The Mighty Linden Dollar

Thanks to Prokofy Neva, I read the interesting analysis on RightAsRain Rimbaud‘s blog (and the comments in it) about the state of the land crisis in the Second Life® world, and how strangely Linden Lab® reported a massive increase in land sales and income from land. RAR actually shows that the growth comes pretty close to a new island per new active user!

One thing that always worries me in SL is how few people are willing to spend money in SL, overall. They “expect” free things, and they expect other to work a lot to provide them with free things. It doesn’t matter if it’s land, objects, or services (ie. free music). They don’t want to pay, period.

Yesterday a PhD student asked me if I had by any chance a texture with an asterisk on it. I had none but I told him how it would be so very easy to create one. After my blabbering he explained that he obviously knew how to do a 128×128 texture with a big asterisk on it, but he had no money to upload it.

I was flabbergasted. This is a PhD student who probably earns more than I do, and certainly has less expenses. And we were discussing L$10 — a few cents (either in Euros or US$…). With some shame, he then confessed that he had no intention of getting a credit card just for SL, it was a hassle… and when I explained to him that there were quite a lot of alternatives (from international bank transfers to LL to local agents who accept domestic bank transfers) he was unaware of all that. Or perhaps… uninterested. It’s always safer to beg for someone else to upload a L$10 texture. As a matter of principle I did not send him the money over, and he wasn’t asking for it really, since begging for a few cents seemed ludicrous even to him.

In my country there is a culture of never paying for things, so perhaps this particular guy is just copying the attitude that he sees around him. None of the avatars he deals with have money, or ever bought anything in SL. They just get along with freebies and enjoy creating content. Applying their skills to create content in order to sell it never crossed their minds; they just happily make do with what they can beg their friends for free. They never have their own land — neither owned on the mainland (it’s hard to see anyone who is Premium these days!…) nor rented from anyone else. They squat. They get invited to cool groups by being nice, and expect that someone in the group provides them a corner for a sandbox or skybox.

For them, the SL economy is something that happens to other people, which they view probably as “rich bastards”, but they don’t miss the “luxury” of being able to own land and buy content

On the other hand, they buy all possible gadgets in RL, subscribe to paid TV channels on cable, avidly buy games for their consoles, and naturally spend money on other trivial things. And they do it as a matter of course, even knowing that in RL there are also free alternatives to all that.

Now this lack of willingness to spend money in SL is worrying, since it is sadly something I see happening all over the place. There is just a very, very small number of residents — 1 to 2% perhaps — that are active participants in the economy; Linden Lab allegedly claim that about a hundred thousand residents regularly spend money in SL, and close to sixty thousand make more money than they spend. I’m not saying that everybody ought to be “forced” to spend a few US$ every month, like a “requirement by law” to participate in the economy. Of course not. However, the total lack of interest or motivation to acquire content by most residents is frightening.

Another example, someone who wanted to do a thesis presentation of their mastership work on SL asked me what they needed to do. I explained that usually slideshow presenters are used — you just save your slideshow presentation to the appropriate format, and upload it. His virtual shoulders sagged. His answer was: “I will never make enough money for that on the camping chairs, my presentation is in a few hours”. Again, my shock and surprise. We were talking about the price of a cup of coffee in RL! And this guy — another student — was complaining about the “time it takes to make (free) money in SL” just to upload a few textures… for his real work in SL… when just one Euro or two would be enough.

I shared these comments with others, and they looked at me in a strange way. And then carefully explained to me that nobody (in my country at least) is willing to put any money in the SL economy. The whole land used by the Portuguese is 90% sponsored by companies and non-profits in SL; landowners are such a tiny minority. I’ve heard that the Brazilians are not much different. Sure, they all have great fun in SL, but they don’t wish to spend a single cent in it.

We used that avarice to work for us in a campaign, by giving out L$10 to anyone who gave away a texture announcing an event iRL for a client. L$10! In less than eight hours, half the active Portuguese population in SL had been targeted. The implications were awesome. Everyone thought, “wow, I can get 10 friends to accept this texture and will make more money in half an hour than by sitting two or three days on camping chairs!”

