Poor economic decisions within LL

I actually listened to the whole thing....dunno, it doesn't seem like Zee "get's" it...which is sort of what the Gartner and InfoWeek guys are hinting at thoughout...but of course, he does not realize it so it is irrelevant.

Land prices are still on average a lot higher than when I first got land in SL, I'm not sure what the issue is really. The barrier for entry for new users into the land-market, or just to own land for a house/shop shouldn't be allowed to go too high. There was one time where you could expect to pay upwards of L$15/m for a really crappy plot of land. Now your L$15/m can get you a more premium plot such as a water-side one, which IMO is the right direction.

As for private islands I can't comment, really better tools are needed in general as the market for private island land is so unregulated yet could be solved by simple payment tools to prevent abuse and improve searching.

I am feeling rather cynical this morning...therefore, I totally agree.

George W. as an economist?

That just may be the funniest thing I have ever read on these forums.

Des, with the exception of the first graph (which shows the impact of the gambling ban), all of those graphs exhibit a classic "S" growth curve. They start off slowly, then ramp upward exponentially, and then bend over and level off.

That says to me that SL is approaching, or has reached some sort of equilibrium point. Unless something changes, growth will continue to level off.

What could change? Many things, both in the external and the internal environment.

thread starter is whining and the person who actually fails and believes he can blame others for his failure.

I think the plan is:
1. stampede users into SL (started 6/6/2006, nearly complete)
2. fight stability fires/meltdowns due to stampede (in progress: slow but 'steady')
3. lure suits with corporate cash via user stats (in progress)
4. fuel user growth via corporate tie-ins/lures (slowly progressing)
5. grow platform tech (windlight, sculpties, H4: 'complete'; MONO: imminent; secret projects: in progress)
6. goto 2

Actually, those graphs show that LL is either ignorant or intentionally misleading.

They're talking about "growth" but using a linear scale. When talking about growth (normal growth, which is exponential), it's important to use a log scale.

If they had presented the information meaningfully, using a log scale, we'd see that the growth rate has taken a very serious downturn, even when dismissing the big one-month hit when they outlawed gaming. True, the economy is still growing, but at a miniscule rate compared to previously. Of course they used a linear scale since it makes the picture look better, but then they're taking us all for ignoramuses.

The simple fact is, the charts they present are nearly useless for evalutating the claim they made in the blog when they posted these graphs. Shame on us for not being savvy enough to see through the smoke.

If anyone really wants to see meaningful growth charts, let me know and I'll post them.

BTW, this doesn't undercut your main point.

Simply put, it depends on what you mean by "growth in the SL economy".

If you define growth in terms of simple movement of money, it seems to still be doing fairly well in that regard. It probably will shrink a bit due to the world economy, but is still surviving fairly well.

But if you define growth in terms of closeness to a pioneer economy, where it's still easy for a relatively new business to come in and start succeeding, then it's relatively shrinking in that sense, and that's inevitable - it's maturing as an economy and the most efficient producers are coming to the fore.

Desmond essentially is right that for the existing businesses, growth is still fine. But he's wrong that there isn't a FIC. There might not be an organised conspiracy (which is what "FIC" originally suggested, I think). But April's economic stats showed a Gini of 0.965, and a breakdown of the market shows that:

* The most successful 18.15% of businesses make 94.53% of the income.
* The next most successful 29.86% of businesses share amongst themselves 4.66% of the income.
* The remaining 51.99% of users who made SOME money, share 0.81% of the income!

When the economy is as polarised as that, the appearance of a FIC-like entity - namely, those few avs who are at the top and whose perception of the in-world economy is on a different planet to everyone else's - is inevitable.

Well the OP might have every reason to whine from his own perspective. He's bought into the SL land concept and probably spent 1000's of USD's in the process. What he did not expect was that overnight LL would for first time since the game started decrease the purchase price of a SIM by nearly 40% and hence decrease his re-sell values by a similar amount!!! The flooding of mainland sims, the bait of the Open Space sims has all helped to drive land prices down......not by means of natural supply & demands but by Government (Linden Labs) intervention.....they moved the goal posts forcefully.

My sympathies goes out to those that have made uncontrolled losses... from SIM owners to small plot owners. I have less sympathy for those that should choose to continue to feed the LL cash cow even after reviewing the current data and metrics.

slightly off track here, but as time goes on and other companies start to rip the SL idea off, wouldn't that draw people away and make land prices drop to very affordable rates?

we're all seeing land prices completely fall-off, and some people (like myself) getting into larger lands parcels.

my landlord is having a hard time fill her islands up and our sim is beautiful. no shops, no banners. etc.

i went back to my old island last night to see the sim, and nearly everyone has left. even the person that took over my parcel not more than 3 weeks ago has gone.

i think the thing to draw more people in is to offer up more land at free or insanely low tier rates because soon the other companies are going to make a huge impression and start stealing us away. (hope that was on topic)

Some land owners are getting desperate and virtually giving land away with re-sell rights included...and still not shifting them. It doesn't take an Einstein to work out that 20,500 + sims (and rising) is excessive for the amount of regular logins we currently have.
I've also witnessed an increase in people just abandoning land......is that RL economics kicking in?

