by Jessica Holyoke

Zee Linden recently posted graphs reflecting the strength of the SL Economy here – and Zee is very happy to report that the SL Economy grew by 15%. However, the story is not that simple. By several other measures, the economy growing slowly if at all. For instance, the Quarterly Profit per Capita (QPC) shows an anemic growth rate of 0.18 for the first quarter of 2008, the lowest on record. This suggests that virtual economists may want to take a very careful look at Zee’s numbers.

Quarterly Profit Per Capita posts lowest growth rate on record

Zee’s first graph tracks User-to-User Transactions in SL It is an interesting graph because we’ve never seen user-to-user transactions before. The economic statistics page uses Resident transactions and counts. The raw data spreadsheet has L$ Supply and user-to-user transactions as a page, but only details the Money Supply on that page. The raw data used to create the first graph is not readily available. More importantly, the graph uses two specific terms, user and resident. In Second Life, a user is the typist, the person behind the screen. One user can control many residents’ user-to-user transactions – which would eliminate the transfer of money between alt accounts from the reckoning.

More importantly, Zee Linden is using user-to-user transactions as an indication of Gross Domestic Product, in spite of the fact that it could be anything but. The outside currency exchanges would be a User to User transaction. HippiePay would be a User to User transaction. Paying rent would be a User to User transaction. Giving your friend money so she can buy new hair is a User to User transaction. All of these actions inflate GDP – in many cases without reflecting production. While the purchase of the hair does reflect production, the transfer of the money between friends for the purchase does not.

Another point Zee made was that the transaction rates were annualized. An annualized rate plots the change in an indicator over the whole year as if the latest monthly or quarterly figure is presumed to persist for the rest of the year. This is calculated by multiplying one month’s change by 12 to produce the annualized rate, or one quarter’s rate by four http://glossary.reuters.com/index.php/Annualized_Rate – so the real numbers were transformed a bit in order before Zee used them on on his graph.

Zee Linden used User hours – and again using an annualized rate, Zee stated that the hours also increased by 15% However, the one problem with those hours is that there is an unknown Bot effect. How many of those hours have no economic value to them?

One way to measure the Bot effect would be to compare the Total Users logged in with the Number of Residents who spent money. While this may also pick up Residents who log in and don’t spend money, either way, it removes residents who don’t participate in the economy For June 2007, the last month on the archive with both sets of numbers available, 305,551 residents spent money in world. As of June 30, 2007, the 30 day log in number was 1,091,017 residents. Dividing the number who spent money by the number logged on suggest that only 28% of the world’s residents participate in the in-world economy. While many arguments can be made about how long a Bot is logged in for or if a Land Bot should not be excluded because it does spend money, at least 28% is a starting point. For now, Bot effect is not a good measure because we only have older statistics and it might not be helpful to see how the hours are being used now.

Positive Monthly Linden Flow bounces after falling off a cliff

Zee Linden also uses my favorite stat, Positive Monthly Linden Flow He states that PMLF grew by 11% from December 07 to March 08 – even though, 50,688 total PMLF residents in December to 57,888 total PMLF residents seem to be 14% growth. Even though PMLF has its limits, at its heart, it does measure the number of residents who earn more than they spend If you fill out $1000L of surveys and you spend $900L, you are counted in PMLF.

LindeX activity is skipped because no one has convinced me that purchasing Lindens translates into taking part in in-world production due to the other purposes for which those L$s might be used. For instance, the US dollar is a reserve currency. Other countries buy and sell goods and services in dollars even though those dollars are not used in the US.

So how does the economy track with the figures I used before? Using raw PMLF over Quarter 1 2008, the total number grew by 4.80% from January to March The average weighted monthly PMLF over the same time frame grew by 6.22%.

Quarterly Profit per Capita (QPC) shows Q1 08 shows a QPC of 0.18, the lowest that it has reached on record. Could this have something to do with falling virtual land prices?

by Jessica Holyoke

After the banking ban, there are commentators who state that the Second Life Economy is in a recession and then there are the opposing commentators that say that the Second Life Economy is not in a recession. 

According to Wikipedia, a recession "is a decline in a country’s gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year."  Linden Lab does not have figures on GDP or economic growth.  But the Economic Statistics page does provide two numbers that can assist in seeing if there is a recession, Positive Monthly Linden Flow (PMLF) and total User Hours Logged. 

PMLF is the number of unique users that showed profit over a particular month.  On the statistics page, they are grouped by number of users that have experienced a degree of profit in U.S. dollars.  This number is better than the other monthly spending numbers because it eliminates any Alt effect.  For the resident transaction numbers, if I gave an Alt any amount of money, it would be counted in the totals, even though I was not spending money, just shifting it around.

Second Life users with positive monthly L$ cashflow getting harder to find

PMLF does not include land sales.  According to the source, land sales are investments and not receipts.  So they do not get counted as business receipts.  This makes land comparisons more isolated and it takes out any land businesses, like land barons and banks.  PMLF covers the buying habits of everyone who is not in the land business.

In looking at the PMLF, I took the mode, or the central number, of each category except for the $5000 and above category.  For that category, I used $5000.  I then multiplied the amount earned by the number of users in that category.  I then added all of those sums to create a monthly total which is an estimate of the total PMLF.  I was then able to compare the average PMLF for a calendar quarter and track percent growth within that particular quarter.  Growth is measured as the difference of the starting value and the ending value divided by the starting value.

Quarter 3 and Quarter 4 2007 both saw negative PMLF Growth. The percentages were not more than 2%, but they were both negative.  Negative economic growth for two calendar quarters is an indication of a recession.

Total hours logged also decline

THL also avoids the alt effect because it measures how much total time is spent in world.  While certain content creators do not need to spend any time in world, people searching, purchasing and using their products do need to be in world to use their purchases. 