It’s not that these people are poor. Prokofy very well pointed that out, ages ago: anyone with enough money to buy a decent computer to run SL and have broadband can spend a few Euros or dollars per month to invest in the economy. Even if they live in Angola or Mozambique or Ethiopia or Laos and Vietnam. There are SL users there as well. No, they don’t put any money in it because they don’t want to. And this is what ties everything together: if a huge number of users don’t want to invest a few dollars in SL, they won’t even dream of renting or buying land, and that means that while the resident population might grow, the number of people willing to spend any money in SL doesn’t — and land will remain empty without potential buyers.

Naturally, that’s a cultural thing, and will be different from market to market. And there are always a few people wanting to dynamically engage into the economy; as they quickly found out, however, getting people’s willingness to spend money is way harder than they thought. And it’s not even the question between “cheap” or “expensive”. I’m quite willing to pay L$1000 for an unique outfit with high quality texturing. But others are not even willing to pay L$100 for a poor quality one. Or L$10 for one with awful quality. Even if they have the choice between L$1 (with better quality) or zero, they’ll always go for freebies! I have extensively seen that happening on SLEX, where I have ultra-low quality “newbie clothes” for sale at L$1, and slightly better ones for L$10. I don’t make a single sale on the L$10 ones — and I haven’t for years. The old L$1 ones sell like hot pancakes every day, even if they’re ugly.

Now, I’m not sure what this means long-term. My reaction to Lively was that I was willing to immediately buy some good content, if it were available; but one local journalist claimed that one of the best things about Google — praising their “vision”! — was that it’s all for free, and “Google is doing the right thing” not to encourage an economy. While on the other side we have Meez — the freebies are nice, but for a few dollars, you can get access to gorgeous content. Same as in IMVU. I hardly spend time in either, but on the first day I’ve logged on each, the first reaction I had was to buy some virtual currency to get some money to get better content, and I did that without second thoughts. It was my “natural” reaction — sure, there are good “freebie” options, but why be limited by them? Good content takes time to create and it’s worth paying for it. That was in fact the whole reason why I went Premium on my 5th day in Second Life. And the reasons for doing so, back then, were definitely not so strong: there was definitely a lot of good content around, but there are a million more items these days, and thousands of events to attend, and… 18,000 islands to look for a nice space to live in.

However, it seems that I’m part of that odd minority that actually believes that one of the strengths of Second Life — which makes it different and unique — is the content-based and the land-based economy. It’s the major reason I’m not more active on OpenSim — for ideological reasons (clearly stated so!), OpenSim does not support money or content ownership. It’s not a technical issue, it’s a political one. And until that silly reason is reverted, I’m not eager to join the hordes of people gleefully creating things on OpenSim and seeing it being copied all over the place. There is nothing wrong with freebies. There is also much less wrong in getting paid for doing great content. Second Life’s grid allows both models to co-exist.

So I think that there is more behind the “land crisis”. It’s not just land barons being unable to push more land out. It’s not only having shorter margins (or even dumping land to get rid of the high tier). It’s a motivational crisis, and I’m not sure if it’s only Linden Lab to blame (for the high rate they dump land which remains unsold — remember, their business model comes not only from tier, but also, and very significantly so, from selling new islands every month; I already commented on the dangers of that, a long time ago). It’s not the quality of the content that is declining — private, resident-created initiatives like Loco Pocos show that the complete reverse is true: content just gets better and better. And there are still a hundred thousand or so people willing to pay for content. The problem is that it’s always the same hundred thousand people — the very same ones that came to SL in late 2005 or so and are still around, and are still dynamically engaged in the overall economy.

The newer generation is the freebie generation. And this has to be reverted. Second Life, without an economy, weakens dramatically its value as a cornerstone of the (future) Metaverse. The economy of land ownership and content sales is what made Second Life become a major player (undeniably so) in the market. IMVU, according to Hamlet, seemed to understand it perfectly as well (although they don’t have land sales) and allegedly has more registrations than SL, but the same amount of active users.