If a rival platform were to emerge and depending on its pricing structure...LL could well be forced to review and lower both purchase prices and tiers inorder to hold onto their market share. As you cna see form below link, there's certainly activity in that market already.

http://hoteurostartups.wordpress.com/2007/11/11/three-virtual-worlds-from-europe-worth-watching/

S curves, log scales... growth mathematically can't continue to climb as it has.

Let's say the growth rate of 2006/07 sustained. Roughly, we went from 1 to 10 million signups. Factor of ten growth in a year, a steadily rising line on log scale.

At that "rate" we would be at 100 million signups by now, then close in on one billion about the end of 2008. Eighteen months from now, it would be ten billion signups. By 2010, 100 billion.

Folks, start reproducing as fast as you can.

* * * * *

The "S" curve. I see this:

There was a grid. There was marketing hype. People came to look. Reality set in once people discovered the grid really didn't babysit your kids or mow your lawn.

Hey, as hypes go, the grid did very well in the aftermath. There is actually something to it, and there are still increasing numbers and interest.

Compare that to pet rocks and Milli Vanilli. The "S curve" is the only decent post-hype outcome possible, unless we all start making babies *right now* to prop up that factor of 10 growth rate. Fail would look like an upside down "V" curve on any kind of graph.

* * * * *

Just to make a point, check out Habbo Hotel. Amazingly similar in a lot of ways.

http://gigaom.com/2007/09/08/howhabbo-hotel-got-this-big/



Edits: Lear, if you have anything interesting, I'll all for seeing it. I'm a sucker for a good discussion. Yumi, no disagreement that 1 in 5 businesses makes income here. In fact, that's astoundingly good, considering that it may never occur to most people to ever 'work' or 'run a business' here. Educational usage is what, something like 30% alone?

exactly.
i was offered an 8000m2 sim for free with a 39kL tier recently. (that was with ownership)
i now own a 8125m2 (class 5 sim) for L18k/mo. (that's split with a friend - ownership)

Oh yes, its a brilliant time to be a buyer right now. The last i checked there were 45000 plots of land for sale! Again, when buying (or even given) land on Estates, still very wise to make checks on the SIM owner.

Exactly. An S curve is normal growth for a great many things, from corporations to plant life. My point is that to make a significant change in the shape of the curves will require, uh, some sort of significant change in SL itself, or in the external world. A new SL. The Next Big Thing. Portals to other worlds. I don't know what it will be, but whatever that change is, it will start a new set of growth curves.

Whining? Failure? if you werent sch a misguided soul I would almost take offence to that statement, however since my long track record of steady growth in SL proves differently I'll just setlle for merely caling that statement trolling

If I may throw in a non land-owner perspective here.

People are complaining about LL lowering land costs and them losing their "investments". Another way to look at this is that LL don't WANT land to be an investment - they want people to DO something with the land. Build a world, create something, don't just turn it around for a quick profit.

Bring the prices down to encourage more people to get in - not as a way to speculate, but as a way to own something and build something and take part in the fabric of the world.

We're seeing how most of the usual things people buy (clothing, hair, etc) are being produced increasingly by "established names" - maybe this is a way to encourage others to come in and try their hand at competing, which will actually add to the economy. If land prices go down, rentals can go down, so it affects everyone who wants to get into a business, and see how it can work.

Taking the growth rate in on-line hours from the beginning of available data to spring 2007, I calculated that if it continued unabated, in under 9 years, every person on the planet would be spending 2000 hours (the equivalent of a full-time job) in SL. Yeah, that's likely!

Exponential growth can't continue forever, in SL or anywhere else other than the imagination. No surprise there. My point is simply that LL shouldn't try to cover up the fact that its exponential growth phase has either finished, or else the growth rate is significantly lower. But the point of the blog post when those graphs were posted was that economic growth in SL had recovered. A more defensible statement would have been "showing signs of beginning to recover", and even that would have been optimistic.

But I won't deny that SL has a functioning economy. I think it still has plenty of room for successful startups. With zero investment in tools and just a little sweat, I find I can make products that are comparable in quality to very popular and high quality products. If I bothered to do any marketing, I'd probably be able to make some serious money, but heck, this is just a hobby and I've little interest in doing the marketing.

There's still plenty of room for successful startups here, even ones challenging major money makers.

