell that by looking at someone! My gut reaction was that he would help us, and I was right. He became my CTO. Atherton: What was the first conference on Echo? Horn: When I got it all set up, I had a bunch of empty conferences. I couldn’t advertise “Join Echo” and participate in discussions that don’t yet exist! So I got 20 people to log in and help start these conversations. Among the early conferences was “Central,” which was where you came first, like a lobby, where you could tell newcomers how to get around Echo and what other conferences there were. Users would answer questions and could raise problems with getting around Echo. From there, we started the New  York conference to talk about the city, where to go, where to live, anything to do with that very general heading “New York.” Those 20 people just went around to all these different conferences, starting discussions and talking, so that when I finally did open my doors, there were conversations to join. I lucked out from the very beginning that the idea of virtual communities or social networks was very new and interesting. Most of the people involved with early computer technologies were men. My presence in this arena was very novel, so journalists jumped on that, and I got a lot of attention, just by the virtue of my sex. Being female had not been an advantage for most of my life, as someone who grew up in the 1950s and 1960s. With that press, I got a lot of people joining right off the bat.

The Rise of Virtual Communities Atherton: How did you encourage new Echo users to engage in meaningful conversation? Horn: It was part of a conference host’s job to encourage new users to imagine the conversations they would be having if they were in a room with other users. The host could tweak conversations and help new users who were perhaps shy or feeling awkward and help the conversation along. I called every user who ever logged in to Echo on the phone to get feedback. As the founder, I would take the time to speak to new users, so they would feel connected and a sense of ownership. Plus, if I could get people to attend a face-to-face event, they were more likely to stay on Echo. Atherton: Echo has been described as the virtual salon of NYC, can you tell me about the demographics of the platform? Horn: I wanted to have as many women as men on Echo, and I wanted the discussions on it to be about anything but computers and technology. I felt the latter were interesting subjects, but had already been covered elsewhere. On Echo, we’d talk about art, music, movies, and culture. Atherton: Echo users were known as Echoids, how intertwined was Echo’s virtual and face-to-face community? Horn: People were meeting up a lot in real life as well as just online, and that was also intentional. I had at that point three years’ experience of following The WELL, so I was basing a lot of what I did on that. One of the things that I was disappointed by at The WELL was that I would log in, talk to all these interesting people, and I wanted to meet them, but they were mostly in California. I thought I’m going to make that. Anybody who wanted to dial in outside of New York was welcome, but we marketed Echo as for New Yorkers. In addition to starting Echo, the virtual salon, I immediately started organizing ways that people could get together in person. Originally, we just met at a bar, once a week. We had a lot of writers and readers online, so I started a reading series at a bar. We had an alternative film festival and music jam sessions. Anything that I could think of that was fun to do, we did. Atherton: Did you consider moderation from the start? Horn: When I started Echo, I thought I was creating this network of interesting people and that I could log in to and have fun, as I did on The WELL. What I didn’t foresee at all – it still shocks me that I didn’t – is that I was now responsible for things that happened. If conversations went wrong or got ugly, I had to figure out what to do – having to moderate the problems of human behavior, without any particular training to do so! Echo quickly became less than fun for me.

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Chapter 3 | Stacy Horn, Founder of Echo I was just making it up as I went along. I borrowed things that I saw on The WELL that worked, but I didn’t always agree with how they handled things. As a woman, I think I was more sensitive to harassment; I responded to that in a very strong fashion. People almost forget that there’s real people on the other end of the line. I can’t imagine they would ever be that rude to someone in person. I found that if people disagreed online, if they met in person, it would usually fix the problem. They may not always be friends, but once they have looked that person in the eye, they would never speak the same way to them online again. Atherton: What were some of the rules that were inspired by The WELL and others that you made up to moderate the community? Horn: The main rule I used was “attack the idea not the person.” If somebody says something that you disagree with, rather than say “you’re such an idiot,” explain why you think the idea is stupid. It was a small shift in communicating to keep the conversation a safe space. I was particularly careful about harassment as Echo was filled with women and in that sense was unlike many other virtual communities at that time. We had cases where some users wouldn’t leave a woman alone. We had a rule: no harassment. If someone says “leave me alone,” you have to. You can’t argue that you’re a nice guy. You can’t “yo” them, which was Echo’s way of communicating in real time. If they posted something on a discussion in the conference, you couldn’t respond to them. Atherton: Did you physically block them from communicating or was it an instruction? Horn: The software had some limitations. We could block someone from “yo-ing.” In terms of posting, we would first ask them to stop, and if they kept going, we would put them on read-only. If this behavior continued, we would kick them off. We published these rules of engagement; people knew what they were signing up for. Most people didn’t mean to harass, so if you asked them to stop, they would. Atherton: Echo’s gender split was about 50-50 (male, female), very healthy for the time. How did you achieve that? Horn: I think I was the only one even trying. I did depend a lot on all the press I was getting, and I tried ads. I went everywhere I could think of to talk about Echo and the Internet. I would give presentations to anyone who would listen. I was going to women’s groups at the time. There were a lot of activist women groups that were early adopters. The most successful thing I did was that women got the first year for free on Echo. Men got one month free, women got a year. So why not try? It wasn’t costing them anything.

The Rise of Virtual Communities I was operating on my memory of always working for men, standing up at that conference table, and having to pitch the Internet to men. I thought when women get here, they’re going to see as many women in charge as men. Every conference had two hosts, one male, one female. The conference manager who oversaw all the conferences was a woman, Miss Outerborough. Atherton: Why are hosts that users can relate to so important in virtual communities? Horn: I always tell the story because it’s indicative of the time. When people joined Echo, I would mail them this card with a list of conferences and who the conference hosts were. A man on Echo read all the names of all the conference hosts, and he exclaimed, “oh my god most of your conference hosts are women.” I said, “Really? Look again.” He looked again and reiterated, “yeah, mostly women.” It was, in fact, exactly 50-50, but to approach equality appeared to him as almost only women. Atherton: Did Echo ever expand beyond New  York? I know the original purpose was to encourage real-life interaction. Horn: I wanted it to be mostly New Yorkers, but I loved the idea of people visiting. What I enjoyed about The WELL was its very West Coast flavor. I wanted people when they went on Echo to feel like they were visiting New York. At the time, people were talking about how the Internet was going to break down geographic boundaries and the positive effects of this. There are a lot of good elements to that; it would be nice if we all felt more like members of the same planet. Equally, the joy of travel and online communities is seeing our cultural differences. I didn’t want to eliminate that, I wanted to accentuate that. Atherton: How do you think you’ve achieved giving a virtual venue a sense of character? How did Echo feel like New  York and The WELL like the West Coast? Horn: I set the stage and then didn’t do anything. It’s the users who gave it that sense of place. They talked about New York, what was happening, both good and bad. I gave people the space to allow this to happen and then supported it. Atherton: Echo had a Bulletin Board System; you could send “yo’s” and emails. Were there any other features that you wanted to create that you didn’t see built? Horn: Because this was a New York virtual community, I wanted to involve the City of New York more. Since Echo was text based and communication was via words only, I approached New  York newspapers and magazines. I suggested they start a conference on Echo, where users could discuss topics raised in their articles. I was able to attract The Village Voice, Ms. magazine, High Times magazine, Mademoiselle, and a bunch more.

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Chapter 3 | Stacy Horn, Founder of Echo I didn’t make any money from their involvement; I felt it was mutually beneficial that they would bring users and conversation to Echo and vice versa. I met the director of the Whitney Museum of American Art, David Ross, at an opening, and I approached him. He was a very forward-thinking man, and the Whitney Museum started a conference in Echo on American art. Another thing I briefly considered was the idea of starting other communities like Echo in other cities that like Echo and The WELL would have the flavor of their city – in Boston and Austin and so on. Atherton: How big was Echo? Horn: At its height, our user numbers were in the tens of thousands. Not all those people were using Echo for the virtual conferencing, some were just using it for email. Echo had text-based software, which required learning commands to get around. I held classes in my apartment once a month on “How to get around on Echo,” and I included how to get around on the Internet, so I felt like I was also giving them something that did not just benefit me. But the necessity to know these commands limited who was using these forums. The minute there was a graphic interface for the Worldwide Web, Mosaic, I thought this is what the Internet has needed all along. People will not have to learn commands anymore, they can just point and click. Atherton: I read that John Kennedy Jr visited Echo. Did other high-profile people come on using their real names? Horn: Kennedy used his real name; everybody had to. It was my way of forcing people to own their words and be civil. If you posted like a jerk, everybody would know who you are. I did make an exception for very famous people who couldn’t be there as themselves without being descended on. I gave him that option. He went by Flash, as everyone could play around with pseudonyms, but people could still see the user’s real name, and he opted to show up as John Kennedy Jr. Atherton: Having that dual interface, where you can play around with a pseudonym, but everyone can see your real identity, probably prevents things from getting too out of hand. On Twitter and other platforms where we can be completely anonymous, we can witness the worst in human behavior. Horn: That was my intention behind it. But there are people who seem to have no problem posting the ugliest thing using their real name. It seems like behavior and civilized discourse is eroding. Atherton: How did you monetize Echo?

The Rise of Virtual Communities Horn: The business model was subscription based. Originally, it was $19.95 a month, plus the communications fee. In addition to running Echo, I had to pay for the phone lines that people used to call up Echo, and that was enormously expensive. We started with ten phone lines, which I had to pay a monthly fee on. As Echo grew, I had over 100 phone lines going into my apartment. Eventually, I maxed out all the available phone lines in my neighborhood, and the telephone company had to rip up the street from their closest office to my apartment to install more phone lines. It drove all my neighbors crazy, but all I could think was “You’re welcome. We’re getting an upgrade thanks to me!” We eventually did break even and make a little money. Though I didn’t get rich, not even close! Before that, there was a point that I thought we would go under. I was getting users on ten at a time, and it was expensive to operate. Around that same time, Clinton was elected president of the United States. Al Gore and Clinton started talking about what they called the Information Superhighway that was going to take over the world. It was having an effect, and people began thinking that they had better learn about the Internet or get left behind. When I presented Echo, I told the audience, Echo is a stop on the Information Superhighway. Get on Echo and I will help you learn how to get around the Internet. That’s when I knew Echo would survive. Eventually, I decided that Echo should become an Internet provider. We offered people Internet access, and from Echo they could go anywhere they wanted. It came with the account, and they paid for usage. When Mosaic emerged, I also threw in a website as part of users’ accounts. At that point, we moved Echo into offices. We had a bunch of T1s, which were expensive, massive cables with many phone lines within them. I charged a communication fee based on how many hours Echo users were online for (essentially their phone line usage). When the pricing on the Internet changed, I could bring that price down. Around then, I decided I was sick of the Internet provision side of things. Keeping those phone lines in operation was very hard. Phone companies were used to providing telephone lines for telephone conversations, so there was always noise or static on the line. On a telephone, that meant a voice sounded faint. But for data communication and modems, the noise would garble the communication. A message sent on Echo would come out spelt incorrectly. We had to keep those phone lines cleaner than they had been for telephones. My background was in telecoms, so I knew it was the phone company’s job to keep them clean. I had to call them all the time. Eventually, I got sick of it and used other companies to provide telecommunications access, like Panex. Atherton: That is fascinating, because the Internet feels so centralized nowadays. You go to a Verizon or Comcast, and it’s a one-stop shop. Did you ever have any offers to acquire Echo?

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Chapter 3 | Stacy Horn, Founder of Echo Horn: There were a couple of nibbles. The only serious offer was from Bruce Katz, who bought The WELL. He wanted to buy Echo, but I didn’t feel that he was a good fit. So to up the ante, he said, “Let me buy Echo, and you can run both Echo and The WELL.” That was very interesting, but when I thought about it more, I realized I was not the right person to run The WELL, as wonderful as it is. People were already doing a good job, and I didn’t see that I had anything to add. I was where I needed to be. My dream was to become an author, and I started writing books and getting publishing contracts, so eventually I let Echo slide to the wayside. Atherton: Does Echo still have active users? Horn: Yes, but it’s a small group of friends. We’ve used it for years and probably always will. Today, I saw a fight online, and I sighed. I have been managing these troubles for 30 years now; I don’t want to do it anymore. It’s almost like a dysfunctional family! Atherton: Do you have any guiding principles to leave our future community builders with? Horn: It’s hard to say, because I’m not sure that everything I did at Echo was correct or worked. To me, what I saw in founding Echo and through using The WELL were these powerful conversations between people who would show respect even if they don’t agree. That tolerance allowed one-off thoughtful conversations to take place. I don’t see that happen anywhere else online these days, except perhaps Reddit. A community should be a place for people to have discussions and to freely change their minds.

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4 Jim Bumgardner Creator and CTO of the Palace The Palace was one of the first multiplayer real-time virtual worlds, made up of avatars and rooms within graphical chat room servers, called Palaces. Bumgardner created the software in 1991 when he was working for Time Warner Interactive. Within the Palace, avatars could navigate the rooms, chat to each other, create props, and even follow links to other decentralized Palace servers. In 1997, users began clothing their avatars like paper dolls. With these “Dollz” and crowded servers run by the likes of MTV, 20th Century Fox, and Sony Pictures, the popularity of the Palace peaked at around 1.5 million users.1 In 1996, Intel purchased the Palace for an undisclosed sum, with SoftBank as a majority investor. The Palace was subject to numerous sales and ultimately closed with the bankruptcy of Communities.com. Atherton: So, if you can take me back to how the Palace started as one of the first multiuser dimensions (MUD), what were the early inspirations for you? Bumgardner: I was going to CalArts as a music student in the early 1980s, and I got into computers around then, because that was the first time they became accessible to people with no money, like students. I remember going to K-Mart and buying a TimeX Sinclair computer that was about $100. I hooked it up to my little black and white TV and started learning to program on it. Not too long after that, I got a Commodore Vic-20, which  As estimated by Bumgardner. The Palace had additional decentralized servers, however, so this figure was perhaps higher. 1

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Chapter 4 | Jim Bumgardner, Creator and CTO of the Palace is the cheap version of the more famous Commodore 64. I also bought a modem that fit the standard AT&T telephone handset we all had back then, so I was able to connect to dial-up services. The communication software it came with wasn’t very good, so a friend of mine and I ended up writing our own that was called “quasi modem.” We used it to connect to CompuServe at the time and to dial into BBSs. This was before AOL, pre-Internet even, so CompuServe was pretty popular around 1983. There was a community of people in Los Angeles that were on a chat board on CompuServe that was called NetWits. Their users were all over the country, but there was a fairly large LA contingent, so we had some things in common. NetWits was my first exposure to online chat. At that time, online chat was mind-blowing. Up until that point, the closest equivalent was writing letters or calling someone. It was interesting what it took away in terms of what you have on the phone – what’s implied between the lines  – that all goes away with text. I remember trying to explain the appeal of it; I just got incredibly addicted to it. I went into debt in those early months on CompuServe, running up a bill that I couldn’t afford on a credit card. I tried to explain the appeal of online chat, the cause of my debt, to my relatives. I told them “it’s like you’re meeting people on the inside before you meet them on the outside.” Now we’re all steeped in online communication and also very aware of its associated problems. At the time, it was an incredible new way to communicate and to find people that shared similar interests, because prior to online chat I was relatively lonely. Suddenly, there was this community of people that I met; we’d chat on CompuServe at two or three in the morning! There was another chat board topic on CompuServe related to golf. A group of users from our NetWits board “trolled” the golf board by all changing our handles to Russian names, which seemed funny at the time, and joining the golf board all at once. Then we all went back to NetWits and laughed about it… Atherton: How did you find these online communities? Bumgardner: We must have been aware of CompuServe from advertising. Around 1982 or 1983 if you bought a computer, like a Commodore 64 and Vic-20, you were also buying magazines that were filled with articles on computer software. CompuServe was probably advertising in those magazines. Once you got into CompuServe, they had menus; it was purely text based. There was no graphic interface. That came much later with the dawn of AOL. CompuServe had menus of the active bulletin boards, which showed how many people were on them. Initially, you would sample them to see if you liked what you saw. I stumbled upon NetWits probably just through the menu and found I liked that one.

The Rise of Virtual Communities Atherton: How did you first get the idea for the Palace? Bumgardner: In the early BBS (Bulletin Board System) scene, virtual communities were entirely text based. You would sign in to a BBS, and there would be a menu… Press 1 to see our files, press 2 to have a chat with a system operator, press 3 to access our help system. But there were also a few companies that were creating custom BBSs, trying to make them more like a text adventure game. Mystery House was one of the early text adventure games; there were some from the Old Hacker. One was called Rogue, which was an ASCII dungeon. There was also a board in LA that was supposed to be a shopping mall called Citadel. The software would tell you: “You are in the main hallway. To your left is x is happening, and further down is the post office…” I only went there a couple of times, but it was always completely empty. No one was using it. I think it probably only lasted a couple of years. It was trying to be an online shopping mall, a physical space, though it was way too early for that, with only a handful of people using BBSs at that point. A few years later, when I was working a tech support job and I had a lot of free time on my hands between phone calls, I started working on a text-based system called the Mansion, which was sort of a precursor to the Palace, but was text only. The Mansion allowed you to cut doors and create objects inside the text adventure. It was intended to be multiuser. I didn’t get very far with it, I just worked on it for a few weeks, and what I found very quickly was that language is really hard. I wanted to be able to say things like “create a table, put a vase of flowers on the table. On the wall to the East, put a painting on the wall.” Just the difference between a vase being on a table and a painting being on a wall were very different things, and I immediately started running into difficulties with parsing the grammar, because at that time language parsing was a huge struggle for everyone. We’re doing language parsing really well these days, but we’re doing it with neural networks! So, the idea was a multiplayer text adventure in which you could create rooms or spaces and do fairly imaginative things, like create a door that goes to a spaceport, with a rocket ship on which you can then go to another planet. Or there might be a bottle on the table that you would drink, it would make you very small, and then you could go into a mousehole. The idea was to be able to have a wide variety of experiences, something that’s always been very important. Atherton: Was there an ideal community size you were aiming for at the Palace, to maintain a healthy community?

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Chapter 4 | Jim Bumgardner,Creator and CTO of the Palace Bumgardner: We intentionally restricted the number of people that could be in a room. Remember that the Palace server was divided into rooms that you could navigate between. Users could watch and participate. Each was represented by an avatar, with cartoon chat balloons over their heads, and a separate window which just had the chat history of the dialogue. You might miss a chat balloon go by, but you could go back into the text history and read it, and so you were typically going back and forth. But after about 16 people, just as what happens today with overpopulated live chat channels like YouTube comments, it just becomes an endless stream of chat, and you no longer have the ability to follow the thread of conversation. Everyone is essentially a stranger to each other, and you can’t form into clusters and have conversations the way you would do at a party. It was possible on the Palace to have maybe two groups of people in a room that were having two separate conversations simultaneously, and an onlooker could enjoy each cluster, but that was probably the limit. Already if all 16 people were constantly chatting, it was too much. But because of the nature of human dialogue, there were always introverts and extroverts, people who were actively conversing and others sitting back to watch. So 16 felt about right for one room in the Palace. The room limits could be changed by the server operator, but it defaulted to 16, and most people didn’t mess with it. It also physically worked because the avatars took up space within the room. More than 16 avatars and they start trampling on each other! Atherton: What I loved so much about the Palace is the blend of feeling like you’re in this physical space within the virtual. And that still doesn’t really exist today. In a largely text-based community, there’s less accountability that you would get when you’re in a real room with people. Bumgardner: Very early versions of the Palace I made as a plug-in, which worked on top of IRC, so that you could take an existing IRC channel with avatars, whose position could be controlled by sending private messages to a bot. So the earliest versions of the Palace that worked on IRC could in theory work on Discord or Slack. You could create a Discord bot that would create a 2D palace-style room with avatars. The other equivalents of the Palace these days are 3D avatar chats, like virtual reality chats in the metaverse. Atherton: How did the first users discover the Palace and how did the original community form? Bumgardner: We went out to other early Internet communities, to places like The WELL and ECHO, which was New York’s equivalent of The WELL, and would mention this great new platform called the Palace. We also signed into existing virtual communities that were experiencing growing pains and

The Rise of Virtual Communities told unhappy members about the Palace. Some were having major issues where users disagreed with the decisions that were being made as they handled their growth, and we ended up getting major influxes of people from those other virtual spaces. The analogy I often used was a beehive: if you want to build a beehive, you have to go to another hive and steal the queen. When we could get alpha influencers from other communities to discover the Palace, they would bring their bees with them. But Mark Jeffrey was more involved with marketing than I was. Atherton: Wow, that is such an awesome model for early-stage community growth. Find the queen bee, who’ll in turn bring the hive. Bumgardner: We did some of that inadvertently, but I was aware that it was happening. By using these other communities, some of which we probably were on already, we would talk about what we were working on, invite people, and then they would tell their friends. Fairly early on, I remember we had an influx from World Chat, some of our early moderators came from World Chat, and then a big influx from Echo NYC. The latter was partially fueled by an Echo meetup Mark Jeffrey and I were invited to speak at; they had monthly demos followed by dinner at a delicatessen. We gave a very nice presentation of the Palace, we showed the features, and the members loved it. Many of those attendees were either already on it or ended up joining as a result of attending that day. Atherton: Did you find that the cross-pollination of online to offline happened a lot? Bumgardner: It definitely happened with the Palace. There were a lot of people meeting each other physically for the first time at Palace events. It was probably not dissimilar to a class reunion, except that they were meeting people that they were talking to concurrently, rather than people they had known 20 years ago. We had a couple of Palace get-togethers in Vegas, where we rented a nightclub for the evening. Atherton: How do you think that the interaction between the real world and the virtual impacted the community? Bumgardner: That’s a big question. I’ll just give you a few anecdotes, because I can think of both positive and negative things that happened. Tons of people found their future partners through early virtual communities. I’ve received many letters from people that met their wife or husband on the Palace and are still together. So that’s a great thing. But in those early days, we weren’t as aware of the pitfalls of anonymity, like misinformation and hateful groups. Anonymity, while useful in certain situations, also introduces real problems, which at the time I was not as cognizant of. It was evident that accountability was necessary, you didn’t

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Chapter 4 | Jim Bumgardner, Creator and CTO of the Palace necessarily know their name or who a user was in real life, they could still be who they wanted to be, but it was useful to attach responsibility to users for their actions. We were just beginning to get our heads around the difference between identity and accountability. Atherton: Interesting, I wonder how you can blend both to keep communities healthy? Because I think in one sense, bringing people together in real life builds trust, because you see the people behind the version of yourself that you might play online. Bumgardner: Oh agreed. I spent a lot of time thinking about the differences between communities I liked, committed to, and enjoyed participating in. Communities that were, in my view, healthy as opposed to one-sided. My experience with virtual communities is that, in general, it’s often healthier when it first starts up and is in an initial growth phase. The community is smaller and tends to consist largely of early adapters. Then if the social medium is successful, it gets so many people involved that it loses its original charm. It becomes infected with urban blight, it becomes more difficult to moderate and manage, and you end up with Facebook and Twitter! Atherton: Can you tell me a bit about the gender split on the Palace? Bumgardner: I don’t think it was 50-50, but it was definitely much better than the Internet as a whole was at that time. It might have been 60-40 men to women, whereas the early BBS scene was more like 95-5. Atherton: Why do you think the early BBS scene was so skewed toward men? Bumgardner: I don’t know. The early BBS scene was an offshoot of ham radio (amateur, noncommercial wireless communication), which was a maledominated hobby to begin with. In a patriarchal society, so many early BBS founders were men, and they were not creating content that necessarily appealed to women. There’s nothing inherently male about technical stuff, but culturally it has often been the province of men. The Palace broke this pattern. Atherton: How did the community on the Palace shift overtime from adults and artistic types to a younger audience? Bumgardner: Initially, the Palace was in beta while we were developing it for the first year and was free to use. We officially launched in November of 1996, which meant we began selling it as a product, not for much, perhaps $15 or $20. The Palace could be used for free, but you had to pay to be able to customize your avatar. Stores like Egghead Software sold the Palace in a box. Some of the original users let their kids use the Palace; kids were really interested in it, including my daughter who was around four at the time. At first, our users were an older crowd. After we came out of beta, the core of moderators were called wizards. They came from those early adapters, largely from World Chat. They tended to be in their 30s or older. As the main

The Rise of Virtual Communities administrator, I was the head wizard, or “God of the Palace,” as it was called! So I’m sure I was selecting for people like myself to some degree. We had a pretty good mix of male and female wizards; I would say that was pretty 50-50, or at least I believed it to be; it’s hard to identify my own biases. As time went on, we started seeing more and more kids. They were wreaking havoc, making it very difficult for the wizards, because initially we didn’t have any established rules. Atherton: Do you think that it’s essential for communities to have rules? Bumgardner: No, communities should be able to do whatever they want, but all the communities that I enjoy being in have rules. There are people that enjoy anarchic communities, and that’s why 4 Chan exists, but I’m not one of those people. Overnight, we had all these kids asking to be wizards, because wizards had the power to create doors and run scripts. If scripting was turned on, you could wreak all kinds of havoc. You could write scripts in rooms at the Palace that would steal everyone’s props, which were the pieces that form their avatar, and they would scatter on the floor and could be picked up and stolen. Scripts could cover the screen with graphics, because the Palace had a rudimentary graphic painting ability. So kids would ask to be wizards to be able to run scripts, and we would say no. I remember doing an experiment, though, where I let everyone be a wizard in this other Palace I had created, called the Wild, Wild West. Everyone there was a wizard. It lasted about a day and a half; it was just sheer chaos. Someone eventually figured out a script that would shut it down! Without rules, it becomes a Lord of the Flies situation, especially with multiplayer games, as many people within that game are often playing differently. For example, in World of Warcraft, one person might be fighting monsters with swords, while others are going in to converse and find people who share common interests. Meanwhile, a lot of the kids at the Palace were just trying to annoy as many people as they could. If they annoyed people so much that they logged off, that was how they “won.” So the problem is that different people joining a virtual community have varied expectations about what the experience is supposed to be. Without rules, the most dystopian version of that often ends up winning. So the wizards spent a lot of time banning accounts, which was the equivalent of kicking a troll off of a chatboard. Atherton: You mentioned that many of the moderators came from World Chat and became wizards. A lot of people would say that moderators are essential in keeping a community somewhere you’d like to be. What do you think?

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Chapter 4 | Jim Bumgardner,Creator and CTO of the Palace Bumgardner: If the community is like the Palace and does not have effective crowdsourcing capabilities, then absolutely. The Palace not only required moderators, it required the server operator to actively select and recruit moderators, if the server was going to have any size and succeed as a stable community. By contrast, something like Reddit has a moderation system in place, but it’s a crowdsourced moderation system. Reddit and Wikipedia are probably the best examples of successful crowdsourced moderation, where the creators of the space hardly need to moderate because the community is self-moderating. There are generally sufficient systems in place for that self-moderation to work. Though not always, there are orphan subreddits and things like that. Atherton: Are there any other roles, in addition to moderators, that you think need to be present within the community? Bumgardner: We had people that functioned as social care takers, who worked to ensure that everyone had a good experience; that was one role. Not all these people were necessarily wizards, some users were very law and order oriented. I was often kind of trying to keep a balance between hardline moderation vs. self-expression to make sure that both were happening. It’s a tough line. Because there would be users that would try very hard to get as close to the edge without technically breaking the rules. Eventually, we did have to establish specific rules over what was and what wasn’t allowed. Another very important role is the creators, community members that were creating interesting content and sharing it. People that were making avatars for other people and making props. As a creative person myself, I originally naively thought that everyone would just love making their own props. A community where everyone owned sewing machines and was making their own clothes, which of course is not realistic. On the Palace, you could role-play and think “I’m going to be the Pope today,” go on the Internet, search for an image of the Pope, use your screen capture to copy it, and then paste it on the Palace, and that would be my avatar for the evening. I could be the Pope or Sammy Davis Jr or whoever. Some people would pick a particular avatar and never change it, opting for a fixed identity, while other users enjoyed making a lot of different avatars and sharing them with people. Atherton: Can you tell me about the Dollz? Bumgardner: There are a few different versions of the Dollz, but they were basically a virtual paper doll system. I believe that that community was largely female driven and that the original creators were women. The young baby boomers or the late bloomers like me tended to use more heterogeneous

The Rise of Virtual Communities props, where we would all look different from each other. The dolls were a brilliant way to have a modicum of unified self-expression, but also replaceable parts, which we never bothered with. I was thinking about this earlier, and I realized that one of the driving factors behind the Dollz’s success was our shitty business model. Remember when you got the Palace, it cost 20 bucks, which was to unlock prop making. Because of that, we didn’t spend a lot of time on providing good avatars. We had these pretty crappy smiley faces and a few things you could stick onto the smiley faces, almost like a Mr Potato head. So within the community over time, anyone wearing that traditional smiley prop was a newbie and using a free account, almost a lower social class. It was kind of like being on Twitter with a generic bird, a newbie. Because we didn’t provide a sophisticated avatar system, the community created some on their own. Dollz looked like angsty teenagers; they were slouchy, with hair over their eyes. There was a subversive aspect to their appeal too which probably helped with their popularity, as they were constructed in three parts: a head, torso, and legs. It was against the rules to walk around with nude props, but when someone selected the macro that applied their full outfit, there would be a brief flash where nipples were visible. Atherton: Did you find that people who used Dollz or custom avatars were more active users in the community? Did customization of their identity within the community mean they became more active community members? Bumgardner: The Palace was sort of a self-selected community as there were really only two things to do: chat or mess around with props (making new ones, sharing them). And if you only wanted to chat, there were probably better choices. Atherton: So would you say that users of the Palace were mainly artists? Bumgardner: I didn’t know much about users’ occupations, but users were attracted to the visual aspect because the chat features weren’t groundbreaking in any way. You could have an equivalent chat experience on AOL or any number of sites at that time, but avatars were relatively new, and it was also totally uncontrolled. Randy Farmer was convinced that we were going to get takedown notices about copyright infringement just from people choosing pictures of Calvin and Hobbes comics and making an avatar from it. It never happened that I’m aware of, but I think only because we weren’t big enough to target. Had the Palace succeeded to the same degree as AOL, it probably would have become a problem. Atherton: Was there any in-community economy around selling these props?

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Chapter 4 | Jim Bumgardner, Creator and CTO of the Palace Bumgardner: I’m not aware of trade that was tied to real money. I remember Randy Farmer talking about unintended artificial scarcity which became an issue in Habitat where most avatars were free and abundant, but they engineered into it rare avatars that you can buy in a vending machine. They also engineered a kind of currency, but as I recall, the currency became worthless, and people were trading heads. The lesson that Randy learned from that is that you can’t always create your economy. The economy is driven by scarcity, and I believe they were giving users a portion of currency every week. So there was a kind of inflation of the intended currency. But the heads were rare, or the rare heads were rare, and people started using those as currency. Atherton: So very similar to NFTs and digital assets vs. just digital currency. When you think about a company like Roblox, users can build their own virtual worlds within a world. So many open source metaverse worlds are being created today, where you can build an alternate reality. The Palace was much earlier to this consumer trend? Bumgardner: What I originally wanted for the Palace, though we didn’t quite achieve it, was the ability for everyone in the room to be able to draw a portal to a new room they had just created. It would have been possible, but it probably would have been mad. So the compromise we reached was that the server operator had the ability to cut doors in the room and create new rooms while the servers were running. Server operators would typically do that in their first few weeks and then settle down to serve a fixed space that people expected. One of the reasons why I never really got into 3D avatar chat systems is because they’re very limiting physically in terms of what you can do because the avatars are human sized, occupying a three-dimensional space, and it’s harder to do Alice in Wonderland type things or create a neo-Picasso person, which is what I wanted to be able to do. This creativity is easiest to accomplish in text, because you could write anything you want. It’s still somewhat easy to do in 2D, but it’s very hard to do in 3D. Atherton: Yes, I read you said once, 2D is like an alternate reality rather than trying to mimic reality. Bumgardner: Well, I remember talking to people that were really into 3D at the time, and they would suggest creating a flat wall in 3D space to accomplish these things, which I didn’t like as I felt these activities would be inferior or secondary to this larger 3D space. Although having said that, in the Nintendo Switch versions of Super Mario World, they’ve created walls that have 2D games on them, and that’s how they introduce retro content to that world.

