Impact: The fourth quarter was a rough one for groundbreaking virtual world Second Life and its developer.

Not only did competition from emerging online realms begin to take a bite out of SL’s usage time (which was down 5% in November) and advertisers bail (AOL and Pontiac ankled in December), but Rosedale parted ways with his longtime CTO, Cory Ondrejka, referring in a discreet company memo to the old and dreaded “irreconcilable differences” and not the technical glitches that have been mostly to blame for a sudden rash of user dissonance.

Still, it’s probably not wise to underestimate the visionary creator of SL, a 2007 “Time 100” profilee (musician Suzanne Vega did the capsule write-up, describing the experience of performing as an avatar to a global aud).

Rosedale has pledged glitch-free, crash-free “stability” as Linden’s top priority for 2008, noting in a November company blog posting, “We figured (correctly) that this was a very large software project, and that if we tried to carefully design it all up front, we wouldn’t even come close to getting something working before we ran out of money.”

POV: “What will help Second Life to stay relevant is that the platform is open — residents are empowered and free to create the content they want and to use the virtual world in the ways that are most valuable to them,” Rosedale says. “This openness is key for the success of virtual worlds, much as it was key to the success of the Internet at large, and we’d like to make Second Life an increasingly open platform in 2008 and the years ahead.”