SL Economy Takes a Lickin' and Keeps on Tickin'

The Lindens have come out with some economic statistics again -- and they're incomplete. They've opted to, er, "hold back" the information about just how many islands they lost.

While they were willing to declare their world experienced incredible growth when people converted islands to open spaces when the full-prim island prices crashed last year, when people converted *back* to full-prim islands with the sticker shock of the openspace price increase, the Lindens began to mumble. They have a contorted footnote explaining that the numbers are "misleading" and could be under- or over-counted. Well, wait. If you were happy to "overcount" them  when they burgeoned ridiculously as every one sim became 4 in the OS frenzy, why not simply be honest and say, look, the world dropped from 32,000 to 22,000 and we goofed?

Island numbers are important to gage the world economy, but at the end of the day, let's be frank, they are a better gage of the *Lindens' economy* -- not ours, as inworld businesses. Joined as we are at the hip and heart and not separated at birth because we both would have died in the operation, we still have different interests and our weights are measured differently.And what's good for Linden isn't always good for us, and visa versa. It leads to insect politics.

Those that don't remember the past are condemned not to remember the past. So you have to go back to my blog in the depths of November 2008 to compare these figures. Of course, people who are organized and good with Excel and such should script all these reports to "stay" somewhere and graph them -- I don't have the time or ability.

Land prices are another economic indicator for both LL and for our internal world.  In November, it was $1.9/m for October -- I rounded it off and now I can't tell how to guage November, at 1.98, which went to 1.91 in December -- there seems to have been a blip that may have been caused by the Nautilus sales -- but I don't know. Those numbers look heavily massaged, but all we get out of the Lindens on this is now a footnote, that says:

"2 Please note that these average figures do not represent the true average value of land (especially Mainland) which is significantly higher than the figure shown. This is because these numbers include transactions for both estate and Mainland sales, zero value land swapping, Governor Linden auction parcels, group and non-group purchases."

Well, why do you mush them all together, Lindens, if you can disaggregate them? And why worry about auction parcels, which aren't inworld purchases but outworld debits with $0 transfers? Just take them out of the mix. Take out the $0 sales to self. Take out the island parcel sales which can be merely tier for a month up front. Cut all the poetry, give us this number: average price per parcel of Mainland. Whether sold to a group or not is irrelevant. Keeping out group purchases is silly. Groups buy from each other; groups buy and sell in the liquidation business, but that's fine. That all tells the VALUE. $1.9 is not likely that value. I'm going to say it's probably more like $4 or $5, because prices way down. I see $2500 for a 512 in mature bordering a Linden build.  Elanthius, please call me, I keep forgetting I need to rent some tier and snag that.

So, sure, the land market is all futzed, and it's hard to figure out what's going on there. I can't count sims on the map -- can you? Hasn't some tekkie wiki figured out how to do that? I just don't think that there are more than 10,000 "lost" sims. If they reconfigured as full-prim sims, the Lindens still get the same or more tier. Yes, it's a dip, but...what's happening to the internal economy, of which land is only a portion?

Well, here, there's some disturbing signs, but not the sort of calamity reported with breathless drama by the Herald.

For the first time in memory, the number of avatars willing to spend at least a dollar for a purchase has gone *down*. It was 419,000 in October; for November, it was 417,000. So that figure is crab-walking, and 2,000 people held on to their purses and walked.

Meanwhile, contrast THAT figure with something else: a huge increase in sign-ups *that continue to log on*. That figure went from 1.2 million 60-day uniques to 1.445 million 60-day uniques. THAT is the figure that virtual world and MMORPG industry people stare at and try to grow at any cost, because it's what ad buyers look at. Everything else matters little to them.