I leave this question open. RightAsRain Rimbaud’s business model plays on the assumption that people (some people!) are willing to spend money on high-quality content. That’s certainly quite true for at least a hundred thousand residents. The rest of them, however, don’t see the point of having an economy at all — and no, Prokofy, they’re not all communists 🙂 They’re just, well, uninterested to spend money in virtual worlds, no matter how appealing the products and services available to them.

And I have no clue on how to revert that worrying trend. Definitely there is no single answer to it, and it’s not just blaming Linden Lab’s policy of dumping land and crashing the land market, although that certainly helps to destroy the economy as well, bit by bit.

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  • Wild! There are clearly lots of different subcultures in SL. I’m not sure if the differences are RL-national, or academic vs. non-academic, or what. But the people that I hang out with and tend to encounter in SL are *constantly* engaged in the economy.

    Tons and tons of clothes / skin / hair shopping (sure, always with an eye out for a good freebie or a sale, but also spending lots of money), texture creation, going to each other’s shop or gallery openings (the kind of gallery where you can buy the art), discussing the merits of this or that non-freebie airplane or sailboat, talking about how much it costs to run a club these days, wondering how much a store greeter job should pay or what mainland land is going for, etc, etc…

    I do run into people now and then who won’t spend any Lindens that they didn’t earn inworld, and whose idea of earning Lindens is chair camping. Nothing wrong with that attitude, of course; they’re probably having fun at it and as you say there’s no law that everyone has to add value to the economy. Some of them produce stuff and give it away, some of them don’t produce anything more than conversation; that’s fine too.

    But for me the latter are the minority; most people that I know or just bump into at random seem to be actively engaged in the economy. I wonder what makes the difference…

  • P.S. Have you done a post about the “land crisis” in SL that you mention above? I have to admit I’m pretty baffled about the nature of the “crisis”. There’s more land than there used to be, and it’s comparatively cheaper than it used to be (especially if you don’t want too many prims). Some people were willing to pay lots and lots for Bay City land, but if you want a piece of a void sim, you can get it cheap. Mainland land is reasonably priced, and land on open islands varies alot with estate owner and covenant.

    Sounds like health to me: growth, lots of different options depending on what you want, etc. How is this a crisis?

    I can understand that the people (if any?) who bought land expecting to resell it at a profit later would be upset that prices have fallen. But, well. People who buy computers expecting to resell them at a profit later haven’t done very well recently either 🙂 and we don’t talk about a “computer crisis”…

  • As a happy no-payment-info person I’d say there is one thing that you missed. I don’t buy land because it is not land. I don’t invest real money into SL because the Linden dollars I get for my euros is not money. I don’t buy some expensive bit of kit because it does not exist. It’s virtual, it’s code, it’s pixels.
    I think a lot of people actually think like me and that most of the world is not (yet) ready for the concept of ownership of virtual things.
    That is not an endorsment of freeloaders from my part – it’s just an observation based on my own ideas.

  • Economist

    Well, Laetizia,

    you are wrong. Buying a currency is always and only buying a share on a national economy, nothing more.

    When you buy something with Linden $ in Second Life, you’re buying something very real: time safers. You’re paying someone real for making that stuff that you like. And the time needed to make, for example like some nice skin, is something very real indeed. So you’re not buying something virtual, you’re buying something real in return when you consider that otherwise you need the skills and time to do the same.

    Also buying “land” – well, land is nothing else then getting some services from Lindenlab (storage, assets) and you’re buying there a timeshare on one of there servers in their computation center. Again, something very real.

  • Wow, great post Gwyn! And it sounded just like you talked about most of the Slovenian users too! They come into SL and expect free money without much effort. And this of course can be used by people to attract users to their venues – pay them to come, always have a sploder ready etc. What surprised me is that while they are so eager to get free Lindens, they refuse invest even the minimal effort in for example a competition with thousands of L$ where all you have to do is take a snapshot and upload it to a website (not in SL where it costs, on the web!). They spend so much time hunting for free stuff, collecting freebies… so much time that could be invested in something creative.