The Rise of Virtual Communities So I was working on the Mansion, considering these ideas, around 1985 or 1986. I didn’t start working on the Palace until almost eight years later, when computers were very different. I was able to do more graphics; we weren’t restricted to 640K of memory, which was the limit for a large part of the 1980s. We could do fun stuff with pictures, and also there was the Internet. Had I succeeded with the Mansion, it would have been a dial-up service. The Internet started becoming available to consumers around 1993 or 1994, so the Palace was very much envisioned for the Internet. If the Palace were made today, it would be the Web and HTML, but in the early days of the Internet, the Web was just one small piece of it. There were many other protocols, and the Palace had its own protocol that was not a web thing. There was Gofer, and all these other ways for programs to communicate. Again, I had some free time at my job, and I thought it would be cool to revisit the mansion idea, but do it as a visual space with avatars. I initially had a proof of concept on top of IRC and I liked it, and then I went ahead and made a stand-alone version of it. This was when I was an employee of Time Warner Interactive (previously Warner New Media). I had some basic ideas about how I wanted it to work. There would be a mansion called the Palace. When you joined, you’d arrive outside at the front gate, and then you could click on the front door to enter. Each room in the Palace, including the front gate, had a maximum of 16 people. We found that some people would just stay by the front gate because there was a constant influx of newcomers and people there. Why would you go to an empty room inside the mansion when there are people at the front gate? When we started, there was only one front gate, so people might be trying to get onto the Palace and get bounced out because it was full. So eventually we had to make multiple front gates, and we would bounce people to other copies of the front gate, so they wouldn’t be rejected. The crowding problems were more prevalent at the original Palace, which was the one the palace.com hosted and the software defaulted to connecting to when you downloaded the Palace. It was the most populated Palace by virtue of the fact that it was the default one. Then people could make their own Palaces, run them on their computers, and there were tons of those. On a fairly thriving one, there might be 5200 people, and the original mansion was usually at capacity. Atherton: What was the maximum capacity on the original Palace? Bumgardner: Capacity wasn’t very high, about 350 users. We increased it in the later days, but we were not using multiple computers to host the way it would be done now. It was a single computer that was basically managing all of the chat traffic and also the prop exchanges. Props involved pictures which are more bandwidth intensive. I wrote that original server, and I wasn’t super

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Chapter 4 | Jim Bumgardner, Creator and CTO of the Palace experienced at writing high traffic servers. It started to get pretty sluggish after about 350 people, and if it started to get sluggish, it would not be fun for people, and they would log off. So it had a natural maximum. Atherton: What happened in the final days of the Palace? Bumgardner: So, after we got out of beta, we were still owned by Time Warner Interactive. At that point, we were a pretty hot commodity because our community was growing. There was a lot of buzz, and Time Warner started looking for buyers, wanting to cash out. The community was in the tens of thousands. It grew to about a million and a half at its maximum. Fox News Corporation was interested and then Intel, which ended up buying the Palace. They created an agreement where Intel paid a few million dollars to Time Warner. They mutually formed a stand-alone company with both Time Warner and Intel on the board. Then they bought in SoftBank as an investor, which had a controlling portion of shares. At that point, the Palace was a stand-alone company. I had a small amount of stock in it. Despite the fact that I had created it, I had little control and no bargaining skills whatsoever. Mark Jeffrey, my cofounder, was head of business, and I was CTO. Intel brought in a new CEO and took 30–40 Intel employees who were working on similar projects to be part of the Palace. Palace.com had a stand-alone company HQ in Beaverton, OR, where Intel is and a satellite office in LA where Mark Jeffrey and I were. It very quickly became siloed between LA and Oregon. The Palace struggled to make a profit. That original business plan of charging 20 bucks was not really sustainable. I thought I was being really smart by not charging people to run a server so that we could grow like a virus. The Palace charged only for customizing avatars. I still think that was the right move, especially had we been able to stay as a five-person company, like Craigslist. This was all around the beginning of the dot-com bubble. There were a ton of other virtual communities, and SoftBank had invested in several of them. They were all struggling. At some point, SoftBank made the executive decision to take several of their virtual communities and form them into one company: communities.com. The only commercial product within that company was the Palace; none of the other companies came to fruition. Now it was a much larger company that was losing money. When the communities.com merger happened, I left. Basically got forced out. They didn’t intentionally say we want you to leave, but they told me “in order to make this merger work, we have to delete your stock by 100x,” so my stock had no value, which was harsh considering we had made the only product that they were selling. So I left at that point. A few years later, they filed Chapter 11 along with many other companies at the end of the dot-com bubble.

The Rise of Virtual Communities Atherton: When you look back on the Palace, what are you most proud of? Because it was such an incredible invention that I think is still impacting how online communities function today. Bumgardner: I’m proud of having created an experience for people. The Palace was something I wanted to experience, and it was great to find that other people wanted it too. I wasn’t trying to cynically make something that would appeal to the largest number of people. I was just trying to please myself. As someone who spent a lot of time on the computer, I wanted to build a social experience, where I could do fun, creative things with other people in small rooms. A quiet bar with just a handful of people in it who I can actually hear what they’re saying. I was very pleased that plenty of other people at the time seemed to want that too. The first three years or so were great, and then it became harder and harder to keep it going as it grew. Atherton: The pure motivation of wanting to solve a problem for yourself is such a good place for founders and builders to start from. For people interested in creating new types of online communities, I wonder what advice you would give them? Bumgardner: Well, I would say if you want to keep it pure and keep it good, then keep it small. Shooting for massive growth, which is what a lot of startups do, especially by getting venture capital funding, ultimately will generate a cancer. I think you should shoot for building something that you love and can keep going for the long haul, by keeping it small and trying not to do a moonshot. Atherton: Are there any online communities or virtual worlds that you’re excited about? Bumgardner: I spend a lot of time both on Discord and Slack. I like them both a lot. I haven’t been using any avatar systems in the last few years, though I like the idea of them. I think virtual reality is cool, but that whole commitment of having to actually set up the helmet… I don’t want to dedicate a room in my house to living in virtual reality. Obviously, Twitter can be really tough when certain things are going on, like school shootings. But I really enjoy parts of Twitter. I’ve learned to use Twitter in a way where I’ve got enough people that I’m following that enjoy doing creative jokes with each other that you can have a bit of fun if you’re in the right pockets. In a sense, people almost create their own rooms and subcommunities simply by following certain hashtags; there’s #BlackTwitter and #CrosswordTwitter. Atherton: It’s simply a matter of finding your room…

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5 Philip Rosedale Founder of Second Life Second Life is a multiplayer real-time virtual world that was founded in 1999 and remains popular today. In world, on “the grid,” users can create avatars to chat, build, and trade virtual real estate, products, and services. There is a virtual currency, known as the Linden dollar, which can be exchanged for global currencies and has been widely referenced as a precursor to cryptocurrencies. Second Life is not a game, but rather offers users another life in a virtual environment that is in many ways more equal than our world. As of 2021, Second Life has reported around 64.7 million active users on its platform and an in-game economy worth roughly $500 million. It is still run by Linden Lab and has never been sold. Atherton: Your career has centered around immersive experiences (audio, video, virtual worlds) and generating virtual communities. What was the community like at Second Life? Rosedale: Second Life had good fortune in having from the very beginning an almost perfect gender balance. I’m so happy that it turned out that way, and I’m not going to say I was so smart and that it was entirely intentional, some of it was just pure luck. We have to be careful talking about statistics and demographics as Linden Lab is so protective of people’s privacy in Second Life that we don’t store a lot of the data on gender, age, and geography of users. I was careful to never ask for or save any of that information. If we have a cohort of people in Second Life and we want to know their average age, we have to go in-world and send them a survey. So if you ask me how old the average Second Life user is, I can’t just do a query in the database. © Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6_5

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Chapter 5 | Philip Rosedale,Founder of Second Life Second Life has an instantaneous population of 50,000 people online at any given hour. Anecdotally, if you were to walk up to any one of those avatars, the user is equally likely to be male or female, not necessarily the avatar, but the person operating the avatar. So the game overall is gender balanced. But what’s especially interesting is that operators at Second Life have gone in-world and talked to the users that are the most financially successful. They have got them in a room, which we can do quite easily as people that are making a lot of money are engaged users. The most financially successful users in Second Life are dramatically disproportionately female: something around 80% female, even though the population is balanced. In fact, more men sign up than women, the reason being that you need more of a gaming PC to run Second Life, so there’s an inevitable skew toward male users because of the hardware. It becomes balanced in terms of people that regularly log in and then skews dramatically to female dominated in terms of the most successful users. Atherton: What were the inspirations behind building the community at Second Life? Rosedale: I’ve been thinking a lot lately about books that I read at the beginning of Second Life and then books I would read if I was doing it all over again. An inspiring book that I read at the beginning of Second Life was Jane Jacob’s The Death and Life of Great American Cities. Jane Jacobs was perhaps the most famous urban planner ever. Her husband was an architect, with a top-down approach, meaning he favored masterplans and reconfiguring the entire urban environment by moving inhabitants to different areas that suited his neat plans. Eventually, Jane Jacobs became sick of listening to his nonsense and became an urban planner. She argued that the beauty of New  York is that inhabitants don’t live where they work, that they have to get the subway and walk a few blocks either side, that it was clumsy. Some of the time, you’d be the person who has to do that unfortunate walk, yet other times, you’d be sitting in a cafe, with passersby to watch. She saw it all as the game that we play together. An example of a writer whose work I hadn’t read before Second Life, although working on Second Life I developed an intuitive sense of these ideas, was the work of economist Elinor Ostrom, who won the Nobel Prize in the 1990s. She wrote about the tragedy of the commons, the 1950s economic concept that if people are freely able to use a common resource, they’ll overexploit it, and then it will fail for everyone. Ostrom pointed out through her studies that it almost never happens, it’s a fantasy. She highlighted that humans are socially interdependent animals. Our evolved sense of justice and fairness is part of our need for each other. Ostrom explains that the tragedy of commons

The Rise of Virtual Communities almost never happens because people take care of each other’s stuff, even if they don’t need to. The few conditions under which you can make the tragedy of commons occur are weird and unusual. Atherton: Is that why you felt you didn’t have to have governance as a building block because you had the physical laws and the economy? Where did governance come in for keeping the community safe? Rosedale: I’m not going to claim that I was smart enough to design this up front. We were lucky that those two building blocks came together the right way. Second Life is extraordinarily positive internally, in comparison to social media. In fact, it is the polar opposite of social media. While it is a place with a lot of people in it, with diverse communities and local interactions, it is supportive of different behaviors. Second Life causes people that are politically different from each other to become friends, fall in love, or even start companies together. The fundamentals of Second Life were its laws of physics and economy. But that did not result in every avatar for themselves. From day one, users created connections. You buy land or rent; you hang out in certain clubs and meeting places. You form important connections to other people, some financial, others friendships. Those dependencies are very strong when compared to the dependencies established in an online game. Users had responsibilities and social consequences to their actions. Just like in the real world, if you screw up in Second Life, you’re going to pay for that. You can’t just hurt people because you’re part of a community. You have friends, friends of friends, neighbors; you’re part of a city. Maybe you share somebody’s island with them. You have strong social ties to other avatars. These dependencies invoke natural human compassion and the desire to take care of each other. Therefore, Second Life is largely self-governing. Aside from connections with places and other avatars, there’s a small federal government in Second Life. The company operates very profitably today with a small team of moderators that are the final resort. On Facebook or Instagram, the moderators are the only line of defense; there is the ability to report images, but I don’t think that’s very effective. Whereas in Second Life and perhaps other virtual worlds like VRChat, the first line of defense is the immediate community of empowered users. Landownership and social ties mean users want to preserve an ethical locality. We happened upon what Elinor Ostrom describes as polycentric governance, whereby people’s morals are based on their association to various groups. For example, you might be a member of a church group with certain beliefs, work for a company with specific rules, live in a neighborhood with laws, and then your city and your country; that’s what Ostrom meant by polycentric governance. So in my opinion, Second Life accidentally built that.

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Chapter 5 | Philip Rosedale, Founder of Second Life For virtual worlds going forward, the best solution is to establish strong identity and polycentric governance. With a lot of individual empowerment, people feel a sense of duty because they created something of value that they want to protect. Therefore, users are incentivized to keep the virtual world a healthy space and work together to maintain that. Atherton: When people enter Second Life for the first time, are there specific actions that guarantee a user will return and be a successful member of the community? Rosedale: Belonging is important. When we survey returning users about their first experience with Second Life, we hear only one thing, which is I found a friend. Second Life is complicated. You need to create your avatar and find a place to live. You need to find people you want to talk to. It’s so daunting. So almost 100% of those who stay, when we ask them, “How did you get through it?” They say, “I found a friend.” And often they are still friends with that first friend. I think one of the key markers of a successful community funnel is the ability to get people from having a conversation to forming a friendship, because then they feel a responsibility to show up every day. Atherton: In Second Life, would users frequently change their avatar? Playing with this notion of having an alternative identity and self-expression is such a big draw for logging in to virtual worlds… Rosedale: People invested a huge amount of time in the details of their avatar’s appearance; that’s not surprising. But the discovery at Second Life was that users would then tend to stay with that one avatar. Not always. There are certainly people who would often alter their avatars, but it is remarkable how stable, once developed, the visual identity of the avatar tends to remain. It is as if people found the idealized version of themselves that they perceive internally and had then externalized that to their avatar. Initially, I thought that maybe people would change their appearance every week or so, because they could switch from being human to nonhuman, male to female, and so forth. They didn’t do that, though. Largely, users created a strong and unique identity and then didn’t change it. In non-avatar-based chats, the username would be a micro example of that, where people build a brand around a name and then they’re very attached to that name, which works to your advantage because it keeps them behaving better, as they don’t want to disassociate from that name. Atherton: The divide between people that regularly change their profile picture vs. those who just keep it static is fascinating. We regularly observe that people on various social platforms will update their picture to the latest meme or an inside joke that becomes part of the community lore, which is an interesting engagement tool for community building, as it becomes part of the narrative that people talk about.

The Rise of Virtual Communities What type of behavior, if any, were you trying to encourage within the Second Life community? Rosedale: I’ve been thinking and talking about that a lot lately. When I founded Second Life, I was imagining a place that was a sandbox simulation. It was a motivation that stemmed from when I was a kid, to build an ecosystem that had manipulable building blocks that could be edited by people. I imagined a world governed by two laws that would influence how the world would evolve. Firstly, there were physical laws that dictated what you could and couldn’t do which would apply to everybody. Secondly, it would have an economy so that if people did want to engage in trade, they could do so profitably. I envisioned the world structured by the laws of physics and an economy of trade, and that if we just enforced that and started with an empty canvas, then we would see a city emerge. I wanted to see what people would build if they operated within these two constraints. I wasn’t initially thinking about avatars and what people’s identities would be and what that would mean, though that became a big part of Second Life. Everything followed from wanting to fairly partition the resources. A bit like the conversation we’re having around crypto right now, I was trying to create a level playing field so that when you entered Second Life, you were more or less equally empowered, as established users, you could just build. Atherton: Do you think that people became more engaged members of Second Life if they met someone within the first five minutes and said “Hello, Philip, how are you?” Rosedale: The great majority of people don’t stay with Second Life, only a small fraction remain. We still get between 10,000–15,000 sign-ups a day, but of those, only a few hundred will remain. When you ask them what happened, yes, they almost always met someone – usually a stranger. Atherton: Welcoming people to a virtual community, even in a whimsical automated way, is so important as online communities can be intimidating. Users have already built relationships, and you want new users to develop a sense of belonging and feel welcome. Rosedale: I’m so interested to think about how we might welcome people to Second Life when they come in, because at present we don’t! We were always so frustrated with onboarding; we’ve tried a million things over the years, and they’ve never changed anything. Second Life seems to be so impervious to even very substantial changes we make to the onboarding experience or the feature set. We can neither make it grow nor shrink. We were flabbergasted by it at times. For example, we increased the graphics frame rate by a factor of four in most environments, going from 5 frames per second to 30. And as yet, we have seen no evidence to indicate that it was improving any of our KPIs.

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Chapter 5 | Philip Rosedale, Founder of Second Life Like Discord, Second Life has one foot in text chat and one foot in voice, but is more weighted toward text chat, because it’s old. Atherton: Second Life has been widely referred to as a precursor to cryptocurrencies and the “metaverse,” with its digital currency the Linden dollar, the virtual real estate market, and so on. How important to the community was its virtual currency and system of exchanges? Rosedale: Second Life had an economy from the very beginning, but you couldn’t trade Linden dollars for US dollars at that time; that happened years later. (The exchange rate was around $3 for 1 Linden dollar.) In technology, I think we’re at this moment of maximum possibility for both good and bad, in which we now have the power to do everything. I think the idea that self-determination should be extended to infinity and that that would be the perfect world is just complete nonsense. Atherton: Are there any other community interactions you observed that you’d like to comment on? I remember the story you told me once of a plane that crashed in-world, and then users made it into a virtual museum? Rosedale: Yes, they put the first primitive object, a digital atom instantiated by Philip Rosedale, into Second Life in a virtual museum. These primitives were essentially early NFTs, a digital ledger of ownership. That was one aspect that made Second Life take off. Every primitive – every in-world digital atom – is an NFT. Because it is marked with its creator, its current owner, if it’s for sale, and then if you buy it, the properties will transfer to you. Atherton: On community health, was there an optimum number of avatars in a space to ensure engagement and a sense of community? Folks tend to generally agree that a truly healthy community caps at around 200 people, because it’s impossible to keep on top of and engage in conversation with 500,000 people. Rosedale: Well, the human brain sets strict rules for us. Because of its size, we have a limited number of people that we can know intimately. The Dunbar number, by Robin Dunbar, sets that at around 150 people. The inclusion criteria being the people who you would go and join without hesitation if you saw them sitting alone at a bar or cafe. Not a best friend, but someone you would immediately approach, without concern that they might not want you to. Atherton: Second Life is such a rare example of a thriving virtual world and economy, when so many online communities aren’t sure how to monetize. How did you first come up with your business model?

The Rise of Virtual Communities Rosedale: The business problem I knew we would have right from the beginning was the simulation cost, the physics engine, if you will. Even when I started dreaming about Second Life as a kid, I was thinking about the problem of very heavy servers. Each server handles 256 by 256 meters of space in a tile. And each server is tiled next to each other. The cost of running these servers I knew was going to be extremely high. So from the get-go, I thought about Second Life as a hosting problem. Server machines essentially serve up web pages to people, and I thought it was cool that people were willing to pay for that service. I told people that even better would be to have servers simulating virtual birds flying around in a space and that people would be willing to pay a lot of money for that. So we realized that the only way we could make money is if we somehow let people buy land, and if they want to develop on it, then we’ll charge them a simple hosting fee. We were thinking about AWS, well before AWS. I even told our early board members that I thought Second Life would be the most profitable use of server machines. We were reselling servers, so the business model was to charge about $20 per acre, per month. There were various discounts, but the virtual world is the size of Los Angeles, which adds up to a lot of acres, and so we make a lot of money. The other benefit of reselling server capacity to users is that it allows basic access to be free. If you don’t want to buy land, you can just wander around Second Life, free of charge. Best of all, we didn’t have to manipulate our users’ behavior to get them to look in a certain direction or do something for an advertiser, because we weren’t serving them adverts. Atherton: How long did it take a normal user to convert from walking around to paying for server space? Rosedale: Well, not all of them do convert. Second Life has about a million users, and roughly 10% of the user base are landowners. People can also rent land to each other, which the company is not paid for. The company makes money on some virtual goods sales, not all of them. Marketplace.SecondLife.com is the official online marketplace where users can sell things. Like eBay, we charge a listing fee and a transaction fee, which are single-digit percentages, so a low number. Therefore, more than half of our overall company revenues are from the land fees discussed earlier. Users don’t have to use our digital marketplace, they can also make an in-world store. Finally, we have a currency exchange, where you use a credit card to buy Linden dollars or exchange Linden dollars back to US dollars. There are very small fees to exchange currency.

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Chapter 5 | Philip Rosedale, Founder of Second Life The company makes its money through small fees on virtual goods and currency exchange transactions and mostly from land hosting fees. The takeaway is that it is possible to build a vibrant, profitable virtual world doing that. Second Life makes more money per person per year than Facebook, Google, or YouTube, who monetize using advertising. They make about $50 per person per year. I won’t say exactly how much more, but we make more than that. We do that through fees, and still the service is free. I’ve been told by Facebook employees that if you have billions of users, you have to sell them ads. That’s completely not true. Just ask Microsoft. Just ask Apple. For that matter, ask Discord. These companies don’t manipulate people and sell them ads. They sell premium subscriptions and upgrades. Atherton: It can take a community member anywhere from one to two years to convert to a paying subscriber. Rosedale: At Second Life, for the people who do convert, it’s probably a month or two in that they buy land. It’s the time it takes them to get settled and find a property in an area they like. For people that buy private islands, which cost hundreds of dollars a month, that would probably take about one to two years to convert users, and it’s an enormous drop-off. Atherton: How do you think about the evolution of Web 3 and crypto infrastructure as it relates to virtual communities? Rosedale: I spend a lot of time thinking about this, and I will possibly redirect my life into one of these paths. I ask people all the time what they thought was good about crypto when they first heard about it. I want to host a dinner and just go around the table and ask people that question, why did it make sense to you? Some might say they’re so frustrated with the federal government that they’re not going to let them print money and give it to the banks. After the 2008 US financial crisis, in which the government and banks stole a ton of money from people without giving it back, people were mad and wanted to build a new system. I remember thinking about crypto, and of course some of this was colored by the experience I’d already had with Second Life, was that it would be a fairer form of money. That it would make it easier to trade globally. Money to facilitate trade is unequivocally a good thing. If you want to cut hair for a living and somebody else wants to grow crops, the two of you should both be able to specialize, full time. But the person who cuts hair needs to eat, so you need a means of exchange. You could walk to the market and cut hair, but that sucks.

The Rise of Virtual Communities Introducing money also immensely improves the experience of justice. That’s what I was trying to create in Second Life. I wasn’t trying to start a giant Ponzi scheme where because I owned 10% of the money supply, I’d become a billionaire. I didn’t have any aspirations like that. In fact, we managed the money system in Second Life so that the currency didn’t go up in value. Elon would never do that. We set it as a design goal because if you ask any economist, they’ll tell you that a digital currency that is rapidly increasing in value against, say, the dollar will not be useful for trade anyway. It will only be useful as gold, as a store of value. So, the currencies in the community activity we see around Web 3 are in some ways the right idea. But to make it work, we need to do a couple things. We need a currency that is stable in price. We don’t have that yet. Also, to keep value within a community – and this is one of the things that I’m thinking about working on – you have to have very close to zero fees. Zero fees cause its own problems, a type of Wild West where you start to see harm happening, which is what we see with crypto. We need something where the fees are very low and communities can keep trading between themselves. Amber, say you and I are the only two members of a community and all we have for trade is a one $100 bill, we can do something worth $100 for each other every day and just trade the bill back and forth. If there’s a 3% credit card fee on that, we’re going to run out of money pretty quickly. So one of the problems with crypto is that it doesn’t actually model the thing that we need, which is a way to let a community trade internally without bleeding to death. DAOs are also interesting. There’s one thing that they need, which admittedly Second Life doesn’t have yet either, and that’s one secret vote per person. Democratic communities form around consensus: building the concept of an equal contribution per living human, not per dollar or per share. The problem with DAOs is that they can’t count humans. Vitalik Buterin has been writing a lot about this concept called soulbound tokens (SBT).1 An SBT is an NFT that is granted to a single individual and cannot be exchanged or duplicated. There’s a lot of talk in the Ethereum community right now about how to enable soulbound. Each of us would have our token, our ID, and we could vote with those. If the votes were secret, opening up a whole other can of worms, we would both be able to be part of a community that could elect mayors or vote on policies. Ethereum and Bitcoin don’t yet achieve that goal. We’re just discussing hype about an imaginary future in which we have one vote per person and secret voting. All  Vitalik Buterin, one of the cofounders of Ethereum (the second largest decentralized blockchain software), has coauthored papers including “Decentralised Society: Finding Web3’s Soul,” May 10, 2022. The article controversially touches on the need for soulbound tokens, which verify an individual’s credentials, work, and even medical history. 1

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Chapter 5 | Philip Rosedale, Founder of Second Life the DAOs you hear about are shareholders voting publicly on what they want to happen, which is a horrible capitalist dystopia because in a world where shareholders vote and everything is public, you can buy votes. So only the bigger shareholders’ voices are more important. This would create a horrific disparity at the extremes of capitalism. We need to use cryptography and digital technology to establish democracy online, which is one of the things I’m thinking about doing. I completely agree with the idea that DAOs should serve democracy and that contribution is a key part of democracy. You want money to be like rain. You want it to be part of an ecosystem where everybody gets a little, labor contributions are rewarded, and that was very much the idea behind Second Life. It was kind of the original idea of Burning Man too: no spectators. When you go to Burning Man, wherever you park, that’s your exhibit. You have to be of value to others; you might offer people a frozen popsicle or take a frozen popsicle. Everybody gives things to each other with no expectation of recompense. And it turns out that that economy also works wonderfully. It’s not a barter economy; people vastly misconstrue it sometimes by saying that it’s about barter and there’s no money; technically, it’s like Second Life, in being a gift economy, meaning everybody does whatever they can. Of course, the Dunbar number (150 people) suggests the gift economy cannot work on that scale, that you have to know everybody, and Burning Man is up to 70,000 attendees. But what you see is that people give without expectation of recompense. How do you continue to feel a good part of the community if you’re giving and not receiving? Well, as I said before, human beings are basically good most of the time. There’s lots of places where that breaks down, but statistically speaking, we’re much better to each other than we are bad. And you can work with that; that’s a design. The sadness of social media is that it has had to work very hard to break that. It’s actually difficult to get people to be harmful to each other, but social media has figured it out. If you put an equal number of men and women in a room, say 50 of each, and they can’t leave the room, you won’t see toxic behavior. Not if the lights are on and everybody’s in there together. You’ll see a lot of very good behavior. Sometimes, people will be bad, but the rest of the community will crack down on those people hard, and they’ll get relegated to the corners, or to irrelevance, but they will still be taken care of. Do you know there’s a story about Second Life? In the beginning, we had text forums, and people would go into the forums, read it, and they would be horrible to each other. And do you know what I would do? I would go in-world and find their avatar, walk up to them, and say, “Hey, it’s Philip. What are you mad about?” and their response would immediately be, “I’m so sorry. I don’t

The Rise of Virtual Communities know what got into me. I didn’t mean to be cruel. I will go and apologize to that person.” Because people get mean as soon as they have asynchronous text, but when I chat face to face with them as an avatar, people immediately adopt the physiological behavior that we do in real life, which is to be polite and civil. So weird. Atherton: What advice would you give to somebody thinking about constructing a virtual community? How do we follow the Philip Rosedale method? Rosedale: One thing to consider is that people’s fundamental nature is to be good to each other and that online environments can preserve that as well as destroy that. So it is key to provide a platform that preserves people’s basic desire, their default behavior, to be good to each other. Give people control. One of the important ways to do that is to give people fair but significant power. The more you strip power away from people, the more they act like 11-year-old boys, the more angry they get. So you should empower users fairly and equally and in a way that spans different behavior types. For example, if in your virtual world, you decide that we’re going to settle everything with fisticuffs, that’s going to create a very biased kind of environment. Be respectful of different types of people, different preferences for interaction. Users that don’t want to talk, for example, they also need to have a way to exert power. These users might not want to tell someone off over text, but they could, say, not let that person into their club; that’s a form of power. They could say, “Hey, you can’t come into my bar. You have finally crossed my line.” So, that’s an example of fair empowerment for different behavior types. Atherton: What are you up to now? Rosedale: It’s a very interesting time for me. I’m deciding what I want to do next  – whether I want to work more on avatars and virtual worlds or something that has more of a positive impact. Second Life has definitely had a positive impact, but within my career span, it’s going to be very difficult to get to anything more than a few million users positively affected. I think that the Facebook dream of taking that figure to a billion right now is not going to happen. So that’s what I’ve been spending a lot of time thinking about. Atherton: What’s the friction preventing you from getting to a billion users, is it Second Life’s technology? Rosedale: The friction is demonstrated by what you and I are doing right now. We are two people that don’t know each other super well, and there isn’t any system with avatars that we can acceptably use for an interview, in other words a deep conversation where there’s an attempt to have some back and forth and some level of intimacy.

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Chapter 5 | Philip Rosedale, Founder of Second Life That’s the litmus test I’ve been talking about a lot lately. If you take two people off the street in New York that don’t know each other and you make them avatars, say in Second Life or Facebook Horizon or VRChat, and then you let them talk to each other, what most people will statistically say is: that was interesting, but I wasn’t comfortable and I’m not going to do it again. They’re not going to give up using Zoom or the personable connection of their webcam. I think the reasons behind that are very subtle and nuanced. I could talk about them for a whole book! But it comes down to the fact that we’re just not comfortable embodied as avatars yet. Getting to that point would involve some hard science. In other words, Facebook saying we’re going to put, or rather lose, $10 billion a year investing in this. Even that doesn’t impress me much because the basic problems of avatars remain unfixed. As yet, there are no inventions that resolve this. Have you worn VR headsets very often? Atherton: Yes. When I first got a VR headset, I spent a lot of time hanging out in VRChat; I liked the Black Cat Cafe. But then I stopped, mainly because the VR headset is just too uncomfortable to wear for more than 20 minutes at a time. Rosedale: Yes, VR headsets being uncomfortable is one aspect preventing growth. But another tipping point as to whether we can use VR for meaningful communication is facial expression. Say you and I go into the Black Cat Cafe, or another multiplayer, multiperson environment in VRChat, and we turn audio off. Then I am told that one of the whimsical avatars at the bar is you. But it does not look like you, and I am supposed to identify you with the audio turned off. I recognize your voice; that’s cheating. So I can only use your body language and facial expression. Only avatars don’t reflect our unique mannerisms. Nonverbal cues help you to fairly quickly identify a certain person. It’s not the only problem, but it’s a pretty big subset of it. The other, more subtle problem with headsets and VRChats (which obviously applies to certain demographics more than others) is that you don’t feel safe when you’re wearing it. You can’t see the room around you, and if there are other people in that room, you are putting yourself in a very vulnerable situation by covering your face with something that’s blindfolding you. The subtle, insidious phenomena that you’re doing something that you’re not safe doing means that the hardware is not terribly inclusive. A big, strong, confident white dude is going to put that headset on and have fun and be totally comfortable with the blindfolding effect. Although, from all the studies I’ve done and people I’ve talked to, even the big white guys experience that unsafe feeling. They don’t use it anymore and are unsure why,

The Rise of Virtual Communities but it’s just that they’re not able to identify that feeling, which is that I’m not safe. Then if you put a VR headset on a woman who’s never seen such a device before, in a busy place, she’s unlikely to enjoy the experience. I think that’s just incredibly important to note that if we, or rather Facebook, push forward with selling these headsets, they’re going to create a terribly biased environment, skewed toward mostly white, mostly young men, who are the ones comfortable putting VR headsets on. We can’t do that.

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6 Sampo Karjalainen Cofounder of Habbo Habbo is an MMO and virtual world in which users design rooms within the “Habbo Hotel” and an avatar that inhabits it. Users can also build and play games, embark on quests, have conversations, and buy and trade “furni” (furniture) with other avatars. Cofounded in 2000 by Sampo Karjalainen and Aapo Kyrölä, the game has since become one of the most visited social hangouts for teenagers worldwide. Habbo has amassed 316 million registered avatars and 500 million rooms. At present, it has over 800,000 active monthly users in 115 countries. It has raised over $35 million from VC investors and has been acquired twice for an undisclosed amount. Atherton: Take me back to around 1999 and how Habbo stemmed from this series of projects, including the virtual chat room for a Finnish band. Karjalainen: Yeah, exactly. That was the first virtual world project I did with Aapo Kyrölä, the cofounder of Habbo. It was a self-expression project for my friends’ band, which was called Mobiles. The band wanted a playground to do cool music videos and experiment with different types of music. And so they asked if I could create some kind of a fun website for them.

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Chapter 6 | Sampo Karjalainen, Cofounder of Habbo I was influenced by old computer and console games and chat rooms, and I liked the idea of creating a meeting place for the band and their fans. So that’s how the concept of the Mobiles Disco came to be. We weren’t trying to create a startup or even a service, it was initially just a self-expression project to do something fun. In doing so, I got to try different visual aesthetics and play with interesting technologies. We made it for the band and their small fan group. They liked it and invited their friends, so with word of mouth it started to grow. That’s when we realized that we actually had something really interesting and started to explore how we could work on this full time, so that it could become our main project, instead of something we did on the weekends and evenings. At that time, we worked in an Internet agency called Satama Interactive in Helsinki. I was a web and graphic designer, and Aapo was a developer. So we discussed with Satama and some other companies how we might focus on building something like Mobiles Disco, as it seemed so interesting. Eventually, we founded a company together with this Finnish advertising agency, which was less of a serious startup, more of a “let’s find a way to explore these ideas further.” Atherton: And was that your virtual game, Hotel Goldfish? Karjalainen: Yes, so Mobiles Disco was our first project; it was a virtual bar. Then before Habbo, we made a game using the same concept and technology. It involved players participating in a snowball fight; it was a campaign game for a Finnish mobile operator. Through that experiment, we eventually decided that we wanted to build our own service completely from scratch – and that was Hotelli Kultakala (Hotel Goldfish in English), which was basically the first version of Habbo. We built Hotel Goldfish as a customer project for a Finnish Internet Portal, as they were looking for some unique content. We thought that this could be a good way to finance the building of our own products, so we sold the Finnish operating rights to the Internet portal and then we kept the concept and technology, so that we were able to turn it into an international .com service, which turned out to be Habbo.com. Atherton: What were those early chat rooms that you were initially influenced by for Mobiles Disco? Karjalainen: I would say the most direct chat room influence was WorldsAway, which is in turn a successor to the original Commodore 64 game Habitat by Lucasfilm Games. WorldsAway I played for one or two evenings on my iMac and other chat rooms were popping up; I think those must have influenced me.

The Rise of Virtual Communities I think I also played with some real 3D chat rooms and games, but I think back then the difficulty was that many of these required pretty fast Internet connection and a powerful computer for 3D graphics. One of the angles that made Mobiles Disco and Habbo special was that it was browser based. I think that was one of the key reasons why we were able to achieve viral growth early on, because it was easy for people to just open up a browser and follow the instructions and play. You only had to install the Macromedia Director plug-in. Atherton: Can you talk a bit about the original tech stack of how Habbo was built, I’m guessing this is post Mosaic? Karjalainen: Correct. Aapo and I had worked on CD ROMs and information kiosks for a couple of years before we created Habbo. Those were built using Macromedia Director, which was a very powerful multimedia authoring tool that was mostly made for CD ROMs and info kiosks, but there was also a plug-in that enabled you to play those Director files in the Internet browser. It was before Flash, but it is similar in some ways. So for the front end, we used the Macromedia Director, and that was the key to author something so interactive and rich. Well, the pixel graphics are quite a basic retro aesthetic, but still rich for that Internet era, inside the browser environment. The back end was a Java server built by Aapo, because he had worked on a number of Java back ends already. So this was a really interesting technical challenge for him – how to build a real-time back-end system. And that was his creation. Atherton: And then Habbo came into existence around August 2000? Karjalainen: Yes, it was around then when we launched the first version of Habbo, which was Hotel Goldfish in Finland, and then later Habbo Hotel in English. It was based on the lessons learned from Mobiles Disco and our early game. We knew that people who become active users, and keep coming back, wanted to have more control over their own space. They wanted more ownership. So the natural idea was to introduce the concept of your own rooms inside the virtual space. And that’s where the metaphor for hotel came from: that there are personalized rooms within a virtual multidimensional hotel. As our own product, we also knew we needed to come up with some type of revenue model, and that’s when we started testing micropayments for purchasing virtual furniture. Atherton: I had a lot of furni (furniture) in my Habbo Hotel when I played! *Sampo laughs* Can you talk a bit about how you made these payments possible?

