A pass-time even greater than year-end forecasting these days is dumping on the SL economy. With so many wrong-headed reports out there -- like the Herald, where Jessica Holyoke is wildly messing up and claiming the SL economy "isn't predictable"; with the Rezzable guy making a few sharp comments but having way too many errors (um, mainland isn't just 15 percent of the land supply, even with more islands than mainland -- look at the map); and even the reliable Mitch Wagner getting a few things wrong. Well, what can you do? Consult Prokofy, of course, who, like a broken clock, is right at least twice a day, and a Linden even said the other day, "for once, you are wrong". Once? Hehe!
So let's take a look! Please pay attention, I have some good insights here!
Fallacies that need sweeping away, first:
1. There are more foreigners than Americans.
Well, sure. It's not too hard to add up the other 190-odd countries in the world, and come up with more people "overseas" (whatever that means in a virtual world) than in the U.S. Duh. But that would lead you to making a lot of further fallacious assumptions. Yes, there are now more non-Americans, and that's interesting for a "start-up" as Bill Geller calls this 7-year-old aging toddler. But...A more accurate picture would be to compare, say, Asians or Westerners (or WEOG), or Latin Americans and North Americans. The fact is, even if you add up all the EU countries together, you do not get more user hours -- or even more users -- than the EU countries taken by themselves. Americans in the U.S. of A. still count for the lion's share of sheer time on line. That can be accounted for by a number of things -- a) older residents b) better working connections to SL by being in the US near the servers; c) wealthier or at least willing to put disposable income on virtuality d) more media coverage.
2. SL still is seen as a weird place, with sex and bad shopping malls as Rezzable put it, merely pumping their own "rich content" sims. People who engage in cybersex and go shopping a lot don't find this the problem that the prudish Rezzable does; however, it's actually not the case that SL is filled with only sex in a box and business in a box. If you watch the CNN blog, which does of course tend to have "positive happy" stories, you will actually be surprised to see the amazing amount of stuff going on in SL -- live music, medical training, weather simulation study, fund-raising for charity, talks on religion, a movie-tie-in game, home-made resident RP games, etc. I've actually seen a reduction in the extremist BDSM type of tenant in my own rentals, and more and more what I would call more-vanilla-M, PG, business, creator sort of rentals.
3. SL is the big empty -- as Valleywag puts it. This is one of those things I always have to chuckle at. If you look at the figures for "foreigners," which are impressive, you'll have to realize that when you cynical 30-something geek nihilists are awake and willing to log in to SL, much of the rest of the world is alseep and their sims are empty. Of course, some sims *are* empty even whe you are on the same time zone, and that's Second Life. It doesn't matter. People fill them. Russia, Canada, the United States were all sparsely-populated once too. What matters is that people do use them, and keep paying their tier bills.
4. Linden should get rid of Popular Places (Rezzable) because...Rezzable isn't on it, and because it is "gamed". No, keep your paws off this, everybody. Popular Places is gamed. It's less gamed than it was, now that there is a new SEARCH function that does not, repeat, NOT rely solely on traffic. Of course, it still relies *in part* on traffic so that anyone gaming it with camping -- and picking and landmarking, which are the new gaming devices -- will show up in popular places. Leave it alone. Avert your eyes. Filter. Stop trying to socially-engineer our world and set it up for only certain aggressive businesses like Rezzable.
Let the people pick -- which is what they do when they go camp, or when they are willing to pay campers. Camping is SL's entry level job. Got a better one? It's the poor man's advertising device -- have you seen what they charge for classifieds these days especially now that SEARCH has been engineered anew? Although I ban camping as a resource hog and a drain, I do put out money trees. I can spend $30 US a month and pay hundreds of people to pick dollars off a money tree, and get visitors to all my properties, some of whom rent or buy from my tenant vendors, instead of paying that price not even to show up in the classifieds. It's worth it, just to see all the wacky new names in the people list every day, and many of the people actually IM and *thank* me and tell me what they're doing, exploring and creating, and that's lots of fun!
4. Purchases are down. Many businesses feel this instinctively, and depending at how you look at the spreadsheet numbers, it appears as if there is a slowing of buying. Is this still the crash from the casino/gambling ban? Is it due to the VAT? Well, the dirty little secret of SL is that there are still plenty of casinos, although not everywhere as they used to be. I find them up in the sky on access-only lots without the tell-tale words in the description, like "O'Neil's Balloon" in the age of Prohibition. And there are plenty of Europeans not bitching about VAT tax as they just buy Lindens and spend them, and aren't VAT'd for that.
