Why There's More Spending in SL

The figure I've always watched for the last few years to determine the health of the Second Life economy, in addition to other signs (Sarah Nerd's liquidation rate, the size of my rental groups, the price of classifieds, etc.) is the number of people who spent more than one Linden dollar in world.

If you didn't even spend $1 on a near-freebie, chances are you weren't remaining for more than the first hour -- it's hard to get by the first week without at least camping and picking up some free dollars from money trees and spending them on *something*. This figure has gone from 300,000 last year...staying there for a long time...to 350,000...and is currently rising more quickly at 380,000.

Hamlet finally noticed this number, but remains puzzled about why, if we are "in a recession," this number could go up, and naturally then concludes "we aren't in a recession" or "only some people are in a recession."

Of course, he, like others in Silicon Valley who can't believe the rest of America is in a recession because they aren't in one in their Valley, can't understand this. (I was just reading a novel from the 1930s the other day about how people in this same Valley survived the Depression: eating all that fruit!). Is this a "pockmarked downtown" he asks, i.e. some industries suffer, others thrive, the way bars, delis, OTB, and Rick's can thrive in some poor neighbourhoods while all the copy, shoe-shine, hardware, and stationery stores have to close.

And the answer is -- no, it's a bad economy for just about everybody now, adversely affected by the awful destruction of the land market perpetrated by the Lindens' shortsighted (or deliberately cynical) policies of glutting not only islands whose prices are slashed, not only mainland whose prices were slashed (and devalued by failure to act against ad extortion), but dumping the new open-space sims on top of that. Thanks!

SO, let's look at what the theories are for where that money is coming from.

Answers:

1) Casino Loot -- I continue to maintain that we are merely seeing the hoarded casino and bank money now ease its way out of storage on various alts. People who closed banks because they couldn't pay back their depositors didn't get permabanned from Second Life; they and their alts remained. With lots of cash. Where could this cash go?

It couldn't go to the Linden exchange -- well, some of it crashed out of there, making Supply Linden have to fall on his sword and take a hit to keep the rate stable, but it surely didn't ALL go there because volume didn't increase substantially if we are to believe the numbers.

And it couldn't go there without depressing the rate or making people have to wait really long, long periods for cashouts which they were willing to do -- we saw some of that money stacked up on various points along the spectrum above 263 but nobody, maybe not even the Lindens, were likely able to track that significantly as it changed or for which businesses it changed.

Instead, it had to go into land. Hence: Bay City, which was calculated to fetch higher prices, was denominated only in Linden dollars, and which could be purchased from the auction -- if you had at least $50,000 for a 1024, as it developed! -- in Lindens.

So all those Lindens left the alt cold storage and went into the land, and for some lucky extortionists, enabled flippage that *then* saw a trip to LindEx to cashout -- but for the very wealthy, probably not entirely, because that would either a) depress the market or b) depending on Supply Linden's determination, take a long time to sell.

This is what RightAsRain focuses on when he bitches about "land speculation" in SL, although prices like this are a total aberration and don't pertain even in Brown or Boardman, where price can be 100 times above market.

2) Camp bots. There are LOTS of these. Lindens swear there are only 10 percent of the log-ons, but as I keep saying, either they are a) not telling the truth about their inability to track bots, because we all sense there are lots more or b) they are able to track bots, and yet do nothing about them and their abuses. Recently I was told by a Linden to abuse report bots that keep landing and clogging the infohubs -- and I will be doing that. Somebody told me that the scripters are lazy or neglectful and aren't coding the script right to make the bots land right, too, and they need to fix their scripts.

But the bottom line is that if loads of bots can now go around sucking down camping dollars, and possibly money tree dollars and money ball dollars, too, that collected loot has to get off the alt somehow, where there is "No Payment Info On File" into the hands of the account that can buy things with them or cash out -- so there's more expenditures that way, and more desperation from camped joints to get scarce, dwindling eyeballs as concurrency doesn't rise and as new membership doesn't rise and they are fighting over the same 50,000 as everybody else is.

3) Land sales -- more land glut, more land sales, surely. I don't there's an awful lot of this, given that premiums are only at 88,000, fallen from near 100,000 last year, but still, something is moving.

4) New members purchases It's hard to believe, when you are "in a recession" and sales are flat that in fact, there are at least some new people who keep coming, and keep buying stuff -- and when they're new is when they tend to buy the most stuff, as older people tend to buy less.