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Chapter 6 | Sampo Karjalainen, Cofounder of Habbo Karjalainen: When it came to micropayments, we were pretty early adopters, but we also happened to be in the right place at the right time. Nokia in Finland was driving a lot of mobile phone innovation, and the local operators were supporting SMS payments very early on. We realized that SMS payments could be an interesting way to pay in an online game. It was pretty cumbersome, but also very novel. In the first version, you didn’t buy any credits. You just browsed the virtual furniture catalog on your computer; each furni had a code. When you typed in a code on your phone, in an SMS, and sent it to the Habbo number, a huge hand would show up on your computer screen and deliver the piece of furniture. It was quite amazing, but also really tedious to type all those codes. Atherton: Did you partner with Nokia for any of that? Was there a geographic advantage to being in Finland at the time? Karjalainen: The main advantage was just that the SMS payments showed what was possible. That there were ways to pay small amounts of money for digital goods and services very easily. It wasn’t available everywhere internationally yet, so when we actually started to roll out Habbo, we had to implement all kinds of other payment methods like telephone line (regular telephone calls to numbers to get credits) and obviously credit cards (but teenagers didn’t have them) and all kinds of prepaid cards in different countries. We even tested people sending checks by mail to us. So we built a huge palette of different payment methods and operators and spent a lot of resources to do that. Now it’s so easy with Apple and Google being everywhere. Atherton: So when you launched, you raised money. Were you raising from VCs at the time, how did that work? Karjalainen: If I remember right, we raised the first funding from a Finnish telecom operator, Elisa. That was just before the Internet bubble burst, and we were building the Finnish service for their Internet portal, and they saw the potential. That funding helped us to launch the initial service internationally and continue to build it for some years. It wasn’t that easy in the very beginning, as in the early 2000s. I think we were still struggling because of the lack of broadband everywhere. Habbo was slow in a browser, if you were using a modem connection. But when we focused on streamlining the service and ensuring it was easy to buy, then it started to grow really well. Around then, we raised a proper VC funding round for international growth. We needed that funding because we set up companies in almost every country where we opened the service, so we could have local people set up the local payment methods, agreements, moderation, and ensure each hotel felt local. Instead of doing it globally from one country, we set up all these offices, and that was a lot of work and cost.

The Rise of Virtual Communities Atherton: Was Habbo originally aimed at the teenage market? Karjalainen: So originally, we created Mobiles Disco for ourselves and others in their early 20s. Then, when we made the game before Habbo, we noticed teenagers starting to appear and take over. Eventually, in the early days of Habbo, we started to acknowledge that virtual worlds have a wide appeal to all age groups, but teenagers are the ones who get most out of it, over a long period of time. Teenagers as an audience began to define the whole tone of the community, so the old timers almost had to leave. And that included us; we had to change our mindset that we’re not building this for ourselves anymore. We had to consider teenagers’ motivations, their needs, and build this for them. That was one big change in the journey. Atherton: How important was the virtual world building element of Habbo [with rooms] vs. the chat-based capabilities [chat bubbles] to these teenage users? Karjalainen: I think that the social aspect was definitely the glue. Habbo isn’t a particularly immersive virtual world – people don’t come there to have outof-body experiences. As a pixel-based, browser-based software, the virtual world aspects were limited. I think we got some small details right from very early on, especially when it came to social interaction. For example, the spaces were created for a conversation, with tables and chairs where your avatar could sit and chat, turning their heads when others speak. There was also a hearing range, so you could only hear what was going on close to your avatar, but could see other groups of avatars in the bar and the corners, which made it natural to go and meet new people. That changed a little when teenagers became the focus of Habbo. Then it became more a tool for being in touch with your real-world friends from the school or playground in the evening in their own rooms. Habbo became a social tool to extend their social network, but predominantly a playground to be a little bit more independent than they were in their real lives. They could come up with games and activities and their own kind of goals. Atherton: How did self-expression manifest on Habbo? You could have a pet or buy virtual furniture? Karjalainen: There were many levels of self-expression. Like in every virtual world, you have your own avatar which you can customize; you can buy furni and build rooms. But I think the more interesting aspect in Habbo was its capabilities for open-ended play; you could set up your own goals as to what you wanted to achieve there. People created all kinds of crazy games, groups, and subcommunities there.

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Chapter 6 | Sampo Karjalainen, Cofounder of Habbo For example, we didn’t create any furni for horse stables, but some people role-played all kinds of horse stable scenarios, where they chose furni that could be from a stable, some habbos played horses, and others acted as their caretakers. People would spend hours, days, and weeks in these role-play scenarios, without the room even looking like a horse stable. Other role-play themes were, for example, armies and game shows. I think that was key to keeping the environment fresh. There was always something new going on in players’ own guest rooms. It also meant that many players felt that it was really their space, as if they were cocreators of Habbo, which built strong personal connections to this service. As the developers, we were always trying to build more “lego blocks” that could be used in various ways and see how users could surprise us with what they came up with. We always felt that game is not the right kind of word for Habbo; we saw it more as a playground with so many possibilities. Atherton: So when you logged in to Habbo, you landed in the lobby, where you could speak to other users and visit public spaces, like the pool. Can you talk a bit about that funnel? When people landed, where did you want them to go? Karjalainen: We thought about that in all kinds of ways. There was a phase when we thought that making friends in the public rooms should be the first step, so we intentionally made creating your own room a little bit difficult. You had to navigate one of these public rooms to a terminal or kiosk where you were able to create your room. But we scrapped that idea quite soon because it was so difficult to find and people found creating their own rooms really exciting. Afterward, we had a number of different guided approaches of how to help people get started with Habbo, so many that I have since lost track. I don’t remember one particular solution that turned out to be the best. Atherton: When you think about building a virtual community, how should you welcome users and keep them retained over time? Are there any fundamental principles that everyone should think about when new users land in a space? Are there important initial interactions that help predict whether they will stick around or not? Karjalainen: In the early days, especially in Mobiles Disco, where we were active users, we were curious when new people popped up, and we would talk to them and welcome them. When we gave some moderation rights to some of the active users, they acted as both volunteer moderators and would help new users to get started. Later on, we also had “tips” pop up and guides on how to get started.

The Rise of Virtual Communities Atherton: You hosted a few events that became ritualized, like the pool parties. Were these to bring all the members together? Why were these events important within the virtual world? Karjalainen: Well, the main focus was on letting the regular visitors create their own events and run them, but every now and then Habbo would host some community events, competitions, and so forth. There were also some music artist visits, who would enter the world as a habbo, and these were very popular. I think we had the Gorillas, Pink, and some other pop stars of that era in different countries visit Habbo. They brought crowds: their fans and people that just wanted to interact with them by asking questions. These visits were also great marketing opportunities for those bands, so it was interesting content for both parties. Atherton: One role of the community hosts was welcoming you and keeping the world lively. The other side of that is moderation and keeping the community safe. So can you talk about the “Hobbas,” a.k.a. the moderators? Karjalainen: So the Hobbas grew out of Mobiles Disco; we couldn’t be there 24/7 to moderate everything. We and the users wanted some rules, so we decided to try this approach where we give some moderation rights to selected active users on a volunteer basis. It worked for a while, and at Mobiles Disco, it was the only practical approach when we were just us two and no revenue. But later on, this also turned out to be challenging, because many of the users wanted to have this special status as a Hobba. Having community moderators inevitably opens up all kinds of ways to misuse those moderation rights, and we ended up spending a lot of time sorting out issues on overtime. Eventually, we retired the program and focused on paid, full-time or part-time moderators. Atherton: Was that due to scale as in volunteer community moderation wasn’t capable when virtual communities start to grow? Karjalainen: Exactly. Real-time chat rooms and virtual worlds are very hard to moderate. With millions of lines of text, we built all kinds of tools and filters. In some other projects, we also experimented with a limited set of words that you can use. It was definitely a difficult problem and still is in virtual worlds – how to moderate them efficiently. Atherton: Yes, very much an issue. Did you ever think about introducing forums? Some of the earliest virtual communities were just Bulletin Board Systems; was that ever a part of Habbo? Karjalainen: Well, we had a phase when we were a little bit influenced by Myspace. So every Habbo had their own home page. We didn’t really support any forum-type conversations there.

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Chapter 6 | Sampo Karjalainen, Cofounder of Habbo Additionally, there were a lot of “fan sites,” as we called them, essentially Habbo-themed websites that were often run as a forum. Active Habbo users who had set up their own discussion forums and those were used for all kinds of gossip about what’s going on in Habbo or among their friends or game scores. There was also fan art, where users created pixel graphics. I remember discussing the correct way to approach these forums, how much we should try to control them, especially if the fan site got really crazy, as people may think that they are somehow related to Habbo. Over time, we came up with a pretty good approach, where we started to list the official Habbo “fan sites,” and to get the official status, you had to follow some version of the Habbo rules of what is acceptable. In that way, some of these websites became an extension to the real-time virtual world experience, providing a different angle to it. Atherton: Going back to the play element, users could come and participate in live chat, build their own room, but also build their own games and play games with each other. Was there a particular aspect that was the most popular attraction to users? Karjalainen: Initially, the games were mostly played so that the owner of the room was personally moving furniture around to, for example, let people pass into certain areas or self-moderate by kicking people out who didn’t follow the rules, so it was just like in a playground where a group of friends agree how to play a game. If you all agree and want to cooperate, you’re going to have a good time. People would build all kinds of labyrinths by moving furni, where you were supposed to run through the maze as fast as possible, and could use teleports to go between rooms. Chat-based quizzes were also popular, where someone was asking questions and others had to answer, and a score clicker would count each player’s correct answers. Later on, we also started to introduce more functional furniture that had different states and interacted with other items, and you were able to wire them together. You had triggers that moved something, and by chaining them people were able to build even space invader type of games with their furniture. Atherton: So would you say it was more Dungeons and Dragons (DnD)– style, text-based adventures vs. actual mini clip games?1 Karjalainen: Definitely. Habbo had way more role-playing and make believe. Rather than playing a predefined game, you had to follow the rules that someone told you or come up with your own rules and become the host of the show.  Dungeons and Dragons is a role-playing game, set in a fantasy environment, that launched in 1984 and has since been influential on video games. 1

The Rise of Virtual Communities Atherton: Can we talk a bit about the economy around the secondary market, because users could buy furni, but there was a trading element as well? Karjalainen: Yeah, when we introduced micropayments and buying furniture, it created this scarcity around furni, and more value was placed on the design of cool rooms. Instead of being able to replicate any type of room, when you saw a really spectacular room, you immediately knew that this must have cost something, and it must have been a lot of work to build. We also introduced a new functionality to control trading so that people couldn’t cheat so easily. Buying, collecting, and trading rare furniture became quite a big motivation for many players, with the goal of trying to build their own furniture wealth. But I always felt that it shouldn’t become like the only motivation, because it’s a finite game. At least I felt that it wasn’t as interesting as the open-ended play aspects where people constantly came up with completely new games and goals within Habbo. Atherton: Did any of those players end up making almost a full-time income from trading furni? Karjalainen: I’m not aware of anyone actually making a living. Turning furniture back into real money was a complicated process, and it was difficult to find people who were willing to buy something from you and trust you. We always said, you should never trust and make any trades outside the game. You had to buy credit to buy furni, but you could trade with other users without using Habbo credit. Initially, you didn’t have to buy any credits to trade, it was possible to just give items to others without any payments, but then later on when this economy became substantial, we noticed that if there is too much furniture in circulation, it will eventually fill the whole virtual world. So we had game designers who focused on balancing the economy, and that’s when we introduced sinks for virtual furniture to get some of it out of the system. We also built more controlled trading platforms, but that was later on when I was less involved in Habbo. Atherton: So what were Habbo’s user demographics? What was the gender split? Or geographical bias? Karjalainen: It was pretty much 50-50, female and male. Habbo’s appeal, as with other virtual world experiences, was quite universal. For almost every person, the first time that they play in a virtual world, it is very exciting and fun. The user base was mainly in Europe, South America, and a bit of Asia. We had users in North America, especially in Canada, but I guess in the US Habbo never reached quite the same level of popularity as we did in the Nordics, where almost every teenager had played or regularly played Habbo. Perhaps because in the US there have always been so many more entertainment options for teenagers. Also, maybe some cultural aspects and themes of

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Chapter 6 | Sampo Karjalainen,Cofounder of Habbo Habbo perhaps felt a little foreign to US teenagers. Our great popularity in the Nordics was also likely down to word of mouth. Teenagers talked about it with their school friends, and that’s how it grew naturally. We also partnered with some youth media in different countries, like the UK and the Netherlands. Magazines and websites were one way we got Habbo known when we launched a new country. But otherwise the growth was pretty organic and even easy in the early days. I guess the advantage of the teenage demographic is that it can go viral on- and offline. Atherton: Was there any competition at the time? Karjalainen: Well, of course, there were other games for teenagers; Neopets and RuneScape were very popular browser-based, massively multiplayer online games. And then gradually World of Warcraft became hugely popular. But there were times when we were a little puzzled that there wasn’t more competition in this space. It’s not impossible to create something like Habbo, but still the big entertainment companies weren’t entering the space. I think it was partially because of the teenager market, especially with this type of open chat, is quite risky and difficult. Many also found it difficult to grasp exactly what they would be trying to create – is this a game? Is this a virtual world? It didn’t really fit any of the existing categories, which I think is another reason why we didn’t see so much competition early on. Atherton: Touching on the languages you use across all the Nordics and when you then opened offices in different countries, what was the number of languages you could interact with on Habbo? Karjalainen: Every community has its own website and local language. We created different hotels that had the local language and few local cultural aspects. So there was a HabboHotel.Finland, HabboHotel.Sweden, .Norway, .Switzerland, .Germany, .France, and that’s how we split it by language, country, payment methods, and local advertisers. Atherton: Can you talk a little bit about the life span from where you started to where Habbo is now? Karjalainen: There was this natural organic growth phase where the concept was clearly successful, and it grew almost automatically. Eventually, in some countries, it reached a saturation point, where almost all teenagers knew it and many of them played it or had played it. The users also grew out of it at some point, because teenagers don’t like to be doing the same thing as one or two year groups below them and so find something else. I think the main challenge was the transition from computers to mobile phones and tablets, especially teenagers using their phones for entertainment. Habbo was about real-time interaction, and when you arrived in the virtual

The Rise of Virtual Communities world, you needed to focus on what’s going on in the world in real time for at least 10–15 minutes, maybe longer for it to be a good experience. But when teenagers started to have phones, they switched to more asynchronous, on-and-off entertainment. We worked on a couple of different versions of Habbo for mobile phones and spin-offs, but we never found a way to make it competitive with other games that were made natively for phones and with users recently shortened attention span. Atherton: And you then left Habbo at some point? Karjalainen: Yes, there were a few years where we couldn’t achieve the growth we wanted to. We had all these investors, and we were trying to increase our user base year after year, and it started to get difficult to make any progress. I had worked on Habbo for about ten years when I finally thought that most of my ideas have been explored, so I am happy to let others see if this can be taken in a new direction. So I left the operational role, and then some years later, I also left the board. Habbo was acquired by this Finnish telecom operator, and now it’s owned by a Dutch company, which operates a number of games. Now it’s reaching completely new phases where they are exploring NFTs, so that’s good, but I haven’t been involved now for ten years or so. Atherton: I think you created something so unique that truly sits at the intersection of a virtual world and an online community. In one sense, you have a Second Life in an immersive world, but then it also echoes Discord and Reddit with its chat-based aspects. Did you consciously decide to use 2D graphics vs. 3D? The 2D pixel aesthetic of Habbo has evidently paved the way for the fully immersive 3D metaverse and ways of interacting online through VR headsets, but I’m curious was there a particular advantage of having 2D with avatars? Karjalainen: Yeah. The aesthetic of Habbo was inspired by old computer games and the Commodore 64, Spectrum, and other 1980s computer graphics. It also was a happy accident starting with a retro aesthetic, as it doesn’t have to follow the latest 3D development every year. Especially in the 2000s, as there was so much progression all the time and games had to constantly reinvent themselves to remain current. Instead, with our retro aesthetic, we were able to just build on the existing foundation and create more furniture and maybe gradually refine the graphics a little. So in that sense, it was an economical solution, and people still love it! The pixel graphics are a timeless style and are now very popular, for example, with many games or NFT projects. Atherton: What are you working on at the moment?

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Chapter 6 | Sampo Karjalainen, Cofounder of Habbo Karjalainen: So after Habbo, I wanted to create something completely new. So for some years, I worked on an activity tracking app for the iPhone (basically like a Fitbit, but in your phone). It was one of the first software-based activity trackers for iPhone and Android, called Moves, and when it launched in 2013, it was a technical innovation. We couldn’t find a way to build a revenue model around it, so we ended up selling it to Facebook. And that’s how I got to move to the Bay Area and then later to New York, working for Facebook. Eventually, I wanted to create something new again, so I cofounded with my wife a secondhand and vintage clothing search engine, Gem. It’s quite a Web 1.0 idea to build a search engine, but it’s fun to be back doing it all by myself together with Liisa.

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7 Lance Priebe Cofounder, CTO, and CCO of Club Penguin Club Penguin was a massively multiplayer online game (MMO) and virtual world. Founded in 2005 by Lance Priebe, Lane Merrifield, and Dave Krysko, players used cartoon penguin avatars and played in an arctic-themed open world, which rapidly expanded into a large online community. By 2008, Club Penguin had over 300 million user accounts and ranked as the eighth top social networking site in the world (Nielsen) with players using in-game currency to purchase virtual clothing and pets. The game and community were specifically designed for children aged 6 to 14 to be a safe social networking site that kids could enjoy free of advertising. After turning down VC investment, in August 2007 the founders agreed to sell Club Penguin to Disney for the sum of $350.93 million. Atherton: Tell me a little bit about how your career got started? Priebe: I have a graphic design background and got my start designing websites and building mini clip flash games through my own little game studio here in Canada. I’ve been fascinated with building virtual worlds since I was a child, creating moments in people’s day that bring delight; that’s always been the goal. Atherton: So how did the idea for Club Penguin come to you?

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Chapter 7 | Lance Priebe, Cofounder, CTO, and CCO of Club Penguin Priebe: Back in 2004, there were a ton of news articles about how the Internet wasn’t safe for children. Kids were starting to use MSN, talking to strangers online, and I remember I was sitting watching a news broadcast about all this and thought how can I design a solution?1 So I sat and wrote a four-page document on how I could keep kids safe online. At the time, I had been developing this game called Snow Blasters that then morphed into another project called Experimental Penguins and then Penguin Chat which were all attempts at building a successful MMO. I spoke to my colleagues Lane Merrifield and Dave Krysko about creating a spin-off company where we could fully focus on building this new idea, a virtual world that was genuinely safe for kids to hang out with each other in. Atherton: What were those early days of building like? Priebe: So we spun out and formed a new company, New Horizon Interactive, and decided we’d just fund it all ourselves on credit cards so we could keep 100% ownership. Lane brought the business brains to the operation, and I brought the design and creative skillset. We used Penguin Chat as a starting point in terms of the design inspiration; it also helped that we still had a lot of users on the original Penguin Chat as they then became our early beta testers. Atherton: How did you approach the design of the world to begin with? Priebe: The truth of Club Penguin is that our aim was to distract the children. We wanted it to have this fun party feel like a world of activities that you knew you weren’t doing alone. So we thought let’s run this like a kid’s activity magazine rather than run it like a game. There would be new content and challenges every week akin to OWL magazine or Nat Geo Kids. We also knew from user feedback on other games that we had created in the past that fans kept asking for a place to gather and talk, so right from the beginning we had chat built in. As a graphic artist myself, by trade I did a lot, but I had a great team. We had an artist called Peter Welleman, who designed a lot of the early quick sketches of the rooms and backgrounds. I hired him directly over the Internet, as a work-for-hire concept artist. He came up with the town itself, the hockey rink, the ski village, the original concepts, and they tended to be very dark and strange. Then myself and Chris Hendricks, an illustrator and Club Penguin’s first employee, heavily modified these sketches to create what the world you saw, permitting the character moving around the space, on a different scale and in 3D. Chris Hendricks designed all the events and parties, the furnishings of the environments, and clothing. The most notable of which was the penguins, because his background was in animation, so all the movement and dancing was him.  MSN, an acronym for Microsoft Network, launched in 1995 as a dial-up online portal. Its most prolific feature was for instant messaging. 1

The Rise of Virtual Communities As we grew, we employed Chris Quigley and Gord Quigley, known as the twins. They created every single room and party since the start of Club Penguin until it shut down; I think that is over ten years. The twins were an amazing team because they drew identically the same. We’d request rooms and you couldn’t tell who had done what, and it would be produced in half the time! When we joined Walt Disney, the Disney team reminded us that Walt’s original art team also had twins who drew identically. If you talk to anybody in the production or development of games, to find artists that can draw the same is very difficult, you have to train artists to draw the same. Atherton: OK, so a world of activities to keep fans engaged was the beginning, and what happened when you launched? Priebe: We launched in 2005 with a basic world, just a couple of rooms as a free sample on mini clip games. As we already had this loyal user base from Penguin Chat, we were just quickly incorporating their feedback in real time. Atherton: Can you tell me about the architecture of Club Penguin? Priebe: So we had the world itself, which we called “rooms,” but they are essentially screens. Penguin would walk from screen to screen, or “room to room,” around the world. Kids logged in and started in the town square, and they went into the coffee shop or the dance venue. They would explore the secret rooms: the boiler rooms, the secret agents, the underground caverns. We decorated these venues for events; Halloween was perhaps our biggest art change. Users also had their personal space called an igloo, which is their own room that they could furnish. In later versions, they could invite friends and have their own little parties. Each public room in-world was carefully designed for the activity that we wanted to encourage in that room. Early in high school, I wanted to be an architect – this is before user design and UX roles existed – but my grades were too low. I found out later in my life that I have dyslexia. So my art teacher took me aside and introduced me to graphic design which had less rules than architecture and engineering. But I’ve always been obsessed with how people move through space and those architectural theories. For example, in kitchens, architectural literature suggests you should arrange your fridge, stove, and sink in a triangle to prevent collisions and promote efficiency. Club Penguin was designed with these architectural theories in mind. Your town was a hub that you never really hung out in; instead, you would move through it and go on to explore the next place. There was somewhere to move through, somewhere to socialize, and somewhere to play a game. When you step out of the game with pockets full of earned coins, there would be a shop selling items and clothing. Then you would step out of the shop into the town and choose what to do next: visit

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Chapter 7 | Lance Priebe, Cofounder, CTO, and CCO of Club Penguin the coffee shop, socialize at the dance hall. That loop is everywhere in Club Penguin. In the ski village, through the forest to the beach, there would be gaming spaces, shops, and social venues. It is how Disneyland is designed and how towns are planned. Disneyland has these hubs, Tomorrowland, Fantasyland, Frontierland with shops that sell drinks or merchandise, and so forth… Atherton: Did you think about building the community in the beginning? Priebe: We actually didn’t start by thinking about building a community at first. We wanted to build a place where you could express your personality and meet your friends and have fun. We never thought let’s build a community, we were first and foremost a place that allowed people to gather. That’s what should come first – venues, a place in time, an event. We were not building a community, we were simply the host. Events are a lightning rod to connect people. Atherton: The game really quickly blew up; any idea of what triggered the growth? Priebe: We believe that it grew because of kids just talking about it at school. Kids made their Club Penguin groups in real life in the school yard or at the school computer lab, then they would go home and meet up in Club Penguin to play together. Later, as it grew, we watched kids play and noticed some interesting patterns. We learned that kids would play on a schedule – because the game was so huge you could never recollide – so kids would agree when to play so you could encounter the same person. Atherton: So the network effects actually started in the real world? Priebe: For sure. We’d hear stories about church and youth groups that would meet in Club Penguin. If one kid got sick or was in hospital, the entire classroom would meet up in Club Penguin and play altogether. Kids would share their penguin names at summer camp and connect again in the game. At summer camp, kids would write their Club Penguin names on chalk boards or their backpacks; it was an incredible multiplier. We saw the logins of the servers. You could see New York literally get out of school: boom! Server loads would go into overdrive. It would repeat exactly an hour later in the next time zone. The largest traffic of all was after supper in New York and just out of school in LA; the two big coastlines are online at the same time. The lowest collisions were spring breaks and summer. Users would log in at different times so they might not be able to find their friends. Atherton: So the virtual and IRL crossover came from players colliding in-world but also kids playing together in this after-school ritual. On the topic of rituals, can you tell me about the monthly parties on Club Penguin?

The Rise of Virtual Communities Priebe: The parties were key to Club Penguin’s success. We didn’t know why, but when we’d host parties, everybody showed up. There were collisions of different social groups at the parties who would converse and play unique games. It would have a buildup beforehand; kids would talk about the upcoming Club Penguin party at school. “Are you going? I can’t wait, etcetera.” It was capitalism at work, because everyone who attended a party received a free exclusive item that evidenced their attendance. The parties also drove the monthly subscription, because if you attended a party as a paying subscriber, you would unlock an extra item the following month. A party never went into the next month of subscription, so it encouraged members to stay on for the next one. At the time, we thought it was a form of marketing our subscription, but what we have now learned is that these items formed our user’s identities. It wasn’t just looking forward to the party, it was that commonality between those who attended the parties, which was evidenced by the items members collected. It was like a reputation that kids could earn for themselves; they essentially collected parties for their social value. The equivalent social capital at work that you see on Twitter where people post the NFTs they have purchased. It’s like saying, “well, I was there, were you there?” All the blogs associated with Club Penguin are filled with posts like “Remember the blackout party? Who was at the blackout party?” The value was a past tense thing: I attended, not that I’m going to attend. It’s like proving you were at that music festival by wearing the t-shirt. In fact, in the later days of Club Penguin, we launched a merchandise store that sold t-shirts, key chains, and physical goods. At the time, we were oblivious. We thought items given at parties were a monetization system for subscription. Now we look back, it’s clear that these items were the social fabric of our users’ identities. Atherton: So if you were to start Club Penguin over, would you approach creating these parties, these community rituals, in the same way? Priebe: With the benefit of hindsight, I realize we should have relaunched the classic Club Penguin Halloween party annually instead of making a new Halloween party every year (same with our Christmas party and so forth). We spent a lot of time coming up with entirely new concepts, but often there’s more nostalgia returning to a party with a little flavor of new than going to an altogether different party. I’d compare it to watching the same Christmas film every year; it holds the nostalgia of tradition. We didn’t realize at the time that we had these anchors we could have returned to. A missed design in Club Penguin was that parties were our only narrative. We always had a story to go with the party, to explain why it was happening. For example, an asteroid has collided with Earth. Christmas was a funny one because Club Penguin is a snow-covered world, and the design brief was to

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Chapter 7 | Lance Priebe, Cofounder, CTO, and CCO of Club Penguin add more snow, because you have to make it look like winter vs. normal life which was also winter. If I was still designing stuff, allowing communities to launch their own parties would have been really valuable. Users could host a few people in their igloo and decorate it, but at the time, we just didn’t know how to do it on a larger scale. Atherton: What were the technological challenges of building at the time using Adobe Flash Player? Priebe: When I look back at the technology that we built Club Penguin on, I’m in awe that we were even able to launch. I was repeatedly told it was impossible. We just kept trying things. We fully rebuilt Club Penguin so many times in those first couple of years, from the ground up, because we’d run into a new astronomical problem. Club Penguin launched before cloud computing, so we were in one single data center worldwide. We had to learn how to build our own data center. Serendipitously, one day in the office the phone rang, and uncharacteristically I answered. This guy was going on about CDN (content distributed networks) which were this modern idea of pushing content out further on the Internet so that it was floatable by everybody. I didn’t really understand what he was talking about, and I hung up. But critically, as I was saying we weren’t interested, he mentioned Webkinz  – our number one competitor, which sold stuffed animals with an online game counterpart – used their software. Sometime that afternoon, I realized I should take that call seriously because I didn’t have a clue what a CDN was. Turns out it was early cloud computing. So I went through the numbers that had called that day to track down the guy – we didn’t have call displays in the mid-2000s – and I called him back and asked him to walk me through exactly what they do. We needed their product as we were being overwhelmed with bandwidth, servers, and data. A simple technology solution can reduce problems dramatically. Another nightmare was that we wanted parental approval for a Club Penguin account. To create an account required email authorization. One day, Hotmail, one of the largest email providers at the time, blocked us. If an email came from clubpenguin.com, it was not even spam, it was blocked and wouldn’t go into their spam box or inbox. We put a banner on our website saying if you have a Hotmail account, we cannot accept it. We had help guides on how to set up a Yahoo account or an AOL account because you couldn’t use Hotmail. Eventually, we got a hold of Microsoft (which owns Hotmail). They responded that there is no way any website in the world needs to send this many emails; they thought we were attacking their servers. Online registration was not a widespread practice at the time. We explained that our traffic was legitimate, but it took them months until they realized that it was not just Microsoft that was growing exponentially, other online venues are also mushrooming!

The Rise of Virtual Communities Microsoft executives eventually responded, admitting that we were a legitimate service using email, and we were finally unblocked from their servers! Atherton: Club Penguin set the standard for online safety for kids, meeting and playing games with other strangers. Alongside the paid moderators, you would also promote users who reported inappropriate behavior to be an “Elite Penguin Force” agent. How did that self-policing role come about? Priebe: There has been a lot of research in game design and online communication since then. For example, when you first install WhatsApp and tap your first chat message, a prompt comes up, “do you understand that the messages you send are going to have x impact,” and you click yes, that you understand. That simple exercise has been proven to improve behavior. At that time, there was far less research. Rather than being self-moderators, the “Elite Penguin Force” agent status was more a way of incentivizing kids to learn about child safety online, because you had to pass a test to gain this status. The special agents didn’t have any more power than any other person playing the game. They had extra gear, clothing, among other stuff, but no true moderation abilities. Special agents were implemented as an educational tool to draw attention to being safe online. To become a secret agent, you had to pass the test on how to be safe online, but we had to incentivize kids to learn this. Questions included: “If you have a problem, which button are you supposed to push to call the moderator and report the user?” The test also had example messages from users, which you had to identify as bullying or joking. To pass the test, you essentially just had to read the rules and prove you had understood them, though we added interesting graphics and penguin jokes, you had to find the secret door and hit a button. In Canada, we worked with the Royal Canadian Mounted Police and other bodies to come up with the short syllabus of what children needed to know to be safe online. This incentive was far more effective than the more conventional safety measure we implemented where upon joining there are a series of messages saying “be careful of talking to strangers, don’t share your home address, don’t share a phone number.” The kids are not incentivized, they just click through without really reading it. Atherton: What were the other measures you used to ensure the community was safe, given its young user base? Priebe: Aside from the Elite Penguin Force agents, who felt they had a purpose and would go around looking for and flagging trouble, we had strong filters. The Club Penguin filters flagged certain behaviors which our moderation team would investigate, and the systems would flag repeat offenders.

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Chapter 7 | Lance Priebe, Cofounder, CTO, and CCO of Club Penguin Our filters blocked everything. A large proportion of conversations never went through at all, even if the kids weren’t saying anything wrong; the filter just wasn’t smart enough. Our approach at Club Penguin was to approve a small proportion of phrases rather than ban phrases. The filter would not recognize obscure words, so the messages quietly wouldn’t go through. Parents could turn on the “ultimate safe chat mode,” which limited players to selecting from a menu of phrases. This was also helpful for our younger players, aged six or so, who couldn’t type anyway. Atherton: Another Club Penguin tradition in the approach to Christmas was Coins for Change, an in-game charity fundraising initiative. Can you talk about how that came to be and its impact? Priebe: A portion of our revenue always went to charities. The idea emerged from a challenge we had set ourselves. Club Penguin had a monumental captive audience of kids, and we were trying to work out how we could teach them something. We were not a Saturday morning cartoon with a plot teaching morals. Club Penguin was not even a linear game, in which you play through the adventure and become the hero. It was a challenge to teach something in an open sandbox game format. So the idea for Coins for Change emerged. Club Penguin wasn’t based on failing – that was too much for our six-year-old players – it was based on earning. The main aim was to earn coins through mini games, with which they could purchase items. For every five minutes you played a game (even if you didn’t “win” the game), you earned enough coins to buy the lowest thing in the catalogue. So if you played 20–30 minutes of games, you should be able to buy mid-range items in the catalogue. All our pricing was based on time, because our business model was to convert users to paying members. Coins for Change was a choice for these kids – are you going to spend your coins on you or donate them to one of our three charity options? So kids would donate their coins to a charity for the planet, animals, or for the health of other kids. When the campaign ended, a portion of Club Penguin’s profit, between $1 and $2 million, was divided between each cause, based on the ratio of in-game currency each charity had received. Interestingly, every year the donations were almost always equally distributed between the three charities. We would just let them get all hyped. They donated billions of coins. If you reverse-engineered that, let’s say users earned ten coins for five minutes of playing, you suddenly realized how many hours millions of kids spent donating time. Nicole Rustad was in charge of our virtual altruism systems. We had a fulltime Coins for Change team at Club Penguin to manage the donations and choose the charities. Disney loved our Coins for Change so much that they

The Rise of Virtual Communities put the Club Penguin Coins for Change team in charge of Disney’s donations as well. The Walt Disney Company went on and started a change program on Disney Channel and continued the program across their different franchises. Atherton: What was the business model behind Club Penguin? Preibe: Club Penguin operated solely on the revenue from its paid monthly subscribers, which was less than 5% of users. Over 95% of users played the free version, which had so much content that kids still thought it was the greatest game in the world. After Disney purchased Club Penguin, they expanded its avenues of revenue by introducing toys and merchandise. There was no advertising except some cross-promotion, which emerged under Disney. There were themed events when Disney would launch a film; they called it a “takeover.” When the Disney film Frozen came out in 2013, Elsa’s dress and other aspects of the film came up in Club Penguin as items. Atherton: How did the community change after it was acquired by Disney? Priebe: That’s a contentious topic. The older fans now think that Disney killed Club Penguin, which makes me sad to hear as it’s not true. Lane Merrifield, one of our cofounders, often uses the analogy of Club Penguin as a child. We were able to give it an elementary education, we were able to struggle its way through high school, but we couldn’t give it a university education in business or worldwide factors. Disney brought a lot to Club Penguin. Our biggest fans were in Brazil, they became the majority of the players, and other nations, the UK, Spain, France. Kids around the world wanted to play Club Penguin, and we didn’t know how to continue growing it. Disney did an unbelievable job those first number of years after acquiring Club Penguin. They were able to move us into their Disney São Paulo offices in Brazil. We had hundreds of people on our team working in São Paulo, Brazil, translating Club Penguin into Portuguese, Spanish, French, Italian, Russian, and German. Hundreds of millions of kids that we would have never been able to reach were able to play the game in their languages with their context and localization, all as one, because Club Penguin was played globally as one game. When Disney acquired Club Penguin, our virtual parties were attended every single month in every single nation in all their languages. Atherton: What have you been up to at Hyper Hippo most recently? Priebe: Most games have moved to the free-to-play business model. People forget that the premium features, the business model of these games, are luxury goods, which you can choose not to buy. The global COVID-19 pandemic was a boom for the gaming industry, but Russia is the third or fourth largest gaming nation in the world, and given the present war with Ukraine, that revenue is currently gone. So at Hyper Hippo, we’re hunkering

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Chapter 7 | Lance Priebe, Cofounder, CTO, and CCO of Club Penguin down to wait out winter, focusing on our community and the games that work well. It just means the risk tolerance has to come down a bit. We’re doing contracts with Netflix right now; we just put out a game called Dungeon Dwarves on Netflix’s newly launched gaming platform. Atherton: What advice would you give to future community builders? Priebe: If you want to form a community, one of the ingredients of all communities is a space to gather. Space creates context and gives the impression that we are facing something together. You need a venue. This was part of Club Penguin’s success. There was the ice rink or the ski village, these social places where people could live chat with each other, something our team called colliding. We wanted to create collisions; otherwise, you’ve got this feeling of everybody running past you. Collisions meant that users met each other, made a friend, played a game with someone different. Then you need an event. I adore Seth Godin’s book Tribes (2008). It was required reading for management at Club Penguin as we believed we were creating and leading a tribe. Godin explains that communities need a stimulus. They don’t have to lead it, just to start a spark. For example, music artists might be a common interest that sparks a fanbase; the community is the fans. Even in a modern setting, you need a spark: an IP, a brand, a story that the fans have to gather around. At Club Penguin, that was our parties; the tribe was really just the commonality of being there too. Nowadays, this stimulus has to be faster; I’m not sure our monthly parties would be frequent enough today, they would have to be at least weekly. Modern virtual worlds are a bit different. Club Penguin’s era, alongside miniclip.com and the other flash game sites, was the equivalent of after-school TV. Kids did not have mobile phones. A lot of the girls on Club Penguin would have a group call on the landline after school and chat while playing together. There were fewer competing stimuli back then. So to conclude, a community needs a venue to gather and then a topic or shared interest to gather around. Godin wrote something along the lines of “the tribes are just waiting for us to lead them.” Our job isn’t to run the community. Our job is to lead the community – to lead by example, by asking questions on topics we want them to discuss and demonstrating actions we’d like to see them mimic.