    Personally, I don’t mind paying for everything in SL. Not because I want to help LL or because I want to help the overall SL economy, but because I want to reward the effort of other residents the manage to amaze me with their creativity day by day. The sums of money are of course quite low in RL money, but at least they can help to pay tier and that’s already something.

    @Laetizia Every currency is virtual. Credit card payments are virtual money transfers – no real money changes hand, just like there is no “real” money in SL. You could also say that movies are just dots on the screen, music just a bunch of sounds etc. So why do you then pay to go see a movie I wonder? Or why do you pay for services iRL if you get nothing tangible in return?

  • Interesting article, Gwynn.

    I think Laetizia Coronet makes a correct interpretation of people’s reluctance to spend in SL. The fact that we spend money all the time in RL on stuff you can’t actually touch (we usually refer to these things as ‘services’) is irrelevant. It’s a perception thing.

    And there are some other considerations. Why would I wish to entrust my credit card details with a company (and one who, in the past, has had its servers hacked), on the off chance that I might wish to buy some Linden game tokens? The ToS makes it abundantly clear that, legally and contractually, my Linden dollars are not currency.

    Another barrier is, perhaps, the apparently large sums we are asked to pay for stuff. 10 for this? 50 for that? 1000 for those?? If instead of 10L$ to upload an image, it was clear it was 2p or 4 cents, then I might have a better perspective on this.

    Finally, the occasional(?) issues with loss of inventory are hardly an incentive to spend.

    BTW – I do have payment details with my account… and that first 250L$ (or 50 pence) I got when I created my account lasted me about 6 months. Though for a long time I have paid my monthly tier for a plot of land, I still prefer to make my own stuff and see little reason to spend on stuff I don’t want or need.

  • A simple region based indicator that showed your account balance in both L$ and local currency ( with which residents would be more used to evaluating worth ) would help with this I think. However I wonder if it would attract more attention .. ( tax etc )

  • Andabata Mandelbrot

    Hi Gwyn. Nice subject, and timely, too.
    As someone who faces this issue on an almost monthly basis, I think there are two different issues providing this “no pay” mentality. Laetizia already pointed out one, the sense of “waste” tied to the purchase of virtual goods. But that also existed (or exists) regarding paying for hosting space, and regarding paying – monthly! – to play on-line games, just a few years ago. In fact, you can still easily find people that find the concept of paying monthly to play an on-line game ridiculous, but look how WoW and LoTRO grew since! Culture will adapt, give it time.
    The other factor is not knowing how much is L$10, as Aleister said. I’ve solved this issue of “no pay” for dozens of students now: I simply tell them: buy 5 euros, a mere 5 euros, and you get around 2500 Linden, enough for 250 bitmap uploads! This is usually met with amazement, and a response of “really? just that?”.

  • Dale, if the land people were buying was out of date and needed replacing, then you’d be right with the computer analogy, but that’s not the way it works.

    There’s also the issue of premium members being down whilst land prices crash, which indicates it’s not the cost of the land that is the issue.

    Gwyneth, you are coming from a different angle from those who want something for free. When I tried Entropia Universe I had no intention of buying peds, I wanted to see if I could earn them. It’s a try before you buy scenario.

    You’re also an older avatar, from a time when the Lindens dished out stipends and higher value stipends than new users get now, so your mindset is bound to be different to those who come looking for a free lunch.

    The way to get people to spend money is to get them intergrated within the world and that’s a huge challenge. Those who spend feel more affinity to a place and will find themselves more engaged.

  • Well, at least I’m coherent. I don’t spend money IRL either 🙂

  • Dale, if I interpret Prokofy’s words correctly (and I’m often accused of being a bad “interpreter”), the crisis comes mostly from land prices having dropped dramatically due to an excess of supply for a lack of demand — making land barons (also known as “wholesale buyers of land”, since LL relies upon them to buy whole sims and parcel them out accordingly) suffer from the lack of sales and the tier payments they have to sustain until the demand grows again. Remember that all these people are mostly short-term profit-makers, they cannot hold unto land for months and months until the crisis is over. They need to buy quick and sell quick, or they’ll lose money every month due to tier. Linden Lab is quoted to be the major agent in the crisis by oversupplying land for a slow growth in the user base — namely, in the number of residents that are, indeed, interested in “buying land”.

