Supply & Demand - too much land

Currently five sims are up for auction. The average size is 60,400 sm. At the Linden exchange rate of $332, they will cost a minimum of $332,000 linden or $5.50 per sm based on the average. According to Linden's economic statistics, the average selling price for land in May is $5.75 per sm. For your $1000 USD investment, you could have a profit of $45.48 USD total or .25 linden per sm. If you sold all of that land without incurring too many costs. This does not take into account classified ad fees, fees in find, or TIER!

I haven't seen any mention in the forums about the glut of land and low land price having a detrimental effect on the economy. Why not? The auction of virtual land has to have a substantial impact on Linden Labs' bottom line. Tier and sim auctions are in U.S. Dollars....not Linden. I think that Linden Labs is shooting itself in the foot by releasing too much land for auction and flooding the market with land that won't sell.

The glut of land is probably THE problem.

But land brings LL cash.

So they want more of that; less of things that don't directly bring them cash, like stipends and dwell.

They don't really care about the fallout from doing things like removing dwell on entertainment or removing premium stipends on premium player subscriptions.

They are willing to lose those things.

coco

I've mentioned this point over the past month in several threads. Read my two posts in this thread:

/130/22/108574/1.html#post1051666
/130/22/108574/4.html#post1056346

The land market IS flooded and LL has their fingers in their ears goin lalalala. This is the reason I haven't been buying new sims at auction. I tiered down 3.5 sims last billing cycle and plan to tier down more than that when the next one comes up. LL seems determined to increase the number of mainland sims by 1000 this year... regardless if anyone needs or wants them.

Jon.. I agree with you 100% Linden Labs has a complete and absolute
motivating self-interest to continue pumping out sims.. Look at it in terms
like this:

Initial Revenue: US$1000
Reoccuring Rev: US$2340


The more they pump out, the more money they make. And as long as the
Land Barons take on the risk of selling the land, Linden Labs is making
Pure Revenue with zero initial risk.


Its more risky to be a Land Baron holding plots pending resale. So don't
expect LL to shut off the land tap any time soon.. Its a Golden Goose...

One reason LL is right to release new sims at the current rate is because they look lovely.

Newly created sims look like unspoiled wilderness, and a newcomer to SL can see the potential in our virtual world for free -- just by flying around them.

Most main grid sims are divided into lots, each of which has some build that may conflict with the style of adjacent builds. The overall look is less harmonious than the look of an unspoiled new sim. Residents who buy a lot on a new sim, then become dissatistifed when the sim fills up with builds of conflicting styles can alway fly to the frontier to see the potential in SL again.

It's a natural next step for the person to investigate island living to see if there are places where that sense of natural beauty is treasured.

You must not read the forums often or perhaps you're a new user? or perhaps you have another agenda and you're fuelling speculation for your own means.

Hmmmmm.....


Troy

Okay, I'll bite.

Here is a demonstration of what you're talking about. Prior to September 2004, land was very scarce. LL would release *maybe* a few sims each month. Land prices were through the roof (I'm sure Schwan is getting aroused just thinking of it...). That's the dip in the exchange rate down to L$170/US$.

Come September 2004, the land tap was opened, and the world was flooded. Prices dropped overnight. Ever since then, the exchange rate has been sliding inexorably downwards.

OK, so....

Say LL shut off ALL incentive payments, AND sells L$ via Lindex at 250/US$, AND shuts off the land tap?

What hapens?

LL STILL makes money selling L$ as the excess L$ are soaked up by the increasing price of land and the exchange rate reaches 250, and, when land hits, say L$20m2, they make even more by selling land at the US$ equivalent of L$10m2 instead of the current US$ equivalent on top of L$ sales...

Aren't you glad they rarely listen to me?

I mean, it fixes the economy, LL makes money, the Land Barons make money... I really don't see a downside. OK, so, residents have to pay for what they get, but is that so very bad?

Yup.... Since Land in Pre-Sept2004 was so expensive, it created a lack of
Linden Dollars to afford what little land was available. Then once the land
flood hit the valuation of land dropped into the toilet. Then Linden Labs kept
cranking out the Money Supply based on population growth, nevermind the
fact that new members didn't do anything to strain the economy/GDP.
As such, the Linden Dollar starting going down the tubes. Not only because
of the money supply increasing, but because land valuations no longer
commanded people to buy up the currency.

