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The Second Life Economy in Q3 2010

Nelson Linden


The Second Life economy continues to be steady, with nearly all key measures staying within a narrow range of just a few percentage points up or down over the last year. The largest changes compared to last year's Q3 were an increase of 7.2% in World Size, a decline of 11% in User Hours, and a 115% increase in Web Merchandise Sales Volume.

Over the last year, the number of people participating in the economy has also been consistent, ranging from 480,000 to 496,000 (currently 486,000), as has L$ Supply, which has ranged from US$25.4 million to US$26.2 million, and was at a 12-month high in Q3.

For a definition of the metrics in this post, please see this wiki page. Click on each image below to see a larger version.


Average Monthly Repeat Logins fell 2.1% from Q2 but still rose 5.3% year over year.



User Hours fell 3.7% from Q2 and 11.0% year over year. The most significant quarter-to-quarter loss of user hours was from the heaviest usage segment (accounts logging over 300 hours per month).



Active economic participants fell 1.0% from Q2 and year over year.



As expected from the fluctuations in June, the average exchange rate of L$ per US$ rose 1.7% from Q2, or 2.5% year over year. Note that a rise in the L$ exchange rate represents a drop in the value of the L$, as one US$ now buys more L$ than it did last quarter.



The equivalent US$ value of all Resident-held L$ grew 1.2% from Q2, or 6.1% year over year. Although there may have been fewer economically active accounts in Q3, this suggests the L$ in those accounts did not exit Second Life.



LindeX volume in Q3 fell 3.8% from Q2 and 2.8% from Q3 2009. With fewer economic participants, there was less need to replenish L$ balances from the LindeX.



Total sales volume on both Xstreet SL and the new SL Marketplace rose 8.5% from Q2 and grew 115.2% year over year. Note that the SL Marketplace was only in beta during Q3 and makes up less than 10% of total Q3 Web volume.



Total world size fell 1.4% from Q2 and grew 7.2% year over year.



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I don't know if I had over 300 hours a month, but I certainly was in one of the heavier segments. Now I am only doing about 4 hours a week.  Spending the time I used to spend in SL in another grid.

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My Online time has increased dramatically, and will probably continue- since I retired from my RL job this month!  And what else can I afford to do unless its virtual!

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Nice to see just the clean data without any spin. Thank you for providing this report.

SL is in a plateau for sure, but as long as its not locked in a downward spiral, I'm happy.

Looking forward to see how LL will generate the next hype curve!

SL seems like its all geared up & ready to go for a massive expansion.... only thing we're missing is LL marketing it properly so that average people on the streets know SL exists.

Let's grow SL together into a bigger & better place!

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Considering all the dire predictions I've been hearing, all the changes at the Lab, and that the 3rd quarter is seasonally slow - I'd say this looks pretty good.  Thanks for the data, it would appear the sky is indeed staying put for now 

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Ok, I confess! I might be a little bit to blame for the increase in Web Merchandise Sales Volume. I can’t help myself, it’s fun and the pictures load right away!

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Thanks for the info.  Overall not a bad quarter (better than a lot of RL companies in this economy), here's hoping that some of the recent initiatives start to have an impact on increasing numbers of new residents, increasing retention, and increasing user hours.

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I'd love to know who is being "successful" in this economy. It sure isn't me, or any merchant I personally know who is willing to talk about their sales figures. My in-world sales are at an all time low, and heading steadily downhill. The only thing keeping me "in the black" are occasional large-scale projects, which are not reflected in your L$ earnings figures, since those are paid for in real Dollars, direct to my Player.

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A 115% increase in web sales does NOT mean there are more shoppers, or that there is more shopping. Since we haven't had a 115% population increase in SL, it more likely means the same shoppers are shopping on the web site instead of doing it inworld.

Why would people do that? Oh, let's see ... search has been borked for over a year? The newest changes favor large parcel owners over smaller ones? The inworld population has been dropping?

"Although there may have been fewer economically active accounts in Q3, this suggests the L$ in those accounts did not exit Second Life."

Meaning no one had enough to bother cashing out with. HOW MANY "fewer economically active accounts" are there now? Where's THAT number?

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Last time it was "stable".  This time, "steady".  Or in some cases, continuing to decline slightly.

As I said on my blog, that's a great euphemism for "flat",  which in the online gaming and social networking worlds really means "dying".  Yes, something needs to be done.

"The most significant quarter-to-quarter loss of user hours was from the  heaviest usage segment (accounts logging over 300 hours per month)."

So the oldbies are starting to lose faith.