    Laetizia, I’m sorry, but your argument is really old and outdated. Sure it’s not “real” nor tangible; and exactly as you mention, we “buy” intangible goods all the time, and assign value to them although they’re just bits and bytes: imagine domain names under .com, for instance. It’s amazing how people make a profit by hoarding names that they invent or look up on dictionaries. So I agree that it takes some time to mentalities to change and understand that a bunch of pixels on the screen has some value (because mostly someone is maintaining the servers that allow it to be there, 24h a day).

    I’ve always been a supporter of value-added services. If “land” in SL is just land, without any concept of value added on top of it, no wonder that too much land is a bad idea, since the only variable in the equation will be how cheap you can get it. I’ve been often accused of “not understanding anythin about the land business” when claiming that the problem with most small-scale land barons is that they just wish to make a quick profit without effort: buying wholesale, parcelling it, announcing it for sale, getting rid of it as quickly as possible, buying some more. You’re simply too dependent on the market changes for that. Sure, it means that sometimes the high risk yields high profits (that’s true for everything in an open market economy…), but it also means that it’s as risky as gambling on the stock market.

    Planned communities, adding services (like protection from griefers; zoning rules; dealing with abuse), providing events and entertainment, all these are factors that make land be more important, and attract potential customers because of the value-added service. It also means that the land prices can fluctuate, but your price will mostly depend on the services you provide on top of the price. That’s why in real life you can get a virtual host with 300 GB from Dreamhost for 6 USD per month, but Verio charges for what apparently is the same service about US$1000/month. The range of services provided by Verio is on a completely different category than Dreamhost’s (and I’m a DH fangirl, too!) and that’s why they can charge 160 times as more! The value of “bandwidth” or “hardware” is pretty irrelevant in that case…

    Then again, the argument that technology-related prices drop all the time is my favourite one 🙂 But tell that to anyone in the land business and they’ll crucify you for being a heretic. See one of my early articles, specially the comments. Let me quote Ciaran Laval:

    Gwyn I’m sorry but you’re wrong on so many levels on this issue.


  • Translations into Portugese are among the 3 most demanded translations from me. And businessowners in SL pay well for them. Interesting you say the Portugese/Brazilians are not willing to spend money.

  • And you’re still wrong, it’s a lease agreement not an ownership agreement 😛

  • Prokofy

    The problem is socialism, real and virtual.

    The problem is the freetard culture, and we have you and all your early adapter oldbie friends to thank for inflicting this on us.

    Everybody can pay something. I charge at least a $1 for freebies. Why should I tier somebody else’s loss leader for free?

    The fact is, people don’t pay not because the are all slugs, but because they aren’t asked. I ask. They pay. I put out tip jars, they fill all the time in the public land preserve to help support tier. You have to ask.


  • People fill your tip jars because you are universally loved, cherished and respected, Prokofy. You’re right up there with Torley in the Love Machine.

    Gwyn, I did not make an “argument”, I stated how, according to me, most people think. And most people do not have domain names. As Aleister correctly said, it’s a perception thing.

  • Land crisis or confidence crisis is sorta the same issue. “We’re on it” is positive, but committments would be more encouraging than more promises from LL.

    Issue on Land sales is: the SL land mass grew more than 35% in the last 2 months–the grid was already empty and now is even more so. Isn’t the point of the virtual world to meet other people? So we hear that there were some new land sales–from education mainly (and lot of broke Phds and more broke students scavenging free stuff–come the Dump sim btw)

    So lot of activity at LL land store–but who is going buy sims for the rest of 2008? Education sims are a lot cheaper than the ones we buy and their tier is also less.

