Second Life Economics Puffery
by Pixeleen Mistral on 20/02/07 at 9:17 pm
The Register hating on Second Life
by Curious Rousselot, virtual correspondent
Shaun Rolph at The Register dissects the phony economics of Second Life and how the mainstream media has latched onto SL as “The Next Big Thing”(tm). Rolph concludes that based on churn rate statistics provided by Linden Lab, the population of returning residents is probably around a quarter of a million instead of the over 3 million ‘residents’ the Lab likes to flog on their website, and notes that retaining only 15% of the residents that logged in during October after 30 days is “a churn rate that might surprise and dismay executives from other industries”. Even more telling, the report suggests the SL economy “has a population about the size of Ilkeston, Derbyshire, or Troutdale, Oregon”.
Rolph speculates that with around 15,000 clients logged in at any one time and the small proportion of paying customers – premium accounts – “there may be as few as 3,000 paying customers online at any one time”. From what I’ve seen when logged in this should be more like 20,000 to 30,000 clients logged in.
The comment that this is more like an economy of a small town like Troutdale Oregon is a little off. Troutdale had a population of 13,777 in the 2000 census. Has Rolph considered that the residents of a small town do not go shopping all at the same time? Wouldn’t it be better to compare the size of the returning population of a quarter million?
The Register also goes on to comment on Linden Labs definition of a Second Life entrepreneur. It might surprise you. It certainly surprised me.
“Linden Lab itself estimates the number of “in world business owners” by counting those with a positive monthly cashflow. There were over 21,000 of these last month. For more than 11,000 of them, however, their positive cashflow came to less than US$10. And this is before Linden Lab’s charges were applied to their account.“
With a profit of only US$10 at the end of the month, I could be considered one of those entrepreneurs by writing a few articles for Herald. Not that I mind – but I would call it a Second Life job to help finance my avatar. I don’t run an SL business, I’m simply a SL reporter.
Despite some inaccuracies, the article in the Register punctures some of the hyperventilated press coverage that Linden Labs has enjoyed and points toward a bit of reality to anyone thinking they are going to make playing this game into a first life career.
Prokofy Neva
Feb 20th, 2007
The figures to look at are things like 187,000 plus residents who spent at least a dollar in January 2007, and 57,000 residents who have the paying premium accounts. That might not seem like much, but it was a fraction of that a year ago. The growth rate is pretty spectacular.
It’s true that the businesses in SL don’t make much. It all gets eaten up in tier. It’s a kind of exotic experiment. But when you think that they made stuff out of thin air, out of an online experience, out of monetarizing their time online, it amounts to something.
Petey
Feb 20th, 2007
“”Linden Lab itself estimates the number of “in world business owners” by counting those with a positive monthly cashflow. There were over 21,000 of these last month. For more than 11,000 of them, however, their positive cashflow came to less than US$10. And this is before Linden Lab’s charges were applied to their account.”
Am I reading this right? Only 10k businesses in SL made more than $10 total before paying LL last month?
Anikal
Feb 20th, 2007
Second Life is doing quite well for being one of the few games of it’s type around.
I think this is just a mud-sling towards it.
Rock Ramona
Feb 21st, 2007
/me gets Anikal a big icy glass of Kool Aid…………..
Khamon
Feb 21st, 2007
It would be interesting to see the number of premium accounts earning a positive linden cash flow post reduction of the US equivilant of their premium and tier charges.
In other words, the number of premium accounts actually making a US cash profit after the monthly fees are paid.
Bob Perry
Feb 21st, 2007
I am a business ower and over the past 2 months have made over 1000USD. I have taken near 300 USD out of game. The rest was spent in game buying stuff and reivesting it n the future o my business. SL would not consider my other 700USD profit. I believe they are going by th cash taken out of game.
Bob Perry
Feb 21st, 2007
I am a business ower and over the past 2 months have made over 1000USD. I have taken near 300 USD out of game. The rest was spent in game buying stuff and reivesting it n the future o my business. SL would not consider my other 700USD profit. I believe they are going by th cash taken out of game.
Bob Perry
Feb 21st, 2007
I am a business ower and over the past 2 months have made over 1000USD. I have taken near 300 USD out of game. The rest was spent in game buying stuff and reivesting it n the future o my business. SL would not consider my other 700USD profit. I believe they are going by th cash taken out of game.
laika
Feb 21st, 2007
/me gets Rock Ramona a big icy glass of patronizing asshole juice.
Prokofy Neva
Feb 21st, 2007
>It would be interesting to see the number of premium accounts earning a positive linden cash flow post reduction of the US equivilant of their premium and tier charges.
I think they said this figure was something like 3,000 awhile ago. I’m one of those people who is able to extract a small profit from way too many unpaid online hours accumulating zillions of micropayments and having to constantly suffer losses due to SL itself being down, griefing, blight, etc. I usually end up only subsidizing newbie communities or commissioning builds or whatever. Is it worth it? Probably not, but I love it.
Shockwave Yareach
Feb 21st, 2007
I have a premium account, and I have a little 2/hr a week job primarily for fun and to meet new people. SL is, to me, a way to visit with friends and to have fun, together and alone. Under that definition, SL is a game. Running a business within the game to make it self-paying might be fun for a little while, but the work and the time necessary would have to come from time spent having fun. If I’m going to give up what little amusement time I have to make money, I sure won’t do it for nickles in SL.
