A Bad Day for Fanboys
by Alphaville Herald on 20/12/07 at 11:30 pm
Positive spins becomes more difficult
by Pixeleen Mistral, new media critic
US$ (in millions) spent by resident fall – where is the bottom?
An illuminating view of the state of Second Life is available to readers of Infoworld InformationWeek columnist Mitch Wagner’s December 18th coverage of the Electric Sheep Company’s sudden downsizing. Our pal Mitch wonders if something might be wrong when the Linden Lab CTO departs from the Lab in the same week that the ESC ejects a quarter of their workforce. Mitch’s concerns are addressed by ESC honcho T. Sibley Verbeck and you can almost hear the relief in Mitch’s voice as he notes that “the service is still growing, adding more than 10,000 new sign-ups every day, with 11.5 million accounts created since it opened four years ago, and 433,500 logins in the past seven days.” Right. Nothing to worry about there.
The story was originally posted at 5:25 pm, then updated three hours later as Mitch notes he might have spoken too soon when claiming “usability and stability are improving steadily”. One small inconvenient truth had come to light. The Lab had released statistics that “show that client-side performance is down”. Even worse, Adam Reuters had published a story suggesting that residents in SL have seen a steady worsening of the in-world experience with dropping frame rates and appalling crash rates. That the best crash rate ever recorded was in November – when 21.5% the sessions ended in a crash does not inspire much confidence that the service will be stable anytime soon. Still, Mitch is a pro – he updates his story and moves on.
Until 2:00 AM – when Mitch awakes in a cold sweat to update his coverage – again – with the news the Lab’s usage statistics for November show “…more bad news. Hours logged in November were actually down month-over-month”. Even worse, US$s spent have dropped by almost half. Hard to imagine why that would happen – don’t the players appreciate how good they have it? The 24% crash from April rate has dropped to 21% – who cares is SL barely manages 12 fps?
While I could feel Mitch’s pain as the sands shifted beneath his feet, I was left with more questions than answers. Might this sort of coverage rouse the mainstream media to take a little harder look at the Linden PR spin next time? Will the unpaid LL fanboys be able to hit back – hard – against this oppressive news? More importantly, does anyone know where to get a HiPiHi account? I’d like to take a vacation somewhere that does not crash all the time. Who knows, maybe they need a newspaper over there.
BrickTamland
Dec 21st, 2007
What? The Second Life Economy is inflated? Who would have guessed.
When will you fools realize it? This is a FAKE economy, you aren’t buying REAL things. How do you expect any economy, even a fake one to operate when there is a script that can steal anything without the user ever being caught. How can a currency keep a steady value when there is an exploit to create Lindend spacemonies out of thin air, and can easily be stolen by an intelligent scripted, gaining a profit of literally thousands of dollars with no risk to himself of herself.
In short, did you truly think any of this “metaverse” bologna was going to last? How could it, when the consumer has NO incentive to buy things. If they don’t have money in the game, they either go make a similar product, or get one free, or go back to REAL LIFE. Enjoy your failing FAKE economy, fools.
Alyx Stoklitsky
Dec 21st, 2007
Anyone else notice that Second Life’s economy was in it’s peak for the 5 months that Woodbury was home to the /b/tards?
The month the sim was finally taken down, the value of the economy dropped by almost half.
Mitch Wagner
Dec 21st, 2007
Actually, I write for InformationWeek, not InfoWorld.
Ian Betteridge
Dec 21st, 2007
Pixeleen, unless you can show that this curve differs from the equivalent period of last year, this is meaningless – you need to take out seasonal factors before you have a meaningful statistic. Year over year, not month over month
Ann Otoole
Dec 21st, 2007
The new search almost wiped out all but the so-called A List designers favored by LL.
Almost everyone I know became invisible in the new search and even the top classified ad runners reported to me their hundreds of dollars a week ads were not visible most of the time. I.e.; LL almost killed the entire economy with the stupid rules that favored 80-sleekbots-in-a-sardine-can falsely inflated traffic scammer merchants. It took a lot of pain and effort to get them to listen and modify the rules. Now the search is working much better than ever in SL’s history and things are on the rebound. There is still a massive opportunity to improve SL by dealing harshly with the people that make things like Brick mentioned, the people that revel in the ability to steal entire sims (the open sorcerers), the countries where most fraud activity sources from, etc. The largest impediment to the commercial success of secondlife is leaving. Things will improve. and if someone thinks its so bad then they should stop hanging around yelling at people and leave.
pixeleen mistral
Dec 21st, 2007
@Mitch – I just asked Audrey in typesetting to correct that – you do write for InformationWeek. You know how it is this time of year – the typesetters seem to have been having a little holiday office party last night.