THL growth was negative for Quarter 4 2007.  The only other time it was negative was in Quarter 1 2005.  In talking with wise resident Gwyneth Llwellyn, around that time, the Lindens stopped paying L$500 for each host of an event.  This may have created a negative use rate.

In dividing the quarterly values of PMLF by THL, you get an index I will call the Quarterly Profit per Capita (QPC).  Because of the lack of historic PMLF values, QPC cannot go back before quarter 3 2006.  While QPC is lower now, it is not dramatically lower.  QPC was 0.26 during the Quarter 4 2006 boom and 0.20 for Quarter 4 2007.

Quarterly Profit per Capita

So while total profit might be down, and showing recessionary signs, the strength of the economy based on the people who use it have only slightly slipped.

Total positive monthly L$ flow

As many of us are no doubt aware; Linden Lab publishes statistics about Second Life. Conveniently they also make the historical data available in Excell and OpenOffice, and Google Docs format. This gives us here at the Herald a chance to see how the economy of Second Life is doing and to comment on it. More importantly, it gives us the chance to make pretty graphs of the information too. So, I thought it might be nice to put some of my amazing spreadsheet skills to use and see what we could get.

Obtained by dividing the total L$ by the total US$ of LindeX transactions

As we can see, after a serious drop in value of the L$ in September of 2006 the L$ has been holding pretty steady between L$260 to L$270 per US$. Admittedly I’m no economist but considering the relative size of the economy this is pretty impressive stability over the last several months.

We can see a slow and steady increase in L$ balances held by residents with almost flat supplies and sinks of L$. What is far more interesting is the significant spike in User-to-User transactions. It looks like we really enjoy our shopping in SL.

It looks like the number of premium accounts is rising quickly. Linden Lab seams to have made the right decision when they got rid of New Land. This surprised me somewhat since I had been thinking of signing up for a premium account and picking up some new land right around the time that they canceled the program. So, I still don’t have one because I don’t see the point.

Obtained by dividing the “total hours online by the number of residents”

This last graph will probably help all those who think the boast of having over 5 million residents is a bit misleading. It appears that between 2003 and 2005 the early adopters of Second Life were spending an average of 45.2 hours a month in the game. 2005 itself saw a small drop with an average of 38.1 hours per month.

2006 and so far in 2007 the average is a significant drop with 14.3 and a pathetic 4.9 so far in 2007. As has been said this is probably largely due to the significant increase in one-time-use account. If we assume that the usage patterns of regular users hasn’t dropped significantly we can start to make some real analysis. First we will notice (just from the numbers) that the first significant change in usage appears to start in September 2005 when hours per-user drops significantly from 40.2 to 34.7. Taking the average from before that point (44.3 hours/month) and applying it to the March 2007 number of 3,177,434 total hours spent in SL, we come up with approximately 346,044 active residents with an estimated error of around 5%. This assumes that the active residents are still spending an average of 44.3 hours per month in Second Life.

This may be a far cry from the millions of us advertised but it is a significant increase over the 28,801 figure from July 2005 (prior to the availability of free accounts).

by Pixeleen Mistral, National Affairs desk

For those who’s Second Life might not be complete without acting out fantasies with hermaphrodite child avatars – the odds do not look good. But an exclusive Herald study suggests that daddy/little girl ageplay is popular among 44% of those who express a preference by joining an ageplay fetish group. Mom/daughter ageplay is in second place with 25%, and daddy/boy places third with nearly 15% of the group members – so perhaps incest is not a major issue in this community.

How would you like to play today?

However, in the study of the Second Life groups, Herald researchers found only about one in a hundred ageplay avatars joined the hermaphrodite/intersexed ageplay group. It is unclear if this is due to poor marketing, asset server problems, lag, or the limited number of groups Second Life citizens can join.

Ageplay preferences by the numbers

The study employed a rigorous methodology – scientists looked up “ageplay” in the group search tool, then read the group charters and categorized each group into either general ageplay, or fetish-specific ageplay, and compared the relative popularity of the fetish-specific groups. With around 1200 members, the fetish-oriented ageplayers easily outnumber the roughly 700 members of the more general ageplay groups.

Researchers point out that the actual number of adults who wish to have sex with act like children in Second Life is likely to be higher than the number of members in these groups.

Casting call for the Elizabethan Pornography Smugglers “Gay Boys in Bondage?

As the Second Life homepage map reveals, the population of SL now exceeds 40K, which, according to the most recent figures, means it has probably passed the ever plunging TSO. Of course people don’t actually *pay* for their monthly accounts on SL, so it is not clear what this statistic really means — the only meaningful measure of success for SL is the amount of land being rented or owned by customers. Still, it is a psychologically important milestone, both for SL and for those of us who can’t avert our eyes from the train wreck that is TSO.

Last month: 20,000 people used SL. 50,000distinct items were sold. There were 1million p2p transactions.There are 7000 user hours per day spent creating. 3.5 user years per day! If Sturgeon’s law holds, then 90% everything made is crap bit 10% is good. It follows that of the 1300 items created daily, SL gets 130 really good. Also: 50% of the users are women.

I have no idea how SL can reliably document some of this, and I also wonder if person hours spent creating objects includes newbies working on their avatars and rezzing cubes. Saying that 10% of the objects created are “good” sounds wildly optimistic to me.

Category

We are told by EA that TSO has 80,000 subscribers, but did you ever wonder how many actually play TSO or how many hours are logged? Perhaps we can extrapolate. Following is a census of recorded visitor hours listed in all the top 100 properties on Feb. 5, 2004. This is mostly for fun, so you can draw whatever conclusions you wish. Following the raw numbers are some methodological remarks.

2/5/2004