    250 staff at LL–working harder for less revenue? Maybe they all gonna become Phds also?

    ps–and Laetizia–you right, there is no land, no water–only neighbors and landlords. You can go to 4000m to avoid the neighbors at least unless you must see the “water” and “sunset”!

  • Hi Gwyn – great post
    The wanting services for free attitude has another impact too. I came in world a year ago and as someone who has the skills to build and design content I have to admit I have not even attempted to make and sell anything in SL. Why because in RL I can get $100.00 an hour using the same skills and why knock myself out for a culture that demands expects and only values freebies.
    That said I have a premium account, a small block of land and I do spend in world. As far as I am concerned it’s cheap entertainment. I happily pay to go to the movies so I see Sl as entertainment and no different.

    Framing virtual objects as objects to buy I think is a bad marketing move as people want something solid.(As pervious comments verify) framing Sl as entertainment might however shift the perception of customers. So people shop because it is fun – you dress your avatar in great gear because it reflects the person you are and it fun to do that. To people who want freebies and JUST freebies (after being in world a little while) I say that if you want to represent yourself being a tight fisted, aesthetically challenged, twit… go ahead but don’t expect good content to be around in the future because designers are not going to work for nothing.They might try it for a while or have give aways to promote something but doing it year in and year out?

    One thing however in Australia your PhD student would be living well below the poverty line and the computer and connection my be supplied by the university.

  • Morning all.

    Teal, that’s been a reality for awhile actually. Last year, that was balanced by corporations paying 3rd parties for creating sims that, as Hamlet put out in his book, generates visitor numbers that were better than any ad-sponsor could ever hope for on a web site.

    But a number of corps are pulling out, due to many factors (SLA, content control, bad press, tightened budgets, etc). I’m not certain that LL is tuning its marketing quickly enough to get around that yet; They’ve never been clear about what is actually ‘free’ and what is paid.

    It used to be quite clear what Premium gave you – access to land and their forum. Now you just need payment info on file for both; At this point Premium just gives you better support (in particular phone support and ticketing). That’s not worth the cost, even to me! [Ignoring the L$ they throw at you as a token amount these days, since its cheaper to buy it directly.]

    As a contrast, take They are reasonably clear about money – Membership is free, but hobbled as a ‘visitor’ without access to certain things like Voice. Only US$10 (one-time payment) gets you the Premium features such as Voice; And once they’ve got you on that payment screen, it gives you a one-time discount on Tbux (effectively making their Premium cost free if you buy the equiv of US$50 in T, IIRC). Until recently I’ve successfully ‘lived’ off that for nearly two years (while still having a lot of fun) – the only reason that’s changed is that I rented a building from them for a couple months, and will be reverting back to ‘nomad’ status shortly…

    If LL can lure folks more clearly to their currency-buying system, or make the Premium account actually *worth* something again (alternatively making it very clear what it gives you now), things may turn out better.

    Of course, there’s always the more drastic measure of removing the ability to give money via script… 😉


  • The Economist

    Well, of course it might be nice if everybody spends money in here or has the opportunity.

    Truth is: not everybody has that opportunity. I agree, normally should everybody be able who has such a computer to let some money sink in here, like I do.

    But: this idea only holds true in an ideal world, but our world is not ideal, so it does not mean necessarily for someone who’s able to access Second Life that he has the opportunity to spend money simply because he might lack money at all.

    For example, the computer might be a present and he’s poor or he uses a public computer like in a library or university.

    Not everybody has a credit card and other ways of buying Linden Dollars might be quite adventorous.

    And if you’re in such a situation, 10 L$ can be quite much money, when you’re camping and get perhaps 5 L$ / 30 minutes. It’s simple like that and since many people are either not willing or able to buy money and camping around is their only solution to get L$, 1 L$ is spent quite fast but 10 L$ already seem to be like a fortune.

  • MimiSoleil Dagger

    Brava, Dear!

    Thank you for your sharing your thoughts on this matter.

    Mimi ^_^

  • MimiSoleil Dagger

    Sorry about my sentence structure typo on my reply. 🙁

  • Maximilian Proto

    Despite some progress on stability, SL is often still not working very well. This limits the user experience and does not help to convince people to spend any real money.