I don't think even with all the bots that have continued to come on SL that the increase is all due to them. To be sure, there are more and more bots. More and more people buy them, I see, to do chores, not just traffic. They put them on as greaters, as RP characters, as NPCs just holding stuff in scenery -- I can tell, as they crash and pile up at the infohubs. They aren't just traffic bots. One common usage of them is to issue group invitations or spam cards about sims, or to shout out various RP or dance club stuff. And a particularly innovative use of them was recently described by Yohan Pintens, who has made a bot that automatically ejects anybody playing that stupid-ass retarded Bloodlines game (which I ban from the Iris moth preserve I can control, but which plague Linden infohubs). Unfortunately, the Lindens will not likely move bots as a category of "people," but they might define "residents" as not those...things...that reside on their servers, but actually conscious and intelligent people, as in, you know, organic people. OPs. The bot people should get a desigation, and be paid for. I spent an hour arguing with Gwyn about bots -- she continues to claim they are unrecognizable upon log-on. I disagree; log-on routines plus patterns of behaviour make them trackable. She says that's an expense. I say no, it's not, especially when tied to a trigger from an AR, not constant maintenance.

And that brings me to the point that Gwyn also argues about, which I just am baffled about -- her claim that the economy is "saturated" with goods, that oldies create too much, that midbies are blocked, and newbies frustrated.

I think that sounds like something out of a socialist textbook. That is, economies are saturated in socialism when, say, Factory no. 27 keeps churning out teapots or men's shoes and nobody buys them because they have them already. In the old Soviet Union, every store would have huge pyramids of tushonka, this awful Spam-like canned meat that no one would ever buy, because it was produced and delivered, but not bought. But such an economy isn't saturated. It just hasn't a) lowered the price of tushonka to make it eligible to be purchased as dog food, say or b) issued size 8 men's shoes instead of size 10, to sell them. It hasn't become responsive.

So, sure, there are a lot of dresses or widgets stockpiled at too high a price. My rentals that I won't lower in price are stockpiled. Somebody's Japanese lanterns aren't selling.

Because the real Japanese are here, and they sell for $50, not $150. As I was saying, for the first time ever, I can actually take stuff I've bought here and there on my rounds, for $10 or $25 and sell it in a yard sale for double, and it sells, because it's still cheap. If I put it out at $150, it won't sell. $50, it will. That's the free market. Love it or leave it.

Does that mean the market is "saturated" with overpriced $150 Japanese lanterns or now "saturated" with $50 Japanese lanterns? Well, know. It just means the Third World showed up to compete with Americans who will have to go out of business or make things better and cheaper (like the car industry). This pain isn't avoidable just because it's a virtual world.

So, are there less purchases because the market is saturated? Gwyn might say so; I think it's just two factors:

o poorer people are coming from more and more non-American continets and not shopping -- yet. We've just seen a big boost in 60 days uniques in fact, and it hasn't gelled yet
o poorer people are making businesses and selling to new people, and older people aren't buying becaues they suffered island shock. Possible evidence of this is the increase in positive monthly linden flow business in the modest $1000-2000 level -- a small increase.

But, that may merely be because other bigger businesses shrunk out of the $5000 or $2000 bracket. I know I dropped out of this bracked and flowed backwards, for example because I abandoned an openspace island, didn't take rent on it therefore, abandoned some island parcels, so I wouldn't have to pay tier next month that would be higher in Ansheland, and then also bought some mainland on a sim where it became available -- and spent some developing the land preserve because I had the time off to do it. So like others running a small business constantly needing to be developed and adjusted under these conditions, I drop down for a month, but then fortified, I go back to flowing positively again, as I have other years. Unless I don't -- and some people reached that point where their hobby/business got too much, and they bailed.

Still, this figure, if it continues to decline, is worrisome, because content businesses are a sign of health of the world. The Lindens may have decided to give up on the inworld economy as a "product" and focus on getting tier fees out of non-inworld participants like education or big business. We'll see. That would be stupid, in my view, as it's a hugely compelling feature of their product and makes their hardcore unique sign-ons remain and grow.

That uniques could grow during the largest land mass loss, and the huge openspace scandal, show the "keeps on tickin'" part. That purchases are down, but not crashing also shows the ticking.