Two more Metanomics Videos taking place after the banking shut downs, that should be seen.

Banking Policy Forum:





Banking followup:

[url=http://www.slcn.tv/metanomics-banking-forum[/url]

Yes, it sure would. Not that it would draw off too many old timer residents, because we have friends and things we wouldn't want to part with. But it would compete with SL for new residents.

Even more, LL has said that it plans to make the server open source and to find a way to allow 3rd party sims to join the grid. This would seriously undercut the value of unimproved properties.

The point is: "property" in SL is very different from RL real estate. Prices are nearly guaranteed to keep going down. Anyone who makes a long-term investment in unimproved land is making a serious judgement error, IMHO. For improved land, they need to keep in mind that their investment is continually depreciating. More like buying a building than buying the land.

I agree people are making money, and lots of it. I can say I'm one of them, although I'm just a small fish compared to many. But I know what I make, so by extension, I know what they make. When I was new to SL, I never would have believed it. But my eyes have been opened, to that fact, and many others.

But I don't share your rosy picture of the land market, I immediately halted expansion when the price drop was announced on sims, and did some watching, and I didn't like what I saw. So i've closed my estate, working on finding new homes for my residents, and selling off most of my sims, save a few for my personal use.

The way the land market is now, unless you're big enough to cross the threshold of profitability, you're going to be down in the street on your hands and knees, scrabbling after pennies, so to speak. The low end market has become too crowded with new upstarts, and many renters are leaving estates and buying their own islands, as the cost of entry was lowered.

I don't think LL messed up when they did this, I think they knew exactly what they were doing.

I generally agree with the assessment, Darien.

Two caveats:

a) It's spring, and it's the low season for a lot of people, which immediately follows the high season. It feels like a market correction to many. Remember last year? Same thing. Remember way back to the 'glut' of snow land when the world was a lot younger? It's cyclic.

b) There is still a huuuge difference between paying nearly 5000 USD for the first year for a full region, and getting say, a 4000ish square meter parcel. A factor of ten price difference is big enough that many people will simply say: I'd rather pay 30 USD a month than 300 a month - 1000 prims is 'good enough.'

That difference means the land market door stays open, provided that there is some 'value added' and something unique about your estate.

* * * * *

Paraphrased, and not word for word what Zee said in his metanomics rebuttal, but hopefully close - attribute any error to me:

"...the LindeX volume represents the sellers on the LindeX: primarily represent successful inworld businesses.

And so you can look at the 9.2 million [Desmond's note: US dollars] I think that we traded on the LindeX last month - roughly 45% of that on any given month is cashed out by residents, another 45% is paid back to us in fees for land and other things.

The fees that come back to us from basically sellers on the LindeX also translate into more than half of our overall revenue billings; the success of the inworld economy is tied into our own success."

* * * * *

So let's fancifully round up just a tad and call it 10 million dollars a month. That 45% mentioned then loosely translates to residents making 4.5 MILLION dollars a month from the grid, or something on the order of 50 million USD a year here.

That's a whole lot of postapocalyptic furniture and talking virtual weiners, any way you slice it.

Note that Zee says that about half their income is coming in that way as well. So if they are making roughly 50 million this way, toss in another 50... ah, a 100 million dollar company is better than a poke in the eye with a sharp stick, no?

The way I look at this: residents generally cover tier with their businesses, so if they cash out about half... they are having to make about double that, gross $L income.

Combine that with the stats Yumi mentioned. Roughly 20% of businesses are part of that almost-ten-million USD monthly gross collective income.

For those that bother to be in business, one guy in five 'making it' speaks pretty well for the grid economy. Contrast that to say, the real United States economy - where due to the need to eat, participation is mandatory. Not terribly different!

land prices are not land prices, they are server prices.. what you buy is time on a server.. SL makes that as enjoyable as it has to, to get you to buy that time..without the server control, ie if you could run your space..yourself, offline... and only make it online when you choose..to whom you choose, there would be no business that SL could hold.. look at what happened to to Palace Chat.. Palace is sadly only 2d.. but its totally user controlled, and as a consequence no business is interested in it.. no one except those who provide servers for those who cannot provide their own.... ive suggested to some already that if 3d is the only reason one is here, ok.. else one neednt spend anything to achieve as much as what one pays to use 3D in SL.

Vanity is a chosen cost.

Yes, agreed. There is still plenty of opportunity out there in the land business. However, at the point my estate had reached, I could only see two choices, invest another 15 thousand in SL and hope Linden Lab gets their act together, or close. I just didn't feel the risk was wise. If I had more invested, I would be more reluctant to close.



Oh yes, the economy is doing fine. My sales in world have stayed strong, and I intend to focus more in that direction once I've closed my estate. Honestly, I'm really going to miss it though. :\