There's only one number to look at -- for my money -- to understand Second Life's economy, and that is "number of people who spent more than $1 in world this month*. This is a number that the Lindens can't tweak, massage, remove, or lie about. It's a very simple mechanical number that generates from actual expenditures. I assume it doesn't include things like the $1 I pay to myself to transfer a land parcel to myself from one group to another. This number is 330,726. That might not seem much if you think of it as a number that actually truly represents the people really logging on, but it is a number *that has grown*. They don't show you this growth (they should!) but I've been tracking it for some time and seen it go up in the last year from 250,000 to 300,000 to now 330,000. This represents the solid, invisible, steady growth of SL that nobody notices or likes to fete, especially because the commentators often hate capitalism, are socialists, and love to knock mass cheap culture, which is what this growth curve does represent (like Rezzable knocks it). It's the number that counts, and Philip and company should get down and genuflect before this number, and encourage people to make and buy stuff, and stop all this freebie giveaway crap.
Now for some more refutations of Rezzable:
o "There were roughly 2.0 million transactions between 200 and 5,000 lindens. Maybe 50% of those are for purchase of items (as opposed to services, land). We use 500 as a base transaction value and doing all the math gives an idea that there is $1.8mm per month worth of retail transactions."
Actually, land and services are going to make up the greater cost items of purchases. Don't forget that sexscorts cost $100-500 or more an hour, and land is going to run at least $3000-4000 for a 512, and many people still buy 512s. But $500 doesn't strike me at all a reasonable figure for some "average purchase," given the huge amount of cheap clothing and furniture now available. I sell some of it myself, and I constantly see the $5 ka-chings. Anshe Chung has persisted against all the critics and is continuing to successfully promote her line of $10 furniture. Oh, and she did something funny recently I must report for truth in advertising: she sent me L$20,000 as a Christmas present and told me to shop at Slexchange.com and tell my tenants about her new furniture. I happily accepted this gift, as it in part made up for all the pain I suffered over the years at the sharp end of some of her business practices, like the era of overpriced water that you'd be forced to buy in order to prevent griefing. No matter. I planned to buy some of that cheap furniture anyway, just like I buy anybody's cheap furniture, and put it out for free or at the same price in yard sales I run for new people.
5. Pontiac and AOL leaving and the Electric Sheep downsizing are bad signs for the SL outworld economy and inworld gigs for creators. No, Pontiac and AOL are the Sheep's clients, and they are downsizing the servicing of these clients for whom they only had year or less contracts (I'd love to know how much staff time was put on providing for clients that didn't really pay for this, as kind of a good-will loss-leader). ESC shedding 22 people is just a natural response to having been over-enthusiastic and over-hiring in the first place. They fired events coordinators because they are giving up both corporate hand-holding and resident hand-holding on lame events where their staff would often make up the bulk of the so-called party-goers. There are plenty more companies in SL, many of them "foreigners" -- see point 1. These people have stores, parties, tie-ins, real-world media hits, etc. etc. Americans often think that they are the center of the universe, and if things go badly for them, the rest of the world must be depressed, too. But it's our dollar that is weak now, not the Euro or even Canadian dollar; other companies aren't dashing for the doors quite so dramatically, perhaps because they either set their sites lower, wait on their customers better, or take a longer view.
Are there a lot of unemployed content creators around now? No, because a lot of the best are serving as contractors, not full-time employees at ESC anyway. Some of these content creators ran their inworld businesses in which they made living salaries anyway from their content. They will have to look around, yes, for their second and third gigs to make their living salaries also have pension plans and health insurance plans, welcome to real life. Meanwhile, with an older SL population with more land, and richer Europeans and Asians, perhaps we will see more attention coming at last again to inworld architectural development that makes SL a better place to be in, instead of feeding only the empty corporate trade fair on a few islands.
6. The economy isn't predictable. This was one of the sillier ideas about a synthetic world controlled by its makers, who sell Lindens to keep the LindEx stable and dollar/Linden rate around 265-266/$1.00 -- and whose paydays on Tuesday and outage days on Wednesday make the world highly predictable. (You can also plot new features each quarter and figure there are unplanned outages that develop on them pretty predictably at least 1-3 days after the patch with the features).