    Also, SL seems to deliver the best user experience when you are immersed in it, i.e. when you are able to convince your brain to compensate for the technical shortcomings.

    However, immersion requires focused attention. Focused attention requires time. Time can be quite a limited resource for a large part of the working population.

    Combine now the need for focused attention with the high learning curve of SL and think of a casual user that uses SL for a few hours every week to replace television entertainment with an animated chat room, you might have an explanation as to why the large part of the active residents don’t see a point in spending any significant amounts of money (or any amount at all) in SL.

    And don’t even get me started about virtual land and the “crisis”. The setup fee and the monthly maintenance costs are still ridiculously high for the vast majority of users – including myself, btw. Come back to me with an island for US$99 and US$19.99 in monthly tier, and I might order one or two. Today, the price/value relationship for SL land is simply unattractive.

  • Scarp Godenot

    Maximilian: I feel I need to respond to your comment about having an entire sim for $20 a month tier.

    It takes one physical server to run 4 sims. That would make your math equal $80 a month to run and maintain a server and pay the bandwidth charges.

    That cannot be done. Period. No matter how you cut it.

    The Tier cost is directly related to the costs of running servers and bandwidth and providing the service and hopefully making a bit of profit as well.

    You have to see the real economics here. Your proposed model will never exist on a platform as complicated and rich as Second Life with todays technology.

    My two cents worth.

  • Indeed, Max, I believe that Scarp is *totally* right. The reason why we have providers like, say, Dreamhost, giving you access to a full virtual server for, well, US$10 per month, is that they can fit a thousand users per physical server, which will cost them little more than US$1000/month (in leasing costs and high-speed bandwidth from ), and possibly as much in (human) maintenance. Large-scale providers cn thus make a huge profit that way.

    The very same economics completely fail for grid service, where one single physical server can only have 4 virtual sims running on it. In fact, I’m actually surprised how LL charges so little per sim! I would say that they contract way too little bandwidth per server, thus having a lower price-per-server… which would explain things like the hard-coded limits on the number of avatars.

  • Maximilian Proto

    Scrap, Gwyn, although I am genuinely not interested in any technical background of SL, I am aware of SL’s hardware setup, etc. However, thank you for highlighting my key issue again – albeit probably unintentionally 🙂

    See, if I simply value owning a virtual island with not more than, let’s say, US$20 per month, but LL is not able to make me an offer at this price level, then I don’t buy an island.

    And if I’m a casual user that spends only a few hours in SL per week, I might not feel to waste that time searching for any land whatsoever. Also, with plenty of quite decent free content around and enough places to visit, I might not even bother to go to the SL website and update my account information with credit card or Pay Pal information. Etc.

    And this might exactly be what we are currently seeing in SL with a large number of users.

    So, my take on this: Unless LL offers a kind of easy “click-to-buy” island directly from e.g. the land store at low monthly costs, SL is likely to move sideways being stuck with a limited group of early adopters/hardcore users and plenty of “freebie residents”.

    And what are “low costs”? Well, if you look around in the industry, you will find that Blizzard or CCP Games have probably figured out the most attractive basic pricing level that people are willing to pay per month: approx. US$15.

    Real economics, so to speak 🙂

  • I see your point, Max 🙂 Now, one question: why do you value a whole island — all 65,536 m2 of it and the 15,000 prims so low?

    Understanding the reasons for it might also help LL target their product better. For instance, those numbers above are actually a bit “arbitrary”. A sim could theoretically be 1024×1024 in size; or it could be 64×64 but have 15,000 prims! Or, like LL does with the OpenSpace sims, you can get one much cheaper, with the same 256×256, but far less prims. I can imagine sims being offered with 512 prims, 256×256 in size, but only for as low as L$20 — running, of course, 128 sims on the same server, and allowing as little as 3-4 simultaneous avatars per sim…

    While there is a theoretical limit on the combinations, I think that LL could effectively tailor one combination that allows them to get an extra-low price, trading off on the features.