Maxx Something
Dec 21st, 2007
The Second Life economy is failing. Ask any designer or merchant who isn’t receiving ummm special Linden preferential treatment.
NinaA
Dec 21st, 2007
Has anyone noticed the quality and amount of FREE content available in SL? Seriously. LOL. I tell newbies not to buy anything until they have checked out places like The Freebie Dungeon. Then they do the same to others. It is probably my fault the economy is failing.
urizenus
Dec 21st, 2007
>Pixeleen, unless you can show that this curve differs from the equivalent period of last year, this is meaningless – you need to take out seasonal factors before you have a meaningful statistic.
Ian, the curve she posted is for a two year period.
SqueezeOne Pow
Dec 21st, 2007
Awww well that’s too bad guys! I guess all you make-money-at-home people flooding the market with shitty products will have to go elsewhere as it’s not worth it anymore.
But seriously this is just fostering creativity and hindering greed so I’m all for it. The people that are complaining about the falling economy are in SL for the wrong reasons and are generally the reason there’s so much shitty content in world to begin with. LL already helped by getting rid of casinos so there are a lot fewer giant neon boxes with slot machines inside now! Now just to finish the rest of you off!
There’s also the fact that there seem to be a smaller percentage of avid consumers in SL these days as compared to when I started in 2005. This is probably due to performance issues as well as how much everything costs vs. the low quality of it all. These days it seems more people would rather just raid the freebie bins or try their hand at building their own shit.
Then there are the people that buy land and do builds for the fun of it or for expression. They’re not “contributing” to the “economy” per se, but they’re also not in it to make money so much as make something quality.
So yeah, fuck your economy! It isn’t real anyway.
Wyvern Wycliffe
Dec 21st, 2007
“there is a script that can steal anything without the user ever being caught.”
“How can a currency keep a steady value when there is an exploit to create Lindend spacemonies out of thin air, and can easily be stolen by an intelligent scripted, gaining a profit of literally thousands of dollars with no risk to himself of herself.”
What? Please tell me this is misinformation, a hoax, out of date, or something? I have heard none of this before now.
Obscure Doodad
Dec 21st, 2007
A few concepts in play here:
1) Age verify devastates business grid wide. Not every place on the grid. Just grid wide in a cumulative way. A significant proportion of the market will not Age Verify and put themselves in the Requested Porn Database. If that is 20%, or 40% or 80% . . . whatever percentage it is represents a diminished number of potential customers for either buying products in adult flagged sims or renting an apartment/land there. This is not a matter of moral debate or sociology debate. It is mathematics and economics. If your market shrinks, your sales are likely to. If you are an adult flagged land owner then unless you find a way to destroy your adult flagged competition, a shrinking pie shrinks all the slices within it.
The published economic stats from Meta Linden do not even show this yet because Age Verify is so new, but they will.
2) A significant percentage of the SL economy is now off world. Not OnRez. Not SLShopper. Not products at all. Payments for land rental. That money may have changed hands in the past via Linden payments from renters to landlords. Those transactions are moving off world to Paypal. This will show in reduced Linden transactions in world. Land rental almost certainly dwarfs product purchases as the dominant source of SL GDP.
3) Premiums have increased. Only a tiny growth rate, but they have increased. 92,000 premiums at average $100 USD/yr is gross revenue of $9.2 million USD. Companies do not fold with 9.2 million in known revenue. They shrink. They layoff. They may seek a buyer. But they do not fold. There is always someone around who thinks he can make a profit on 9.2 million in revenue. And of course this entirely neglects tier revenue, which dwarfs Premium money influx.
