Google announced yesterday on their blog that they are shuttering the Lively project. This is unfortunate for multiple reasons:
1) Google was the first real major player to have a virtual world platform launch, albeit social avatar-chat centric, which in many ways validated the market space to external skeptics. Terminating the Lively project will reinforce the views of the perpetual doubters due to the press it will receive. Very public failure.
2) Google had a unique opportunity to tie in Lively with a number of it's other products (GTalk, Chrome, the App suite) and never did so. This would have made a very strong market position, allowing them to exploit existing GMail/GTalk contacts (as Vivaty does in Facebook) and embed GDocs into collaborative rooms. No other virtual world company has the horizontal footprint to carry this off, and Google had the resources, the positions staked out on the battlefield, and still miscarried.
This reminds me of the Persian King Darius III at the battle of Issus against Alexander the Great. Darius had the overwhelming numbers (in this case, Googles vaunted market capitalization and resources) and somehow still lost to this scrappy upstart (scrappier startups). It's still to be determined who the Alexander will be in this analogy.
3) There were a number of secondary companies who invested in Lively as a platform for value (Rivers Run Red comes immediately to mind) who are also going to be impacted by the closure. Startups cannot afford to partner with multiple large company platforms due to the engineering commitment involved.
At the end of the day, this isn't something as straightforward as Google choosing to 'prioritize our resources and focus more on our core search, ads and apps business', as said in the blog. The entire Lively team was less than a dozen people in a company with 17,000 employees. They have more than a dozen people somewhere in the depths of their finance department who do nothing but analyze the costs of Google trade show tchockies. Cough, Bullshit, Cough.
What this proves to me is that Google is just as political and functionally inert as other large companies, their propaganda aside about being a fluid startup at heart. Vibrant large companies encourage risk taking and have longer attention spans than 6 months for new products. It isn't a matter of Google 'not believing in the 3D Internet/Avatar Chat market', as large companies don't believe ANYTHING other than the composite opinions of a few leaders, so you can't say with certainty that there was a single corporate position on Lively. What is certain is that the team there didn't achieve the level of support from the rest of the organization that would have insured it's success in this challenging market. Unfortunate, and yet another reason to sell GOOG if you hold it.