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8 Angelo Sotira Cofounder of DeviantART DeviantART is the world’s largest virtual art community, in which artists and enthusiasts can meet, share, and sell their art. Founded in 2000 by Angelo Sotira, Matthew Stephens, and Scott Jarkoff, it was one of the first social networks, pioneering in permitting users to create free profiles, a space to post artworks and converse. Innovative features of DeviantART include the ability to comment with a drawing tool, instead of words. Llamas became an important mascot to the DeviantART community, added in response to an Internet meme as something that could be gifted between users. Sotira bootstrap funded DeviantART in 2000 with $15k, and it grew on cash flow until 2007 when it raised $3.5 million Series A from software developer DivX.  In 2009, DeviantART raised a further $10 million and launched a world tour to ten cities globally, connecting the community in real life. The platform now sustains 30 million members, 65 million unique visitors per month, and 350 million artworks. In 2017, Wix acquired DeviantART for $36 million. Atherton: Tell me about your early experiences with virtual communities. You became involved in Bulletin Board Systems when you first moved over to the US from Greece to Fairfax, Virginia, is that right? Sotira: Yes, being 12 I was the perfect age to get a computer with a modem, so I was dialing into every BBS that I could find. Every time you logged in to one, you would get phone numbers for more BBSs. I became obsessed with profiling, documenting, and reporting on BBSs, then building community, telling people I met online which BBSs I thought were cool, asking for their

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Chapter 8 | Angelo Sotira, Cofounder of DeviantART opinions and recommendations. BBSs provided a place where you could chat, but were also used for the distribution of illegal files, games, and cheat codes. After a while, I landed on the Netherworld BBS. The Netherworld was amazing. As a major BBS, the Netherworld came with a feature for game connection, like what we would use Xbox for now, but you could also hang out, exchange files, and so on. It was built by someone with the username Strider in his spare time when he was working at AOL.  He made it for a similar audience to those who played Doom and Heretic, the first-person shooter games in the early 1990s. I spent a lot of time on the Netherworld board and got involved, designing maps and building some of the myths and laws. I made a lot of friends in the Netherworld, some of whom remain friends to this day. A lot of the roots for my projects in online communities came from that BBS. Back then, computers were really in need of a lot of work, so you needed friends who knew solutions, so you could make your computer work properly. Or even upgrade it to have that little performance boost which could give you an edge, perhaps on getting an extra frag, a kill in a first-person shooter game. Through BBSs, I met the Winamp1 founders. I met creators of other scannable software applications and ultimately my cofounders for DeviantART, Matthew Stephens and Scott Jarkoff. Logging in to BBSs aged 12 turned out to be a really good idea. I followed this online community from the BBS era onto later developments. The IRC2 era and then onto EFnet, a major IRC network that launched in 1990. IRC was a conglomerate of quite a few different servers that were completely separate and not governed by a single body. The largest of those servers were EFnet, DALnet, and Undernet. I migrated to EFnet because it was the most aggressive, in contrast to DALnet and Undernet which were moderated. In the latter two, you would log in or register, and if you were misbehaving, there was a central authority to control that. By contrast, EFnet was a pretty raw installation of IRC. It was divided into #MP3 or #MP3files to share music and other channels. In order to create any sort of feeling of protection and protect your chat room, you needed to build attack and defense spots. Otherwise, people would come and take them over. You would recruit other community members to help defend a space together; that was what everybody on EFnet did, and there were about 100,000 people on that platform. I still continue to play games, but nothing has since appealed to me as much in how to build community around attack and defense. It didn’t seem anywhere near as fun once that was done by DALnet and Undernet.

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 Winamp was a media player that was sold for $80 million to AOL in 1999.  Internet Relay Chat, a protocol that offered instant messaging.

The Rise of Virtual Communities Atherton: How did this involvement in communities sharing MP3 files lead to your first company, a music file sharing website, DMusic? Sotira: So I spent a lot of time in the #MP3 chat room on EFnet. You wanted to occupy as many channels as possible and make them popular on EFnet, because then you could control the title bar. This granted the ability to give websites exposure. If you wanted to drive traffic and build a web presence, you could use these places to create virality. So this is how I developed DMusic. I had learned that in order to have a proper MP3 distribution bot network, you need a very strong attack and defense network which is completely separate. Through the Internet, I met hackers and kids that knew how to build attack and defense bots and who had strong T1 or T3 fiber optic Internet line connections and good computers. We would use their hard drive space in exchange for music files or for attack and defense services. Though I was in high school, none of my peers liked computers or used MP3s; this is back in the heyday of CDs, so all the friends I was distributing with were purely online. It was very Wild West, it was super fun, and DMusic evolved out of that. DMusic launched in 1997 and became a web portal for a few things. One was a blog where I was writing news articles five times a day about software updates on MP3 player programs, including Winamp or Sonique. Community members could set up profiles. DMusic had more than 20,000 unique visits per day. Beyond that, we had a file area on which anyone could listen to, share, and discuss music. We didn’t know whether it was legal or illegal – we just were having a lot of fun; I was about 15 years old. Soon enough, we learned that what we were doing wasn’t right. We were one of the first companies in the world to be contacted by representatives from the Record Industry Association of America (RIAA). Around 1997 or 1998, MP3s and distribution of music online became big, so we had quite a few acquisition offers. I was negotiating at the age of 16 and 17, but I didn’t want to sell. Then when I graduated high school, I got an offer from a consortium of successful friends in the music industry, one of whom was Jim Griffin, from the RIAA, who was trying to get DMusic to stop. He proposed that DMusic stop its present illegal distribution of MP3s and help the RIAA to spread the word that this was an illegal activity, then they would connect me with managers, agents, and bands so that I could distribute music legally. That sounded really exciting. So I started working with some wonderful folks from Hollywood Records, Disney, and Geffen Records. That network eventually reached out to an agent named Michael Ovitz, the founder of Creative Artists Agency and former president of the Walt Disney Company, and recommended he take me on, in order to navigate the weird and crazy Internet that was increasing in popularity. So I went to work for Michael Ovitz; he acquired DMusic in 1999.

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Chapter 8 | Angelo Sotira, Cofounder of DeviantART He had just left the Walt Disney Company in a controversial departure to start Artist Management Group (AMG). Michael switched from being an agent to a manager, because in California agents cannot participate in the distribution of music, whereas managers can. He pivoted his entire career from agent to manager so he could participate in the emerging distribution network: the Internet. The acquisition pitch for DMusic was irresistible, a well-connected individual who was going to help me deal with all of this illegal stuff that I didn’t know about, to help integrate the music industry and the Internet. Remember I was 18 at this point, embarrassingly labeled as this Internet wiz kid. Working for Ovitz, I had a split set of responsibilities. Partly, I was to manage DMusic. I was also helping his clients and the management team understand Internet distribution better. I was essentially trying to get more and more bands to sign on to DMusic and distribute their music through MP3s. I was able to use the existing relationships inside of AMG to get more and more legally distributed MP3s. I was taking that music and syndicating it through bot networks back on EFnet in order to create more grassroots support. So this was probably one of the most clever things we did. I really am proud of that because if you fast forward 20 years, it’s still exactly what you should be doing. Though at the time, trying to explain to bands and managers that you’re going to be distributing their music on bot networks on IRC, they looked at you like you were crazy! Atherton: Can you tell me a bit about the community behind DMusic? How was it growing? Did you have community managers? Sotira: Our DMusic team was all over the place: some nearby in Orange County, others in Japan and Texas! We had built this team because there was a series of compatible services to DMusic, and I found a way to bring everybody together. DMusic wasn’t employing everybody, they were freelance contractors, but after the acquisition, their work was rewarded by earning equity in the larger organization. That was how we had structured it. DMusic acquired about 10 or 15 MP3 sites to build a network, the DMusic Network, and each website had reference links to the others and cross traffic. We built publishing engines where we were syndicating articles to absorb the traffic from each source. In addition, we were able to build a commenting engine that would absorb all the comments from articles across the different websites. This was pioneering technology in 1998 and 1999 and a great source of growth. Atherton: It is fascinating how much and yet how little has changed when you think about discovery of communities and how important bots are in that! Do you remember what led you to sidestep from MP3 audio into the visual and pave the way for DeviantART?

The Rise of Virtual Communities Sotira: The personal catalyst to start DeviantART was an interaction with a company called Winamp Facelift. Back then, everyone was listening to MP3s using Winamp, Sonique, and other cool MP3 players. Those MP3 players could be customized; you could change the skin on them, which looked really neat. People would spend time modifying them and sharing these customizations with friends. In fact, it became a trend to not only modify your MP3 player, but eventually the wallpaper on the computer. Then you could redesign the graphics on all of your desktop windows. People made elaborate, beautifullooking environments for themselves. From this skinning, customization, and custom wallpaper era spawned a series of customization websites. The first one I ever saw was called Winamp Facelift, founded by Mark Streich. I liked it so much I got Mark to join the DMusic Network. We acquired and launched it, so we would have a portal for Winamp skins on DMusic. In exchange for the website acquisition, Mark also wanted some free data transmission per month and hosting resources, as he didn’t have servers. With those resources, he created customize.org, which was the same concept, but it permitted modification of any MP3 player, not just Winamp. We didn’t have advanced contracts back then, and ours just stipulated that Mark wouldn’t build another Winamp customization site, so he burned me there. Mark took the money and the hosting resources to program a competing site. It destroyed the traffic to Winamp Facelift, but worse, because it was constructed on our server, we could watch the traffic reports murder us. Eventually, Mark sold customize.org to a New York corporation, but it left a lasting impression. That experience was formative and paved the way for DeviantART because I learned that a company will win if you offer the most categories or the most flexibility on a platform for submission. For example, customize.org was always going to trump Winamp Facelift as it supported 15 or more different media players. Evidently, the platform that would support any new category of work would probably be the most successful. Another of those acquisitions was of a company called Cybertropix, founded by Scott Jarkoff, and when he suggested starting a virtual art community, I immediately thought it would be a big success, with all the mediums it would encompass, and so I put a lot of weight behind it. Atherton: Can you take me back to the early days of founding DeviantART in 2000? Sotira: Nobody was working full time on DeviantART until about 2001. I was still working for Michael Ovitz; DeviantART was tiny; it was formed inside of DMusic, so we had lots of different team members involved. The idea of running one more website was pretty normal because DMusic was a network of sites including Cybertropix, Layer3news.org, DMusic, pureMP3.com. It was an environment in which we might incubate sites and see what worked.

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Chapter 8 | Angelo Sotira, Cofounder of DeviantART DeviantART was to be an art platform, a community for sharing art online. Initially, we thought of calling it Dimension Art or D Art, but neither sounded good. DeviantART came about because we wanted to deviate your desktop and change your computer. Of course, the name later became more associated with challenging perceptions when you create a new artwork. Chris Bolt was technically the first full-time employee in 2001 because I didn’t have the money to pay myself, so I just paid Chris Bolt. Entrepreneurship often starts with no salary for the founder! DMusic was exciting, but DeviantART was a much more successful formula for a few reasons. At the time, there were still slow connections, some had broadband, and others dialed up through modems. So JPEG files and art loaded faster and so could be more entertaining and sociable than a 3 megabyte MP3 that has to be listened to and then commented on; it’s not so instant. The visual component was more viral and instant. DeviantART got people talking and socializing around the circulating images. Atherton: It’s interesting to compare your observation of the visual being viral with successful platforms today. TikTok, for example, is inherently aesthetic, whereas Discord is text based and audio based. Both have participatory behavior and engage a community, but the prompt may be visual or text. Do you feel that the images were the impetus that engaged the community and supercharged its growth? Sotira: Definitely. At the time, we did not have the level of technical sophistication as we do now with platforms like TikTok, so there was no way that a video or song could be as compelling, as interactive, as immediate, and therefore connective as images were at the time. I suppose we had blog posts which were pretty good at prompting conversations, because they could occur fast. You could read the headline, the article, and then comment. But DeviantART was the first place where you could post an image in a comment and that supercharged its success. Atherton: Thinking back to the first community members  – deviants as they’re lovingly referred to – what was the dominant attraction of DeviantART, was it the utility of the platform, its resources, the fact artists could sell their work? Sotira: Part of it was there was no competition. There weren’t other communities around user-generated content and art back then. We were also doing a good job of community development. Perhaps one of the main appeals of DeviantART was that when a user posted their work, most of the team and active members would comment on your work. We made sure of that. It was an internal policy that we had active staff touching every single submission as it was coming on to the platform. So you would get

The Rise of Virtual Communities lots of engagement if you posted to DeviantART. Our staff would see your work, watch your account, begin a dialogue with you, respond to your every comment, wait for your next submission, and cheer you on as you were doing it. The amount of effort that went in from our founding team was extraordinary. It’s such a winning principle of successful virtual communities to just welcome new members and encourage them on their journey in those very early interactions; it makes such a difference to how long you stick around. Atherton: So the initial draw for users was rooted in creating and sharing art. What were the challenges to building features with artists in mind? Sotira: We were becoming quite sophisticated at the time in understanding the different segmentations of our audience. We knew that we had to build software that would be powerful enough to enable a lot of different types of use – from users getting together as photographers with a consistent style to create a virtual exhibition as a group to artists grouping together to do a virtual performance piece and pretend that they are wolves. DeviantART is a pretty wild place; I would not be able to describe it in any single way to characterize it accurately, it’s super diverse. Atherton: Did other communities form that were surprising to you, perhaps outside of the common interest in art? Sotira: Having run DeviantART for 22 years, I’ve stopped being surprised by anything. A better approach would be thinking of communities that perhaps would be surprising to someone else! DeviantART has touched the lives of a lot of digital artists today, and countless roots lead back to the platform. One example of a successful art collective formed on DeviantART is Depthcore, which is today impactful in the NFT world. Cofounded by Justin Maller, the organization is contributed by artists all over the world. There have also been so many artists that produced wonderful art and have since stopped – so DeviantART preserves this history. Atherton: As communities grow, they often break off into smaller groups of common interest; was that the case at DeviantART? Sotira: The DeviantART community kept growing, artists were telling artists about it, but it wasn’t until about 2008 or 2009 that we developed the group platform. However, well before the platform facilitated them, there were lots of groups. People would create an account and then share passwords with their group mates, so people were using profiles as group accounts. We had about 35,000 or 40,000 groups sign up the day we launched the groups feature. I remember thinking it was the fastest growth driver we’d ever seen. So many of these shared profile accounts immediately converted into a group, which allowed us to see for the first time just how many people were congregating under these single profiles.

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Chapter 8 | Angelo Sotira, Cofounder of DeviantART If you look in the history books, DeviantART’s introduction of the group platform was incredibly pioneering. There was Ning, a platform for building virtual communities and social networks, but the ability to create your own community within a platform did not really exist – the reason being it was really hard to do. You had Yahoo groups and forums, but you didn’t have the ability inside of those to create application platforms, media galleries, member areas, admin logs, and backrooms. The DeviantART group platform essentially gave you the ability to run your own DeviantART. That was the mission of our group platform: to permit users to create their own smaller niche forums. Facebook has debatably done a great job of groups since, but back then it was completely uncharted territory. So you could be part of DeviantART, but you could also find all of these specific groups that were set up by users around different topics, and some of them were private password protected, others you could join publicly. Users had 100% control with a full admin system. You could choose what applications to install in your group, perhaps the journaling feature, or the collection feature where groups could collaborate to collect artwork, or the gallery feature in which users could group publish their work. You could also determine the level of access users had, down to minute details. For example, you could permit some folks to edit journals, while other folks could only write or read them. It still blows my mind how powerful a tool we built there. We had never seen anything like that at that time, and so I think that’s why it was so successful. Atherton: An important pillar in some of the best virtual communities is the inside jokes that become community myths and traditions. Can we talk about community rituals in DeviantART? Tell me about the llamas. Sotira: Deviants can give one another llamas in recognition of anything. They were a nod to the old Internet days of IRC when users would come into your chat room and beg for operational privileges; they were referred to as llamas. These llamas were referenced by Winamp in the MP3 audio clip that came free when you first downloaded the media player. Winamp hired DJ JJ McKay to create a hilarious MP3, which said: “Winamp, it really whips the llamas ass.” Llamas became a defining motif of this time period. So the reason I chose llamas as the “mascot” of DeviantART was because I wanted to pay homage to the creators of Winamp  – Justin Frankel and Dmitry Boldyrev  – who I looked up to and were a great inspiration in building DeviantART. By the time we introduced llamas to DeviantART, the motif had been fading away, so we wanted to reinvigorate that conversation. It also happened to coincide with the launch of a digital payment system called points. Points was a virtual currency which was going to allow users to buy virtual goods and earn royalties on their art. I created llamas one afternoon, and llamas cost zero points. But on DeviantART, a message would pop up to tell you that a

The Rise of Virtual Communities llama costs zero points, so you had to learn the interface and that there was such a thing as points. Users would repeatedly send them, because they wanted to give other users free llamas. When we launched llamas around 2007, for the first month or two, they rivaled favoriting in terms of a feature activity. Imagine a feature that you launched being so successful that it rivals your like button! About seven or eight llamas were being sent per second. You could only give one llama to a person, and they can only give you one back in return, so for that many to be being sent, users were giving everyone they knew and interacted with a llama. It was incredibly viral because it was fun and ridiculous and made new users curious. To this day, if you sign up to DeviantART, someone will send you a llama. At our ten-year anniversary party, we even had live llamas! Aside from the llamas, our annual April Fools’ campaigns are also legendary. Atherton: DeviantART has hosted “in real-life” (IRL) events  – Deviant Summit and world tour, birthday bashes, and meetups  – tell me about the benefits of having IRL events for an online community? Sotira: We launched a “DeviantMEET” feature within our group platform to aid IRL, because it was something that members were already trying to organize. Users would write a journal with details on a meetup and its purpose, but there was never a way to reach all the people in that area to let them know that this gathering would be going on. We started seeing users publishing photos of deviant meetups, and so we formalized that during the launch of the group’s platform. In order to celebrate it, we ran a world tour of DeviantMEETs. We bought an around-the-world plane ticket starting with Australia and then went to 10 or 12 cities, including Singapore, Warsaw, Istanbul, back to back over 60 days. At each one of the locations, we would tell people about these new features and groups and how to run DeviantMEETs yourself. The world tour was to introduce users in local communities, so that they could continue to meet. The most important thing that I learned was that it’s cool to have a feature, but it’s better if representatives of the community, your team, or a popular artist in that part of the world physically show up and get everyone together. That world tour was the beginning of a serious acceleration of DeviantMEETs. That world tour formed so many bonds, so many marriages, so many work partnerships, so many beautiful things. Our team and I have received countless letters that attest to its impact. So when I look back at my journey at DeviantART, that’s what resonates the most. Atherton: How did the business model evolve at DeviantART into multiple revenue streams?

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Chapter 8 | Angelo Sotira, Cofounder of DeviantART Sotira: 22 years is a long time, especially when you’re talking about an early social platform, so there was a lot of meandering between success and failure with our business model. Digital art was in its infancy, and when you do stuff first, you learn a lot of things the hard way. The most successful revenue model, from the beginning until now, has always been premium subscriptions. Members upgrade to have access to customization options, having an advert-free platform, and so forth. Even through economic recessions, people took their membership to DeviantART seriously, as this was an escape for them when there was something bad going on in the world. Our subscription revenue model saw us through the 2008 economic crisis, though not unscathed, and through a global pandemic and ensuing downturn. At each of these difficult points, we would focus more on member subscription. These days, we are focusing on the ability for members to sell their own subscriptions on the platform. Prints and print reproductions for an art community are obvious, and that was a pretty good business, but in hindsight they were not as successful as you would expect, because an artwork for your wall differs from usually the wider variety that you enjoy looking at. We tried advertising, though ultimately I felt it was not aligned with the interests of DeviantART. Advertising was lucrative, but it was taking users’ visual attention away from the art of our users, which was what the platform stood for. Atherton: Another founding principle of many virtual communities is having rules of engagement, helping you understand how you should play in this space. I read that you have some of your own additional rules for community engagement. Can you elaborate on the most important rules for a thriving and healthy online community? Sotira: So DeviantART has long published an etiquette policy, which is the most important place to start for a healthy community. Classic things like “don’t post hateful content.” Moderation can be difficult because our rules are sometimes conflicting, as we want to enable freedom of expression while also protecting our users. There is not one set of rules that suit all communities though. Everyone’s part of lots of communities these days, so you’re really looking for what those communities are missing in order to create that meaningful rule set that differentiates you from other groups. If you’re creating your own community, you have to sit down with your cofounders or early users to put thought into the mission of your group and how it will attract other people. Sometimes, you’ll find that somebody else is doing exactly what you had in mind, and perhaps the solution is to join them and help them out. If you find other people that are doing the same thing, maybe they should be your cofounders.

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9 Caterina Fake Cofounder of Flickr Flickr is a photo sharing and hosting platform, serving a community of photography enthusiasts. Founded in 2004 by Caterina Fake, Stewart Butterfield, and Jason Classon, Flickr permits users to upload chronological photostreams, tag photos, and rate their “interestingness.” Flickr was also a pioneer in implementing “tag clouds,” whereby users can find photos based on keywords. In 2015, Flickr reported 112 million registered users and more than 3.5 million daily image uploads. The site hosts over 11 billion images and in 2007 was the 19th most visited website globally. Influential users include the White House official photographer and international museums and galleries. Just a year after launching, Flickr was acquired by Yahoo! for $25 million. In 2017, Verizon purchased Yahoo!, including Flickr, for $4.5 billion, and in 2018, Flickr was purchased by SmugMug for an undisclosed price. Fake has since served as Chairman of Etsy and on the board of the Sundance Institute and cofounded Yes VC. Atherton: Can you tell me about the earliest virtual communities that you participated in? How did those influence the founding of Flickr? Fake: For me, it all began when I was a student in college at Vassar in New York. I was online, which was quite unusual for the time because it was around 1988 or 1989 when I graduated. It was at Vassar that I discovered an online community of Jorge Luis Borges scholars based in Denmark. Borges was an Argentinian writer who anticipated the Internet. He wrote short stories such as Funes The Memorious, about a © Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6_9

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Chapter 9 | Caterina Fake, Cofounder of Flickr boy who could remember everything; The Library of Babel, about an entire universe made up of a library which contained every book possible; Tlön, Uqbar, Orbis Tertius, which spoke of the existence of an invented other world by a group of rogue scholars; and The Aleph, about the discovery of a fictional peephole through which you could see everything in the universe all at once. All these stories by Borges were very much about anticipating the Internet. Discovering this group of Borges scholars on the Internet was a huge revelation for me – I was hooked! To me, the Internet has always been about community, from my very first experience of being online which preceded the Web as the Web didn’t even exist at the time. This was all done through Bulletin Board Systems prior to Netscape.1 This was my very first experience of the Internet, and it was super geeky because you had to be able to write and operate the command line in Unix in order to participate in these communities. I was not familiar with computers as a kid, but I was lucky enough to have a slightly nerdy dad who had one of the early computers. That’s how I got online initially and became interested in the Internet and virtual communities. Around that time, I joined The WELL, a Bulletin Board System which was based in California, though I was on the East Coast. My first professional exposure to the Web was in a temp job at Columbia University in the IT department. They gave me a dial-up account which I used for many years afterward. At the time, things were very different. You felt at the center of discovery and on the frontlines of the future as it was being invented. Everybody was collegial, and there was a culture of generosity and sharing. I found myself in this department at Columbia University, and my colleagues mentioned “this really cool thing called Mosaic, where you can surf around using a graphical interface.” Mosaic was an early web browser; back then, there was not very much on the Internet, if you can believe that! You could be looking for a website on say Vladimir Nabokov, the author of Lolita, one of my favorite writers, and not be able to find anything. So I made probably the first web page on Vladimir Nabokov, and that was the nature of the times. I then gradually started participating in various online communities after The WELL. I was really interested in publishing as that was the career where my interest in literature and writing crossed. These online communities were not just for consumption, they were for creation. I was very active in all of the early Internet platforms for writing, which included GeoCities and LiveJournal and subsequent to that Diaryland.

 Netscape was an early web browser in the 1990s that was acquired by AOL and disbanded in 2003. 1

The Rise of Virtual Communities As a hobby, I had written a kind of encyclopedia before the Internet was around, in which I would save little scraps of pictures and information that I called the encyclopedia flexicon. I stored it on a floppy drive, and I had written it on HyperCard, a software for Apple computers. But once the Internet was there, I no longer had to do that as the Internet took its place. This was where my participation in online communities shifted toward an unstoppable juggernaut. I subsequently worked with Howard Rheingold at Electric Minds as a virtual community host. Howard understood really early on how influential virtual communities were going to be. I was participating in and hosting all of these communities. I realized the principles developed at The WELL still hold true: “own your own words” among other principles for how to have a healthy online community. Atherton: When you were hosting these online communities, what did you learn about being a good host? Fake: It was very similar to hosting a party. You would roam around and make sure everybody knew that they were welcome, introduce them to each other, encourage the blossoming of conversation, take anyone disorderly into a quiet room. There was a lot of social massaging to build a good community. You also had to ensure everybody knows the community rules and that you are modeling them – because people show up, observe the community for a while, watch how people interact, and learn where the interesting conversations are happening before they engage. So you have to make sure that you’re always highlighting all of the positive aspects of the conversation and quickly stomping out any unproductive, nasty messages or spam. You had to be present. In addition to rules, there are unwritten assumptions about what to do or say in an online community, about what is permissible. Some users self-moderate and prompt conversations, while others are passive and don’t participate. Yet these users, for the most part, understand how to behave. Of course, there’s always bad actors, who need to be sidelined or banned, and there’s all kinds of administrative tools for doing that. A community without oversight will devolve into a bad place. I think this presence is something that, in the transition from online communities to social media, was lost because you were no longer identifiable as a participant in the community as a human being with opinions and values and individuality and character. Instead, you were in a feed, which is a very different, more dehumanizing model. Atherton: Of course, Flickr was not a social media, it was an online community on which people came together over their passion for photography. Can you bridge the gap for us between hosting these online communities and founding Flickr?

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Chapter 9 | Caterina Fake, Cofounder of Flickr Fake: I was very deeply involved in the blogging community when I moved to Canada and cofounded Ludicorp with Stewart Butterfield and Jason Classon. There is sometimes a misnomer that Flickr began as an MMO. Ludicorp was also creating a game around the same time. That game was shut down. It was completely unrelated to Flickr; it wasn’t even a pivot because it was a totally separate product, but the same people and company were building it. The only bridge between the two is that the community using these two different products was similar, if not identical. It was partly our own followers that followed us to new platforms. At the time, there was also a group of power users, people who were always on the cutting edge of the next new thing, who would jump from product to product. They were in all the interesting betas of the original Internet communities. Flickr was conceived of as an online community. Atherton: Did you set out to build a photo sharing community with Flickr? Fake: We didn’t! Photo sharing just happened to be the first feature that we added. Initially, we were planning on building a larger social platform, but the photos were enough to build a community around. Atherton: So aside from those initial alpha users who already followed your blogging and came to try out the new platform, how did Flickr begin this snowball growth in the early days? Fake: A lot of things happened that made it grow from that initially small community. My ex-boyfriend was Evan Williams, the founder of Blogger, who later went on to cofound Twitter and Medium. So we knew the Blogger team and the platform didn’t have photo hosting. So one crucial reason for Flickr’s growth was that in Blogger’s FAQ section, under “How do I upload photos to Blogger?” Flickr was mentioned as the site that would enable posting photos on your blog, you just had to type in your URL. That created incredible virality. Another key factor behind Flickr’s growth was the platform being used by well-known community influencers, who would bring their entire community along with them. One memory that stands out is when one of the most popular bloggers in the Arab world, from the United Arab Emirates, started using Flickr. Within a few months, we had an exponential influx of UAE sign-ups to Flickr. That was a massive community, which the government later shut down. In fact, we were shut down in many different countries, but that came later. This viral growth could be visualized like a spider diagram. One new user might join from a region, who was well connected within their own community, and on their recommendation thousands would join Flickr. In sociology, this is called a soda straw, somebody who acts as a bridge between two communities,

The Rise of Virtual Communities in this case a geographical locale or common interest. We might get a sudden influx of academics studying social networks or people from Korea or Australia because one pioneer within their community had signed up. You would see these links appear and then burst like a firework into hundreds of people joining Flickr from that initial user. It’s called viral growth, but really it’s more fungal. The spread of users looked like a rhizome. Atherton: Was Blogger not thinking about adding a photo upload feature? Fake: Well, Blogger was more publishing content rather than being a community; it hosted individual blogs which had weak connections to each other. They were connected to each other only by hyperlink. Blogger created the first “newsfeed.” It was based on reverse chronology from a blog, but it included activity from your friends, “recent activity.” This was appropriated by Facebook and called a feed. Atherton: Flickr was a pioneer of using tags for users to search for images. How did you come across this idea and was it responsible for helping the community engage with their interests? Fake: There were a few different innovations from what later became known as Web 2.0, which Flickr pioneered and helped aid growth and retention of users. We had borrowed the concept of “tagging” from Del.icio.us, an Internet bookmarking platform. Flickr pioneered using tags which allowed users to search for images. These had already been used for websites, adding metadata to make things findable, but its best use turned out to be for photographs, because while bookmarks are text based, photos don’t have the ability to say “sunrise.” Later, all of this metadata became unnecessary because recognition software became widely available that can determine whether an image is of a dog or a parade or a hot air balloon. But in those days, it was magical to be able to find things. Flickr was a great place to be a photograph because you could be described, found, and connected to similar images. Del.icio.us also used open APIs2 at a time when barely anyone did. So we replicated this at Flickr by essentially turning our software inside out. All of the features available on Flickr were available through the API, with the exception of creating and deleting accounts and the admin interfaces, so people couldn’t hack into Flickr’s back end. The public-facing features of Flickr were available on the API. Atherton: How did the community converse in Flickr? Fake: We had forums and areas for commentary under each photograph and photostream.  An API is an application programming interface that allows two applications to communicate data. 2

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Chapter 9 | Caterina Fake,Cofounder of Flickr We wanted Flickr to be a community, not just a platform for content. So we participated and molded the conversations. A lot of people later thought that these were outlandish claims that we had built the community by hand, by greeting new users, chatting, and introducing them to each other. I became known for this quote, which to me is actually an understatement: “you have to greet the first ten thousand users.” In fact, I think you had to greet the first hundred thousand users – because without that management, various Internet platforms have devolved into these cesspools of nasty comments that were unsupervised and unmanaged. The idea behind Flickr was that each person had their own photostream and was the proprietor of it. You had to manage your own comments. Atherton: A recurring theme in online communities is that virtual connec­ tions often spill over into real-life interactions, and a trust loop is created by meeting in real life and then again online. Was there any cross-pollination between Flickr’s virtual community and reallife events? Fake: We designed real-life interaction into Flickr. In the sidebar of the blog, we published what we called Flickr Forays. We would encourage users to form groups in their towns, post in a forum, and arrange to gather. It worked as they shared a common interest in photography. From the suburbs of Detroit to Kyoto and Tehran, these meetups were arranged organically, and then we would post on our blog about when they were happening. They would meet in interesting places and take photos, such as a site of urban decay or a festival or a golf tournament – anywhere that was interesting to photograph. Dozens of people met, got married, had babies. I would get messages about it all the time saying they had met on Flickr. Anyone who runs a virtual community will experience this. I used to joke with other social software companies that you knew you had built a successful platform when somebody had a wedding cake with your logo on it! Connection is not always good of course; you don’t want people with hateful beliefs gathering together. A flourishing community is made up of people who get  along but don’t necessarily agree. They’re diverse, they don’t have the same political beliefs, and yet they are able to interact fruitfully online, within a few guard rails. That’s what we were trying to create at Flickr, and it’s sadly absent in a lot of the software that has been built subsequently. The in-person elements reflected the mission behind Flickr, which was humanistic; it was not a technocratic company built by people with computer science degrees. Flickr was created and populated by people interested in literature, philosophy, sociology, and so we wanted to build human relationships into the software. It was a tool for connection rather than an end product. We wanted users to meet in real life because photos alone are incredibly reductive. People think of photographs as memories, but they’re simply a

The Rise of Virtual Communities visual record of something that happened. Memory has sounds, smells, gestures, interactions, and moving images. A photograph is a very poor substitute for a memory. I grew up surrounded by paintings; my sister was a classical pianist; I had this sensually rich, three-dimensional experience of the world, and coming from that orientation, you build very different software to what a computer scientist might create. Atherton: What do you see as being the guiding principles of virtual community building today? Fake: There are many mediums in which these find expression: asynchronous vs. live chat, avatar-based immersive worlds, and so on. I think all these mediums of virtual community have been amply demonstrated, but in this era of social media, they’re far less in use. I don’t think people have the same expectations nowadays as they enter these online communities; we need a social reboot to show people how to behave online. People have grown up today in this very transactional experience of social media, and it’s hard to undo that. They notice loneliness and a lack of human flourishing, but don’t necessarily know why. It is the water in which the fish is swimming – it’s hard to see when you’re in it. Liking a tweet is not a real human connection, and it cannot replace that. I came from a different generation of the Internet, of nondigital natives; I was 18 before the Internet really came about. As was in my mind when I cofounded Flickr, we need to consider those founding principles that emanated from the early virtual communities, like The WELL.  Communities having a common purpose, a sense of shared ownership, and magical interactions that were only made possible by the Internet, like somebody with a rare blood type finding a kidney transplant through online forums. There are beautiful stories about perfect strangers engaging in extreme kindness through online communities. Founding a virtual community with these good intentions will serve your users well.