Looking at Meta’s data (and yes, you can disbelieve it if you want — I just think a non shareholder has no reason to explicitly lie to the community on a monthly basis) we see 755 island square kilometers. This is 11.5 thousand sims, and we know some of those are 4:1 sim combos in 1 server box — and some are not. So let’s just cut it to 5000 and say they are collecting tier on 5,000 island sims. At $295/month that is $1.2 million USD/month or $14 million USD/yr. So this is 14 + 9 = 23 known million USD / year gross revenue. I won’t bother with mainland because there is Linden land in the mainland that does not pay tier, and it’s only a fraction of the island total. The do also make more money up front on the $1.7K an island owner pays for a sim (from which they pay maybe $700 for the box). This year the stats show they added 500 islands. That is another 0.5 million USD in net revenue (not gross) after buying the hardware.
In general, this is probably a $26ish million per year revenue company.
Their growth rate has collapsed. Outright revenue . . . maybe not.
MOONFACEDKID
Dec 21st, 2007
THIS BLOG ALWAYS MAKES ME DEPRESSED ITS ALWAYS SO GLOOM AND DOOM
Ric Mollor
Dec 21st, 2007
This may be the peak of the bubble. It would be interesting to have numbers on the usage of current virtual land. As the number of free items increase the profits of shopping venues will steadily decrease. Eventually it will become obvious that Second Life is ‘over malled” and there may be a steep decrease in land prices as mall owners try to get out while they can.
Linden Labs may be able to counter this a bit by slowing delivery of new sims but that would certainly be counterproductive to ‘growing the business’. If course they carry the blame for this glut of freebies as the current system makes texture theft trivially easy.
Unless enough users believe that they need virtual homes and are willing to pay tier for them there are certainly some big changes ahead. And with more and more competing worlds offering free homes LL may be feeling a pinch very soon.
DaveOner
Dec 21st, 2007
Everything except #1 made sense, Mr. Doodad. Age Verification has yet to become mandatory so at this point that was all just random speculation based on personal bias.
I agree with everything else you’re saying, though.
SLH should get someone with more of an understanding of economics (and math) to write these articles. Looking at the only stats provided as a foundation for this article actually makes it look like pretty positive growth in general. Sure SL didn’t do as good in late 2007 as it did in early/mid 2007 but it did easily twice as well as late 2006. It’s still too early to actually tell (thus all the irrelevant speculation) but it could possibly level off where it is now for quite a while. That’s still positive and fairly consistent growth.
It’s obvious to me that negative spins becomes more difficults! s!
SqueezeOne Pow
Dec 21st, 2007
@Ric:
From my experience the amount of freebies is more of a combination of the fact that so many unverified accounts have so much less money to spend these days so people have to cut prices to make a profit. I’m finding things that would have been easily L$1k in 2006 now being sold at $L300. I myself have gotten better results when I lower my prices. I’d rather sell a ton of stuff for cheap then only a few things for expensive prices.
Then there’s the possibility of inventory liquidation by some of the older builders. After a while products stop selling because everyone that would buy that item already has. There’s also the prospect of advancements where the builder or their competition makes something of superior quality and/or functionality…just like IRL.
So what do you do? You don’t just delete it, you make it a freebie! I’m actually looking at doing the same with stuff I’ve been selling that doesn’t move that much anymore. This will (hopefully) be offset as I make new items with better functionality as I learn from each build I make.
Also, I’d be surprised if any noticeable amount of freebies are a result of straight up copybot theivery. I’m sure it happens but it wouldn’t be in a freebie shop owner’s best interests to do such a thing. If it becomes confirmed that items in the shop were, in fact, copybotted then it’s easier to trace it to the owner of the land (since they own the land)…and now that we know that LL won’t keep EVERYONE’S information confidential in EVERY situation, people are probably noticing this and acting accordingly.
That’s just my take on it, though.
sirhc Desantis
Dec 21st, 2007
Well for one thing I’ve been on SL for almost a year and quite frankly I’ve got everything I wanted. Like was said I rummage through the freebies from time to time but now if I want say a skybox I build one. Same with clothes etc. All I’m paying for is my land fees and I’m selling most of that anyway
Ian Betteridge
Dec 21st, 2007
Uri: “Ian, the curve she posted is for a two year period.”
Me: “Hi der! I no read! Doh!”
Eric Reuters
Dec 21st, 2007
And as it happens, I wrote that performance story, not Adam.
Your typesetters should be fired.
asher bertrand
Dec 21st, 2007
You failed to make note of the end of sanctioned gambling. The timing of the gambling ban seems to directly correspond to the drop in spending. A lot of the spending you saw before that were pays into and out of slot machines.