In fact, one reason the purchases *might* have gone done is the strength of the Linden against the dollar. I'm not sure why that happened -- this was a political decision. Because the dollar strengthed against the euro, and LL takes both? Because to stimulate the economy bashed by the OS gouge, Linden had to make the cashout a little sweeter?

There was a very curious LindEx...crash isn't the word...because the Linden INCREASED in value...upswing. You could sell Lindens at 252, not 262, and some people cleaned up. The dip is visible on the graph. Perhaps someone guarding the LindEx Christmas eve had too much eggnog -- or it was one of those SL Easter Eggs that *do* happen sometimes to our benefit.

The decline in group fees means nothing. That is a correlary with openspace sims. You need to make a group to take over the land that gets deeded to your group on an island when you get a parcel --  you have to make a group. That's a L$100 hidden fee, BTW to island rentals, not required on mainland. It gives you the advantage of controlling the parcel as an officer in your own group. With island rentals down, people didn't have to make groups.

Upload fees took a crash, and that's a sign that creators aren't creating. Because they stopped building on OS sims?

Parcel director fees are still healthy, and over time, higher than in previous periods, but they took a dip, too, from 6,383,670 to 6,363,570. So that's some 20,000  people that didn't make a Christmas card. And that's just it -- these figures should have been UP for December, and overcome the hits of November, but they didn't go up. Maybe some people made more creations and purchases, and that masked a deeper hit than might have been. I can't tell.

Premiums are down to 79,000.

The Herald completely misreads Supply Linden. Supply Linden sold only $280,923 in November. An all-time low. At his peak last year, he would sell a million, or half a million, devaluing our wages and keep us in the Linden quit-renters scheme perpetually. But now, he fell on his sword, just like he did during the casino shock period -- and the Lindens let us know how much they love us, truly, by this sacrifice. But not for long -- they sold $335,027 immediately the next month, and watch, if they think not enough newbies are buying stuff because Lindens got too expensive especially for non-Americans, they will go for half a million or more, and probably have that planned.

The mystery to me is Nautilus. But I think it's just that those who bought expensive Nautilus auctions to flip didn't flip them yet. They sit there. How much longer can they  bake in the sun? I think February, we will see the thaw...

Overall, 2045 people didn't make their Lindens positively flow. There were lots of island losses. 2,000 people didn't spend even $1 (because they were bots?). Losses happened. But uniques increased, the price of land held even with their wacky counting, Supply Linden took some of the body blows for us and next month will be better.

Comments

[Dirk Talamasca]

Unique signups at this time of year are not unusual and should be expected across the board as people get new, more powerful computers as gifts over the holidays.

[Ann Otoole]

Upload fees are going down because people are getting better about using the beta grid to test work before uploading the final to the main grid. In addition there is so much prefab content available full permissions now that people no longer have to upload much. They just buy stuff like sculpty shoes, slap the prefab textures on them, and sell for L$250. I put stuff like that in my lucky chairs because it requires no effort other than adding my custom invisi prims on (so the shoes won't have those alpha wedge sleds on then that look stupid on dance floors). In fact it is becoming questionable to sell anything but full permissions stuff since Linden Lab will not deal with the blatant ripper operations that are set up to vacuum copyrighted content off to "open source grids".

Perhaps the Lindens need to ask themselves really why would anyone want to stay in Second Life when it's owners don't even care about it's future viability. They can forget the corporate and government sectors. IBM/Forterra Systems has that wrapped up. Whoops. Someone was unable to accept the fact that Second Life is an entertainment business and function accordingly.

Oh well. 50% bots because of a useless search engine "powered by google" (yea right) and the langoliers are eating the islands up.

There is time to fix it. But they are going to need better help doing it. It doesn't help that really smart software engineers are quitting the Lab followed by a swarm of old defects and copy leftist featurettes (that were previously removed) reappearing and things becoming generally unstable with the sim code. Apparently one person did make a big difference. I too suspect there is an internal war raging within Linden Lab.