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10 Alexis Ohanian Cofounder of Reddit Reddit is an online discussion and community platform that ranks, at present, as the eighth most visited website in the world. Founded in 2005 by Alexis Ohanian, Steve Huffman, and Aaron Swartz, it was envisaged to become “the front page of the Internet.” Users can post content, which is ordered by subject, into “subreddits” or “communities.” Reddit has over 138,000 active communities and more than 400 million monthly users. Posts with greater upvotes are displayed earlier within each subreddit; the most popular are featured on Reddit’s home page. Ohanian developed Reddit at Y Combinator with his cofounders, and they sold it to Conde Nast in 2006. In response to his online activism, Ohanian has been described by Forbes magazine as the “Mayor of the Internet.” Atherton: Can you take me back to your middle school days, because I believe you spent a lot of time on BBS messaging boards. What were those very first online communities you were part of? Ohanian: Those message boards were valuable because I learned to code and to build websites. In fact, as a kid I would build free websites for nonprofits, which was empowering and also a great way to build skills, without the risk of charging them and finding out my age. I didn’t want to tell my parents about any of this either, so I would go to these message boards to advertise that I would build a website free of charge, just give me the brief. They were basic, with a landing page, an about page… I did my schoolwork, though I didn’t find

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Chapter 10 | Alexis Ohanian, Cofounder of Reddit it very important, and then I’d come home and talk to adults on the Internet – who didn’t know I was just a kid – but I had skills that they didn’t, which were valuable to them. That sent me down a rabbit hole, learning to code, which dovetailed with getting into video games like Quake 2 and Half-Life. That is probably my first experience of communing online. I joined a Quake 2 Clan called Damage Incorporated, after a Metallica song. You had to do tryouts to get in. You would participate on their forum and chat and have practices and matches scheduled. It felt just as realistic as my soccer practice, even though I didn’t know what anyone looked like. From there, like a good young CEO, I wanted to start my own clan. I started a Half-Life Clan called Team Nocturnal. I built and maintained a website for it. At this point, I was spending a lot of time online: playing video games with strangers, building websites, participating in phpBB1 forums and newsrooms. I was on the 3D fantasy MMO, EverQuest. I never ran an EverQuest guild, which is the name for a group of users that frequently play the same game together, but I participated in a few. Then World of Warcraft. In college, around 2003, I started a web forum called EyesWide.org, another phpBB forum which was a precursor to Reddit. I encouraged people to post their opinions online about news and politics. I put flyers and stickers up around campus, and I built a community of around 500–600 daily users, while I was at the University of Virginia (UVA). That was what made me realize I could build a successful online community, because I was already doing it while studying. All my friends, including my future cofounder, thought it was absurd. But I enjoyed talking to these strangers on the Internet more than some of the people around me. One joy of the Internet is that we can better curate the communities of people who hold our attention, for better or for worse. I graduated in 2005 and decided to go and apply for Y Combinator,2 which was in its infancy. Steve Huffman, my cofounder at Reddit, had a job lined up already. Once I realized that I was not going to be a lawyer, I recruited one of the best developers I knew – Steve – and got him to come join me on this crazy adventure. We went to hear Paul Graham, the cofounder of Y Combinator, give a talk at Harvard. We pitched Y Combinator on a very different idea to Reddit. It was a way to order food from your phone called MyMobileMenu, and shortened to “mmm.” He rejected us, then shortly after called me back, saying “we want you to be part of YC, but work something else, just don’t do mmm!”

 phpBB was a free open source forum software.  Y Combinator is a tech startup accelerator that has since launched Airbnb, Doordash, Dropbox, Stripe, and Instacart. 1 2

The Rise of Virtual Communities Atherton: That was the first Y Combinator batch, and while it has scaled terrifically since then, it is still such a tight-knit community. There were 200 companies in my batch in W2018! What was the early YC community experience like for you? Ohanian: Paul Graham is not a natural community builder, but Jessica Livingston, Paul’s wife and his cofounding partner, is very maternal, and she brings a lot of EQ and IQ to the community. I don’t think it was that deliberate, because from Paul’s standpoint he would hold a meetup every Tuesday at his house. He’d make some chilli, and we would talk. That was it; there was no programming other than those weekly dinners over three months. YC is now a very formidable community, but that was largely a by-product of great timing, as nothing like that existed. There was no alternative for a naive 21-year-old. There was even an entrepreneurship class at UVA in my fourth year that I was not allowed to participate in. I published the email from the professor in my book. She just said the class was full and I couldn’t take it. I asked if I could audit it, but she still declined. I was going to graduate, and it was a class only on offer in your fourth year. I was already doing a double major and taking about 22 credits per semester. I explained that I could handle it, let me just audit the class. She still said no. It wasn’t a hypothetical business I wanted to start, I had already incorporated the company. The point being there were not a lot of resources in 2005 for someone like me. YC nailed it by providing that resource and community. In that first batch, everyone else was an engineer. I’ve never been a very good developer. I’d like to think I’m a decent product designer. I can do low-level programming like JavaScript and CSS, but I’m not an engineer. So for the first three months, the running joke at Y Combinator, even from Paul, was “what does Alexis do?” I told them, I’m community building. At that early stage, there’s not a lot of business stuff for the CEO to do, so the first batch of YC were CEOs who did their own engineering. They didn’t understand that we were building a community platform, and an important part of the job is being the community leader, being there and present. If I wanted to start a jogging club – the Alexis Ohanian running club – and I put up flyers but never showed up to the Saturday runs, would a community just magically form? Of course not. If I delegated the community work by hiring a 20-year-old intern to show up on Saturdays, lead the run, and afterward go out to brunch, every week for six months, and then one day I turned up to “lead,” everyone would think “who the f*** are you!” If you were so presumptuous to think “I am your leader,” everyone would disagree; they don’t know me; where have I been for the last six months? People forget that online interaction is just like offline in many ways. But in 2005, I felt like a crazy person at YC.

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Chapter 10 | Alexis Ohanian, Cofounder of Reddit Unless you were either naturally inclined to do community building or had experience, as I had, it wasn’t something that YC was promoting in that first batch in 2005. I was really lucky because I had built an online community, a forum, for two years in college, just because it was fun and satisfying. So it was obvious to me that community building was the only way to approach Reddit. Atherton: How did you approach growing the user base in the early days of Reddit? Ohanian: Stickers. Our entire marketing budget was a few hundred dollars in stickers and merchandise. I remember we had a big fight about merch, the first cofounder fight we had. I said it’s not about the t-shirt, it’s about having something that feels like you’re participating and helping support this community. I put my foot down and pulled the CEO card. We bought 300 t-shirts, with little Snoo, our Reddit mascot, on them. It was before Shopify, so I built a little storefront with PayPal. We sold out in 24 hours. I packed each one of those t-shirts. I wrote each a note, signed it, thanking them for supporting us. I took two garbage bags to the post office and mailed them all out. It felt good to be right. But more importantly, in 2005, three months, maybe six months, into creating this thing, there were people from all over the country willing to spend $15 or $20 to buy a t-shirt for a relatively unknown website. We were rewarding them as early community members. Even if you’re the founder and CEO of a company that has two employees that most people have never heard of, handwriting a note thanking someone for buying your merchandise has a massive effect. The person on the other end is not thinking, “oh this is just some janky startup with a couple of employees running out of an apartment in Boston”; they are thinking, “wow, the people behind this website that I love took some time because they care.” We have become accustomed to poor interactions with companies in which the CEO would never take the time to write me a note, so the good news is the bar is low for community building! As humans, moments of being thoughtful go a long way. In 2005, the ripple effect of doing that was quite limited. Maybe they would have posted on their Myspace or Facebook, but today, when CEOs do the exact same thing, the ripple effects are greater, with Twitter and TikTok and these viral mediums. There is more noise, but also more surface area for where that story could go. Atherton: So with these thoughtful gestures, the early users became loyal and invited friends, and you interacted with them aiding that initial growth. How did that growth begin to supercharge in the year between founding Reddit and it being acquired by Conde Nast? Ohanian: It was a grind. For the first two or three months, we would fake posts under pseudonyms, but after a couple of months, we no longer needed to. We needed to demonstrate conversation. If you showed up on Reddit and

The Rise of Virtual Communities saw two posts from two people, you would think this isn’t real. So we had to get over that initial critical mass. I emailed all 500 or so members from Eyes Wide, and about 20–30 of them signed up, but we had a nascent community. Once we had a few hundred users that were actively posting, then it began to fuel its own growth as it was fulfilling its function. So my next approach was talking about Reddit to everyone I met and productizing virality. The techniques have evolved over the years. We didn’t do Facebook’s canonical hooks like notifications that you had been tagged in a photo, which is such powerful clickbait. We never wanted to be that aggressive; perhaps we would have grown faster had we done so, but it was a personal preference. I came up with ways to gamify content. As a lifelong gamer, if you look at the early Reddit, there was a stats page in the top navigation bar. It displayed the most engaged users, based on upvotes minus downvotes. On Reddit, responses in threads are upvoted or downvoted by other users based on their utility. The stats page displayed the biggest gainers of the week, the month, and all time. We found ways to gamify that small percentage of the user base, 1% or 2%, that created all the content on Reddit. We incentivized participating through old-school video game–style leaderboards and made engaged users more motivated and competitive. Reddit awards were also ways to gamify the everyday. You could be a winner even if you were never going to have the highest karma score. You could have the “best submission that day” or the “most controversial submission that day” and be awarded a badge. Awards, which feel dated now, were pretty novel at the time. In rewarding the most valuable community members who were creating the most interesting content, these badges became coveted. I would also comment everywhere Reddit was mentioned on the Internet for those first few years. You can find me in the comments of blog posts commenting, “thanks so much for the mention and your feedback,” even if they were bad-mouthing Reddit. Trying to be a public-facing CEO and take the good with the bad. Even negative blog posts I saw as flattering that Reddit was worthy of writing about, and I would engage. Once that was working, the next flywheel for growth was allowing people to create their own subreddits. We started these ourselves. I created r/gaming, and then over time we flipped the switch and allowed users to create their own. That enabled another generation of people who are basically role modeling behavior of early-day community building to be active in the comments to be curating. Atherton: Reddit is open about the impact of community self-moderators vs. employed admins. How did you approach moderating, especially once users were able to create a plethora of subreddits? Ohanian: Self-moderation has been critical to Reddit’s success.

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Chapter 10 | Alexis Ohanian, Cofounder of Reddit But first you as the founder have to set the precedent. You have to show up and demonstrate how you lead in order for them to have a role model of the platform’s standards. People absorb social cues intuitively. If I started a club, the Super Secret Club, and invited you to a meetup, and when you arrive I’m managing the cake stand, there’s loud music, and everyone’s playing beer pong, instantly you know how to behave in this environment. It’s a relaxed party scene. You have understood that the person in charge is doing the cake stand. So if you were to create a chapter of the Super Secret Club, that is the atmosphere that you would recreate. Similarly, if you turn up at my Super Secret Club and everyone’s in suits with parliamentary proceedings, this would set a different precedent for how you’d manage your subchapter. These are obvious in offline settings. Online communities have the same emotional instincts. The best parts of Reddit tend to have a thoughtfulness to them. They’re a little snarky and funny. They are extensions of the original community. That’s because much of the original community became the first moderators because they liked the platform and decided to create their own subreddits. These mods were volunteers and were happy to be as they felt a sense of pride with a growing flock of members participating in their subreddit. They got the satisfaction of being a creator. As we grew, the product challenge became how do we keep these moderators motivated and excited? How do we retain the customs and feel of physical places that you want to hang out in? The pride of having control over a subreddit encouraged moderators to enforce rules in their space, welcoming newcomers and helping them navigate the platform. If I were to start Reddit again though, I would rethink the moderator setup – perhaps with more election, delegation, and graduation of self-moderators within the community. My biggest challenge was leaving in 2010 and returning in 2014. We had to start over again, modernizing so many of these moderator tools. There was a lot of inertia from bad design decisions that needed to be sorted and updated. Atherton: Can you tell me about how Reddit’s community traditions and rituals have aided community building? For example, Reddit’s April Fools’ Day pranks – which began in 2010 when all users were made an admin for the day – and the AMAs (Ask Me Anything interviews), whose participants have included campaigning US Presidents Barack Obama and Donald Trump, astronaut Buzz Aldrin, actors including George Clooney, even fictional characters like the Cookie Monster. Ohanian: The AMA is one of the best known things that has come out of Reddit, and yet no Reddit employee created it.

The Rise of Virtual Communities It began with the “self-post” – which is now just a normal text post – but originally it was only links to other websites. We weren’t very smart about our SEO: the permalinks just went up sequentially, meaning the URL for each post was reddit.com/6663, then /6664, and so on. There wasn’t so much volume on the platform, so a Redditor (Reddit user) could preempt what the URL of their post would be and then submit it to Reddit; so their post was the same self-referring link. That’s how users hacked the first self-post, which we thought was cool and so made a product from it. Then a user created the first AMA, just said “hey, ask me anything.” It’s evidence that if you’re creating good tools in an engaged community, they will come up with brilliant things that no employee could have. A pattern I’ve seen time and time again. In fact, a number of the early Reddit execs involved in community are now at the helm of a company called Commsor which I have invested in with Seven Seven Six, my Venture Capital Fund, which is building the operating system around community. Commsor is an extension of what we preach to brands or startups about understanding and engaging with the community. It is effectively a CRM to understand, reward, and encourage members of communities. This will improve engagement and retention, but also, as we saw at Reddit with self-posts and AMAs, give teams inspiration and ideas that never would happen without an engaged community. I have my lived experience, and I have spent a lot of time online, but I wish more people could see the parallels between engaged online communities and IRL communities. Think of a caring neighborhood in which residents are willing to pick up trash or tell someone to stop being a jerk. As a spectator at the Women’s Football Club I started, Angel City, you feel this communal experience. First-time visitors often come out saying, “I’ve never been to a sporting event quite like that. It felt so great bringing my family there. It felt like a safe, exciting, exhilarating experience.” We talk about offline community experiences all the time; you can tell when the people behind it are putting in effort; the Internet is the same! We may not be occupying virtual communities physically, but emotionally and almost even spiritually we’re in that same place with those people digitally. If you get it right, I think you can do some real good. Because lovely IRL communities are constrained because there are only so many people you can fit in the room. The Internet offers this greater scale and, with that, opportunity. Atherton: In online communities, we often hear that in spite of the potential anonymity of a username, trust is built with the concept of “artificial stable identities,” meaning users that show up regularly under the same username and behave similarly gain our trust. How have you built trust within online communities?

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Chapter 10 | Alexis Ohanian, Cofounder of Reddit Ohanian: I tried to make pseudonymity a thing. I don’t know if that ever caught on. That’s what Reddit is. I didn’t even know that word, but growing up as a gamer influenced our design choice to have usernames. That’s why my username on Reddit is kn0thing; I never even thought to use my government name. I think that was a crucial decision. Pure anonymity removes accountability, which is a problem at scale. The thing that works with pseudonyms is that you’re still accountable to an identity. You may be “FluffyBunny42” in a thread on heavy metal and “PurpleTurtle12” in another on animal welfare. If for whatever reason you didn’t want the animal welfare community to know you’re also into heavy metal, pseudonymity permits that. To me, there is no different to having your friends at the office that you don’t talk to about hardcore metal music. It permits you to let those flags fly when you’re with that community. So I’m a huge advocate for pseudonymity because it unlocks a lot of freedom while still holding a bit of accountability, whereas if everyone can be “Anon,” you don’t get that accountability feedback loop, which causes serious problems. Trust is also built on feeling like Reddit is a safe space. I left Reddit quite publicly two years ago in protest, to force the company to ban hate speech and replace me with a black director. As an industry, we have not moved fast enough to prevent hate speech. Media platforms should have some amount of curation. I use the analogy of Reddit as a convention center. Reddit is not a city because with that analogy the CEO who runs the platform is the dictator of the city. It’s not a democratically elected process, so you’re not allowed to say that it’s a city and still lean into these ideas of democracy. The World Wide Web is a kind of city with several contributing leaders. The more apt analogy for Reddit is a convention center: infinite rooms within the building. A convention center might decide to host Comic-Con or an event for the Robin Hood Foundation. If the KKK turns up, the community center can say: “in spite of wanting to fill our space, we’re making an editorial decision that you cannot host your convention here.” A private business is able to choose who they want in their convention center, as should online communities. Especially since with Bulletin Board Systems, you might have people talking about how much they love Pokémon right next door to the next convention hall which is talking about white supremacy – this normalizes and legitimizes hate speech when you see it in a feed side by side with your nephew winning the swimming tournament and your uncle’s promotion. The effect of this at scale is something that unfortunately we’re only now starting to realize. Even if you’re not an Internet native, anyone can understand some of these offline metaphors. I think we would all agree that if we walked into a convention center and saw a huge QAnon set up there next to Comic-Con, we’d be troubled. The World Wide Web provides a platform for those communities to exist, but being on the Internet doesn’t legitimize it, it’s being on platforms that we trust that legitimizes it.

The Rise of Virtual Communities Atherton: What aspects of online communities do you think are shifting as we move into the next iteration of the Internet in crypto, DAOs, tokenized communities, and gated access? Ohanian: Web 3 does not solve everything, but it gives a chance to reset and obliterate these platforms with a centralized front page in which an algorithm is deciding who the main character on the Internet is today. I always say it’s not about freedom of speech, it’s about freedom of reach. No one has a right to freedom of reach. Expressing any extreme view is what makes people want to amplify, whether they utterly agree or disagree. The one-size-fits-all, centralized algorithm that decides what goes on the front page I hope will be what is most challenged by Web 3. That will still be the effect within smaller communities that people have self-selected into, but you won’t have this notion of a singular front page in a singular algorithm just for you, pumping you full of whatever nonsense. We still have to build it to see what is possible in this decentralized version of the Internet. I love working with Kevin Rose, my former arch nemesis as cofounder and CEO of social network Digg. I’m Kevin’s earliest investor in his latest project called PROOF. It runs the PROOF Collective NFT members club and launched the Moonbirds NFT collection, which within two days had generated $280 million in sales volume. I’m excited to see what we will be able to achieve. Web 3 also makes it possible for nascent communities to be self-sufficient in terms of funding. Reddit Gold  – a premium membership to Reddit  – exists because of Drew Curtis, founder of Fark, a community website which at its peak boasted 52 million page views per month. I had drinks with Drew around 2006 or 2007, and we were discussing how much I hate ads. Though we barely had any on Reddit, I still hated them. He explained that Fark had this premium membership called TotalFark, which cost about $9 per month. Paid members had an icon that would appear next to your username to make you feel special within the Fark community. TotalFark members had access to an exclusive forum, and among other privileges, TotalFark members could give it to users on Fark. I was taking notes. That conversation led to us building Reddit Gold where paying members could access a private lounge just for gold members, and you could give the subscription to other members. Unfortunately, Reddit Gold launched around the time I left Reddit, and in those intervening years, there wasn’t a lot of development on it. So we watched other companies like Twitch explore membership, gifted memberships among other perks. It was a missed opportunity for Reddit Gold; it was what Reddit should have been doing. I’ve long believed that the business model of the next community platform looks more like that. It’s based on membership, microtransactions, or tipping or gifting to capture all those good vibes between community members  – especially because the infrastructure of the blockchain allows for that. Perhaps it’s a project, and they take a percentage of every secondary sale which goes into the community DAO.

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Chapter 10 | Alexis Ohanian, Cofounder of Reddit The frustrating part about Web 3 is that we’re still seeing only the start of what we’re capable of doing. I remember adverts when I was in high school about making sure not to use your credit card to buy products online – and my dad saying, “Son, I hope you’re not buying things online,” meanwhile I was building websites for nonprofits. That we were unsure whether we’d be able to buy things on the Internet is laughable now. That’s why it’s been so important for me to back Web 3 builders as we still don’t know what the technology is capable of until we build the things that have a great user experience for the whole community.

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11 Kevin Rose Cofounder of Digg and PROOF Collective Digg was the first social news site, founded by Kevin Rose and Jay Adelson in 2004. News stories could be upvoted (known as Digging) or downvoted (burying) by the community. Rose and Adelson reviewed the weekly stories from Digg on their Internet TV network, Revision3, which they founded the same year along with David Prager, David Huard, and Ron Gorodetzky. The network boasted more than 80 million views per month. Within two years of launching, the pair turned down Fox’s offer to acquire Digg for $60 million. In 2008, Digg entered talks with Google for a reported $200 million acquisition, but it fell through. Digg was sold in 2010 in three parts to Betaworks, The Washington Post, and LinkedIn. In 2012, their TV network, Revision3, was acquired by the Discovery Channel for $30 million. A serial entrepreneur, Rose went on to cofound microblogging site Pownce, mobile app development lab Milk, and wristwatch community with Watchville, among other ventures. Rose served as General Partner at Google Ventures and has been named in MIT’s top 35 innovators under 35 (2007) and in the top 25 most influential people online by Forbes and Time (2010 and 2019). Most recently, Rose cofounded the PROOF Collective, a members-only community of NFT artists and collectors, which launched Moonbirds, an NFT collection which is among the top ten highestgrossing collections of all time. Atherton: Thinking back to your childhood years, what are the first online communities you remember participating in?

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Chapter 11 | Kevin Rose, Cofounder of Digg and PROOF Collective Rose: I joined Bulletin Board Systems in the early 1990s which were accessed via dial-up modems, which allowed you to connect to someone else’s computer. If you were lucky, you would chat with the owner of another computer, but mostly people were there to download and share things, like games. The technology evolved, and multinode Bulletin Board Systems emerged. This meant more than one person could be connected at once, so BBSs became more like a group chat. Then came America Online, AOL. When I joined, it was just insane. There were rooms and conversations and chaos. Those were the first chat rooms that I participated in that gathered such a mass of people. Atherton: How would you say that early experience of chat rooms influenced the founding of Digg and Revision3? Rose: I don’t know that it really did influence Digg and Revision3. Those early chat room days were me messing around as a teenager. I would join others to actively try to cause chaos with these tools we downloaded. One application, AOHell, could boot people offline. It allowed you to post text that was well over the character limits. These early BBSs were almost an outlet online to vent some of our teenage frustrations! Digg was born out of the early Web 2 environment. The two main influences for Digg were Del.icio.us, the social bookmarking site, and Slashdot, the computer science news site  – Slashdot particularly because user-submitted stories were making Slashdot’s front page. Revision3 was a natural progression. I had been cohosting a show called “Dark Tip” on TechTV prior and realized that increasingly content  – particularly video – was going online. The idea for Revision3 came at a time when the owners of TechTV were reimagining the shows to be more mainstream and less technical. Revision3 would be a network aimed at a technical audience, with programs made in a much cheaper fashion than we had been doing at TechTV. We launched a series of shows. The first was called Systm, a hobbyist tech show in which myself and another cohost would build and discuss fun hacker tools. These attracted a ton of downloads. The scope of content at Revision3 grew as more creators came to us, and we took on new shows. Eventually, we had about 15 or so shows, and Revision3 became one of the first podcasting networks. The Discovery Channel purchased it and turned it into their digital arm, because they didn’t yet have podcasting or an “in” to this new world of online content. Atherton: Can you touch on whether you were able to cross-pollinate the Digg and Revision3 communities or were they mostly the same users across both platforms? Rose: When we started Digg, we wanted to have an outlet to talk about some of the best Internet stories on the platform – stories that were getting a lot of Diggs. Revision3 was the perfect venue for that, so we began producing

The Rise of Virtual Communities a podcast – Diggnation – that would talk about content on Digg. My cohost and I would choose a beverage and then consume that while discussing the top stories on Digg from the past week. The two platforms  – Digg and Revision3 – complemented each other and fueled each other’s growth. People would hear about Digg on the Diggnation podcast, or users of Digg would then stumble upon other tech-focused content on Revision3. Atherton: Launching in 2004, Digg was the first social news site, and it pioneered so many prevalent features in social networking apps today. The defining feature of Digg was the ability to “Digg” a news post (upvote) or bury a post (downvote); can you tell me more about how that fostered community as it permitted users to share, recommend, and discover? Rose: Nowadays, it’s hard to believe, but back then, to interact with a web page, you had to click a button that would take you to a new web page and confirm you had completed an action. This was because browsers did not yet support the technology that became known as AJAX (asynchronous JavaScript and XML). So on Digg, users could click “I Digg this,” and it would take them to another page that said “thank you for your Digg.” My hope was that the collective wisdom of the crowd would surface interesting content that a trained editor would probably miss or might not choose to highlight as the most relevant topic of the day. That turned out to be the case. Digg was surfacing a lot of quirky stories from around the Internet, sourced on random blogs. This was before the days of viral Twitter loops, and back then, the Facebook newsfeed was focused on friends’ updates. There was no way to reach into the depths of content being created around the Internet. So the idea of voting and then featuring the bestrated web pages online was very exciting to people. They had a say in what would make the front page and the top ten list for that day. Alongside displaying trending Internet content, I wanted to feature our users to let them know that their contributions weren’t just a number going up and instead grant them a reputation. We had a top 100 Digg user list, and you could see how many stories they had submitted, how many they had dug, how many of their stories made the home page. They were ranked by how many stories hit the home page. We were creating these microcelebrities of people that were good at finding interesting content in certain verticals. And Digg was a different and exciting platform. That combination was our initial secret sauce that prompted, within a few months, an exponential growth in the community. When AJAX hit, you didn’t have to leave the web page to “Digg” a post, and the number of “Diggs” a web page had would increase live before users’ eyes. That was completely novel to people. The Digg team began thinking of ways we could add additional signal to understand what content interested users. So we added the ability to “bury” a story, signaling “I don’t like this.” This was

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Chapter 11 | Kevin Rose, Cofounder of Digg and PROOF Collective followed by voting on comments, a feature we had not seen done before. Users suddenly had the ability to vote a comment out of existence. If a comment got buried enough times, it would shrink down and it wouldn’t be displayed, unless you clicked to expand it. When that feature first launched, we thought our code was broken. The threshold at which a comment would shrink down to nothing was set to five buries. Yet our team found all these feeds with comments that had over 100 buries. At that moment, we realized the bury feature piqued human curiosity; people would click to expand this shrunk down comment, wondering how bad it was that it had been voted to disappear. So they would expand it, read it, and agree, “oh that person is an a******,” and then they would bury it as well! I think the dislike button is like a pressure release valve, even if it’s a button to nowhere. Frustrated people can either continue using a platform with that frustration simmering and building in the background, or they can feel like they did something about it by clicking “dislike.” Atherton: Online communities definitely need more release valves to quell the toxic behavior that has been shown to build up. Drawing again on the features that fostered community at Digg, can you tell me about the introduction of the friend list feature in 2005? Rose: The idea behind the friend list feature was that these rockstar users were emerging in the community who were really good at finding stories in specific verticals. If you were very interested in a geeky topic and you knew that there were these top five contributors inside of the Digg community, you could follow them, even though you didn’t know them. In tandem, we introduced this little badge – a green star – over the side edge of the Digg button, so you would know one of your “friends” that you’re following had touched that. Users could hover over that green star and see which two users that they followed had also dug this article. It was a method to show users that somebody that they find important enough to follow also thought this web page or article was cool. We envisaged that this would encourage users to click through the story and take the time to read it because people they respect had given it a vote of confidence. The friend list was less about friendships; it wasn’t a bidirectional relationship, it was more about people that you wanted to track. Atherton: I read that when you founded Pownce, the microblogging site, in 2007, its extensive media coverage meant that there was such high demand for invitations to join Pownce that they were being sold on eBay! Can you elaborate on how you were able to generate such a buzz?

The Rise of Virtual Communities Rose: In 2007, Twitter was so basic we started Pownce because we wanted something better. A lot of the features that we introduced on Pownce eventually made it to Twitter, but it took a few years. We had replies, Twitter didn’t have replies; On Pownce, you could attach images and files and links, when Twitter was just a text box. You could create events, unlike Twitter. At the time, Twitter didn’t have autoexpanding content, so we wrote a lot of those features. On Pownce, at the top of the interface you had the ability to post a link, a file, an event; you could send it to all of your friends or subset of people. There was a pro version of Pownce where you could send up to 100MB files, so people were sharing MP3s and things like that, with no advertisements. To be quite frank, at the time it was a better version of Twitter, largely because Twitter ended up adding most of our features! In retrospect, we probably should have pivoted to more of a corporate tool for communication, like Yammer – the enterprise social networking service – that did quite well in the space for a while, because we were a little too late to the game to take on Twitter; they were already growing so fast! Atherton: The virality around the invitations to join Pownce was, to me, a really interesting parallel to platforms today, like Clubhouse or private Discords. That is probably the enduring secret behind community virality: limiting access to the community in the beginning. Rose: Exactly, the virality builds with that metaphorical velvet rope that stops you from seeing what’s on the inside when you haven’t quite made it in! Atherton: So, Pownce was acquired, and then you spent some time as a General Partner at Google Ventures, and at present you’re a partner at True Ventures… How did that time on the other side of the table, as an investor, refine your ideas of what works in virtual communities? Rose: Well, I started off at Google Plus. The reason Google bought my company is that they wanted me to come in and run mobile for Google Plus. It was challenging because they wouldn’t tell me what they were building, just “trust us, when you get in you’ll see we’re doing some groundbreaking things here, which are game changers.” Lots of promises. When I got inside, sadly I quickly realized that they were wanting to do feature parity with what had been done already by Facebook. They were building another Facebook in the exact same way. Google thought that just because they had scale, they could win by putting Google Plus into everything, Gmail and their other services with millions of users. They didn’t understand that the costs are too high for people, when they already have an emotional connection and a friend group on Facebook. It’s too much work to convince people to join something new when it’s more or less the same or perhaps worse than their existing product. You need a magnitude improvement over these existing solutions or the existing incumbent to get consumers to switch.

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Chapter 11 | Kevin Rose, Cofounder of Digg and PROOF Collective That’s why I’ve been anti-VR for five or six years. I just don’t think that the value proposition is there to get consumers to switch from traditional gaming on standard PS5s. Yes, there are several hundred thousand people that love VR, but I don’t think it’s tempting enough yet. I feel the same thing about the metaverse, where people blindly buy into the hype without really questioning whether consumers are actually going to use this. As a VC, I have never made a single VR investment. The venture game is fun, in that you get to see a lot more ideas in their earliest raw stages and hopefully back some great companies along the way and make some new friendships. I’ve been very lucky that that’s been the case. Atherton: Before we get into your Web 3 company PROOF Collective, I wanted to touch on the many subculture projects you’ve been involved with. You founded Watchville, a news aggregated community on wristwatches; you’re on the board of the Harlan Estate winery and the Skatepark Project, building public skate parks. There is an evident crossover between physical and virtual communities in these. What lessons in community building have you taken from your time on these projects? Rose: If you take Watchville, for example, I was trying to tap into these preexisting pockets of people that were passionate about old-school mechanical wristwatches. Today, mechanical wristwatches still make up a double-digit-billion-dollar-a-year industry. At the time, if you went into the App Store and you searched for information on that topic, nothing came back. There were no apps to support that community. I felt that if I built it, the users would come. Mobile was going to be in everyone’s pocket, so mechanical watch enthusiasts were going to want to consume watch-related news on their phone, in the same way they might subscribe to the Times or The Wall Street Journal. To my surprise, the majority of watch blogs and websites that provided information didn’t even have mobile templates. On your mobile, you’d see a full desktop version of their site where you’d have to pan and zoom. They were outdated. Perhaps because if you’re into mechanical wristwatches, you’re not necessarily the most bleeding edge technologist! I wanted to fix this, so I built an aggregator. I took RSS feeds, cleaned them up, showed this information in beautiful fonts, made it presentable, and then started gathering collectors. First thousands and then tens of thousands of readers. At some point, I had a conversation with the wristwatch blog that I respected the most, Hodinkee, which had all the great writers and none of the technology stack, and suggested that we join forces and merge the companies. I would come and build out their ecommerce side. Hodinkee now has over $100 million a year in revenue and is growing.