I'd like to get more science on this, quite frankly, because I think it's received oldbie wisdom that they don't buy any new content once they are saturated with their skin, home, and furniture. I see people constantly updating and revising all the time -- they just aren't those more aesthetic vegetarian oldbie types but are more consumer oriented. Still, it probably makes sense that most big purchases come earlier in SL than later.

5) Prefabs are more expensive -- prefabs, 3 years ago, were $50 or $250 or $1000 -- today you can spend $3500 easily to get a fair one and maybe have to spend $8000 or $10,000 to get a really large and nice one. Land-glutting benefits the prefab and custom homes sector, of course, and this is the Lindens' dream, to make content-creation always do better and be more privileged in the economy than anything else -- and it's working.

The freebie prefabs are appalling -- I scour this area constantly and find little beyond the initial awful Linden cabins and claustrophobic Frank Lloyd Wright homes, Siggy's ugly beach house, and various hideosities. These ugly prefabs, given away for free and sometimes with "no mod," are one of the killers of competition and innovation in the newbie-to-newbie 512 market. I do occasionally find Europeans or Asians who have skipped over the ugly Linden/FIC prefab freebie stage and made cheap prefabs they sell to their fellows.

Anyway, other than Ace Albion and Parker McTeague, bless them, few people seem to bother to make low-prim and lost-cost decent, habitable homes.

6) Are skin and clothing creators charging more now because of rampant copying, trying to make a buck before their creations are copied? Is that the inevitable correlation to "business in a box"?

7) Someone should research the sex industry and see if whores are more expensive -- I see anecdotally that some are, although more people from more poor countries should be driving the price down

8) Classifieds -- with sales in a slump, people resort to more advertising, paying more for classifieds and search ads and inworld PR services.

There are other things I haven't thought of surely.

What's interesting about the table contrasting 2007 and 2008 is that the proportions seem to stay roughly the same.

And if you look long and hard at a figure like "5000-10,000" -- 26,231 or 34,663 this year, you have to realize that unless bunches and bunches are paying for rentals on PayPal there is a relatively small, and not growing sector from which people can expect a 4096 rental to be purchased monthly (and that's less likely, given that Dreamland switched from PayPal subscriptions to Linden payments to kiosks due to chargebacks and complaints of recurring subscription costs when rentals were terminated).

Basically, more spending isn't a sign of health, just like more hours inworld is a sign of health.

Just as in real life, the higher prices in a deli in a poor neighbourhood where people are buying 40s and cigarettes, don't spell "health". More hours that are spend by people desperate to create or work harder to sell whatever goods and services they have doesn't spell "health".

We've come to expect that "health" is spelled only by a steady influx of new members and steadily rising concurrency. If we are now at a wall, then only the principles of creator fascism so dearly beloved by the FIC and the Lindens can kick in: more skilled artists become more innovative and forcibly produce more expensive content and attract the most sophisticated and affluent dollars out of SL, driving out the poorer, less creative, less connected. The social Darwinism of Silicon Valley start-ups will also prevail, driving out those businesses that either can't create and die, or don't have real-life infusion.

Comments

[Jane2 McMahon]

"We" are in a recession means the USA is in a recession, not the rest of the world. Hamlet needs to look beyond not only the faux hills of Silicon Valley but the US borders as well.

[Prokofy Neva]

The rest of the world will be in a recession soon enough. Have you somehow missed the global food crisis?!

[Ciaran Laval]

Well I can assure you Jane, rising fuel prices, rising food costs, rising energy bills, falling house prices, increasing inflation increasing interest rates and falling share prices aren't making the UK look too pretty right now.

As for the main article, I've read elsewhere that escort rates are down. Classifieds could be up as people try to work out the new search, the new search has also meants that picks only count from certain types of avatars, you don't need payment info on file but you need to spend some Linden Dollars in a certain fashion.

[Ann Otoole]

Bear Market (Officially today), Recession, Dollar is toilet paper, Maniacs trumping up "More War Please", Impending "Special Announcement" from Kapor, and on and on. I bought a couple of anthromorphs avis today (for the heck of it).

The universe must be going nuts.

So let's all go spend more in SL.