    And there is a HUGE market for having 256×256 islands with 60,000 prims and allowing 400 avatars, for US$1200/month. It’s such a pity that Linden Lab does not wish to offer that service, because it would simply be *awesome* — imagine what you could do joining four of those super-sims side by side, and get events attended by 1600 avatars simultaneously!

  • 1600 avis, all blinging away, all carrying their Mystis and their flexi hair and their alpha layered clothing and their scripted objects and…
    I’d be dead in a minute. maybe LL does not want that kind of weakness in the system (the end user being the weakness) exposed too much.

  • Maximilian Proto

    Gwyneth, thanks for your reply; your thinking around sim sizes and prim levels is actually not too far away in principle from the point that I was trying to get across.

    While I would be happy to share my thoughts on this, I fear this would go beyond the scope of a blog comment, since I’m such a chatty guy… If you are really interested, let me know and I can send you some notes.

  • Ricardo

    Hello Gwyneth 😀 ! I do not see how you see this not. At least here in Brazil, people may even feel some resistance at the beginning – first months – that are in the SL, but then begin to put the money inside yes. Few still reluctant to put money in SL, I can say this, because live closely with people who work in buying and selling L$ here, and demand is great.

    Regarding the real estate crisis, I had decided that putting more land to sell. It was without many expectations due to speculation on this crisis. But to my surprise, two weeks almost all sold, even with prices a little above the market.

    Sorry for mistakes, my english is not very good.

  • Tabliopa Underwood

    Gwyneth wrote in part “I can imagine sims being offered with 512 prims, 256×256 in size, but only for as low as L$20 — running, of course, 128 sims on the same server, and allowing as little as 3-4 simultaneous avatars per sim…”

    For a virtual home that would actually work for me quite well. If LL gave me 512 prims on a private region with upto 4 avatars at one time, Id be happy as. I could make a nice home and garden for myself with that many prims.

    LL could charge me $US15 per month as as a Premium Homeowner for this, and I’d be happy to pay it. I wouldnt have to worry about nosey neighbours, nosey scripts, ugly builds (except my own =)), adfarms or nothing.

    Yes I maybe sharing server and bandwidth space with other avatars (more even) but not visual, chat or scripted space, not at home anyway.

    Bit like Rooms on other sites I suppose, but I would also have the ability in SL to buy/rent other larger parcels for out-of-home stuff. And still be able to shop and club and explore in the world open to me whenever I step out my front door.

  • I have really weird idea, but… It came to my mind during reading last few paragraphs. What if it somehow mapped/correlated with SL hardware requirements for 3D video card? 😉 I remember when I had been going in-world, I couldn’t meet certain friends because one of them had PC broken, and buying another one with _particular_ video card (minimal, after later check). Once they bought it, it looked odd for them to buy anything since “a lot of money had been spent already on SL”…

  • Herne Diker

    #26 great idea, meetings with 1000 avatars would be amazing.I and a lot of others would go just to see that audience.
    #30 that too is a great idea I’d love to have a quiet little spot with no spam in the sky around me like BTEGlobal puts up.Then get dolled up and out the teleporter to the world.
    Thanks for your great blog, Gwyneth.

  • Well, Tabliopa (@30), my only fear is if that would turn SL, the “contiguous virtual world” into one of “separate rooms” (islands!)… 🙂

  • Lazarus

    Well… not much to add but to say very good article. However this is more personal issue than anything else. I can undestand your idea about global SL economy but most of the people are there for fun. Now, in RL how much do i spend for fun? A LOT 🙂 How much am I ready to spend for fun in SL? A lot too. Do I care about SL or RL economy? No. In matter fact I do have premium account and spend many Lindens for items and land. However, can not blame anyone, even though I dont understand, for not spending few cents for their own fun. Different people, different opinions and everyone has its own ways. I must admit that whenever I see nice avatar or house or sim I do pass a comment and praise those who did it. They did put some effort in it no matter how, either buying goods in SL or building them selves. I dont know how to build more than playing with basic prims so I pay for my ignorance cos hey it is for my fun.

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