Is LindenLabs going to turn of the new land spigot?

Has anyone verified how many sims are in the "moth theme" namegroup? I think it's all of Heterocera Atoll up north, which is quite a lot by now.

Well, I'm told there are more species of insects than all other animals put together...

http://en.wikipedia.org/wiki/Insect
http://en.wikipedia.org/wiki/Heterocera

Maybe so. But who is the Linden in charge of crap sim names? Maybe someone should gently suggest THEY CHAINSAW THE IDIOT INTO PIECES.

Marmela, I don't know if "I'm right" but, as I said: all relevant data support the impression that SL is growing at 10% to 20% each month. (The number of concurrent users online are growing with that rate, too, btw.)

Maybe that does not coincide with your personal expression when "going around" in SL. But its hard getting a complete overview of a land as large as SL as just one person

I think LL needs to create more transparency and sim buyer education so that people who are bidding on all these sims have a more clear idea of what they're getting themselves into.

Otherwise, the decisions are going to made more on guesswork and less on evidence based economic decisions.

The "education" that is needed is a rather simple one: have a look at the current land prices on the market, then sit down with a calculator and calculate what the sim is worth (maybe even subtract a little profit ?). And then - and most important: don't bid more what it is worth - even if it might be nice to "win" at the auctions.

The neccesary information for that calculation is online on the SL website and in the inworld land listings ... No additional transparency from the side of LL needed. Just a cool head and some common sense on the side of the bidders.

It's not that simple

For example, what if LL wasn't going to do any marketing in the next few months? What if they were going to do a lot?

We don't know what's coming down the pipe.

Think about this leasing functionality and how that'll impact mainland sims. If that suddenly pops in tomorrow, people could start buying/selling island land rather than mainland.

What if they fix the island bug not showing on the map? What if they don't?

What they could do is give us a longer lead time to these chagnes or more of a heads up, but I suspect that might be hard to do.

*smiles*

Thats all very true, and I would like to know the future too - but it has not that much to do with people making outrageous bids at the auctions. There are some business decisions that would profit a lot from knowing what will happen in SL in the next time.

But when buying whole sims and selling them in parcels you either make a profit this month or never. And if you pay to much now, of course you can hope that somehow some things will happen soon that will lead to rising land prices - but I would not call this sound business practice.

Marketing? For SL? By LL?

Where?

Hype. Many people are confusing free basic account with real growth.

The real growth rate of SL you can see here. Look at "Total in world sales".

My point being that LL should moderate the spigot based on their superior understanding of what's coming down the pipe.

Hmmm? But I did. And when I do an average over the monthly growth rate (which fluctuates some) over the last 4, 8, 12 etc. weeks I get results between 11% and 13% for the AVG monthly growth rate of "total inworld sales" ....

The only exception is the period of the last few weeks - the update to 1.7 really did hurt the inworld economy

Yef. That looks about right.
Yef.
Interesting spike preceding, yes?

You are correct that people are confusing the influx of free Basic accounts as being representative of real growth.

However, the total volume of in-world sales is between players. Though this is representative of growth within the economy, it's not representative of growth within the Premium account base, specifically, the percentage of residents who hold tier over 512-sq.m of land when compared to the population as a whole. Approximately 6-months ago this percentage was at around 12-percent. At the end of October this percentage had fallen to 6.875-percent, a pretty stiff decline. For whatever reasons, the rate of growth of residents moving up from Basic accounts into Premium accounts, and the rate of growth of Premium accounts expanding beyond 512-sq.m, has fallen steeply.

This doesn't mean Premium accounts that own more than 512-sq.m of land and thus pay tier fees aren't expanding. Some are. This doesn't mean Basic accounts aren't upgrading to Premium accounts. Some are. It simply means that the strong rate of account conversion we enjoyed approximately 6-months ago has fallen. Basic accounts are no longer upgrading as rapidly as they once were. Premium accounts are no longer expanding beyond their minimum 512-sq.m parcels as rapidly.

If the rate of account conversion had remained steady there would presently be 9,600 Premium accounts holding more than 512-sq. of tier, and paying the associated tier fees. Instead, as the conversion rate has fallen steadily presently only 5,500 Premium accounts hold more than 512-sq.m in tier.

Part of the reason why there is a sudden abundance of First Land and auction parcels is that LL is attempting to return to this strong rate of growth in account conversion. Between the week starting 10/16 and continuing through the week ending 11/6 more than nearly 50-sims have been auctioned. This is more sims purchased at auction than the 13-weeks prior to 10/16.