7. Developers are heading for better pastures in other virtual worlds and they will make stiff competition for Sl. Baloney. They are like spurned girlfriends who tell their other girlfriends that both they and their boyfriends agreed to "see other people" even though the real issue was that their boyfriend wouldn't commit. The developers do not have anything doing of any significance -- yet. They are spending money and burning staff time, not making ROI. They are going through the same thing they went through with SL, only worse, as there are more difficulties in trying to get lots more customers (as Gwen keeps pointing out, Kaneva raved when they had 750 concurrent -- that doesn't mean Kaneva isn't going to succeed -- it will, for what it is).
Why won't this boyfriend -- LL -- not commit? They are so weird, these Lindens. They don't make business deals with corporations or have special corporate accounts, even though they still selectively fete here and there (as they feted the Sheep and CBS over CSI:NY -- and as Robin Linden put it to us rather pointedly, if we promised to bring in a million customers (or even only delivered 120,000) with one project, we'd get feted , too). The problem with the Lindens isn't that they play favourites and fete. The problem is that they don't institutionalize this in a systematic, programmatic, and transparent way. They should have a corporate-level account that anyone can buy and get more face-time with Lindens and more stuff. They should have enterprise accounts or business accounts that can provide office hours with Lindens that aren't the usual ones where one busy business owners have to sit through reams of fanboy chat and idiocy to get to their issues at a higher level than the average user. And so on. It's the lurching between hippie and entrepreneur and the instability that causes in image and in relations that causes havoc. Codify it, be capitalist, stop fretting.
Does this mean moving away from their grand notion (illusion?) of serving only as a platform, that everyone uses but they don't get involved in? Um, yes. Because...the business plan post-open source is all about them being the biggest and the best in an open playing field of competitors. So...why not start now serving customers that you think you will still have in the Bright Future?
8. Landbots are destroying the economy. Actually, despite all the received wisdom on this, I have to point out something few would ever admit: no, landbots keep the price of land liquidations higher than they would be. Precisely because landbots have to function automatically, they don't make market decisions. They decide that they respond to any parcel for sale that is set slightly below market, and they define that very literally, by what the land list says land is selling for that day. So that means you can put out an unwanted parcel for $7.9 and have it sell; or at no lower than $7.5, even in PG, even scruggy adfarm land or boxed in land next to ugly builds. The landbots don't fly around like a person, looking to see if land is ugly, has bad neighbours, is too steep. They just buy. They then put it to sale instantly, and more often than not, someone else on the sim buys it.
This high liquidation price is something most people don't understand or appreciate. They don't realize that before landbots, we would have to put out land wildly guessing. None of us could possibly keep that much of a watch on the entire market, even refreshing the land for sale list all the time (which you could do, and can no longer do now). I can recall many times having to get rid of a 512 to fix up tier, and having to wait around for a day, seeing if something would sell for $5 even in PG -- and then having to put it even at $2 in the hopes that finally somebody from Anshe Chung would see it. That meant people liquidated way lower than the price that the landbots are willing to take liquidations -- and they either held off liquidating, or lost money. People that buy land for $2/m don't respect it and put shit on it. Landbots in a grown-up land business trying to make land have value, respect land and pay $7.5 on the barrel for it, regardless of time or day or style of land. Ironically, landbots seem to be holding up the market - just the way Anshe Chung used to hold up the market singlehandedly.
BTW, if the Lindens want to make the economy work better, they need to take this retarded damper/check-gate off the refreshing function. In response to whining about bots, the Lindens now make it impossible for a normal person to rapidly browse the land list. Several times I sent in search of a specific size and price like 4096 at $40,000 and had to give up as the land list bit back too many times, stopping and informing me that I was refreshing or revising too many times. Screw you. While I am held up unable to buy, landbots which are evidently existing outside of this silly system function perfectly (no doubt because most landbotters keep a herd of these bots available, and if one can't refresh and move because LL has stalled them with the checking function, another can be refreshing).