Ombrone
Feb 21st, 2007
I read the article of the register, it’s interesting, and I could even agree with some sentence, but it anlysis is less than perfect.
Evidently the author lacks a clear understanding and knowledge of SL.
One for all:
“To become an entrepreneur in Second Life – to fulfil the business press’s predictions for the virtual economy – a user needs a premium account”
Please?
If this is an example his knowledge of SL, I would not trust the rest.
He should do better homework before writing
Wayfinder Wishbringer
Feb 21st, 2007
Although a decent article, this information is not all that new, nor surprising. What IS surprising is that there are still people who think SL is all roses and that LL is doing a great job. I’m not busting LL chops. But I compare SL not only with THERE, Active Worlds and other Virtual environments (none of which are all that impressive) but with virtual activities entire (including Unreal, Quake and other online games). It is just as possible to create a user-interactive environment with the Unreal Engine as it is on There or Second Life. A bit more difficult, a little more challenging, but possible nevertheless. Compared with the MILLIONS of ACTIVE members of WoW, GuildWars and other such systems, no, really, SL isn’t doing all that great. And yes, their acclaimed “resident” numbers are badly overblown. I would even go so far as to say that since LL absolutely refuses to reveal subscription figures (ie. paying members)– those figures are likely pretty dismal.
Reference article: http://s183430029.onlinehome.us/Is_Second_Life.html
and in case anyone feels that this is just anti-SL propaganda, here’s a little more well-known source:
http://s183430029.onlinehome.us/PC_Mag.html regarding:
http://www.pcmag.com/article2/0,1895,2089463,00.asp
LL’s hyping “residency” figures is well known. The liberal estimate is that SL retains between 5-10% of those who sign up. Which would be understandable if they required paid memberships for continued residency. But since they offer free memberships, the old saying holds true: they can’t even give it away.
Not badmouthing LL or SL. Just taking off the rose-colored-glasses and looking at plain ol’ facts.
Aleister Kronos
Feb 22nd, 2007
I think a fundamental problem with The Register – and other press coverage – is to confuse the micropayment-based inworld economy with the economic aims and aspirations of RL commercial organisations (like IBM or BMW).
The latter, I would contend, are not remotely interested in the to-ings and fro-ings of the L$, or its viability as a true currency. Whether we like it or not, it is still “play money”, tokens for use in SL that, for most people, have little or no relevance to “real money” or “real life”. Buying L$ is not so different from having a pay-as-you-go cellphone, in that the payment enables a service: with L$ you can buy fun stuff.
The big RL companies are in SL for all sorts of reasons, but making L$ is not one of them. It was interesting to see recently that Adidas had sold 23,000 pairs of customisable trainers @50L$ a piece. This is about 2,300 GBP – a sum that offsets a little of their build costs in SL, but that’s not the point. In their case, they have demonstrated a degree of tech-cool and made some kind of contact with a significant number of real people who might now part with real money in the real world for said trainers. The L$ raised in SL is incidental.
SL is a 3D social environment; it is not a 100% accurate simulation of the real world (thank god!) and as such its economy is “phony”. So what? It largely does what it needs to do. Th big companies are not so naive as to believe SL is a huge cash cow… and I am surprised that many journalists are so naive as to think they are.
Team Mascot
Feb 23rd, 2007
I’m with Aleister on this one…. I believe that there are “hobby” users of SL – who are happy to play with L$, to sell artefacts, to gamble on line, to run an SL business…. who make up the hard-core of “financially active” SL residents.
Meanwhile the “commercial” or “educational” users of SL are more likely to be the ones outside of the “SL Economy” (i.e. not actually “trading”, but will just be renting land or islands from LL, and may be employing the odd builder or scripter to help with their sim). I think the argument goes that “commercial” users of SL (i.e. the IBMs and BMW’s of this world) will be happy to pay LL for the privilege of using their servers (i.e. rent for a private island) but won’t want to get involved in dodgy dealing of $L (as demonstrated by the World Stock Exchange in SL) particularly as there are no controls or policing of transactions. This extends further into how businesses permit employees to use SL….. again, would you like to sign off my expenses if I were to put in for e.g. “£50 to cover purchase of $L” when I then can’t show how the $L were spent (is a really good hairstyle for my avatar a good use of business expenses????… or can you prove that I’ve not been purchasing dodgy animations from virtual stringfellows??!)
Wayfinder Wishbringer
Mar 1st, 2007
You know, not to be difficult, but I have to wonder why it is that IBM ever got mixed up with SL in the first place. I have to wonder what marketing-department guy had too much time on his hands and too much available funds laying around and decided “Oh boy! Time to play games!”
Do they really thing that a presence on SL will help them sell computers or services? Do they believe that a virtual conference room will properly replace other options? Do they believe anyone will take seriously a marketing proposal from a 3-D avatar? (And what will they do when the sim or platform crashes right in the middle of that important business meeting?).
I don’t deny there may be some things I’m unaware of or plans they may have which they’re not letting anyone know about. But to invest some $60,000 in a platform like SL… I have to believe either they have so much money they use it for TP… or someone lives in a bigger fantasy world than the elf lands ever dreamed of being.
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