The Rise of Virtual Communities So the formula was I identified a community of people who were rabidly interested in a topic, but the technology underserves them. I did the same thing with Zero, the intermittent fasting app that I founded in 2016. Fasting was starting to take off, and there were literally zero fasting apps out there. I did a search on the App Store, and there were none. Now there’s probably 50 or more. By virtue of being the first, we grabbed market share, with no plans to monetize the community initially, and now we have a million people a month using it. Fasting is a double-digit-millions-of-dollars-a-year revenue business. If you do it first, take hold of that community and don’t worry about the monetization, you’ll figure it out. I never want to play the advertising game ever again, so if you look at my businesses, the financial model is about how we can sell into those markets vs. trying to monetize them with advertising. Hodinkee does have an advertising revenue, but it’s so small compared to the primary sales of new stock watches. Atherton: You have said in previous interviews that while building Digg, the best interests of the community were often at odds with the business model – because you’d have to show ads next to community content. How different is it building a community-powered business this time around – with PROOF Collective in Web 3? Is there more harmony between what’s best for the community and the business? For context, in 2021 you founded the PROOF Collective, a tokenized community of 1000 NFT artists and collectors. Members have access to a Discord, mints, and events. The collective launched the infamous Moonbird NFTs. Rose: Anyone that says that they can look more than three months out in Web 3 I think is making it up. Two or three months ago, the promise was that royalties on secondary sales of NFTs were going to be the main driver of revenue for tokenized communities. That would be how you monetize your community, and value accrual would come to the NFTs and the holders of those assets. I still believe that is mostly true, especially on the art front. There’s two sides to a tokenized NFT community: the membership side and the art side. On the membership side, if you join a “club” that is token gated by an NFT and you buy in early, it’s on you as a holder of that asset, that NFT, to make the community better and try and improve it and grow it. Because if you’re successful in making the community desirable, the value comes back to you. Your membership is now worth more than it was prior. We’ve seen this happening at the PROOF Collective. The g.money project is another good example. On the NFT side, I love the idea that the future of the media is no longer about just being a passive consumer of intellectual property (IP) but an actual owner and participant in the IP. Imagine the next Hollywood blockbuster is

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Chapter 11 | Kevin Rose, Cofounder of Digg and PROOF Collective built on the blockchain, NFT first, there will be real owners of that original IP that own a chunk in the future upside of that property. In some ways, it’s like being a shareholder, buying stocks and having a say at the annual general meeting, but on the blockchain, your impact is more direct. Atherton: Of course, DAOs are a great way to have direct input on the value of your token, as you have a vote on its decisions… So, you mentioned IP. In August 2022, the PROOF Collective announced that two of their NFT projects – Moonbirds and Oddities – were moving to the public domain and that PROOF would be launching the Moonbirds DAO. Is that not an interesting parallel that the art copyright is becoming public and yet a gated community is also launching? Rose: The way I think of it is that the day-to-day operations of PROOF are quite a closed corporate structure, meaning that as a member you don’t have visibility into our everyday meetings. By launching the Moonbirds DAO, this will give members a seat at the table. They will have access to the DAO’s funds to do creative things, if they are building something that the community deems important, rather than being corporate driven. At PROOF, we have finite resources, and being only 28 people, we can only do so much. So through the DAO, we hope to build the right mechanics to find interesting ideas among the tens of thousands of NFT holders that we have across our different collections. Then those creatives will be able to step up and run with the brand in new and interesting ways that we would have never had internally. We hope to leverage the community to champion grassroots ideas, from the bottom up. That way, it is a win for us at PROOF and a win for the community. So I just see it as a fantastic extension of what we already do. Atherton: To any non-Web 3 community builders who are going to be reading this, what differentiates PROOF Collective from other PFP (profile picture NFT) projects? Rose: It’s possible there is a better approach than the one we take at PROOF, but I can tell you what our way is and why we think it’s unique. We’re not video game builders nor metaverse builders; we’re product builders. At PROOF, we set out to build products that celebrate art, artists, and our community. We aim to give people tools that enable connection and enable all the things inside that ecosystem to run smoothly. PROOF differentiates itself in its tooling. You can see that even just on PROOF’s nesting website: in how we display badges and rewards and generally in its ease of use. Other Web 3 companies will be better promoters with celebrities or by building massive video games; that’s just not in PROOF’s core DNA. Yes, we will have those bigger cultural

The Rise of Virtual Communities moments, deals, and brand collaborations that will be pretty meaningful for getting our name out there outside the Web 3 ecosystem. But our biggest differentiator is technical, either in the art domain or the smart contract level, that others are not able to pull off. I have seen projects that wasted literally tens or hundreds of millions of dollars in gas. At PROOF, we write tools to largely avoid that. Unfortunately, I’m not able to share what we’re working on just yet, but in a few weeks, we’ll have some other examples of PROOF rewriting the book on what is technically possible in Web 3. We hope to change how others are doing things, partly because we will open source a lot of the technical innovations that we’re writing. PROOF wants to be known as a pioneer and a risk taker. I’ve had so many people express shock and say “it’s crazy” that we made our NFTs public domain. But do you know what is crazy? Following someone else’s playbook. Life’s too short. I don’t want to die following the playbook just for the sake of revenue; I’d rather make less revenue and have something that is exciting. Atherton: Can you tell me about how the IRL community events, like the Moonbird parties, intersect with the virtual community? Rose: Inside of our Discord, we decided to do this experiment where we partially cross over into real life and bring the community together. So I bought one of the fancy Zoom accounts that supports a thousand people or something, and we did a Zoom gathering with breakout rooms and topics of conversation. Obviously, the in-person meetups that we’ve done at PROOF are the best in terms of creating deeper connections and real conversation. But I was surprised at how well the multibreakout room video chat worked and how much the community loved doing it. Even just seeing someone’s face is so much stronger than a chat bubble. Atherton: Did you have any intuitive hunches about community from your days at Digg that you see playing out in Web 3? Rose: Part of the reason why I wanted to start with the PROOF Collective pass and keep it to 1000 members was based on something I realized in my Digg days: about 1% of all people are a*******, and if you only have 1000 people, there should be far fewer troublesome personalities to deal with. But because NFTs are so free flowing, there’s no application process, you never know who’s going to show up in the community the next day. The community is a living, growing organism. There are ways to disarm those troublesome people – by deputizing other community members to stand in and reinforce principles that the community has or even just having a one-on-one conversation with them. I can’t tell you the number of times I’ve had a community member act completely sideways,

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Chapter 11 | Kevin Rose, Cofounder of Digg and PROOF Collective and after a five-minute conversation with them, they are a completely different person. You have to figure out what motivations are behind the scenes and know that people will try to game you in certain ways. I never wanted our moderation team to be volunteers. I wanted full-time employees so that we could all get together and have deep conversations around what was working and what was not. To walk that tightrope between allowing conversation to happen, but not letting it get too far out of line. We put together an internal reference for the team outlining the big offenders and how we deal with them in order to create a consistent tone across our community. I think that has helped us a lot. Atherton: Obviously, there are surprises every day in Web 3 as it’s a rapidly evolving field, but have you found anything to play out differently than you expected building in Web 3? Rose: Talking about the general Web 3 community at large, including crypto, when the market is favorable everyone’s your best friend, but when things are choppy, it’s a lot harder on people – particularly because many have entered this market less for the collectibles and more to flip NFTs and all the bad things that you read about in the press. A philosophy that I’ve always stuck to and that featured a lot in our early podcasts is, what do you want to buy and hold for the next decade and beyond? And are you scaling your spending to what you would pay for a collectible, rather than what you would invest? So many people saw NFTs and crypto through the lens of “this is how I’m going to make my quick buck” rather than considering it as a movement that they wanted to get in on and approach in a sensible way. There’s this nature in Web 3 that a lot of projects have played into, where the community members are saying “when’s the next airdrop (free distribution of NFTs or tokens to members’ wallets)? When are you going to give me that next bit of liquidity? When am I going to get something of more value?” and I just don’t think that’s going to end well. When you start getting companies creating drops every other month or even more frequently, they start running out of capital to pull that off. And it’s so dilutive. It sets up this precedent where being a token holder is not about the community or the art, but rather what you’ll receive. At PROOF, we’re trying to steer people more toward community and collection and away from this expectation of value. What I hope will occur, especially with Moonbirds because it is our standalone PFP, if we do our job right in about five years, we will have created enough of a halo effect from big cultural moments and have defined who we are as an organization that the question of when’s the next airdrop disappears, and people are owning membership because of what we’ve done historically.

The Rise of Virtual Communities PROOF would have to cross the chasm from some speculative members into historical significance. CryptoPunks, a collection of 10,000 uniquely generated NFT characters, has crossed that. They never have to do another airdrop again for them to endure and value to continue to accrue. That’s because of their historic contributions and what they have represented in their field. A few projects make that leap, and it’s on us to make PROOF one of them. Our dream is that eventually owning a Moonbird will not have any expectation for a new airdrop attached; instead, people will want to collect it because of its significance and what we have built at PROOF over the last decade.

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12 Jason Citron Cofounder and CEO of Discord Discord is a voice, video, and text-based community platform with over 150 million monthly active users. After selling OpenFeint, which created ready-made code for game developers and was used by approximately 30% of App Store games, Citron founded a game studio, Hammer and Chisel, in 2012. In 2015, Citron and his cofounder Stanislav Vishnevskiy pivoted to release Discord in 2015 as a way for gamers to play and chat during and after gaming  – to “solve discord within the gaming community.” Users communicate in private chat rooms or as part of communities called “servers.” Discord has since raised over $995 million over 16 rounds, and in 2021 Microsoft reportedly offered to acquire Discord for $12 billion, which Citron turned down. Every day, four billion minutes of conversation occur on Discord. Atherton: Can you tell me about some of the early virtual communities that you were a part of, growing up in Long Island, and how these paved the way for Discord? Citron: My exposure to virtual communities started quite young. My dad was an early adopter of computers, and my grandfather got me a computer when I was eight. It was a Compaq 1986 portable computer with a 1X CD-ROM drive. My dad had Internet access in the late 1980s and early 1990s. Through that, he used this software called Prodigy, a precursor to AOL. We had two phone lines, so you could dial in and still use the phone. So, I used to go onto Prodigy, which had online communities that you could participate in and

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Chapter 12 | Jason Citron, Cofounder and CEO of Discord games that you could play. I remember finding it fascinating that there was this virtual world out there full of possibilities. I didn’t meet a lot of people on it; I was about seven years old. That came later. A lot of my early virtual shared experiences were more based around playing console games with friends and using the virtual medium as something to bond over. When I got to high school, I moved into more online communities. I was on IRC and AOL chat rooms and AOL Instant Messenger. I met people; we’d talk about programming. I would play video games with my friends on early Battle.net. That time spent online was so meaningful to some of the best relationships I still have. They are a big part of why I took the path that I did and eventually built Discord. Atherton: Before Discord, you started a game, incubated by YouWeb, and then pivoted to launch OpenFeint which though not a community platform was a community tool, can you tell me about that? Citron: The projects that I have worked on have always been vaguely in this zone. My whole career has been about creating shared experiences for people to come together online. Even before YouWeb, I was working on multiplayer video games for Xbox and PlayStation as a software engineer. So I got into the YouWeb incubator and was offered some funding, leadership, and mentorship. I built a couple of things that were based around hangout spaces online. The first company I built was an online dating site, where you played charades with other people as a way to break the ice. This was in 2007, and it totally bombed. In fact, we shut it down almost immediately after we launched it, because we realized that back then people didn’t want to play charades and date online. Though it had some of the essence of what dating sites are doing now! After that, I built a multiplayer Uno game. This was around the time that social networks were opening up their platforms. We built this game called Numero Uno on the social networking site Bebo; we were actually the launch partners on their platform. The idea with Numero Uno was that it was a card game, and we built chat into it. So you could play, but really it was an excuse to talk to new people – a shared experience through the social network. A short while later, Steve Jobs announced the App Store for the iPhone, the year the first iPhone came out. I knew immediately that when they launched, it was going to be a huge new platform. Having grown up in the video game industry, I had in my mind the analogy of new consoles. When a new console would launch, say a new PlayStation, whatever games were compatible with it would get huge because there would often be very few, and everyone wanted to be in on the new thing. So I could see the App Store would be a great opportunity to launch new projects or new companies.

The Rise of Virtual Communities So I dropped the Uno game and started working on a multiplayer game for iPhone which was called Aurora Feint. The day the App Store opened, we launched Aurora Feint, so it was among the first 50 games on the App Store. It was an early social game – that back then we called an asynchronous MMO because the phrase “social game” had not yet emerged. Aurora Feint was free, and users would play Tetris against their friends to improve their leaderboard position, even when they weren’t there because you could battle them asynchronously. The game didn’t end up making a lot of money, but it grew a big audience. We eventually realized that the social tools that we had written for the Aurora Feint – with friends, a leaderboard, chat – would be interesting for other games. So we took the technology out and turned it into this platform called OpenFeint, an early social tool for developers to build their own games. In some ways, it was also a kind of social network, as it had chat rooms, a friends list, and leaderboards. It was more focused on the competitive gaming features than the chat. But above all, it was a way for any game developer to turn their single-player game into an online shared experience that you can play with your friends. It just took off. Two years after launch, we had 100 million users and 100 employees. Around then, we sold it, and that’s when I started Discord. Atherton: Funnily enough, that mirrors what I often think is the role of a community builder: shifting members from single-player mode to multiplayer mode! So you sold OpenFeint and then began thinking about Discord. What were those early days of building like? What were the challenges of bringing the first community members in? Citron: Building programs for gamers is always challenging because the user base tends to be extremely particular and vocal. But they’re also early adopters, and they love technology. So it’s a hard audience to get right, but if you strike that balance, you get repaid with a lot of love, passion, and exponential growth. When my cofounder Stan and I were thinking about building Discord, it was really about solving a problem that we were experiencing, because we play a lot of games ourselves. In those early days – 2015 or late 2014 – we started by saying we’re going to launch on PC first, with a mobile companion product. In that era, the market was entirely mobile focused, as it is today, so there were a lot of people thinking “you’re starting on PC, that doesn’t make any sense….” But Stan and I knew it would be a good starting point because we play games on PC and are only using our phones to keep in touch with those same people. Discord would merge those two. We knew our product would be a better solution for gamers than what people already had.

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Chapter 12 | Jason Citron, Cofounder and CEO of Discord About two months of building later, we had a product that was usable. We showed it to our friends and their immediate reactions were that it was awesome. But no one used it because it didn’t actually work that well yet. So we ended up having to rebuild most of the audio-video technology because that was such an important part of the product offering. Essentially, we built a high-quality, organized communications service for groups. To be honest, the fundamental magic of Discord today is the same as when we conceived it. It has servers with channels. You can organize the groups, the conversations, and the people. There are voice channels that are drop in, drop out. Super high-quality video came later actually. But everything else was there from the beginning. Importantly, we also embedded moderation and safety controls from day zero. Admins could have invite-only spaces or public spaces, in which they could ban people, set rules, and moderate messages. Atherton: Nine months into launching, Discord had a couple hundred thousand users signed up. How do you build such a viral community so quickly? Citron: In some ways, that exponential growth was prompted by having a product that is multiplayer. Fundamentally, if you use Discord, you want your friends to use it with you because it solves the problem of where to go for hanging out and having these shared experiences online. Naturally, our users would go out and recruit their friends who they wanted to have these experiences with. Part of the magic with gaming is that people who play games, especially multiplayer games, talk to their friends; they share it. There’s lots of natural opportunities for one person to tap into their network of friends and get them to join. The other facet of virality was that Discord quickly became a home to other online communities, not just gamers. People who play games are just normal people, and they have other interests in their lives. So within months of launching, people were creating communities on Discord that had nothing to do with video games. We saw programming communities start to pop up. Then streamers and other Internet forward celebrities started to create communities, joining from Twitch and other platforms. We realized that Discord could be useful for people to communicate in different kinds of community settings, not just playing video games together. To continue this growth, we focused on improving the product, which would speak for itself. We also had fun marketing it. A key part of our success, I think, was that we spent a lot of time getting feedback. We would talk to our users and potential users to understand what they hoped for, aspects they liked, and what needed improvement. We would then highlight that we had listened. When we would implement product features that had been suggested by community members, we would give

The Rise of Virtual Communities them shout-outs in our change logs – something like “shout out to Eric365 for this cool suggestion.” People loved that this product was listening to its community members, and in return they helped us create virality. We don’t do it as frequently anymore because that is much harder with close to 200 million users! Atherton: I guess that’s why Discord is one of the most loved brands among Gen Z and continues to grow, because it feels welcoming, especially in an age where virtual communities feel like a part of your identity! Citron: I agree. Discord is open to feedback; that has always been our approach. When we first started Discord, we made a Discord server for our customers. They would come, and we just hung out with them. We did the same on Twitter, engaged with our customers. In a community business, we are them and they are us. Atherton: So Discord was growing; users were coming to find belonging. At some point, you started thinking about how you could monetize the Discord community, can you shed light on that evolution? Citron: We have always intentionally pursued a business model that doesn’t rely on monetizing user data. Early on, we had this vision of building cosmetics and superpowered selfexpression into Discord and charging for it on a subscription basis. Another idea was to build a game store for selling games – which we did – but that didn’t end up working. Our feedback was that many of our users were in Discord communities that had nothing to do with games. They wanted more features for expression and general utility from us. So we doubled down to launch a premium subscription version of Discord called Nitro in 2019. Our subscription service gives you a way to supercharge your Discord experience. There are increased possibilities for self-expression, as it grants you custom and animated emojis, animated and colorful profiles. In terms of utility, premium offers larger file uploads so you can share more high-quality content with your friends. You can also screen share and stream games in super high resolution, so it feels like you’re hanging out with your friends on the couch, even when you’re not. Premium brings users together and gives you tools to express yourself, improving shared experiences online. In September 2022, we also launched Nitro Basic, a cheaper plan that gives you some of the premium self-expression features, though not all, so that our most loved features are accessible to more people, at this affordable price. That’s been really popular. The subscription model creates a beautiful dynamic where the Discord team can continue to dream up amazing stuff that makes people’s online experiences more fun, and some users will pay us for it. I love that our users get to be our customers.

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Chapter 12 | Jason Citron, Cofounder and CEO of Discord Atherton: Touching on identity, I feel that there is an interesting paradox within Discord where in one sense people want to be anonymous, not using your real name or real photo, yet there is still that human desire for creative expression through profile photos, avatars, your customizable background. The fictional usernames and profile photos are in many ways the antithesis to other social media platforms. What features of Discord most enhance the sense of community? Citron: Discord was designed to be different from other communication and social media products, to feel like a place where you can hang out with a group of people you care about. In part, this was achieved because Discord was originally centered around invite-only communities and now is centered around community spaces. These can be public and large, but the majority are invite-only. Therefore, the communities are these safe spaces, filled with just the people you want to talk to, unlike most other virtual communities, where anybody in the world can show up. If you have a Discord server, what we call our community spaces, with 40 people that you want to nerd out on your favorite hobby on, just those people are there. Having a space with folks where you can curate who can show up is a big part of enhancing the sense of community on Discord. It is easy to have serendipitous experiences with friends on Discord, which doesn’t really happen online in many other places, is another feature that nurtures community. The way our voice and video works  – and to some extent also text chat – you can easily pop into conversations with people. We have these always-on voice calls (known as voice channels), so if you and I are chatting in a voice chat and a third person in our community sees it, they could just pop in, almost like we were sitting in a coffee shop and your best friend walked in and joined you at your table. This ability to drop in and out of calls and switch between text, voice, and video seamlessly, in one place, makes Discord a lively and rich experience – something that you don’t really get in other communication products. The third community fostering feature is what we call “rules and norms.” Discord allows you to set in-depth moderation settings in a server that you have created. You can set up some people as moderators, some as regulars, some as newcomers, and each of these groups can be given different powers. You can filter what conversations they have access to, whether they can delete messages or not, who can post images. These moderation settings can be quite nuanced. We’ve found that people love these because they create an environment that more accurately reflects how a group of humans would behave in real life, for example, in a lecture the audience might be silent, but at a bar you might join into a conversation. Discord allows you to reflect the rules and norms of real-life communities in a virtual space.

The Rise of Virtual Communities Finally, because our business model is about premium features, our users know that their conversations and experiences are just for themselves; there is no ulterior motive. The way Discord keeps afloat is that some people give us money to give them an even better experience. So our users don’t have to worry about where their data is going. Atherton: What, to you, is the future of online communities? Citron: The pattern we’ve seen over the years is that people are spending an ever-increasing amount of time on their devices. And yet, spending time with people that you care about is an important part of being human. Shared experiences are where a lot of happiness and magic comes from in the world. I think we’re going to find that people want to spend more time with loved ones and like-minded people through online mediums. It’s a big reason why we’ve been successful, because that’s what we offer to folks. I believe that it’s a pattern that will continue. Many young people spend a lot of time playing video games, which to some extent are “the new shopping mall,” meaning the venue you go to hang out with your friends. A lot of that starts on Discord; you might get together on a server to work on homework together, to decide what game you might play, or even organize meetups in real life. So I imagine that we’ll see more communities come online, both virtual public spaces where people can go and meet like-minded people that share their passions and also people spending time in more invite-only spaces with people they care about, when they can’t be physically together. Continuing to make sure that we can help people do that is what we’re focused on at Discord. Our focus going forward is making Discord more customizable, so that people can express themselves and tailor the platform to meet their own needs. We’ve discovered a big appetite for making the virtual space people hang out in feel like their own, just as you might decorate your house or curate the backdrop of your desk for Zoom calls. We just launched an app directory so our users can customize their spaces more. Continuing to make sure that we’re providing services and capabilities for folks that want to do increasingly different things on Discord. We’ve seen a huge growth in creators over the last year as well as brands joining Discord for various reasons. It has been interesting to see new forms of expression emerge on Discord like Generative AI. Beyond self-expression, it also helps our users have cool virtual experiences and make friends online. The platform is so beyond gaming at this point, which is fascinating and humbling to see. The longer-term question of what is the future of online communities is hard to predict. It’s like asking, “what do you think the future of people hanging out together is going to be?” But I know that it will continue to be amazing.

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Chapter 12 | Jason Citron, Cofounder and CEO of Discord Atherton: The individual can’t exist without the community, and the community can’t exist without the individual is my philosophy. Citron: Exactly. Belonging is part of being human. I wake up every day because I love building software that helps people cultivate belonging in their lives and spend time with people they care about or around their shared interests because that is what makes being alive awesome.

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13 Trevor McFedries Cofounder of Brud and Founder of Friends with Benefits (FWB) Brud is a creative agency that builds community-owned media and collectively built worlds. Cofounded by Trevor McFedries and Sara Decou in 2016, Brud produced the first virtual influencer, Lil Miquela. The CGI avatar has been in campaigns for Prada, Calvin Klein, Samsung, and Chanel and was named by Time magazine as one of the 25 Most Influential People on the Internet. Miquela bridged the metaverse and the real world, was pictured with celebrities, was signed by a talent agent from CAA, and was hired as an arts editor at Dazed magazine; her wardrobe is now an NFT series. Having raised VC funding from Sequoia and Spark Capital, in 2019, Dapper Labs acquired Brud for an undisclosed sum. McFedries became the CEO of Dapper Collectives which aims to make DAOs mainstream. In 2020, McFedries founded Friends with Benefits (FWB), an application-only community for creatives, with the aim of helping members monetize their creative output. Considered to be the first “Social and Culture DAO,” membership fees are paid in $FWB crypto tokens, and networking takes place on Discord channels.

© Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6_13

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Aside from Web 3, McFedries is also a DJ and music producer, “Yung Skeeter,” and has worked with artists including Ke$ha, Azealia Banks, Katy Perry, Chris Brown, and Steve Aoki. Atherton: What were the first online communities that you remember participating in? McFedries: The first ones that come to mind are PHP Bulletin Board Systems on the topic of figuring out things on the Internet. The next step was that I got really into programming and computer hacking. Cyber Army was a place where you could go and try to hack; there was another BBS called Shadow Crew, where people talked about all the dark arts of the Internet. Every shady person I’ve ever met in crypto was also on Shadow Crew! After that, I was on IRC. I wasn’t super into gaming. Occasionally, I would play Command & Conquer: Red Alert or Pokémon. But I was always in search of information, so I preferred material communities like Makeoutclub, LiveJournal, and Myspace. When I was coming of age, about 16, I moved to LA, and I didn’t have any friends that were into the music I liked. So I would go on Myspace and LiveJournal, which had communities around music. One was called Non Ugly Emos. You would post a couple of pictures of yourself and the bands you were into, and people could rank you. If you were hot and into good music, you could get into Non Ugly Emos! I remember that being important – that I needed to have some hot pics and to talk about all the cool EPs that I have. I was also part of Myspace communities that were hybrid online and real life. When I was around 18, there was this indie sleaze moment in LA where we would go to hipster parties, before that was a popular thing to do. A mutual friend from another high school, Mark Hunter, was a photographer known as the “Cobrasnake.” He would post photos from these parties, which became popular online. People on the other side of the world started calling it “the Cobra scene.” We were all friends on Myspace, but that online community really got defined in real life, because we were all pictured at the same parties. Some of us were friends in different ways, but we became crews, almost because of the attention we were getting externally. People would meet Internet celebrities like Cory Kennedy and other “it” girls and rope them into these crews. I was photographed with DJs, and after that, people would book us to come DJ together. That was my first experience of a real-life community and external interest shaping an online community. It was almost an observer effect: there was a community in isolation, and then when observed and commented on, it altered the way the community evolved. Atherton: Were there any other early virtual community interactions that influenced you to later build something in this space? Perhaps when you were DJing and producing? McFedries: I remember the growing importance of artist branding that platforms like Myspace enabled.

The Rise of Virtual Communities This was around the time that Lily Allen got signed from her presence on Myspace. Lily Allen was a girl from the UK who blew up on Myspace, and I remember it being a big deal in the music industry that she hadn’t really played shows. It used to be a rite of passage that music artists would tour, build a following, fill up a 2000-person room, and then the next big thing would be to get signed. Lily Allen just built this huge Myspace following, and a record label signed her. And then of course there were also all of these proto-influencer babes, like Tila Tequila, who were instilling Myspace with a cultural capital. It wasn’t yet clear to me how this turned into financial capital, but I knew I wanted to be a DJ. Growing up, my identity was always that I was an athlete. In high school, I had started a clothing line – Stage Three Clothing – which was rooted in emo, punk rock, and hardcore. I wanted to build a clothing line for that community. A brand called Johnny Cupcakes was doing a decent job, but I wanted to create the brand. I didn’t have any money to start it, so I began reading books about how to start a business and build a brand. I went to college for football, and when I came back to LA, I discovered this new software which enabled you to DJ digitally. Prior to that, you needed to have all these records, but now you could play with MP3s. Everyone had access to all this music for free, so DJing became more of a competition of who could build a better brand and then deliver. I had been trying to get this clothing business off the ground with no capital, but I had a revelation that if you are the brand, there are zero overheads. DJing isn’t that differentiated because you’re playing for mainstream clubs. So I decided to start building a brand and a community of fans. That way, promoters would book me, knowing that I could fill up nightclubs. So I built a website for myself (eatskeet.com), and I made my Myspace look really good. I added my tour dates, photos, and installed little widgets. The Myspace narrative conveyed that I was a big, important, awesome DJ, ingrained in the dance music scene, even if it was totally fictional. Around this time, I remember looking at TheHundreds.com, an early streetwear blog run by Bobby Kim. He would talk about everything streetwear, the latest Supreme drops and Hundreds drops. It became a center of streetwear, and Bobby was at the center of his brand. My blog, eatskeet.com, was a similar amalgamation of things I liked. If my friends were talking about Gossip Girl, I would rip a Gossip Girl episode, post it on Dailymotion, and then embed it in my blog. I’d title the blog post “Gossip Girl Episode S0101 free,” and then I would get traffic from people who were coming to watch Gossip Girl, improving my SEO. I would post memes, remixes I’d made, songs that I liked. It became a culture dump. Almost a precursor to Tumblr: showcasing my visual identity and what I was interested in. With this, I built a fanbase and community around my DJing. It worked. I started booking bigger gigs, I got a booking agent, and I was able to tour.

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I was also part of a major label called Shwayze. I got to see how the major labels kick-started artists, pumping dollars into them, having you do signings at record stores. On tour, you would do meet and greets afterward in the parking lot and meet every single fan to have really engaged followings. Atherton: It’s interesting to hear a lot of your early interactions with online communities were heavily rooted both online and in real life. How did these learnings in music and the first wave of influencers in Myspace then lead you to start Brud? McFedries: While I was DJing, I started a job at Spotify. While I was there, I managed and produced an artist named Banks, Jillian Rose Banks. I had a vision for an artist that I wanted to see in the world, and Jillian had many of those tools – a really cool voice, interesting lyrics. So I got to shape an artist and get it out into the ether. I produced some of her songs, and my friends produced some. It was a collaboration between Banks and I, but I got to guide it. The next part was trend forecasting and putting her in front of a certain wave. I’ve always been good at trend forecasting, seeing around corners, choosing four or five options, and usually one of them plays out. So with Banks, I felt that we’d had an era of girls in leotards singing, “put your hands up, bring the party”; we’d had so much of that stuff that there was a need for something for 13-year-olds to listen to when they’re sad. I was really into “trip hop” in the 1990s – bands like Portishead, Tricky, Massive Attack – which had a big moment in the UK but weren’t massive in the US. To me, it made sense that this was the direction that some underground dance music was going in, because they were sampling Aaliyah lyrics and vocals and chopping them up, kind of early James Blake stuff. So Banks and I started making these kinds of sounds; I got to shape this artist and put her in front of communities. I remember I mapped out this web of influence and how they were all interconnected. It was pyramid shaped. At the top were people that hated everything, like the record label Night Slugs. It was run by two artists Bok Bok and L-Vis 1990, who were the coolest guys in Indie Dance music. I thought who does Bok Bok like? Oh, he likes Lil Silva, this British grime and funky producer. I realized if we could get Banks to collaborate with Lil Silva, I could bring it to Bok Bok. And with Bok Bok’s approval, I knew I could work down the pyramid to the blogs and music editors of “Cool Kid Dance Music,” and from them down the stack to more mainstream bloggers, Indie Dance writers to your average college kids, all the way down to soccer moms. To this day, there are these flows of influence: these nodes that kick things off. Atherton: And around that time, you founded Brud, where you created the first fictional, computer-generated pop star in the Western world: Lil Miquela. How did your experience in managing artists impact your approach in forming the CGI influencer?

The Rise of Virtual Communities McFedries: Well, I had been part of the process that built an artist from scratch, I’d mapped this web of influence, and I’d been around artists as they were being built, like Katy Perry and Ke$ha. I had learned that when building a brand or an artist, there are well-established human psychologies and modes of engagement. I think as a music artist, you’re trying to give people tools to express themselves emotionally in ways they wouldn’t be able to naturally – where a quiet shy person might go to a club and feel able to sing explicit lyrics loudly! Quoting lyrics you can say something you couldn’t otherwise. I always think about building artists, brands, and communities that are entertainment focused and that provide emotional tools for expression. When I approached creating Lil Miquela, I thought, how do we create something that will allow people to say something they couldn’t otherwise via her? The idea was that through this virtual influencer, we could build this new medium for storytelling. I felt there were these blank spaces for talking about things and wanted to try and fill them with people. When we created Miquela, it was a mystery who she was or was behind her account. Lil Miquela is actively ambiguous. My company, Brud, came up with a fictional narrative that she was a half-Spanish robot that was created by an evil company. This backstory introduced these hooks of interest for followers and captured attention. Traditionally, we have had arenas for fiction and arenas for nonfiction, but this blended the two, which I think forced people to pause. In a world of infinite scrolling, inserting something evidently fictional in a nonfiction environment, like Instagram, made people pause and notice something was wrong here. That was our core mechanism for gaining attention, inserting a fictional character into a space that’s traditionally been for nonfiction narrative. Narratives are important. You can do a lot of good really quickly by nudging people to be more empathetic. So we wanted to make Miquela aesthetically engaging, likable, but also polarizing, because that kind of negativity is what drives social media platforms. You need someone that you’d want to defend, but that others would want to tear down. For Miquela, we gave her a gap in her teeth, freckles, and features that are atypical to western beauty. I wanted her to have really short bangs that were a bit close to the top of her forehead, with the idea that people would ask “who the f**k cut your bangs,” which hipster kids would counter with, “you don’t understand, this is art. She cut her hair like that to be provocative.” We wanted to prompt comment wars, because once people get in those engagements, they have picked a side and are now entrenching themselves into a camp that they will stick with. It was pretty clear there were these cultural pockets – in Williamsburg, Silver Lake, Shoreditch – all over the world, in which there were these hip kids who based their identity on having strong opinions on what mattered. So by creating a character that could speak to those opinions in the right way, early on, it was like a wink and a nod, acknowledging that you were in those circles.

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For example, with Miquela I made these memes about going to this afterhours spot in Silver Lake, LA, and being attacked by skaters on drugs. It was stupid, but if you knew that part of LA, it would speak to you. We wrote comments about the “popular girl” Vogue intern starter pack, on what they would be wearing, and if you were in a certain social circle in New York, you could laugh about that. Miquela would comment on news posts that were important with the idea that magazine editors or followers would think, “this girl is cool, she gets it.” People are scared to cross that chasm away from the mainstream, and so they kind of retreat into this stuff. We always knew we wanted Miquela to appeal to the mainstream. We gave Miquela the aesthetics of a mainstream fashion blogger rather than a downtown cool kid. To build that early community around Miquela, we infiltrated very specific pockets of conversation and cultural nuance. It took an anonymous figure to raise and question these aspects that were ingrained into people’s identity. We started getting people in LA or New York sending images of her and memes to each other, citing her as this brilliant commentary on the times we live in. Atherton: Miquela has been featured in adverts for brands including Chanel and Prada and named by Time as one of the most influential people on the Internet! You used your trend forecasting superpowers to grow Miquela’s followers into the millions on multiple channels. How did the storytelling around Miquela evolve into your latest project at Brud which is to utilize the community to decide her next steps and actions? McFedries: In terms of getting Miquela to that scale of growth, I am pretty good at getting from zero to one, that initial community building. To me, the most successful communities draw people with common niche interests, and I live in niches. I just love emergent things. But at some point, it became clear we had to cross that chasm into mainstream, which is where I struggle. I just don’t care about Harry Styles, though I wish I did. So I turned to a good friend, Jessica Curry, who is dialed into pop culture and hangs out with the Kardashians. She’s a step ahead of the cultural mainstream. So I met with Jessica in a coffee shop and asked her if she could come in and take this character to the next level  – and she did that. There was some tension because a lot of fans of Miquela’s voice from when I was driving her didn’t like that she was now talking about things that felt more mainstream, so we probably churned some cool kids that would have aged out anyway, but we grew her following. From there, we have built bigger teams, made other characters, and written these playbooks on how to tell these stories. We have expanded into TikTok and music videos and songs, and all those things feed back into each other.