This abrupt influx of land doesn't necessarily mean Basic residents will become "stakeholders" in the game, especially if this new land is turned into rental parcels. In such a case, the Basic resident is simply subsidizing someone else's tier fees. The best LL can do is make the land available and cross their fingers that some Residents will actually buy First Land and _keep_ their parcel or actually _buy_ land within a mainland sim and _keep_ it.

[Conspiratorial sidenote: As Second Life's largest property holder, with approximately 50+ sims, aren't you a little worried that over the past three-weeks an area nearly equivalent to your total real estate holdings has become available at auction?]

Excellent analysis, Elex. But - and no offense intended - for many residents doing business it is an academic question, how many users are premium and how many are basic. What matters is, how much money they are spending. Of course the relation has changed with the new free Basic Accounts. But the inworld economy grows with basic accounts, too. And thats where all those selling "content" make their money.

I dare to predict - though its hard to measure - that even the land business grows with basic accounts, because a lot more users are now "renting" land.

On the other hand, Anshe and all the others mentioning it are correct of course in emphasizing, that the relationship between number of accounts and inworld business volume has changed. The numbers speak a clear language: while the economy only (?) grows at a rate of 11% to 13% per month, the user base grows at a rate of 15% to 18% per month. But ... a growth rate of 11% per month would not be seen as exactly boring in any other market

Every time I think about getting a premium account I talk to landowners and look at the sims that started out primarily as "First Land", and the desire just vanishes. If there were some realistic kinds of zoning rules so I could be sure my land wasn't going to end up with an auto lot on one side and a Tringo parlor on the other, maybe I'd change my mind.

But the only place I seem to see any real zoning rules are in private sims like Anshe's, and I don't need a premium account to "rent" land.

I suspect that what you're seeing is people with basic accounts renting land... because it sure seems like a better deal. You get higher prim limits, usually, and you get neighbors who are more interested in a second life than a second income. The money flows through more hands before it gets to the Lindens, but the results should similar to the same number of Premium accounts with the same landholdings.

And, hey, guys like me are your customer base. Don't dismiss us so blithely.

The results _aren't_ the same...

If 128 Basic residents were to upgrade to Premium membership and then each individually purchased First Land and filled an entire sim (which has a max of 128 512-sq.m parcels) then the actual annual gross is:
US$9.95-monthly premium * 128-parcels * 12-months or US$15,283.20

[For those relying on a scarcity model for a rising value of the L$ versus the US$ note that this removes L$65,536 (about US$262) from circulation as in-world monies paid to the Lindens are, for all intents and purposes, destroyed.]

If 1 resident purchases a private island (and we amortize the island set up fee over a period of 1-year) it's
US$1,250-island set up fee + ((US$9.95-monthly premium + US$195-monthly tier fee) * 12-months) or the annual gross is US$3,709.40

[Again, for those relying on a scarcity model for a rising value of the L$ versus the US$ note that this removes L$0 from circulation.]

It's a difference of 1 to 4.12 when comparing the gross revenue for Linden Lab of a single private island to the gross revenue of 128-premium members.

Remember that we amortized cost of the island set up fee over a 12-month period. After that first year the annual gross is now: US$2,459.40

It's now a difference of 1 to 6.21 when comparing the gross revenue for LL of a single private island (after having amortized the island set up fee) to the gross revenue of 128-premium members.

If we consider tier fees (for example, the aforementioned 128 Premium members all purchase 512-sq.m parcels for vacation cottages in another sim) and begin paying tier fees the gross revenue for that "vacation" sim is
US$5 *128 * 12 or U$7,680 (HOWEVER, that's above and beyond the gross revenue generated by their monthly premiums: US$15,283.20)

Putting the math aside...

The fundamental question is: Do you want to live in a "dependancy" economy or an "ownership" economy? Lots of renters or lots of owners? Lots of Basic accounts or lots of Premium accounts? Lots (no pun intended) of land in the hands of few players or lots of land in the hands of many players?

At the present rates of high growth among "dependants" (Basic accounts) and very slow growth among "owners" (Premium accounts) at a certain point the "dependancy" side of the economy will overwhelm the "ownership" side. In other words, the expenses (bandwidth, support, etc.) from an ever-increasing number of Basic accounts will exceed the revenues generated by the Premium account base.

You may want to take a closer look at things. It's really not that simple.

For example, here is an example of a SIM: Given the rates for that sim, as far as I can tell it's bringing in max 30K L$ a month, but the costs are much more, like 50K a month.

So, he's not even breaking even.