IntLibber Brautigan
Dec 21st, 2007
whats actually happened is a reduction in spending due to several reasons:
a) wagering ban and the subsequent banking collapse wiped out hundreds of millions in savings, severely reducing the money supply…
b) caused a massive loss in consumer confidence in the SL economy…
c) exacerbated by big mouthed know-nothings on ragsheets (crazy cat ladies or not) bitching and whining about things they know not…
d) resulting in many people with investments pulling their money out of world….
e) also combined with the RL banking problems and Federal Reserve messing with the money supply while the subprime mortgage fiasco and oil-induced inflation pressures mount, means less disposable income for people to blow on things less essential to their real lives, like virtual economies (games or not).
Pontiac and AOL have pulled out of SL, as have some other corps, primarily because the development companies they hired made the same dumb mistakes that corps did in the early world wide web era of ecommerce: they never put their URLs on their print and tv ads (it would help if LL would let people point domain names at their sims or parcels), plus made some new ones, like treating SL locations like websites, i.e. not posting any live help on location.
SL is a social medium, a corporate site in SL needs a human presence to interact with customers. Those corps that do this (and promote their SLURL in their RL media ads), get it and win. Those that dont, see vacant sims nobody visits.
SL is only going to grow if people get this.
Prokofy Neva
Dec 22nd, 2007
Intlibber is such an annoying blowhard.
Um, unless he’s calling Benjamin Duranske/Benjamin Noble a “crazy cat lady now,” I can’t imagine WTF he means by exacerbated by big mouthed know-nothings on ragsheets. It was Duranske who ranted on about alleged Ponzi schemes and Ginko, and helped to cause the run on the bank.
I’ve barely covered the “financial services” of Second Life, I leave all that to Busybody Fugazi.
Obscure could not be more wrong yammering about “the significant amount of the SL economy offworld”. For one, that sector was a bubble that is bursting fast. For two, where’s the big spend? We saw from Glenn Linden’s figure that these much-ballyhooed metaversal agency drones were earning something like $8000 US a year. There are gadget and dress makers inworld that make double or quadruple that. The millions that some companies have sucked down are not invested in SL in any way in goods or services, so they might as well not exist.
The other silly thing is to say that “mainland is a fraction of the islands”. Look at the map. There is a very brisk business off the mainland auction. I’d like to get a definitive answer from LL on this.
The board member Bill Gurley, as I mention on my blog, has a video clip out from a panel where he talks about $5 million revenue per month. So there’s a lot more mainland auctions — at double and even triple the purchase price of islands — and mainland tier than you are calculating obviously.
The revenue of LL is likely triple what you indicate.
As for Intlibber’s hectoring about putting URLs in ads, my God, what an annoyance. Like…someone can click on a URL in a TV ad lol? Duh. And in SL, we don’t have HTML on a prim. So how can we demand that land point to a domain?! Of course, devices can be put inworld to yank the browser up to another page, but many people find this de-immersive and irritating.
Free homes in other worlds that you can’t decorate with anything but an uploaded texture get really old really fast.
Whatever I have published as been pretty straightforward, explaining how the problem of the “financial sector” of SL is really more about psychology than regulation. It’s about people role-playing business start-ups and venture capitalists who don’t have RL experience in business. SL is good for that. It lets failures in RL or people with no experience in RL start anew. But then the results can’t be that different than real life, when it involves real money.
I don’t see the reduction in spending as stark as others are seeing it, because I think that in addition to the dip around Thanksgiving and the service outages, a) the end to gambling spending is to account for it still (casinos still exist and are still being wound down or closed) and b) the messed-up search is accounting for it. Yet SL has shown a great capacity for righting itself. The Lindens have even stopped this nutty idea of devaluing classifieds by mixing them in with “search all,” meaning people stopped buying them. They sometimes *do* listen to protests.
Alyx Stoklitsky
Dec 22nd, 2007
Prokofy, I’ll never understand your hatred for Windlight and the new search.
Yes, the search engine will pick up and list anything that’s for sale on your parcel – which surely, is exactly what most people would want. The fact that you had something accidentally set for sale doesn’t make the new search features ‘Evil’.
Afterall, without the new search, that stuff would still be set for sale and you still wouldn’t know about it. …Or is ignorance bliss?