OK so companies like Disney do remarkably well when the dollar is down because people from other countries are finally wealthy compared to the USA and come over here to have their butts wiped by Americans. So yea you will see more spending by non US accounts if the same entertainment logic holds true.

However I have little confidence in any number published by LL.

Let's see spending by country. And let us have the numbers on the 5th of each month for the previous month. Not months go by with no numbers, etc. Consistency might help build trust. However as long as the parcel traffic falsification bots are allowed to operate in SL then not one number published by SL is valid. Never will be as long as bots are in the numbers. Bots literally render all metrics from SL garbage.

Blow it somewhere else LL. Your not going to fool anyone of reasonable intellect.

[Gigs Taggart]

I'm surprised you didn't mention general inflation of the USD.

The CPI is a lie. The USD has inflated much more than the government would like to admit.

Since the Linden is more or less pegged to the USD now, the Linden inflates along with the USD.

[John Lopez]

I think there is a simple explanation: during downturns people turn to less expensive entertainment.

Our local drive-in was on the verge of closing a few years ago, only drawing a meager attendance of budget conscious moviegoers. Now it is booming with business, turning away traffic (traffic that is composed of much nicer vehicles as well).

Likewise, SL is "cheap" entertainment for those who already have invested the resources for broadband anyway.

This would correlate well with the shift to more free accounts as well, and aggravate the land market as people divest themselves of tier and monthly fees, and divert those resources into clothes and shoes for the avatar.

Going homeless in a virtual world carries no consequences of note; for those who want a stable place to hang with friends, they can rent.

[Prokofy Neva]

Well that runs counter not only to all the propagandizing from LL abot SL as an energy-saving device, but to what we know about the Great Depression, when people spent money on movies, to what we know about their tendency to move indoors and not drive somewhere when gas prices are high and they don't have paid vacations or are short of cash.

SL is obviously still cheaper than the local drive-in.

I guess you've never studied how poor people and rich people spend their disposable income, and how this tracks with educational levels.

Poor people tend to spend on clothing and vehicles, not education. *Some* poor people scrimp and deny luxuries and spend on education. But most don't.

People coming into SL by and large want clothing and vehicles and homes -- the 25,000 people spending more than L$5000 a month are spending it on rentals for the month on fancy islands, but many thousands below that tier are spending them on $150 a week rentals.

The Lindens should tell us what percentage of concurrent log ons are paid premiums; what percent are payment on file; and what percent are NPIOF.

That would help put paid to their own notion, and the notion of geeks and wonks, that there are all these free accounts of "creative" people who are supposedly not alts to have affairs, but doing earnest educational and artistic work on subsidized sims.

I'm convinced from my own observation that the overwhelming lion's share of concurrent log-ons belongs to premium accounts and rent-paying customers.

How do I know this? I look at my own business as a microcosm, and I simply open up the map and look where the green dots are.

If 10 percent are bots and 10 percent are hanging around in welcome areas and sandboxes and .005 percent are listening to John Chambers of Cisco, that leaves you a solid 80 percent in their rentals, using merged with another green dot.

[Crap Mariner]

Question... I pay a RFL kiosk $500, which then automatically hops the $500 from the kiosk "owner" to the Cancer Society Folks.

Is that counted as $500 in transactions or is that counted as $1,000?

If it's the latter, there's your explanation. More volume through kiosk sales increasing the velocity and hops of money, not the actual volume.

[John Lopez]

Next time I drive past the queues at the drive in, I will be sure to yell out the window "You aren't acting according to Prokofy's predictions!"

I'm sure they will realize their error and stop.

[Prokofy Neva]

Yeah, next time I see all these people logged into Second Life I see now on a sunny 4th of July weekend coming up, I'll shout at them, 'GO BACK TO REAL LIFE TO JOHN LOPEZ MOVIE DRIVE-IN YOU AREN'T FOLLOWING HIS INSTRUCTIONS"

[Ric Mollor]

Didn't read the whole article so forgive me if this is totally off base.

Counting the number of users spending 1 Linden isn't a good measure. The next increment up in the metrics is 500 Lindens (roughly 2 USD).

It would be difficult to argue users are engaged when they aren't spending 2 dollars a month. Additionally a recent study put the 'break even' point for MMOs at something slightly above $1 USD.

Of course all the numbers should be viewed with a skeptical eye considering the abundance of bots on the grid and the unrestricted capability of financial transactions through them.