9. There is real competition coming for Second Life with other worlds. No, this is wishful thinking by people who had to fail in SL from over-enthusiasm or misguided application of old media or Web 1.0 or even 2.0 principles. There isn't. The user base of Second Life will not go anywhere, it will merely add to its repertoire, the way it added on Facebook and WoW. That might slightly make the user hours dip, but every hour that someone is online doing SOME onliney thing is something you can't complain about as a peddler of virtuality, because they can easily tab over or toggle over to your world/platform thingie.
SL may not grow as fast, because with competition, people who are just tuning into the idea of avatars may not clunk around in SL, but people who want the open-ended MMORPG without the war game inside and want user-created content will keep coming to SL. You can't fly outdoors in the other worlds; you can have sex in at least one of them openly, but can't build and create. Nothing else has the flexibility and openness of use that SL has. Metaplace might turn out to be that perfect combination of nicerness, flexibility, and lighter handling, but the monetarizing part just isn't visible to the naked eye. I don't see how I can go make a tie-die t-shirt out of the Library and sell it for $5 with a $30 add in search places -- that sort of thing.
Companies investing in SL would like to feel that they are investing in a "sector" or "an industry" that is "growing". But it isn't. Not as fast as they think. Mobile phones with their ability to take pictures and videos are likely to grow more than avatars, that not everybody likes to have and fuss with. More people send pictures on their cell phones of their real life selves in real life doing something even as mundane as shopping or eating pizza or going to a rock concert than they do of their screenshots from SL doing the same thing virtually. People will still go on doing virtual stuff, and there will be more of them. There will just be more of the other people digitalizing, but not virtualizing. They won't necessarily cross-pollinate, even if they are the same person (they will compartmentalize). Plan accordingly.
Now, for some of the points that are valid, but are being needlessly spun in a negative and protracted light.
1. Sign-ups are down, premiums are way down. It's funny how Gif Constable spoke of "growth" consisting of
10,000 sign-ups a day, when in fact it was 20,000-30,000 a day when Tateru was reporting about it back on the Blingsider before it went Massively.com. Well, which is it? I look at another, more reliable figure, because a lot of people never get off Orientation Island and quit (like I quit Eve Online, not figuring out how to work it). I look at the traffic figures on the orientation islands and infohubs, and I watch those -- the really popular ones get 20,000 or so a day, the less popular still get at least 5,000. These dipped quite a bit during the awful performance of November and the Thanksgiving holidays, but they are back up again. Somebody should track those, as they are an interesting figure not only showing new people, but people that still log in at their home log-in place, or return voluntarily to these areas while still orienting and socializing. I don't think sign-ups are down so dramatically; I think we have seen the end of the automatic 100-avatar sign up of the corporations. They don't need to do that.
Premiums have GOT to be down, as it is simply no longer rational to buy them. It's unfortunate that not everyone, especially the pundits, have gotten this message. But the math has to be done, for the monthly or the annual variant. The stipend -- now only $300 a week -- can be purchased much more cheaply by buying Linden dollars directly from the LindEx or even a third-party site. If you want a 512 with 117 prims, you can get that much more cheaply from a rental as well. For example, my 512s, which in fact give you 150 prims in a group, so are a better bargain, and give you a free lockable/tintable prefab, cost you only US $2.25 a month. Add to that a purchase of 1200 Lindens at the current rate of about $3.50/1000, and for another $4.20, you get the same number of Lindens that you'd have gotten in the $9.95 a month subscription. So now you've spent only $6.45 -- to get your subscription cost down to that level, you would have to spend immediately $72 for the annual subscription -- and not get the prefab or the extra prims. There are thousands of rentals just like mine, or even cheaper.
Until the Lindens learn how to get over their ambivalence about land in general, and about suburban land and houses in particular, we won't see the premiums becoming any more attractive. They will not likely do this. Meanwhile, it doesn't matter, as land barons are doing it.
Smart Lindens should figure out that the subscription should simply be for something else, not land and money, which they shouldn't be in the business of handing out anyway, as it interferes with the economy (they print the stipends out of thin air). The premium subscription should be used to give out these sorts of goods: a) 24/7 access to help; b) access to office hours with Lindens; c) a packet of quality free starter content that should revolve each month and be a showcase for creators -- prefabs, clothing, vehicles -- and be advertised on the website, and be available to all creators to apply to be included in the system.
2. Growth in hours is slowing. Yes, because of Thanksgiving, where people are forced to go, as I told Mitch, to grandmother's house, over the river and through the woods, where the Internet sucks. Also, due to outages which I feel are a direct correlary to the attempt to put in Voice and Windlight. So it's a trade-off.