[Prokofy Neva]

If you want to see the best minds of SL, with some of the best bots scraping land data lol, and what they come up with, read this thread:

http://forums.secondlife.com/showthread.php?t=296275

It looks like it's about 6000 OS sims that went down, but that they'll get a lot back as full-prim sims.

[Yumi Murakami]

Price adjustment bothers people because, ok, if a Chinese person sells their goods cheaper but still makes a profit because their coat of living is lower that's one thing (I have no idea where you got the idea that Japan is a Third World country!), but it paves the way for people who sell their goods for L$1 or even less, because they don't want to make money or it's all just for their portfolio.

[Prokofy Neva]

You know where I got the idea that Japan is a Third World Company? Second Life. SL tipped me off to this little known secret.

That is, not all of Japan. Not the most famous and wealthy bits of Japan. But SOME of Japan.

Japan is made up of pent-up, hungry, and not very rich youths and middle-aged women and men who don't have huge amounts of money to rent, and who make little things they sell for peanuts.

I've followed it closely as I've had a lot of tenants who are Japanese and I shop on Japanese sims.

Lots of NPIOF folks trying to make a living in Lindens they spend inworld and maybe don't have the set-up to cash out -- perhaps they are young, or dependent on a spouse.

Japan works as Japan, Inc. where you need hook-ups to family firms and state firms and you work up the ladder. It seems perfectly conceivable to me that not everybody in Japan gets on the ladder to success and they make their way to SL the way Brazilians and Poles make their way to SL, hunger and desperate and enthusiastic.

[Khamon Fate]

Does the Second Life economy have anything analogous to the Dow Jones Industrial Average?

[Desmond Shang]

>>Does the Second Life economy have anything analogous to the Dow Jones Industrial Average?

Now that's an interesting idea.

Of course, it did have something analogous - right down to the collapse - with the virtual stock games and the financial nonsense perpetrated by some players.

The trouble is: the big players in the grid economy are private, not public.

You can't get 100 shares of Ravenglass or Caledon or Dreamland or Azure. Nor can you get 100 shares of PixelDolls or Straylight Botanical. There is no Small Cap New Resident Business Fund to trade, or Extra Tier Savings and Loan.

And certainly, many of the real business successes will never open their books. They don't have to.

It's a joke to call anything an industry on the grid, really, but let's indulge for a second. What sectors do we have?

- Land (private and main sectors)
- Clothiers / Jewelry
- Gadgets/Tech
- Region Developers
- Construction
- Automotive/Aero
- Events/Entertainment

...and probably a few I've missed.

Even if we knew the numbers, it might be great hindsight, but foresight would be close to nil, I think. Who would have predicted the 2006/07 boom, even with exact prior information in hand? Who would have predicted the openspace mess?

I'm not sure the numbers could ever be used to any fine degree of predictability, other than to say: yes, there is some activity here which is highly volatile.

[Prokofy Neva]

I can't imagine anyone getting "100 shares in Ravenglass" because I'd have to do one of those silly IPOs on one of those reputable stock markets, and I'd never do that, it would be nuts.

I do wish we had more economic reporting like the wire services, however.

Like, "Starter homes, up 7 percent" or "furniture sales down 6 percent". Would be great to know. The information is in there. Businesses could get a list of tags to use.

[Ann Otoole]

Based on history it is a fairly safe bet that anytime the SL economy is going good Linden Lab throws a wrench in it causing a downturn. Approximately every 6 months is the frequency. The last wrench thrown may have been the last straw though. The signs are there that people have seriously become disgusted with the entire concept. High quality content is here only because it is... or rather was... a potential career. Take away the real artists and all you have left is shit for content and that is nothing but loserville.

No money no game honey.
Time to grow up.

Oh and btw the "open source" grids want money too. Duh.

I guess this is a game that only the rich will survive. As long as they still have money (available credit on the plat cards) anyway. That might not be the case in another year the way things are going in real life.