The Rise of Virtual Communities The dream now is for the community itself, the fans, to drive a narrative. I believe that a lot of important cultural moments that have come and gone, like Vine, might have endured if they were community owned. We have this “growth-at-all-costs” culture, and there are some things that are special that aren’t going to grow infinitely, and I wish those things could exist. So to me, our new direction at Brud is a way that we can maintain Miquela and the things that the community loves while also continuing to expand with other characters. Long story short: We’re going to hand off the organization to token holders. These token holders will be largely our Brud Inc core team, and over time, as people identify themselves as being talented writers among other skills, we’ll give them more tokens and more influence to make decisions, until ultimately we’re a ton of citizens that are guiding and stewarding these projects. Atherton: At the same time that this community-owned storytelling evolution was happening with Brud and Miquela, you were also working on the very first social DAO, Friends with Benefits (FWB). Tell me about the early idea of FWB? McFedries: I’ve been in crypto for a long time. General-purpose blockchains came around in about 2017, Ethereum emerged, and I felt it would be revolutionary for artists and innovators. Web 3 was going to make it possible to create our own economies – which is as game changing as MP3s emerging when everyone used CDs. There was debate as to what aspects of Web 3 would take off. I talked to Jacob Horne, cofounder of Zora, a decentralized auction platform for NFTs on Ethereum, and to other people. I was certain it would be DeFi that would hit over NFTs. I couldn’t have been more wrong. To me, the opportunity in DeFi was that fungible tokens allowed people to create value and share value with the people that participated in the networks they were building. But most people didn’t know or care about Web 3. I remember having dinner with Toby Shorin, crypto’s favorite thinker and writer, and Jesse Walden, an early crypto founder and partner on Andreessen Horowitz’s first crypto fund, and we were discussing why it was so hard to get our friends interested in Web 3 – probably because it was hard to explain to them. You need a simple example of the power of tokens and the power of owning the value that you create on the Internet, because it’s abstract. It’s like saying “What if you could make money by being cool in Williamsburg?” With Friends with Benefits, I created this simple business model “tokenomics.” With hindsight, it was perhaps too simple. We all understand communities on the Internet on centralized platforms. They’re interesting enough that we go on Instagram and look at other people’s photos. The concept for Friends with Benefits was that members could participate in a chat room – a Discord – and be their awesome, fun selves. In order for them to be in that chat room, they

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needed to own a fixed number of tokens – 50 tokens – and there was a fixed supply of tokens. An analogy would be if you owned a nightclub, which was really cool, and people wanted to come into that nightclub, but they needed tokens to be admitted; that increasing demand on a fixed supply would increase the value of those tokens – to the point where if you were holding the very tokens that others needed to get into that nightclub, you would see the value that you had created. FWB was that nightclub in the form of a virtual chat room. Akin to trading NFTs, you just have to do it for it to start clicking. People realized, the more I hang out in FWB, and the more people want to hang out with me, the more this token price goes up. That’s crazy. We probably should have made it like Y Combinator and done an FWB grant for startups because there are so many companies and projects that have come out of FWB. The tokens also made it self-governing – no one would bad-mouth each other as they all own a piece of the platform. It’s in everyone’s best interest, as common shareholders, that this space is desirable to be a part of. The early community of FWB formed as a venue for cool kids to get into crypto. Atherton: How did you establish a community around FWB – did you use the same playbook as Brud? McFedries: I see Web 3 and Web 2 as living in opposition to each other. In Web 2, you build a product and then build a community around the product, whereas in Web 3 you build a community, and the community builds the product, so it’s a different mode of operating. FWB is Web 3, and members of the DAO are working to innovate in products. With FWB, there was a pretty high barrier to entry – everyone understands music and Instagram, so when I was managing the music artist Banks or creating the fictional character Lil Miquela, that was easily understood and scaled. From when I began FWB, on Twitter I asked, “if you know how Discord and crypto tokens work, DM me,” and I got direct messages from 20 people. Of those, I picked about ten people that might be a good fit to be part of FWB. But ten people wasn’t enough to be the “party” that I envisioned people would want to be invited to. Then friends, DJs, music artists, the general manager of the record label that I had worked with started to reach out, as they were involved in Bitcoin or Web 3. There wasn’t enough critical mass at the beginning to immediately make it a tokenized community, so I would invite them to our Discord channel. Up until then, crypto channels in online forums were like telegrams, with only one “general” channel as there were only 80 or so people in it who talked and cared. The bet that I unknowingly made with FWB was that interest would jump from 80 people who cared to 1000 people, and there would be enough people to have different channels go off. At first, FWB had one “general”

The Rise of Virtual Communities channel in Discord, and it wasn’t getting traction. I would have to kick-start conversations, asking “what do you guys think of this article?” And then I began inviting anyone with a Discord link and giving them a role, just trying to make it a place where there was some curiosity. From there, we moved into Season 2. Everyone had to have a token to be part of the channel. We walked them through the process of purchasing tokens, and I locked them in. That was how the community of FWB started. Atherton: And now FWB is almost like an online town, with a mayor who runs it. Can you elaborate on how the governance evolved? McFedries: Well, at first I was almost the dictator of FWB. There is often this idea of progressive decentralization in crypto where you start off centralized and you move out. I was also running Dapper Collectives full time, which was scaling way faster than I could handle, so the leadership team had talked about bringing in someone to run it. We met with Alexander Zhang, who was a smart hustler. At a very young age, he had been the CEO at Summit Series, and he had really strong opinions about IRL and what community should be. Candidly, I’m more of an ideas guy than a pure community guy, I love my alone time, and I’m extremely online. To me, it didn’t make sense that IRL events would work because a DAO benefits the entire community, no matter where they are in the world. If you’re throwing parties, these are benefits that can only touch people that are local. But Alex had a vision for these IRL events, and the community loved it. That was the first time I really felt the benefits of this decentralized leadership. Then Alex was brought in as the mayor. FWB would propose budgets for projects we were working on. The community would vote as to whether these would be approved or not. The leadership team would then take those budgets toward executing certain goals, and then regularly the community would vote as to whether to extend those budgets or decrease them. So the governance moved from entirely centralized with me running it to a centralized leadership team with budgets that were approved by the whole community to increasing decisions being made by the community. Now we have grant proposals. Someone wanted to create an energy drink for FWB – that wasn’t a concept of the leadership team, a member just wanted to do that. They’d post what they want to do and why it matters, and then the community votes to approve the grant. That’s why we have FWB energy drinks and a festival this weekend which should be interesting and all kinds of insanity. Atherton: Tell me about FWB cities and how it could bridge the metaverse with IRL events?

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McFedries: I love physical placemaking. Right now at FWB, our cities initiative is about engaging people and their local communities by giving them power to create these IRL subchapters of FWB. I think that Alex took inspiration from fraternities where you have these macro headquarters and these smaller sects that do their own thing and events. I don’t think that FWB Shanghai should feel the same as FWB LA – we want to enable people to shape FWB to their local customs, legislation, and what could be the next big thing in each place. These subchapters still have the same essence of what FWB is, but are nuanced to the locale. The physical city aspect of FWB cities is interesting because there are obviously a lot of parallels between online community governance and IRL governance. It gets pretty hairy as people have a lot of ideas about what that can look like. I think FWB cities are directionally right, so this is where we are dipping our toes in the water and trying to explore and learn at a measured pace. Atherton: Now you’re focusing your time on running Dapper Collectives, what else are you up to at the moment? McFedries: I’ve been asked by some universities to teach, and I’d never considered that. I’ve been asked to teach courses about different ways that artists can engage with the future in technology, and that’s interesting to me. I think investing is important. And I’m beginning to hit this mentor stage in my life, where people are asking me for advice or help. So I think that will probably be a big part of my next ten years. My endgame in crypto is to create better instruments to capture value and repatriate it to people – the artists and innovators – who create that value. I’d also like to do more around mental health and placemaking. I’ve never been very spiritual, but I’m interested in this idea of our brains as antennas vs. our brains as computers. We have always looked at consciousness as something that your brain creates, but I’m into this idea that your brain receives consciousness from the divine or dark matter or something else altogether. So I’m digging into telepathy and extrasensory perception and remote viewing, things that I thought I had written off long ago. Atherton: Having built two enormously successful virtual communities, do you have any advice for future community builders? McFedries: I would say your depreciated point of view is your biggest asset in building community. When I work with artists, I ask, “what’s the thing you love but would be most embarrassed to tell your friends?” I’ve had someone answer, “I love ballet and I still go to see it with my parents.” I’m sure there are so many cool kids that love ballet – so they need to be that voice, because there isn’t one. I think that is your biggest strikethrough  – where you feel most isolated, there will be others feeling the same.

The Rise of Virtual Communities When I was starting to DJ and get some traction, I read a book called Brand Hijack that talked a lot about sororities and religions and other kinds of cult marketing. The basic framework they outlined was to look for someone isolated alone, bring them to a free event to establish what kind of community that they can be part of, and then gate access. For example, an American sorority might invite you to one of their parties to hook your interest. Then they might have another party which you can’t come to unless you rush, which costs $500, and you have to do all this stuff. Once someone has made this time and money investment, they have crossed the chasm. If the next party costs $1000, they feel that they’ve already put in work, and if they have to spend another $500, why not. There also is something to be said for having friction upon joining a community and that this friction creates long-lasting communities. People act as if Web 3 is difficult, and that’s why it will never work, but I think that an element of difficulty upon joining is important for creating these “each one teach one” relationships. Snapchat, for example, was a complex platform, but it kicked off from the beginning. It was hard for kids to use, but they’d go to school and they teach themselves, and it became really sticky. For that reason, it was hard for other demographics with no one to teach them to enter, like parents. Therefore, it became a really well-defined platform early on. With Web 3 DAOs, people have to set up a crypto wallet and buy tokens. Having a high friction bar is important because those people then get past that and are going to be more engaged, retained, active members of your community.

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14 Cherie Hu Founder of Water & Music Water & Music is an independent newsletter and research DAO, a decentralized autonomous organization, dedicated to tech innovation in the music business. Founded by Cherie Hu in 2017, the community bridges Web 2 and Web 3 with a focus on collaborative music production, the exchange of research and emerging music technology and platforms. Paying community members have access to premium articles, collaborative research reports and databases on topics including “Music NFT Drops,” and tracking “music tech fundraises, exits, and IPOs.” Hu has grown the community to thousands of paying members across music and entertainment and has been an expert speaker on music tech at Harvard, NYU, and on CNBC. With the advent of Web 3, Hu is building a “research token” for Water & Music, having participated in Seed Club, a DAO accelerator that helps communities build their own social tokens. Water & Music derives its name from a 2015 HYPEBEAST interview with Kendrick Lamar and Quincy Jones, in which the latter declares: “The last things to leave this planet will be water and music.” Atherton: Do you remember the earliest online communities that you were part of and that influenced you? Hu: The first communities I engaged with online were intrinsically linked to offline as well. For example, I loved Club Penguin. I would interact with complete strangers virtually, but I would also talk about it with friends at school; we’d go home and play together online. There were always ties to real-world relationships; we were bonding through this additional online layer.

© Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6_14

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Chapter 14 | Cherie Hu, Founder of Water & Music The first virtual community I was a part of where I built connections with people who I still haven’t met in person was on Tumblr. I think the peak was late middle school through early high school. I grew up playing a lot of music, I’m classically trained in piano, and that was my path for a while playing on the competition circuit, but there was a tight-knit and active community of classical musicians on Tumblr. The community would share classical music memes, but also make playlists of music to share with each other. It was nerdy and niche, but I felt that I had found my tribe of people that I could talk to about music and more personal things, and that can be hard to find through real-world, in-person relationships. Atherton: Drawing on what you said about the overlap of IRL and virtual interactions in Club Penguin, throughout these interviews, we’ve heard the importance of building trust in communities through real-world events. Do you think that this overlap is important? Hu: I experienced that intersection of online and in-person communities more at school. I would see my friends every weekday, there was a sense of inherent regularity, and hanging out online after school was the icing on the cake. Now, and the COVID-19 pandemic certainly catalyzed this, I would say a lot of my closest friends today I met through hanging out online in the lockdowns of 2020. People were bored out of their minds and working mostly from home, remotely. I still work remotely, and so to this day I largely interact with these friends online, but that is complemented by occasional offline meetups. For me, when we do see each other IRL, it’s perhaps more intense and fun as it doesn’t happen very often. Atherton: Having founded Water & Music, which is a DAO, would you say in-person events feel less important for a Web 3 community? Perhaps as members are globally distributed? Hu: I think IRL events are becoming more important in Web 3 for building trust and community. Ironically, the early history of the blockchain and the philosophy behind it was based on trustless systems. The blockchain would permit anyone to execute on financial transactions or access some kind of shared capital, all without a centralized bureaucratic entity having to filter everything. It had democratic intentions; anyone could access the network. But my experience, especially with Web 3 projects around culture, is that culture is all about trust. If you try to build culture in a trustless way, letting people run away with their ideas and having no reins or means of control, it doesn’t work well. The community starts to feel less coherent to its members, or people feel alienated. Building a community involves person-to-person trust; that is a huge takeaway for me.

The Rise of Virtual Communities A controversial example of Web 3 communities on- and offline is the Bored Ape Yacht Club, which is a collection of 10,000 PFP NFTs, profile picture nonfungible tokens, which are digital collectibles on the Ethereum blockchain. They are promoting this more open culture, and then you show up to the Bored Ape Yacht Club party, and it’s 90% white guys, so it’s not diverse at all. It’s a culture of “bros.” Unfortunately at present, crypto is much more homogeneous and insular than it is made out to be, with its utopian vision of including everybody. That’s what I’ve seen at a lot of these crypto or Web 3 events. Very often, I’ll show up to an event and wonder why I’m the only woman. I’ve attended other events, however, that have fortunately been a diverse group, with a wide range of ages, races, and people with different interests that I might otherwise not have come across online. I’m noticing increasingly these in-person interactions are good at building trust and feeling safe. In Web 3, there have been a lot of hacks and security and privacy concerns; several people are understandably fearful of the technology because there’s a lot that is still not yet understood. As is true of any community, but particularly with Web 3, people are looking for a sense of safety. A community in which other members will be able to guide them in the right direction. I think in-person events will be a much stronger indicator of that long term. Atherton: Can you take me back to the launch of Water & Music, just before the pandemic? Hu: Water & Music has gone through many different stages. I initially launched it as a newsletter. It was a side hustle, with no ambitions to grow it into its own business. I saw it as a place to aggregate my writing. My background is in freelance writing, and I wrote for different applications about the music industry. I would post every article on Twitter and then mention Water & Music in the comments: “If you want to keep up with my work across publications or hear more of my unfiltered, unedited thoughts, subscribe to this newsletter.” I was very aware that I was writing for all these prestigious publications, but I didn’t own the audience, and I was getting very little data from those platforms about who was reading my stuff and why. As a solo creator, I wanted to have a space for my writing, through which I could have a closer relationship to my readers and other like-minded people. I write about music and tech, looking at the latest developments and speculating about future possibilities while also being critical, grounding these speculations in reality and data. Within the music industry, there’s a niche group of people who really lean into that approach, and I wanted to find more of those people online. I already had an online following from writing for more well-known publications on those topics. So when I thought about attracting

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Chapter 14 | Cherie Hu, Founder of Water & Music those initial readers to my newsletter, I had a base to work with that was already familiar with what I was writing about. A couple of publications, though not all, also allowed me to link to the newsletter in my bio, which was a great way to cross-pollinate the communities. Atherton: How did the community escalate in growth? Hu: I launched Water & Music as a side hustle in 2017, and in February of 2019, I launched the paid membership on Patreon. The initial wave of people signed up to hear what I had to say as a creative and be in my creator community, though Water & Music has since developed into a brand in its own right that people want to be a part of. I originally framed the membership as a way to dive deeper into the perspective that I was sharing through the free newsletter, which were my personal takes on the industry. In the year leading up to launching the paid membership, I was going to more in-person conferences focused on music and tech. I had a fortune of speaking on or moderating a bunch of panels that year, and I met a lot of people and media. Feedback I kept hearing, at every conference without fail, was that the most interesting conversations were happening offstage, at side events or spontaneous run-ins on the way to dinner, or at a networking happy hour. And yet the programming still held importance in setting the narrative and generating these conversations. I would see all these interesting side conversations happening and then go back home, go online, and there was no equivalent venue for that online, bar a couple of Twitter threads, with their brutal character limit that discouraged deeper and nuanced conversations. People were signed up to the Water & Music newsletter, through which I would send them content, almost prompts for conversation, but there was nowhere for them to talk about them. I identified a real need, to create a place for my readers to speak with each other, that I built in Discord. I also kept meeting people who I was so surprised did not already know one another. Two people who were both working on cool, similar things in music tech but perhaps needed one another’s expertise or to fill a role. From a community building standpoint, those were some of the most exciting kinds of connections that Water & Music was helping facilitate. Once someone experiences that the growth and word of mouth becomes quite viral. Atherton: So Water & Music has been a vehicle for connection, can you talk about the specific types of connections members make? Hu: This is rapidly evolving, but the main connections are work related; we have a jobs channel in our private Discord where people are frequently posting both short-term and long-term job opportunities. I know people get hired from that channel, especially for emerging roles as Web 3 founders are a strong contingent of our community.

The Rise of Virtual Communities Collaborative work is another kind of connection that has emerged through the community. Water & Music has expanded to a network of people working on a variety of different projects, including collaborative research projects. They try to unpack and understand trends in the industry. Our core team works hard to try to facilitate this. For example, we might have a project going on about AI tools for artists. If someone joins the community and introduces themselves as building tools in a similar area, the team will reach out and say, “hey, we’re looking for additional perspectives like yours, we’d love your input on this project.” Water & Music has been highly effective at connecting research teams. Atherton: As a founder of a community, you set the culture from day one, and you cannot underestimate how important it is to welcome people to the community. You were incredibly active in the early days post launch, correct? Hu: I was by far the most active person in the server when we launched. It wasn’t even because I felt like I had to make the community work, I just loved doing it – responding to articles I had read or just banter around music and tech news. I was trying to capture the fluid energy around an in-person conference in a virtual server. So in the early days, the benefit of being part of that server was getting access to my brain dump, but also meeting other members. Atherton: What is the acquisition funnel? How are your members finding the community? Hu: Our member acquisition models have changed as the organization has developed. The freelance articles I wrote that appeared in various big publications were the first point of awareness for a lot of people. If you’re following me on social, you’re slightly more interested in the thoughts I have, but it demonstrates casual interest. From there, subscribing to my free newsletter evidenced a stronger interest, and perhaps unsurprisingly, most conversions to my paid newsletter came from the free tier. I would always push it to subscribers, “hey, if you like what you read, join this specific community.” As Water & Music became more of an interactive community, word of mouth and recommendations from other members are gold. I am proactively trying to get members who are involved in Water & Music projects to speak on panels, go to conferences and host their own events, or go into Twitter spaces that are popular hangouts for those in Web 3 and talk about Water & Music there. I’ve had a lot of people sign up after those online and offline events. Social media plays a role in acquisition. LinkedIn has been helpful. We’ll post articles that are able to reach the professional music and tech community. Atherton: I totally agree that LinkedIn is such an underrated way to attract folks into Web 3 communities.

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Chapter 14 | Cherie Hu, Founder of Water & Music Turning to the business model behind Water & Music, you set up the premium access to Water & Music via a Patreon subscription, what would that give people access to? Hu: I set up multiple different tiers on the community membership. The base tier just gave you access to a private Discord server through which you could connect with other readers. Now Water & Music is an entity far beyond my writing and thoughts on music and tech. Water & Music is a research and knowledge network – in Web 3, what we would call a DAO – focused on innovation in the music industry at large. It’s a limited liability corporation, which grew from just me to three other full-time employees, two part-time employees, and then our most active members who are contributors and project leads. We pay people in the community to lead these research projects or an interview series that run for two to three months. So in total, we are around 20 or 30 people who are powering the community. We haven’t raised any external funding to date; we’ve been 100% bootstrapped by paid membership. We run a monthly renewal membership model. Atherton: So you began Water & Music as a creator, and your members were a tribe interested in the future of music and tech. Do the community members today still all share that interest, or do other topics now orbit that? Hu: Everyone in the community shares a similar curiosity around where the music industry is going. They are open-minded and want to learn and experiment in that arena. Especially as we’ve done more Web 3 research, there’s been a huge influx of Web 3 native people who are excited about what the technology can do for music artists and the industry, but don’t know some basics around sound copyright law or how label deals work. Then on the flipside, we have members who have worked in the music industry for 20 years at famous music labels or in traditional settings who are in the community because they want to learn about new technology and where music is headed. Water & Music takes a neutral stance between these two parties; it does not want to tear traditional music institutions down, nor does it reject all new technology, it is a bridge between those two worlds. As arguably we’re all going to have to work together to bring the music industry to the next stage, whatever that looks like, in an exciting, diverse, equitable, and transparent way. There’s a wide range of perspectives, which is good for a community. We don’t want a mass group thinking the same, varied views encourage discussion as to whether a project or technology is viable or legitimate. Water & Music has the shared mission of improving the music industry and wants to encourage healthy debate over the finer details of those improvements. That’s what drives our research and our writing, trying to experiment as to what that future could look like.

The Rise of Virtual Communities Atherton: Can you talk about how Water & Music shifted from being a newsletter, grounded in Web 2, to becoming a Web 3 DAO? Hu: From a free newsletter to one readers subscribed to via Patreon, I then created a private Discord in which readers could discuss topics they had read with other paying subscribers. From that foundation, the community was a natural development. Our current structure is definitely not completely decentralized or autonomous as the word DAO would suggest. We still have some centralized core leadership, a small group of six people that help steer strategy, operations, and the coordination of the wider network. So our governance is still a managed process. The DAO part which we are progressively opening up more to the community is streamlining the process by which community members can propose their own projects to work on and then get rewarded for it in a more immediate way. We have a token called Stream that you can earn by contributing to any of our projects. We ran some hybrid top-down and bottom-up collaborative research projects in the last several months; our core team would monitor the industry, monitor discussion, and make an executive decision that Web 3 is an important topic to research right now, so we should do a Water & Music report about the state of music in Web 3. For the first report we did on this, for the first week, we opened up the exact topics to cover to community submission. So we had a specific Discord thread where people could submit questions they wanted to explore, and we shape the report around these questions. For example, there were so many requests to look into legal issues around music NFTs because there’s no solid copyright framework for how to deal with infringing NFTs, for example. A lot of other people were really concerned about fan backlash around NFTs; why is it happening and what are tips for combatting it? So we would shape the report around those community needs to make sure it was always addressing something that was an immediate concern to the community. Then, in a bottom-up manner, a lot of the people who suggested those topics to research stepped up and decided to lead and coordinate those projects over a project cycle of eight to ten weeks. So we are transitioning to a DAO; around 500 members right now hold the token. Atherton: What inspired you to introduce tokens to the community? Hu: I did not think to apply the token model to Water & Music until a quick succession of events last summer in 2021. On a macro level, a major industry development was that there was a consolidation of music publications. Penske Media Corporation (PMC) merged with MRC to form PMRC. Therefore, one holding company, PMRC, owns The Hollywood Reporter, Variety, Rolling Stone, Billboard, part owns Music Business

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Chapter 14 | Cherie Hu, Founder of Water & Music Worldwide, as well as some film-specific publications. All the major entertainment media outlets became owned by one company. Historically, consolidation tends to lead to the paring down of resources and a narrowing of perspectives voiced in different publication stories. As someone who cares a lot about writing as a vehicle to help people to understand what’s happening in the world, that consolidation was a concerning development. I was trying to think about what alternative models for this kind of media would look like. Could it be more bottom-up, driven not just by mainstream industry interests, but by people who are on the fringes or are more independent music communities? In parallel, at Water & Music a member of our team, Brooke, and I were trying to research the music Web 3 ecosystem and just realized how limited of a job we could do by ourselves. We were trying to build a music NFT sales database, which is still ongoing. It was a very manual process, and we knew we were missing so many interesting projects from people, especially independent artists whose main media outlet was Twitter, and they would just post a project on Twitter and say “hey come mint or buy my NFT.” We were trying to make the effort much more collaborative with our community of people, a lot of whom are active in this space already. But we didn’t just want to ask them for free data, we wanted to reward them properly for their contribution, especially because it was for our paid publication. Our Discord server was growing, and there was already a lot of peer-to-peer education and knowledge sharing that was happening. How could we harness that energy to produce insights that otherwise would never see the light of day while recognizing the contributions of those involved? A tokenized community seemed to be the only way. So it was a combination of macro-level industry factors around media consolidation and then realizing that certain topics within the music industry would be better reported on with the wisdom of informed crowds and pooling resources that inspired us to introduce tokens. Atherton: Yes, I think there is just so much opportunity for academic institutions, museums, and nonprofits to benefit from having a tokenized incentive system. Can you talk a bit about how you went about setting up the token, marketing it, distributing it, and any challenges you faced with that? Hu: I certainly would not be in this position without having gone through a wonderful accelerator for Web 3 communities called Seed Club, which is completely remote and is run on Discord. I was in their third cohort from September to November of 2021. Beyond the technical introduction to Web 3, learning how tokens operate, the most valuable takeaways were these thoughtful frameworks on community design. If you’re going to start any community, let alone a DAO, you need to think critically about designing the

The Rise of Virtual Communities kind of interactions you want to see among community members, how you’re going to encourage that, and not just talk top-down to them and deliver content to them. The accelerator was helpful for refining that model. Now this is pretty common across Web 3 projects, but we didn’t do a lot of marketing around our token. The only people who could earn it at first were people who had already supported us for a long time. So we did a retroactive airdrop to all of our previous guest writers and to people who had been supporting us through Patreon for a long time and those who had contributed to some collaborative projects we were piloting. So there wasn’t this pressure to onboard as many people as possible onto the token because that wasn’t what it was for; it represented a tangible contribution people had made to the community. That said, it was challenging at the time to get the data that we needed to execute on that. What I mean by that is having a unified picture, in terms of data, of how members interacted across the communities and how many tokens they should earn for their contributions. In the middle of all this, we moved off Patreon to another membership tool called Memberful which is a white label tool, and we launched our own website. So unifying member IDs from Patreon and Memberful with Discord activity and member’s financial support to identify who should receive these tokens was complicated. We had to create our own custom formula, because our community was active in so many different places. For example, on our Discord server, the formula had to be based on not just how many messages you sent but how many “reactions” you gave to other people’s messages or what the length of your messages were. Together with data on how long you had been a supporting member, this would determine the number of tokens you would receive. On top of that was the challenge of getting people’s wallet information. We had an Airtable form in which we asked for members’ wallet addresses. Going into the tech weeds, we asked for people’s Ethereum wallet addresses, and a lot of people gave us addresses for other chains entirely, and others didn’t have any wallet set up at all. We had to run a bunch of onboarding sessions to introduce people to what a wallet was and answer any questions about security and other concerns. We surmounted the challenge, but it took a lot of time and thorough analysis of who we saw was a valuable community member to then map that onto token allocation and then deal with Web 2 to Web 3 onboarding through tutorials. Atherton: Can you touch on community design and the importance of architecting a virtual space that you’re proud of? Hu: It is important to understand the goal of the community. A common pitfall that I have seen with some other communities that spring up around a single creator, whether that be a musician or a podcaster or otherwise, is the failure to accept that eventually as the community grows, you, the individual

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Chapter 14 | Cherie Hu, Founder of Water & Music creator, can take a back seat – because the community will still run on its own and members will get value from each other. The long-term unifying fabric is not just me, Cherie Hu, the creator, it’s some shared interests or values or goals of the community members. In the case of Water & Music, the shared interest is the intersection of music and technology and a desire to understand how they can interact in a more thoughtful way to pioneer within the music industry. The way I initially designed the Discord server is still its layout today. We have discussion channels that are organized by topic, for example, “streaming,” “record labels,” “health, wellness, and sustainability,” “Web 3.” Within these are general news discussions, where people can exchange thoughts with each other. Web 3 is one of our most active channels right now. We also have a separate area dedicated just for industry or professional connections, for members looking for a job or hiring, looking for feedback on their startup or pitch deck. We also have a place for informal discussion, for music or podcast recommendations and memes. Atherton: What do you think of some of the most successful tactics that you’ve introduced to retain community members? Hu: I mentioned that I was the most active person in the server during that first year of Water & Music on Discord. Now I’m definitely not. I still try to catch up on everything, but I try to let the community run on its own. One tactic you cannot avoid as the community founder or manager is just leading by example. There is no shortcut for that. You can’t just post a code of conduct and let people run wild. Chances are most people will not read it, but they will watch how other people behave and try to mimic those behaviors. Our core team attempts to set the tone for the community and start conversations that we are trying to encourage. Another thing we noted is that a lot of community members keep up with our discussions through email. So we have a dedicated email digest that rounds up discussions happening on our server. Our community lead helps curate that and obtains member’s permission to be quoted in the digest. This summary makes it easier for people to jump into the most interesting discussions happening. Discord can sometimes feel overwhelming because it’s all realtime, spur-of-the-moment chat, so making it easier for community members to navigate is helpful for retention. One other tactic that helps with engagement and retention is that whenever people sign up for a new membership, they have the option to have a live member-onboarding call with someone on our team. Drawing on our earlier discussion of trust, it proves that the Water & Music community is human, which is important in an era of Web 3 or in Bulletin Board Systems where there is a plethora of bots. The Water & Music community is human, as are

The Rise of Virtual Communities the people joining, and knowing that other members have gone through this onboarding process creates a feeling of safety. Atherton: What are your hopes for the future of the Water & Music community? Hu: Something that we are beginning to expand into but in the future I would love to support further is making the community even more international, not just in where people are from but in the language that is being used to talk about the topics that we research. We have a Spanish translation team that’s working to spread the word about our research. We have a Chinese translation squad as well. We are trying to not get stuck in the traditional music cities – New York, LA, London – but making it a truly internationally distributed DAO. In general, I hope that Water & Music will be able to convince the music industry that this more collaborative and more social approach to generating knowledge will lead to better outcomes and innovation for everyone. By working together and sharing information more openly, solutions to problems in the music industry will come about more quickly. Our long-term goal is that even if people don’t stay in our community forever, if they leave Water & Music and go into a role in the music industry, bringing our collaborative spirit with them, that will start to bring about systemic change in the industry and accelerate innovation.

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15 Michelle Kennedy Founder of Peanut Peanut is an app-based community for women to connect, listen, and share advice on navigating puberty, fertility, pregnancy, motherhood, or menopause. Founded in 2017 by Michelle Kennedy, the platform has over 2.5 million female users. Through “bump buddies” (which combats motherhood loneliness by connecting women with similar due dates or aged children), group forums, and “pods,” a live audio feature, Peanut supports every life stage of women. As the founder of one of the fastestgrowing social networking apps for women, Kennedy drew on ten years of experience in social networking at Badoo and as a board member of Bumble (IPOed at a valuation of $13 billion). Peanut has been named in Apple’s Best Apps of 2021 and TIME’s Most Influential Companies of 2022. In 2021, she launched Peanut StartHER, a micro fund investing in women and underrepresented founders at the pre-seed stage, attempting to reduce the biases in venture capital. Atherton: What were the first online communities that you remember being a part of that were influential? Kennedy: My best recollection was the online chat room, MSN. I couldn’t wait to get home from school, so I could go on MSN and talk over the day with my friends that I had just been with. My most prominent memory is of © Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6_15

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Chapter 15 | Michelle Kennedy, Founder of Peanut waiting to see the little icon that denoted that people were online. But in the UK at that time, my exposure to anything tech was so basic. We’d have one computing lesson for 40 minutes each week where we would go on Paint.1 I wasn’t on Myspace or Bebo, and I was extremely late to Facebook; I joined aged 23. At that point, I had been through university law school, and I was in my first training contract in Newcastle before I even considered Facebook. I wasn’t online much until my early 20s, and Facebook was the first social network I joined. Around the same time, I would use Ask Jeeves which would link you into a forum and chat bots. I joined Facebook because there was a bit of peer pressure. I didn’t particularly love it. I was an occasional user. Atherton: From doing M&A as a lawyer, you then moved to Badoo. Can you tell us about that? Kennedy: Badoo was this network to meet new people. Really, it was dating, but at the time the only dating sites around were eHarmony and Match.com which were aimed at finding serious relationships. Badoo was about casual encounters. It was a totally different culture, with a more European feel, having been founded in Spain. I remember going to meet Andrey Andreev, the founder, and looking up some background info. Badoo had 52 million active users – yet I’d somehow never heard of it. The website had a ticker which told you every time someone joined, which felt very advanced back in 2011. Tech was starting to get a bit of a wind in its sails in London. Facebook had just opened an office. I joined Badoo at a time when it was extremely high growth and interestingly making really good revenue. Facebook had only just turned on ads. Badoo used a freemium business model. It was web based, and any features that would accelerate your visibility on the site, you would pay for. We had these short codes, which were usually where you would text a code and could get back a ringtone or a screensaver, but we had one for premium chat between people that you had met on Badoo. So every time that you wanted to text that guy or he wanted to text you, it would cost you $1.50. I remember everyone telling Andrey that he couldn’t have a short code, that this was not what they were for. But he could see the potential of them, and so eventually we found one provider. Atherton: So people were coming together on Badoo mainly to date via the Internet. What did you observe there that planted the seed of an idea for Peanut?

 Microsoft Paint is a simple, graphic design program that has come preinstalled with the Microsoft Windows operating system since 1985. 1

The Rise of Virtual Communities Kennedy: The most prominent takeaway was that people wanted to make connections; they were desperate to. It was an age where we weren’t talking about loneliness and isolation, and dating online was still quite taboo, yet there were tens of millions of monthly active users. The other thing that was clear about using Badoo was that it was a game. It didn’t feel serious. It was so sticky; there was layer upon layer of ways to meet people. You could promote yourself to the top bar of people nearby. You could promote yourself so that your message appeared in their inbox first. It was like your own personal SEO.  It was lighthearted; there were so many faces on there that Badoo almost felt like you were playing the board game “Guess Who?”2 Atherton: While you were Deputy CEO at Badoo, you joined the board of Bumble? Kennedy: Using the infrastructure and technology that Badoo had, Bumble was created. During my time at Badoo, we had to do the web to mobile migration. Like Facebook, we were a bit late to the party. We had this sticky product with layers and layers on desktop, how did you program that to mobile and how did you monetize on mobile? So we were a bit late in that migration. The decisive turning point was when Tinder came out. The swiping mechanism was a feature that we’ve had for ages. Instead of it being loads of features, it was just one, done really well. It looked beautiful, and it was native iOS. We just thought “that should have been us.” The most pivotal change that Tinder brought about was that it made it socially acceptable to date online. It legitimized that market. At Badoo, we still didn’t call it dating, it was social discovery or a version of social networking. Being on the board of Bumble was just the next iteration. That’s what the future of dating could be. I suppose I had to live the evolution from working in a community that was connecting people for casual encounters at Badoo to socially acceptable dating at Bumble to then know what kind of community I wanted to build when I set up Peanut. Atherton: Did you do any research before launching Peanut? Did you feel that there was a need for this community of women? Kennedy: When I started on the board of Bumble, my first son was six months old. I was living a double life. By day, I was working in dating at Badoo and advising at Bumble, both of which were exciting companies with innovative products. By night, I would be at home desperately searching for information to do with raising kids. None of my friends had kids; I was the first one. I had come off Facebook, so I had to rejoin in order to get added to a mummy Facebook group, so I could get some intel on what I was going to do with this baby that never slept! I became a little bit obsessed with this group; it was 2

 A board game in which you guess the identity of your opponent’s character.