3. Cory Linden is a bad sign. It's a bad sign for the inherent tribal unity and esprit du corps that the Lindens once had, and their fierce pioneering Burning Man sort of spirit where they were all excellent dudes together on an excellent adventure. It's also not a good sign when two founding engineers of something disagree about something that they can't tell us about but which seems to be part about computer science and part about how the business gets run. But it's a normal sign for all companies growing out of "founding father syndrome" and it's a natural stage to move from the Golden Age or Age of Heroes with very charismatic personalities and myths and quests to the Iron Age of manufacturing and replicating something more stable. It's also a good thing whether Cory a) didn't want to open source because the code was a mess and needed fixing or b) did want to open source immediately but the others didn't.
Like Rezzable, or the Sheep, I'm going to judge Second Life by how it works for my own business. And here is my report:
o I lost about $350 US estimated in September-October because PN griefing was absolutely rampant and forcing my tenants, some long term and high-paying, from my sims. It took 2 months to build the business back up. This was inexcusable. But the Lindens did work extra hard to curb griefing, defeating some elements of it, and holding daily meetings in world to continue to address it. Daily meetings are vital to fixing up any really broken area. The fact that the metrics person, Meta, is now reducing her time to only once a month tells me that system is broken, not busy being fixed (it is inexcusable to stop attempting to report on uniques, which was the one unique feature of all Linden statistics, unlike other companies, like There, which won't tell you their uniques).
o I found business increasing quite a bit with a lot of brand-new customers, or older customers moving to more expensive rentals in November-December, especially in this last few weeks of December as holidays and winter passtimes kick in. There are lots new people coming in -- from Brazil, Spain, Russia, Ukraine, Japan, even China. AND the US! Imagine! They are JUST finding out because they read their local newspapers.
o I was forced to make an unplanned mainland purchase to prevent griefing/loss of FPS on my original sim purchased 3 years ago -- and I couldn't get the purchase below $14/meter. Ouch. It's pretty land though -- Refugio. The Lindens need to grow up and realize that people want worlds as much as grids, and they don't need to shake us all loose and make browser virtuality or pets to keep us here. They can just zone for the ugly extortionist ad farms and improve everything 500 percent.
o However, billing snafus made me get rid of two accounts and stop paying the premium fees on them. The badly-explained new auction system burned me on an auction pick-up, forcing me to tier-up a half tier. I was going to take the forced tier-up gracefully and expand into some new areas of development, but the business slump wasn't enough over to enable me to do that, and performance crashing really hurt some of my customers. So did the new search. I had several store owners quit SL -- it just got too hard to sell stuff when they couldn't show up in SEARCH no matter what they tried. They all face fiercer competition now, something I try to help them with.
o Whenever there's a change in SL, I always run and sell land and Lindens. It never hurts. The minute I heard Cory Linden was leaving, I dumped all my Lindens for sale, and put FOR SALE on fallow prim land or far-flung rentals not renting -- you never know. It's like in New York, where the sound of any big explosion or flickering of electricity sends you running to fill up the bath-tub with potable water. I didn't keep my forced half tier, I put it down, sold some land, and I stay ahead.
I refrained from buying a year-long $72 account, and just kept the $22.50 3-month account. Basically, for me, Second Life works. I'm happy with it. I make a profit from it, even after fulfilling my aspirations of making non-profit projects available for people like newbie starters or low-cost business areas or the land preserve. The losses I suffer are actually because I'm not brutal enough about starting over on new sims, and want to keep my sense of place intact on sims that I began with whose names are associated with communities now. Second Life performs *good enough* for the purposes I wish to use it for and I expect to be in business at least another year.
My father used to remain cheerful himself, and encourage his co-workers and family to keep the faith, by dumping even that famous AA "one day" advice and telling us "to take each half-day at a time". This is good advice for Second Life.
Second Life is an institution that can survive us all. That's very hard to admit for many people because they would like to see something fail if it fails for them, and the institution that is Second Life, like America, is one of those places where people inside it and outside of it mainly use its freedoms to complain a lot and criticize it. Like America, it's going to get most of the immigrants both because it lets them in and enables them to have something beneficial to do faster than other places. Like democracy, it's the worse system except for all the others.
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