On another note, I’ve seen you use the word ‘Ballyhooed’ about 12 times in the last week. Is it your new favourite?
NinaA
Dec 22nd, 2007
OMG It is Prok’s fault. I should have known.
Obscure Doodad
Dec 22nd, 2007
>>
The other silly thing is to say that “mainland is a fraction of the islands”. Look at the map.
>>
Meta Linden quotes on her Dec 18 Blog entry that the November Economic stats are out. In that Excel spreadsheet, the land surface area existant is 755 square kilometers island land and 184 square kilometers mainland land. A lot of mainland land is Linden land and not paying tier. 184 is about 1/4 of 755, i.e., a fraction, and less than that given the Linden land functional.
>>
The revenue of LL is likely triple what you indicate.
>>
That would be $80ish million USD per year. The bulk cost for any enterprise nowadays is personnel. There are numerous quotes around that LL employs about 200 people. At an average total compensation for each of about $90,000 (including all vacation, health insurance, and 401K match benefits plus overhead) that translates to $18 million USD in payroll.
This suggests LL is earning (60 million – $15 million (building lease, insurance and utilities)) $50 million dollars per year for the shareholders. This is a profit margin of 62%.
Perhaps folks who envision this level of economic firepower should ask if they can invest.
Anonymous
Dec 23rd, 2007
Let’s see..
Banning casinos? check. (though let’s be honest, they sucked anyway
)
Upping land prices? check
Treating paying customers like shit? check
Giving preferential treatment to vigilantes? check.
Not fixing long running problems? check.
Ensuring customer satisfaction? negative
Treating adult, paying customers, like children? Check.
A friend of mine just got the linden experience(TM) with her account, she was trying to recover her password so she could actually become a paying customer, and well, they didnt do shit to help her, I know she could have done better to remember her password, but shit happens.
It’s almost like they DONT want people to play or buy sims.
Also, let’s look at the other issue, the land pricing and availability, I’m seeing more and more mainland for sale at ridiculous prices, but no one is buying it. I sold mine off recently as well as a few friends, I have no interest in buying any land in the near future because getting mainland = asshole neighbors who bitch at you or AR you for things on your own property because their personal belief that anything on your e-lawn should be 5m away from the property line.
Private land = you have to deal with the estate and landowners who are usually assholes who will find any reason to kick you off your land and keep your money, or are anti-social psychotic fuckheads who will ban you and take your land because they’re having a bad day. If you want to buy your own sim, it’s insanely expensive ($4k a year!) plus you have to get LL’s blessing on it, if they dont like you, forget it. If you get said sim, put parts of it up for people to buy. Then you either have to deal with the anti-social fuckwads who come and bitch at you for everything, or no one buys it because you arent giving it out for free.
So the incentive to buy land isnt there, it’s nothing but a pain in the ass.
LL is better off promoting SL as a creative tool and platform for educational use and business collaboration, and nothing more.
The hype has killed them though. They’d have been better off stating that you simply buy credits to buy goods in the world and you can exchange them back into money again instead of calling a virtual currency and pushing virtual millionaires and making it sound like a real functioning economical system, when one was never there to start with.
Also, I need to stop posting when drunk
IntLibber Brautigan
Dec 23rd, 2007
Shaun, stop posting when drunk, the “Anonymous” doesn’t hide the distain.
Prok: You dumbass, anybody who was around in the mid-early 90′s knows what I’m talking about. ecommerce sites whose domains were not in their companys print and tv ads did not get traffic, plain and simple. Similarly, if Pontiac and AOL promoted their SL sites URL’s in their print and TV ads (wait, AOL wants you to go to AOL, not SL, unless SL becomes like AOL, then… whatever). Problem is those ‘slurls’ are as long and ungainly as those dumb longass URLs, with the tilde’s and slashes and other crap, of the early web before most people figured out the marketing importance of having your own domain.
SL sims are NOT web destinations because SLURLs are longass, hard to remember unless its a sim name you can just plug into the map, and even then most people are too lazy and want a Landmark anyways. LL needs to pull their heads out about making it easier to get from seeing a print ad domain, like, say, “grid.bntholdings.com” which would send you to the BNT Holdings HQ in SL without a lot of bullshit in between.
Anonymous
Dec 27th, 2007
lol I’ve talked to shaun, but I’m far from him.
stop playing guessing games with anonymous.
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