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Chapter 15 | Michelle Kennedy, Founder of Peanut fascinating. You could see the churn in the group. A new cohort came in, asking the same questions that you’ve already seen a few months ago. The same names pop up, chat about the common things they’re going through, and then churned; perhaps the kids were a bit older or they’d found some friends with similar aged kids, so didn’t need the group anymore. This was just a tiny group in North West London that I had been added to. There were all private groups where you had to know someone to get added. This was the first experience of a virtual community that I felt attached to. There was a very specific journey a parent would go through. It would start with a Google search, “Why won’t my baby sleep,” and Google throws up these legacy SEO threads on blogs and forums: Mumsnet, BabyCenter, What to Expect When You’re Expecting, subreddits on motherhood, Quora, all what felt like old content. This was a terrifying world. Everyone’s using acronyms, which I didn’t understand. Everyone’s got weird pseudonyms like BabySaver281. It’s hard to decipher what is fictional and what is real. I remember speaking to one of my girlfriends, telling her that I was reading this forum for how to get my son to sleep. She gave me a reality check, “you wouldn’t read that kind of forum for any other part of your life, but for your kid, you’re reading that?!” Then I got talking to a girl in a local coffee shop, and she told me about this Facebook group called Babies, Babies, Babies. Going into that, I felt like I had more identity. There was a high element of trust because it was local; I could see their real names and photos, so it essentially functioned as a high trust search engine that I could ask questions to. But beyond utility, there was no sense of belonging or true friendship in community interactions. I started to notice these Facebook groups were everywhere. Upper East Side Mamas had 30,000 members. Miami Moms had 40,000. Park Slope Mummys was slightly renegade because they had a Yahoo group and another offshoot on Slack before anyone was really using it. I was observing these groups all over the world, yet with similar patterns of content. Each had differing levels of trust. People were somewhat reluctant to share vulnerability. I had identified a need that was growing and not specific to the UK. In 2016, I decided to build something myself, a platform that I would use. So I launched Peanut. Atherton: Tell me about the early days of community building at Peanut. Kennedy: I didn’t know what exactly I wanted to create. But I knew there were a lot of women who needed support and were using suboptimal systems to find it. So the starting point was that I stayed on the board of Badoo and Bumble while I figured out what this was going to be. It was always called Peanut. When I was pregnant with my first child, one of the girls in my office used to say “how’s Peanut today?” so that name stuck.

The Rise of Virtual Communities I found my first early team members while I was working in a Facebook office, which they called an incubator, but it was simply a disused Facebook office. My first core member came with me from Badoo. She’d lived through all of my ideas testing. My CTO had been the CTO at Deliveroo. I pitched Peanut to him, and he was like, love it, let’s do it. Through him, we found our designer. And via my network, we found an iOS engineer. A dream starting team. Atherton: How did you go about supercharging the community growth? Kennedy: When we were in the first stages of building, I would ask women: “What would you like? Do you have friends? How many do you have? How did you meet them?” Every woman I spoke to introduced me to another woman. Because I had observed this life stage where people wanted belonging, information, and to connect to other people who were going through the same thing, word of mouth was easy to obtain. So by the time we were ready to launch, I had a little crew of a couple of hundred women who were keen to test it. That baseline of high-intent users was the starting point. We got traction quickly from there, because what we were doing was unusual; people weren’t talking about motherhood. We earned this tag of “Tinder for mums,” which for better or for worse made people understand what we were doing: finding friends for mums. These one-to-one connections were very effective – people loved it and were making friends – but then they didn’t need Peanut. So it was clear that we needed to build a community fast or else face serious churn. Unlike dating, Peanut users wouldn’t break up and return to the app nor did they need to find friends prolifically; they needed on average three girlfriends, who didn’t need to be “the one.” So unlike the dating apps I had worked at, the cycle was different. From the release of the finding friends feature to having a version of community was about seven months. Atherton: Can you tell me about those first community features that helped reduce churn? Kennedy: Our first community features were pretty basic. We decided to go with topics on Peanut Pages. You could post a question under different topics on anything from work and money, love and sex, motherhood, pregnancy, and other users could answer. The challenge in the first instance was that everyone had questions that no one was brave enough to answer. So we would surface questions that were getting responses, so that users were engaged and saw engagement occurring. When a community is small, no one minds using their voice. When it gets bigger, everyone gets stage fright to say anything. They worry that their question is a silly one. Then we started building additional functionality: better search, a better user interface that encouraged people to create and post.

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Chapter 15 | Michelle Kennedy, Founder of Peanut The big change was when we built groups for location. If we knew you were in San Francisco, we put you in the SF Mums group. It transformed our retention and our engagement metrics. From that moment, it wasn’t just that you were mothers or pregnant on Peanut, but living in the same locale, it mattered that you would recommend this over that or were going to go to that local park. Groups introduced a deeper level of connectivity. Members’ location fueled trust because the primary reason they were joining Peanut was to meet people nearby, and then the community layer was wrapped around that. Due to the success of these groups, we moved all of our static text-based forums, our Peanut Pages, into these private location-based groups. While we develop a live chat component, in the interim we have built a live audio-radio feature, because we know that there’s a huge need for synchronous connection. Atherton: Peanut has Q&A forums and private groups, how did you generate a sense of trust and safety for the potentially vulnerable topics being explored within them? Kennedy: When you’re dealing with women who are pregnant, trying to get pregnant, have kids, are going through menopause, whatever it is, the conversations you want to have are so personal that this platform requires trust. So we had to quickly invest in a text app where we could detect women vs. men, we have selfie verification, we have other machine learning throughout the onboarding which will predict the likelihood of you behaving in a respectful way. If the machine learning flags you, we shadow ban you, meaning you don’t know that you’re not being seen on Peanut, but until we verify you with humans in the loop, you are not seen. We have always chosen safety over growth because if we didn’t gain our users’ trust, they were going to churn anyway. We knew this would lead to a steady growth trajectory where people would stay on Peanut. So we continue to invest heavily in our tech stack relating to moderation, trust, and safety, because that is at the core of Peanut. Moderation challenges every community builder because the strength of being pseudo-anonymous is that you can be more vulnerable; there is a reason why these Reddit forums succeed, but at Peanut trust is vital to counter the challenge of spam and bad actors. The consequences of this are visible in Peanut forums. It differs from the content I was once witnessing in Facebook groups or the forums, as honest and raw. They know they’ve each been through the same onboarding checks, so users started to talk about their sex lives, money worries, societal issues, personal moments. These conversations wouldn’t happen on the forums because you need an element of identity for people to discuss these experiences. That’s not to say that we don’t allow women to post incognito – we do. Some subjects, like domestic violence, need anonymity. However, Peanut always knows who you are. We dissuade you from going incognito. We know that users who are

The Rise of Virtual Communities shown a lot of incognito posts start to lose confidence in who else is on the platform. We give clues within the UI to try and dissuade it, but we know that there are topics where incognito is required. The community is very supportive of it. The community is also amazing at self-policing and self-moderating in addition to everything that we build on top of it. Atherton: How has Peanut changed tack as you have grown the community internationally? Kennedy: We’re not quite global, but in English-speaking markets: the US, UK, Australia, New Zealand, Canada. We began to see that we had the permission of our user base to speak to them beyond the moment of pregnancy and motherhood, because the topics they were discussing were so much wider than that. So we included women who were trying to conceive, fertility, IVF, adoption, surrogacy, as an obvious feeder toward motherhood through whatever route, she becomes part of Peanut. But we keep them in walled gardens, so if you’re trying to conceive, you’re not triggered by the topics on baby scans. You kind of don’t see that content; you’re surrounded by other women who are also trying to conceive and going through perhaps a “fourth failed round of IVF, what do I do from here, has anyone else experienced this?” That’s what I mean by these vulnerable moments where women are finding connectivity over common experiences. Then recently, we’ve seen as women have children later, the distance between motherhood and menopause is reducing. We started to see women talking about perimenopause and hormone levels, and so it felt that we had permission from the space to serve that community as well. So now we have another walled garden for women who are going through peri-, mid-, and postmeno­ pause also have a place on Peanut. The wider vision is that Peanut serves women at all life stages, and we talk about it being from menstruation to menopause and beyond. We want young women to join when they’re going through puberty and women who are in their late life and thinking about their next chapter, so that three generations of women, potentially all in the same family, can use Peanut to find community. To me, that’s compelling, as nothing like that exists. Atherton: Peanut is created for and by women. Do you think online communities feel safer and more authentic if they are created by the intended end users? Kennedy: Having felt the need for a platform that did not exist led me to create Peanut. In 2019, I remember seeing an advert for Peanut on Pinterest that the Peanut team had not created. We discovered that women in the community were paying for Pinterest Ads to advertise the meetups that they were arranging on

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Chapter 15 | Michelle Kennedy, Founder of Peanut Peanut. Women love this product so much that they have been using their own money to advertise it, driving people to the platform to find the details of their meetup. The brand has become a point of identity and connection for many women, which I think is special. We’d see other cute things like women dressing their kids as the Peanut logo for Halloween. Atherton: What was the business model behind Peanut that enabled this community to flourish? Kennedy: Monetization is relatively new for Peanut as we really spent a long time building the product and the community. I’ve always been clear that our business model should be freemium: free to use, with premium features. That’s how I learned my craft at Badoo with micropayments and has been the inspiration for what we’ve done. At Peanut, we monetize from our users, rather than monetize our users. This is not an ad play or a data play, this is women opting to accelerate their access to friendship or choosing to pay to have their posts appear higher in the community so that more people will respond. There are one-time premium features that you pay to unlock. We’ve also started doing subscriptions to these features. Atherton: Can you touch on your funding journey at Peanut? Kennedy: The way we talk about motherhood has transformed since I launched Peanut in 2016. I would tell people that I wanted to build a social network starting with mothers, and they’d be so unenthusiastic. They didn’t understand what I was seeing, which was that if I was dissatisfied, other young women behind me were going to be dissatisfied. They didn’t realize that it was a huge opportunity. These young mothers had expectations, disposable income, they’re smart and tech-first. I was fortunate that I had a track record in management at social and dating platforms; therefore, my path was somewhat easier than others. But it was still hard. There are few truly successful social networks, and there’s a reason for it. It’s really tough and not a lot of people want to invest in them or know how to invest in them. Social networks are predominantly based in the US/ Pacific. There aren’t many in Europe, because few European investors are looking at the space. I did a pre-seed round with an institutional investor in 2017. I think I would have benefited from bringing in institutional investors slightly later, but I didn’t know. There have been amazing investors I have brought in, and there have been investors who have not been right for us, or us for them. The best investors can see the resonance of products that aren’t necessarily in their area. They are the keepers, the ones that you go to when the sky is falling in as well as when the awards are flying.

The Rise of Virtual Communities We did a Series A at the start of the COVID-19 lockdown in 2020 and have raised $23 million to date. We have a mix of US and European investors. Our Series A was led by EQT Ventures in Europe. Our pre-series A was Index Ventures, but I also have Greycroft and NEA on the cap table. Atherton: Did you at any point think that you needed to move to America to grow Peanut? Kennedy: Of course! Not just did I think, I was told that I would have to by investors. I was ready to move. I was concerned about the team. My network was not in the US from a hiring perspective, it was in London. One thing led to another, then a global pandemic hit, and here I am, still based in the UK. Now the world is more global. It is easier to raise funding from West Coast venture funds from anywhere in the world now. I spent one week a month in the US minimum for the first three years of Peanut, for cultural congruence. If you’re building a social product, your community must feel like it’s a community built for them. I was always conscious that I wanted the US market, and I wanted anyone who is using Peanut in the US to feel like it was a US product. I had to be in the US to soak up the culture, the way that people were using technology, and the design language. My advice to others is to be at that dinner where you don’t know anyone, talk about what you’re building, learn what others are building, and what about their products gets a good reception. Atherton: What do you think the challenges are going to be in the next phase of scaling the community? Kennedy: We have three million monthly users on Peanut. I think the biggest challenge is the global approach. Going back to what I just said, cultural congruence is everything. I want a woman in Mexico to open Peanut and feel like Peanut is an app that was built in Mexico. That should be true for everyone who opens it. So we need to localize, and that takes time and resources. Atherton: What are some of the favorite rituals that you’ve introduced or that you observe within Peanut that keep these community members retained and coming back? Kennedy: Women love to share their Peanut story. The team and I love to hear these anecdotes: I met my best friend on Peanut; I escaped an abusive relationship with the support of the community; I borrowed my wedding dress from my Peanut friend. We love to hear and share the Peanut stories, and that’s what makes people feel proud to be part of the platform. Atherton: The core functionality of Peanut is in itself a fantastic retention tool. Users are coming to get advice at different stages of womanhood which is constantly evolving.

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Chapter 15 | Michelle Kennedy, Founder of Peanut Are there any other North Stars that encourage a new user to become a regular, participating part of the community? Kennedy: The speed to make your first connection and the time within which we can get you to interact with and message that first connection gives our users a sense of the network and hooks them. From there, it’s about network density, the number of possible connections that are genuine connections. Atherton: What’s next for Peanut? Kennedy: I hope that global access to Peanut is not far away. Women need and deserve to find community. We often don’t grow up where we were born anymore. We move away for work, for many reasons, and in doing so all of those connective points that once came from the family unit are lost. We need to create new versions of what a community can look like. If you don’t live next door to your sister and you want to talk about painful sex after having a kid, who do you go to with that? We see women who think they are going through early onset dementia, and often they don’t realize that they’re just in menopause, and the memory loss is due to a hormone deficiency. Where do you have these conversations if the concept of what community used to be has completely changed? Part of it is about normalizing conversations around womanhood, but it’s also the need for communities that specifically serve women. Atherton: In my experience, many of the most successful online communities have a very specific need that they serve. Are there any other ingredients at Peanut that make the community successful? Kennedy: Beyond utility and the platform being a safe space, I would say creating groups based on users’ location is important, as is the sense of belonging that you get from other people going through the same journey. We gained our first users through the early interviews with our target audience that I conducted, and then word of mouth proliferated, because Peanut serves such a specific purpose – building a community that people want worldwide.

G Glossary API: Application programming interface BBS: Bulletin Board System Commodore 64: An early and popular home computer, featuring the first affordable color graphics Commodore International: A home computer manufacturer that launched the bestselling Commodore 64 DAOs: Decentralized autonomous organizations. An organization on the blockchain that is governed by the votes of its token holders, rather than a centralized authority IRC: Internet Relay Chat was a protocol that offered instant messaging in 1988 MMO: Massively multiplayer online game MUG/MUD: Multiuser game/multiuser dimension, in other words, a virtual world in which users are represented by avatars and interact with others PLATO: A programmed logic for automation of teaching operations on which many concepts such as forums and message boards began Web 3: A new era of the Web facilitated by the blockchain and decentralization, as opposed to Web 2

© Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6

I Index A

B

Accountability, 42, 43, 114

Babies, Babies, Babies, 164

Acquisition models, 153

BabySaver281, 164

Activity metrics, 10

BBS messaging boards, 107

The Aleph, 100

Betaworks, 117

Alexis Ohanian running club, 109

Bidirectional relationship, 120

America Online, 118

Bigger cultural moments, 124

Anti-VR, 122

Bitcoin, 61, 144

AOHell, 118

Blockchain, 12, 13, 115, 124, 143, 150, 151

AOL Instant Messenger, 130

Blogger’s FAQ section, 102

Application programming interface (API), 6, 103

Bored Ape Yacht Club, 151

Architectural literature, 81

Brand Hijack (book), 147

Around-the-world plane ticket, 97

Brud, 137, 140–144

Artificial stable identities, 113

Building Web Reputation Systems (book), 8

Artist branding, 138

Bulletin Board Systems (BBSs), 2, 5, 15, 16, 29, 35, 41, 73, 89, 90, 100, 114, 118, 138, 158

Artist Management Group (AMG), 92 Ask Me Anything interviews (AMAs), 112, 113 Asynchronous JavaScript (AJAX), 119 Asynchronous vs. live chat, 105 Audio-video technology, 132 Aurora Feint, 131 Avatar-based immersive worlds, 105

© Amber Atherton 2023 A. Atherton, The Rise of Virtual Communities, https://doi.org/10.1007/978-1-4842-9297-6

Brainstorms, 19

“Bump buddies”, 161 Business model, 37, 47, 58, 59, 86, 87, 97, 98, 115, 123, 133, 135, 143, 154, 162, 168 Buterin, Vitalik Ethereum, 61 SBT, 61

174

Index

C Caucus, 32 CGI avatar, 137 Chat-based quizzes, 74 Chat services, 11 Chinese translation squad, 159 Christmas, 83, 86 Classic Club Penguin Halloween party, 83 Cloud computing, 84 Club Caribe, 2, 6 Clubhouse/private Discords, 121, 152, 154, 155 Club Penguin aim, 80 analogy, 87 architecture, 81, 82 business model, 87 Coins for Change, 86 community building, 82 community change, 87 concept, 79 earning based, 86 full-time Coins, 86 growth, 82 Hyper Hippo, 87 measures, 85, 86 MMO and virtual world, 79 monthly parties, 82, 83 monumental captive audience, 86 network effects, 82 new Halloween party, 83 online safety standard, 85 profit, 86 ranking, 79 sketches, 80 technological challenges, 84, 85 the tribe, 88 twins, 81 VC investment, 79 venue, 88 The Cobra scene, 138 Cobrasnake, 138 Coins for Change, 86, 87 Colliding, 88

Collisions, 81–73 Comic-Con, 114 Commodore 64, 2, 4, 13, 40, 68, 77 Commsor, 113 Communities, 134 Community building, 23, 56, 109–112, 122, 142, 152, 164 Community features, 165 Community manager, 27, 28 Community members, 24, 46, 90, 91, 94, 111, 125, 126, 132, 149, 155, 157, 158 Community moderators, 73 Community-owned storytelling evolution, 143 Community-powered business, 123 CompuServe, 16, 40 COMUNI, 2 Connection, 104 Content distributed networks (CDN), 84 Controversial content, 10 COVID-19 pandemic, 20, 87, 150 Creative Artists Agency, 91 Creators, 46, 72, 96, 118 Crypto, 60–62, 126, 143–146, 151 Crypto channels, 144 CryptoPunks, 127 Crypto tokens, 137, 144 Cultural pockets, 141 customize.org, 93 Cyber Army, 138 Cybertropix, 93

D DALnet, 90 Damage Incorporated, 108 DAOs, 9, 61, 62, 149, 150, 154–156, 159 Dark Tip, 118 3D avatar chat systems, 48 2D BBSs, 23

Index The Death and Life of Great American Cities (book), 54

The Discovery Channel, 118

Del.icio.us, 103, 118

Disneyland, 82

DeviantART appeals, 94 art platform, 94 building features challenges, 95 business model, 97, 98 cofounders, 90 community growth, 95, 96 community rituals, 96, 97 digital artists, 95 DMusic, 93 etiquette policy, 98 funding, 89 innovative features, 89 IRL events, 97 Llamas, 89 observation, 94 personal catalyst, 93 posting images, 94 virtual art community, 89 wild place, 95

Disneyland hubs, 82

DeviantART group platform, 96 DeviantMEETs, 97 Digg acquisition, 117 AJAX, 119 cross-pollination, 118, 119 description, 117 early experience, 118 early Web 2 environment, 118 fostered community, 120 intuitive hunches, 125 microblogging site, 120 sales, 117 social networking, 119 Diggnation, 119 Digital art, 98 Dimension Art (D Art), 94 Discord, 11, 27, 58, 94, 125, 129, 133 communities, 133 conversations, 132 design, 134 Generative AI, 135 online communities, 132

Disney film Frozen, 87

DJing, 138–140 DMusic, 91–94 Dollz, 39, 46, 47 Domestic violence, 166 Doom and Heretic, 90 Downvoted (burying), 117 Dunbar number, 21, 58, 62 Dungeon Dwarves game, 88 Dyslexia, 81

E Early-day community, 111 eatskeet.com, 139 eBay, 59, 120 Echo active users, 38 Bulletin Board System, 35 business model, 37 Echoids, 33 gender split, 34 harassment, 34 Horn, Stacy (1989), 29 Information Superhighway, 37 Internet provider, 37 New York, 35 text-based platform, 29 text-based software, 36 virtual salon, 33 The WELL, 38 Echoids, 29, 33 2008 Economic crisis, 98 EFnet, 90–92 Electric Communities, 2, 12, 13 Electric Minds, 24, 27, 101 “Elite Penguin Force” agent, 85 Encyclopedia flexicon, 101 Engagement metrics, 10, 11, 166 Engagement trap, 10

175

176

Index English-speaking markets, 167

Fruitfully online, 104

Entrepreneurship, 94, 109

Fujitsu Habitat, 2, 6

Ethereum, 61, 143, 151, 157

Functional furniture, 74

EverQuest, 108

Funes The Memorious, 99

Experimental Penguins project, 80

FWB cities, 145, 146

Expression, 105 EyesWide.org forum, 108

F

G GeoCities, 100 Geographical locale, 103

Facebook, 25, 55, 64, 110, 121, 162–166

Gestures, 105, 110

Face-to-face communication, 18

Google Plus, 121

Fan sites, 74

Google search, 27, 164

Fasting, 123

Google Ventures, 117, 121

Financial model, 123

Gossip Girl episode, 139

Finnish advertising agency, 68

“Growth-at-all-costs” culture, 143

Finnish Internet Portal, 68

Guided approaches, 72

Finnish mobile operator, 68 Finnish telecom operator, 70, 77 Five-star ratings, 9 Flickr cross-pollination, 104, 105 description, 99 features, 99 forums and areas, 103, 104 founding, 99 guiding principles, 105 online community, 101, 102 photo sharing community, 102 photo upload feature, 103 SmugMug, 99 snowball growth, 102, 103 tag clouds, 99 tags, 103 Yahoo!, acquisition, 99 Flickr Forays, 104 FluffyBunny42, 114 Freelance writing, 151 Freemium business model, 162 Free newsletter, 152, 153, 155 Free-to-play business model, 87 Friends with Benefits (FWB), 137, 143 Web 3, 144

H Habbo Aapo Kyrölä (cofounder), 67 avatars amd rooms, 67 chat-based capabilities, 71 community hosts, 73 competition, 76 DnD–style, 74 events, 73 Finnish telecom operator, 77 first version, 69 forums, 73, 74 languages, 76 life span, 76, 77 MMO and virtual world, 67 play element, 74 public spaces, 72 secondary market, 75 self-expression, 71, 72 software-based activity trackers, 78 tech stack, 69 teenage market, 71 trading furni, 75 2D pixel aesthetic, 77 user demographics, 75 virtual community, 72 volunteer community moderation, 73

Index Habitat, 1–7, 11, 13, 48, 68

Liquidity, 126

Half-Life game, 108

LiveJournal, 100, 138

Halloween, 81, 83, 168

Llamas, 89, 96, 97

Hotel Goldfish, 68, 69

Lucasfilm’s Habitat Chip Morningstar, 1 Club Caribe, 2, 6 Fujitsu, Japan, 6 MMO, 1 present-day online community design, 2 Quantum Link, 5 Randy Farmer, 1 virtual environment, 5

Hotelli Kultakala, 68 Hyper Hippo, 87 Hypothetical business, 109

I Incubator, 165 Information kiosks, 69 Infrastructure and technology, 163 Infringing NFTs, 155 In-person elements, 104 “In real-life” (IRL) events, 97, 145, 150 Instagram, 9, 55, 141, 143, 144 Intellectual property (IP), 123 Interestingness, 99 Internal reference, 126 International growth, 70 Internet, 80, 100, 108, 111, 113, 119, 137 iPhone, 78, 130, 131 IRC network, 90 IRL communities, 113, 125 IVF, 167

J Janky startup, 110 JavaScript, 109 Johnny Cupcakes, 139

K Knowledge sharing, 156

L

Lucasfilm’s “Universe”, 3 Ludicorp, 102

M Macro-level industry factors, 156 Macromedia Director, 69 Magical interactions, 105 M&A, 162 Mansion, 41, 49 Marketplace.SecondLife.com, 59 Material communities, 138 “Mayor of the Internet”, 107 Mechanical wristwatches, 122 Media platforms, 114, 134, 141 Memberful, 157 Memory, 35, 49, 102, 105, 161, 170 Microcelebrities, 119 Micropayments, 69, 70, 75, 168 Microsoft, 60, 84, 85 Microsoft Paint, 162 Microtransactions, 115 Mobiles, 67 Mobiles Disco, 68, 69, 71–73 Mobil Oil, 29–31

Lego blocks, 72

Moderation, 3, 8, 17, 46, 70, 73, 85, 98, 126, 132, 134, 166

The Library of Babel, 100

Monet, 31

Linden dollars, 53, 58, 59

Monetization, 83, 123, 168

LinkedIn, 117, 153

Moonbird parties, 125

177

178

Index Moonbirds, 126, 127 Moonbirds NFT collection, 115 Mosaic, 36, 37, 100 Moves, 78 MP3 distribution bot network, 91 #MP3files, 90 MSN, 80, 161

O Off the Hook, 32 One-on-one conversation, 125 One-size-fits-all, 115 Online activism, 107 Online chat, 40, 161

MUD1, 2

Online communities, 8, 17, 19, 99, 101, 135, 138, 149, 161, 170

Multinode BBSs, 118

Online dating site, 130

Multiplayer games, 45, 131, 132

OpenFeint, 129–131

Multiplayer online game (MMO), 1, 5, 76, 79

Orkut, 10

Multiplayer text adventure, 41

OWL magazine, 80

Multiuser dungeons (MUDs), 24, 39 Multiuser game (MUG), 2 Museum of Art and Digital Entertainment (MADE), 2, 13 Music NFT Drops, 149, 155 MyMobileMenu, 108 Myspace, 73, 110, 138–140, 162 Myspace communities, 138

N Narratives, 141 Nat Geo Kids, 80 Neopets, 76 Netflix, 88 Netherworld, 90 Netsmart (book), 25 NetWits, 40 New Horizon Interactive, 80 NFT projects, 77, 124 NFTs, 6, 48, 58, 77, 123, 125, 126, 143, 144, 151, 155 Ning platform, 96 Nitro Basic, 133 Nondigital natives, 105 Non Ugly Emos, 138 Nordics, 75, 76 Numero Uno, 130

P The Palace, 42 in beta, 44 Bumgardner, Jim (1991), 39 CompuServe, 40 3D avatar chats, 42 Fox News Corporation, 50 Internet, 49 IRC, 42 K-Mart, 39 online chat, 40 profit, 50 self-selected community, 47 SoftBank, 50 virtual communities, 42 the Wild, 45 wizards, 44 Patreon, 22, 152, 154, 155, 157 Peanut, 164 app-based community for women, 161 “bump buddies”, 161 business model, 168 challenges, 169 early days of community building at, 164 end users, 167 functionality of, 169 funding journey, 168 global access to, 170 Google search, 164 launching, 163 moderation challenges, 166

Index monetization, 168 move to America to grow, 169 online communities, 161 Peanut Pages, 165 private groups, 166 Q&A forums, 166 rituals, 169 serves women, 167 StartHER, 161 supercharging, 165 users, 169 Penguin Chat, 80, 81 Penske Media Corporation (PMC), 155 Person-to-person trust, 150 PHP Bulletin Board Systems, 138 Pixel graphics, 69, 74, 77 PLATO, 3 Playbook, 125, 142 PlayStation, 130 PMRC, 155 Points, 96, 97 Polycentric governance, 55, 56 Pownce, 117, 120, 121 Pressure release valve, 120 Prints and print reproductions, 98 Prodigy, 129 Profile picture NFT (PFP), 124 PROOF, 115, 127 PROOF Collective, 117, 122–125 PROOF Collective NFT, 115 PROOF’s nesting website, 124 Pseudonymity, 114 Pseudonyms, 36, 110, 114, 164

R Real-life interactions, 8, 19, 35, 104 Real-time back-end system, 69 Real-time chat rooms, 73 Real-time interaction, 76 Real-time virtual world experience, 74 Record Industry Association of America (RIAA), 91 Reddit, 27, 38, 46 active communities, 107 community self-moderators vs. employed admins, 111, 112 community traditions and rituals, 112, 113 description, 107 online communities aspects, 115, 116 trust, 113, 114 user base growth, 110 virality, 111 Reddit awards, 111 Reddit mascot, 110 Redditor (Reddit user), 113 Reddit’s April Fools’ Day pranks, 112 Research token, 149 Retro aesthetic, 77 Revenue model, 10, 69, 78, 98 Reviews, 9 Revision3, 117–119 Robin Hood Foundation, 114 Roblox, 48 Role-playing, 74 Role-play themes, 72 Rules and norms, 134

Public room in-world, 81

S

PurpleTurtle12, 114

*Sampo laughs*, 69

Q Quake 2 game, 108 Quantum Link, 4, 5 Quasi modem, 40

Satama Interactive in Helsinki, 68 Second Life, 24, 77 avatar’s appearance, 56 crypto, 60 currency exchange, 59 economy, 57, 58

179

180

Index Second Life (cont.) federal government, 55 friction, 63 gender balance, 53, 54 in 1999, 53 non-avatar-based chats, 56 physical laws, 57 polycentric governance, 55 server machines, 59 social media, 55 users, 55 virtual museum, 58 Secret rooms, 81 Seed Club, 149, 156 Self-expression, 47, 56, 67, 68, 71, 133, 135 Self-moderation, 46, 111 Self-post, 113 Servers, 9, 12, 39, 59, 82, 84, 129 Seth Godin’s book Tribes (2008), 88 SF Mums group, 166 Shadow Crew, 138 Shrunk down comment, 120 Shwayze, 140 Skatepark Project, 122 ski village, 80, 82, 88 Slashdot, 118 SMS payments, 70 Snow Blasters, 80 Social and dating platforms, 168 Social game, 131 Social interaction, 71 Social massaging, 101 Social media, 8, 55, 62, 101, 105, 134, 141, 153 Social network, 10, 12, 29, 30, 32, 71, 89, 96, 115, 130, 162, 168

Spin-off company, 80 Spotify, 140 Stage Three Clothing, 139 Stand-alone PFP, 126 Standard PS5s, 122 Stream, 155 Subreddits, 19, 46, 107, 111, 112, 164 Subscription revenue model, 98 Swiping mechanism, 163 Systm, 118

T Tagging, 103 Team Nocturnal, 108 Teenagers, 23, 47, 67, 71, 75–77 Telecommunications, 29, 30, 37 Telephone line, 37, 70 Text-based community, 10, 23, 42, 129 TheHundreds.com, 139 Threads responses, 111 Threshold, 120 3D fantasy MMO, 108 3D graphics, 69 TikTok, 94, 110, 142 Times or The Wall Street Journal, 122 “Tinder for mums”, 165 Tokenized communities, 115, 123, 144, 156 Tokenized NFT community, 123 Tokenomics, 143 TotalFark, 115 Trade “furni” (furniture), 67 Transactional experience, 105

Social networking, 79, 119, 121, 130, 161, 163

The tribe, 88

Soulbound tokens (SBT), 61

True Ventures, 121

SPB, 2

Twitter, 10, 11, 26, 36, 47, 51, 83, 110, 119, 121, 151–153, 156

Spectrum, 77

“Trip hop”, 140

Index

U “Ultimate safe chat mode”, 86 Undernet, 90 University of Virginia (UVA), 108 Unix (pre-Internet), 16 Upvoted/digging, 117 Usenet, 16–21, 25 User-generated content, 94

V Venture game, 41, 122 Viral growth, 69, 102, 103 Virtual communities, 8, 11, 30, 32, 44, 105, 129, 150, 164 The Virtual Community (book), 17, 18, 20 Virtual currency, 53, 58, 96 Virtual exhibition, 95 Virtual furniture catalog, 70 Virtual interactions, 150 Virtual multidimensional hotel, 69 Virtual reality (VR), 23, 42, 51, 64, 65 Virtual server, 153 Virtual space, 17, 43, 69, 134, 135, 157 VRChat, 55, 64 VR headsets, 23, 64, 65, 77

W, X

neutral stance, 154 research and knowledge network, 154 research DAO, 149 research token, 149 side hustle in 2017, 152 signed up, 152 stages, 151 token model, 155 types of connections, 152 Web 2, 155 Web 3, 155 Web 3 ecosystem, 156 Web 1.0, 78 Web 2, 118, 144, 149, 155, 157 Web 2.0, 103 Web 3, 9, 61, 116, 122, 125, 126, 143, 144, 147, 149–158 Website acquisition, 93 The WELL, 15, 30, 33, 38, 100, 101 ARPANET, 16 BBSs, 16 conferences, 19, 21 host, 17 in 1985, 16 in 1993, 15 online support network, 20 PicoSpan, 32 Source and CompuServe, 16 technical advantages, 16 Unix (pre-Internet), 16 Whole Earth Catalogue (1968), 16 Winamp customization site, 93

Walt Disney, 81, 82, 87, 91, 92

Winamp Facelift, 93

Water & Music at connecting research teams, 153 business model, 154 collaborative work, 153 in comments, 151 community, 158, 159 creator, 154 DAO, 150 independent newsletter, 149 interactive community, 153 intersection of music and technology, 158

Work-for-hire concept, 80 World Wide Web, 114

Y, Z Yahoo groups and forums, 96 Yammer, 121 Y Combinator, 107–109, 144 YouWeb, 130

181