[Darien Caldwell]

Considering the real-world global economy is in the toilet, the only thing I find surprising is that in-world spending hasn't gone down.

When people have to tighten their belts, unnecessary expenses are always the first to go. Perhaps dropping land is just the first stage of this.

But as many have noted, it's difficut to predict what will happen with certainty. Stay tuned! :)

[Elanthius Flagstaff]

It's easy to get figures like you describe. Simply ask enough people how much they spent on furniture or hair or land in the last week and then report the figures regularly. The trouble is no-one is going to colect and compile that data for fun and no-one really cares enough to pay for it.

It's a shame because I'd love to see some reliable statistics about how the various sectors of the SL economy are doing without having to rely on the repetitive threads on the forum about how dire everything is because they sold three beds last week and none today!!!

I don't know if perhaps a small coalition of business owners could get together and hire some firm to do the interviews necessary. Certainly I'd be interested but really I have no idea what it would cost or how to get it done either.

[Prokofy Neva]

It's not only that people would not pay for such news services -- and they need payment because it's work.

It's that they are terribly fearful of giving out their business information.

That's because they are insecure amateurs for the most part.

When the world matures and businesses mature and become more confident of the value of publicizing information, it will come about naturally.

The Lindens are sitting on boatloads of information that tell them -- if not us -- a story that belies their carefully sanitized Positive Monthly Linden Flow figures.

Some content makers are making absolutely humongous killings. Expensive prefab and weapons and sex animation dealers. Raking it in. Some rental agents are making absolute piles of money. Expensive developed high-end sims and lots of OS flips. They're not talking, and the Lindens aren't talking.

Then there are a lot of strugglers, falling in and out of profits, struggling, spending way too much sweat-equity hours for their results. The Lindens don't pity or help them.

After that, there is another huge sector of hobbyists, part-timers, people who are just lucky but lazy. People selling content or services that they get lucky with or get a little pin money from. Who don't worry about paying tier and subsidize their sales. Who blow their proceeds on more content for themselvs. Who put out freebies because they love the picture of themselves twirling on parade as Helps to Mankind than they love making a dime and advancing the economy. They are a kind of funny hobble that makes the struggling of the strugglers so much harder, but there isn't a blessed thing you can do about it.

[Cristalle Karami]

There may be a way to make it work, in theory. Pay people to take a short survey of what they bought in the last week, and from who. Then you could somewhat track how much of any given genre of item is being purchased, and businesses could use it to measure market share and see how the competition stacks up by seeing what the competition is selling most, and what niches need more competition. It would be useful to determine the effectiveness of advertising campaigns, word of mouth, or just regular return customers.

[AlterEgoTrip Svenska]

"...
- Land (private and main sectors)
- Clothiers / Jewelry
- Gadgets/Tech
- Region Developers
- Construction
- Automotive/Aero
- Events/Entertainment..."

Desmond, I think you missed everything under the headline of "Avatar accessories" and this includes but is not exclusively limited to:
- prim hair
- skins
- eyes (including prim eyes)
- other prim attachements including but not limited to eyelashes, various body parts ect.
- shapes
- whole avatar packages
- unique avatars such as animals, furries, tinys, mermaids ect
- AO's for these specialized avs
and sometimes but not always CLOTHING can fall in with this...

----- these things enhance the quality of virtual worlds by creating a comfort zone.. and for people wishing to create a certain type of appearance, such as characters or portraits for industries which require them, (take for example when CSI went inworld for their show... or when Carl Bilt, the former Primeminister and current Minister of Foreign relations needed a custom avatar) this industry in SL is possibly the only one that cuts straight through the grid within various "needs" from your highest ideals to your lowest morals..the appearance projection seems to lead us in general to a desire for attractive and or unique avatars to fill these desires.

If some can DEMAND 1500 lindens for a skin (or I can buy a monkey av for 1000 and not feel duped) I think this shows that the need is "relevent" to the earning potential.