Ahh the good old days.... If LL would just stem the land to a trickle and
regulate the money supply because on hard economic production data,
then this economy might just get back into gear...

But right now, we have the opposite of Pre Sept2004.. We have a land glut
and a money supply glut. All of which are sending the L$ into the toilet.

Right.. and lets not forget land auctions primarily used to take place in L$'s - thus creating demand for L$'s.

Now, you pay cold, hard greenbacks.

So, a major reason L$'s were demanded is now gone.

I agree, ReserveBank. Linden is blindly releasing land based on new accounts when many of those new accounts are Alts, or free acounts who won't put any money into the economy. Look at the Economic Statistics. Have they noticed a correlation between the amount of auctioned land and the linden exchange rate? It seems obvious to me.

What exactly are you attempting to imply, Troy?

Heck of an idea, Doc. Would love it to go back to L250/US1. Unfortunately, based my financial modal on that exchange rate. If I don't see Linden Labs acting appropiately to protect MY investment, I will have to cut my losses and get out. If others emulate me virtual land becomes exactly that....a phantom commodity.

I obviously should have done a more extensive search before I made a silly statement like no mention of land glut/Linden slide in the forums. Considering that most of you have been in SL much longer that I, I should have known that all possible causes to Linden inflation would have been exhausted by now. I like your chart, Ricky. I wished I had seen it before I bought a couple of sims at auction.

Remember it's auction.
They will never stop selling sim if there is always someone to buy.

Yes, we fools bid and paid in order to contribute to that decline in land value. And then get to watch the U.S. dollar investment we made lose more and more value with the Linden inflation...meanwhile paying terrible tier rates.

But what about the land barons who keep buying them? If new sims went to auction and languished, LL would stop making more.

But yes, there is a problem, and it's one that we have also seen in RL. People are choosing to abandon developed areas and move into more and more remote places, rather than redevloping the existing land. I know that sometimes it's because the vacant mainland parcels are undesirable because of ugly neighbors, but I know of areas where 50% or more of a sim is up for sale -- how much of a problem can the neighbors be then?

There seems to be something in the human psyche -- or at least the American one -- that longs for unspoiled lands, and shudders at the thought of reusing land that previously belonged to somebody else. Unless we can undo that bit of human nature, it will be difficult to get the vacant mainland areas filled in again; the only way I can think of would be to make the land supply a LOT tighter.

Here's an interesting relatively recent article about LL and SL.



What caught my eye, and is relevant to the discussion here, is this quote by Phil Rosedale at the very end of the piece:



Yikes!

Yikes, is right! This article was written when residents numbered 169,000. That number has grown by almost 40%. So has the total acreage grown to 42,000? Or more?

Why, if we have residents of 231,000, do I never see more than 6,000 on at one time? And seeing 6,000 online is infrequent. So that is 2.6%....what happened to the rest?

Ben Linden's alts.

I have actually seen almost 7,000 online in the (late) evenings. It does appear to be rising, but very slowly. I guess the two questions that come to my mind are:

1. How many new registrations does it take to add one additional active user?

2. How many new active users does it take to add one regular consumer?

Unlike in the RW, residents do not have to consume anything to exist. I think that this is one of many unique benefits of SL and it should remain that way! However, it does make the economic system all that more complex since a (large??) number of residents who live within SL never have to (or need to) participate in the economy.

I have actually seen almost 7,000 online in the (late) evenings. It does appear to be rising, but very slowly. I guess the two questions that come to my mind are:

1. How many new registrations does it take to add one additional active user?

2. How many new active users does it take to add one regular consumer?

Unlike in the RW, residents do not have to consume anything to exist. I think that this is one of many unique benefits of SL and it should remain that way! However, it does make the economic system all that more complex since a (large??) number of residents who live within SL never have to participate in the economy.

Yes simply stated, Linden Lab will not consider land oversupplied as long as people are buying it. They don't even have to care how much is set for sale as they are being paid tier on it anyway.

Only when Governor Linden starts permanently accumulating vast tracts of abandoned land that nobody bids for on the auction block will LL stop publishing new sims on their estates.

Good point.

LL is already sitting on several sims worth of abandoned land, some land for months.

They did themselves a great disservice by taking over a "resident run" system. Land sits in unpaid tier, the middleman has been cut out of the market and money is not changing hands.

Yet another few factors contributing to a slumping economy.