However, he has purchased more sims, so what's the dealio? My guess is that he's making money on the dwelloper incentives, which are knocking his costs down quite a bit.

No, they aren't. But why should they? The business model of LL surely is not that simple, that it depends on every account generating the maximum revenue for LL. And it surely would be not very successfull to drive all customers into the most expensive cost model by not offering any others. This might look profitable at first. But it isn't. Because it drives those customers away who don't want to commit themselves to a premium account.

In addition it would drive those customers away which want to make money in the land business. Which is a bad idea because - besides all the hatred that they receive from some residents - they fullfill a valuable role in the economy.

Hmmm ... depending on whom you mean with "you" you might get as many different answers as you have people you are asking. And besides that: Not many people base their decisions on the consequences of their actions on a large scale. Meaning: They might not like it if you tell them that what they do leads to them living in a "dependancy" economy. They will still do it if it looks like the cheapest solution now And that's what you see happening in SL.

As long as it is more enjoyable for some to own or rent land so they can have semi-permanent creations, LL will sell land and get tier payments. This land will at least go for 1,000 US$ per sim up front and 195$ per sim per month. This is not exactly bad for a hosted ASP application (which SL is); many servers now host more than one sim..

With regard to support: what level of support does the average resident need/get? Have you tried out support lately? I have and I can tell you: even as a concierge level customer owning two sims I've come to expect not much in support. I get better support for some software that I bought for under 500 US$ - without any monthly costs

Those newbies on Basic Accounts are good for the SL economy. The sky is not falling down!

If we convert the annual cost of a private island to Linden dollars at an exchange rate of L$250 = US$1 then it's L$927,350... or L$77,279 per month.

After we amortize the island set-up fee over the course of a year it the costs then become L$614,850... or L$51,238 per month.

Well, given that islands have a high resale value I'm not sure ammortizing is correct accounting procedure.

But my point was more towards the issue of that vacancy rates are generally pretty high and plots are usually in 2048-4096 range, so you're going to have about ~32 plots per sim.

People like to complain about Anshe's business model, but it's the only that has a return as far as I can see.

Free Basic accounts don't actually generate revenue for Linden Lab except when they either purchase currency (US$0.30-cents for the transaction) or sell currency (3.5-percent commission taken from the transaction) from the LindeX. For example, for a single free Basic account to generate equivalent revenue to a monthly Premium member there would need to be 33-currency purchases over the course of the month.



Those customers that wish to take part in the land business are already growing at a slower and slower rate when compared to growth of the population as a whole.



Whether or not they like the "reality" of living within a dependancy economy doesn't make the dependancy economy go away. Once the framework the economy exists in goes away it's then too late to ask how it happened.



The SL economy actually exists within a larger framework: Linden Lab. As vibrant and diverse as the SL economy is with lots of little virtual Linden dollars passing through lots of little virtual hands it has a minimal impact on the revenues of Linden Lab. LL actually gets the _vast bulk_ of their revenues from Premium account fees and monthly tier fees. If, at a certain point, the expenses (bandwidth, support, etc.) associated with free Basic accounts exceeds the revenues generated by Premium accounts and tier fees then we all lose. Then the framework the SL economy exists in either has to find a different revenue model, or simply goes away ("The sky falls". At present, what's happening is free Basic accounts are growing far more rapidly than the Premium account base which is creating a thinner and thinner margin for Linden Lab ("The sky is lowering".

In a nutshell: It doesn't matter how large the population is, or how large the L$-volume of the economy is, if the size of the Premium account base (along with tier fee paying residents) isn't generating enough revenues to maintain Linden Lab.

Correct, you're not supposed to amortize the cost of land. However, in the grand scheme of things, it's not really _physical_ land, it's server space. We can amortize the cost of setting up the server space.

Well, yeah, but you can resell your setup-fee. Islands are transferrable, so if you paid 1250 for your island I can pay you 1250 and then you can transfer me the island and I only have to pay a 100 transfer fee to LindenLabs.

I'm just saying if you can recoup your 1250 at any time, I don't think you really have to ammortize that.

You're considering it an upfront charge. I'm considering it to be amortizable. It doesn't matter if you _might_ be able to sell and transfer the asset at a later date, you still have to show the expense on your balance sheet. However, by amortizing the island set-up fee you're better able to get a handle on your overall expenses and have a firmer figure for what your monthly break-even point is.

But it's not an expense, it's a capital expenditure.

You only ammortize capital expenditures when they depreciate, and you only ammortize the depreciation.

If an asset isn't depreciating (an island has proven not to depreciate around here, at least not by much) then you shouldn't ammortize it.