[Prokofy Neva]

Ric, as I said, the sudden surge from 350,000, which had been the number for quite some time, to 380,000 lets me know that there isn't suddenly lots of new engaged customers out of nowhere, but merely lots more engaged bots sucking camping dollars, and staying online 24/7, which ups the numbers, too.

Maybe the Lindens don't mind camping and bots precisely because it increases their numbers, too.

[Agnetha Vuckovic]

To my mind, there may be a somewhat ironic reason for more spending on SL :-

I would suggest that an increasing number of people are actually bored of SL. Beyond sex, dancing, and shopping......there really isn't a vast amount to actually 'do' on SL.

So..never mind the fact that one already has 365 outfits and may not wear today's outfit for another year....let's go shopping !

I suspect that 90% of the shopping in SL is of this nature....people buying items they don't really need and which will be used once before being forever forgotten about in some dusty inventory directory.

If all that junk could be transferred.....the SL 'economy' would collapse overnight.

[Ann Otoole]

Most of what i sell is still transfer Agnetha. Plenty of stuff is transfer. Fact is people like to develop their looks and try new stuff and there really is no shortage of "different stuff" out there if you can escape the places LL wants you to shop. Some of the showcasers are ok though. can't paint them all in fic drag.

[Prokofy Neva]

I never find people tiring of cybersex, seriously, that is a misstatement. They find ever new and more expensive ways to do it.

[Agnetha Vuckovic]

Ann :-

The issue of transferability of items is to me one of the most contentious issues on SL. The very existence of 'No Transfer' is what generates a lot of the revenue. Indeed....it might be worth considering whether a greater propotion of 'no transfer' goods is one of the reasons for increased 'economic activity' on SL.

'No Transfer' adds a decidely false aspect to the whole SL economy. In a true economy....second hand goods make up a sizeable portion. The inability to sell ( or even give ) a large portion of one's inventory to anyone else must surely generate a considerable amount of SL revenue for shop owners.....and of course, they know that.

[Ann Otoole]

Actually only someone utterly oblivious of the facts of how SL is coded would decry no transfer as some evil crap conspiracy. I am constantly having to explain top people that prim attachments are what vanishes from inventory most frequently and it is the chims and AOs that people scream about the most because they are not cheap.

When you attach a no copy prim assembly it is removed from your inventory record set. It does not exist in sim memory. It is in the gray zone of client memory only. One little oopsie like logging off when there is an asset system urp and poof it is gone forever.

Merchants selling attachments such as sex toys, chims, AO's, and animations need to convert to copy no transfer period. I am still having to convert because I made most everything transfer for a year. I'll probably get a vendor that sells a choice for transfer or no transfer but transferables will have no warranty for replacement because of the hordes of 2fer scammers migrating through sl like hordes of locusts.

You see, the poor design of Secondlife is what leads to massive loss of L$ assets. When you attach a prim it needs to be flagged as attached and not removed from your inventory. Simple things like this are far too complicated for the coder geeks to figure out since they are not software or data architects. They just hack out flimsy proofs of concept and technology demonstrators and then force them down the throats of the customers.

[Agnetha Vuckovic]

"Actually only someone utterly oblivious of the facts of how SL is coded would decry no transfer as some evil crap conspiracy":- Ann Otoole

What utter nonsense. I can see why a copiable item would be no-transfer.....though frankly I could live without copiable items. But many, many items are just plain 'no transfer'. It is beyond a doubt a fact that this is used by shop owners to force more sale of goods. After all......think how much LESS would be sold if such items were transferable !

So yes....the entire 'no transfer' thing is most certainly a scam.....to the extent that I would hesitate to even call what exists on SL an 'economy'

[Prokofy Neva]

I really don't think "no copy" is used for "forcing more sales". In fact, when it comes to prefabs, they won't get ANY sale to me UNLESS they make it copy/no transfer.

A prefab is worthless to me on no copy/transfer. First of all, no one will buy a used prefab from me. Why should they? They can't be sure all the pieces are in the box, it never ever sells.

And why can't I have copy on a prefab, that constantly explodes? That constantly has problems rezzing out, and needing to be picked up and down a million times as some customers don't want it, or want it on another lot, and each time, it has to be deleted, it has too many prims that can't be moved.

Prefabs with copy is the ONLY way to go.

[Pandora Beads]

thanks for your article,like your blog very much,well done

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