It doesn't have to be this way.  You can promote SL through new incentives for the social networking folk, while keeping the existing long-time residents happy just by throwing them a bone once in a while and really listening.  You can introduce catchy new viral mini-games within that include recurring revenues, and you don't have to narrow that to one brand of bunnies, but rather grow the whole industry, the whole category of mini-games within, become THE platform for a richer experience of social and building mini-games.  You don't have to replace the existing user base, or abandon the dream of providing that rich content experience for all, a place where dreams can become reality.

You can let the third-party developers do all the work providing these mini-worlds within, while taking a cut on all sales, as well as an increasing number of regions for supporting this, growing the economy overall as well.  It's a feedback loop and the more you provide, or indirectly provide through enabling others, the more new residents will enter, the more existing residents will be retained.  And while letting the others do the work for this, you can fix the underlying base technology, and turn Second Life into the platform of choice.  Making teleports reliable, fixing fundamental issues with rezzing and assets, retaking control of the script engine from MONO so that performance is not impacted, fixing the bottlenecks so that regions properly scale to hundreds of users.

You can stop pushing user activities outside of the in-world environments.  Promote in-world shopping, building, and editing by removing the need to do so much outside SL.  First and foremost, fix the in-world search so that the results are not skewed to completely useless by bots (traffic) and bribes (paid ads).  Dedicate development teams to implement in-world editors for animations, mesh editing, and maybe even clothing design (painting).  You did an amazing job on providing prim-based builders the masses can access.  Replicate that success with the rest of the core functionality...

If you build it, they will come.  Entering the social world requires good support from word-of-mouth; if you pepper them with ads and browser plugins, pushing content creators outside your world, and alienate the millions of existing users who have invested heavily in this world, it will fade away and die.  Treat the residents with respect and given them reason to participate and to believe and they will grow as in previous years.

I am saddened by the deep feeling that, now that Second Life has become a huge success, the huge potential there is being needlessly thrown away.  The difficult part -- attracting millions of residents -- has been huge success.  Just cultivate that and water it and watch it grow.  Stop trampling on the flowers.

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Yeah I been wondering about that as well. What happened to those numbers?

Also, with the weekly rolling restarts now, I bet the "AVERAGE MONTHLY REPEAT LOGINS" will increase quite a bit.

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The last few months have been very damaging for the most passionate, and it's not like theare going to play WOW or something, they are leaving to spearhead the 3rd party grids. Love them or hate them, the heavy users are the one who make and shape opinions, perhaps also why the last quarter has seen a dramatic raise in speculation as to the future of the Lab and this grid.

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Just curious about the Web Merchandise Sales chart.... does this count the volume as in the raw number of item sales, or is it counting the volume of sales earnings?

For example, lets say a $1000 L item was selling 10 times a month on Xstreet =  10 sales / $10000 L per month.

Now instead, a $1 L item sells 100 times a month on SLM = 100 sales / $100 L per month.

Hurrah! We increased from 10 sales to 100 sales.... Awesome?

As this example shows, you can have a rise in Sales Volume while seeing a decrease in earnings.....

Could you explain a little more what this chart is showing?

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I never realized that there this was this much detail about the Linden economy.  I wonder when the Linden Stock Market Exchange (the LSMX as a working title), will be created.  As a day trader in RL, I might like to try my hand at it.

So when is the first IPO of a Linden economy company?  Lol!


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Well, thanks for the facts, Nelson! As for speculating what the numbers mean, I'm sure that everybody else will interpret them differently. I would personally like to see a bit more growth, but after a year of reasonably bad PR (every week some bad news about measures hurting all residents), I'm actually positively surprised that the decline was anything but dramatic.

I hope that for Q4 the constant release of bad news stops a bite and allows us to keep our faith that LL really doesn't want to kick us all out

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Boots on the ground, this is a much rosier story than I've heard from many, many merchants, land barons and even consumers.  It also does not reflect the business realities I've faced.


Word from most merchants is that the new search devastated their sales.  It may even be a 'better' search.  But how it's better, if in fact it is, isn't communicated well.  The quality merchants generally struggle against highly questionable operations who have one skill: keeping up with gaming search.

At least in the old days it was easier to spot.  Now?  I've had numerous merchant~tenants simply throw in the towel, rather than try to keep up with the shifting sands of search optimisation.  There wasn't any tier relief.  We can't say "whoops, tier is late" even while search isn't functional.



Along with the generally honest consumers on the grid, there is an emergent culture of "you are a sucker if it's not free" consumers developing... some would say already a formidable army on the grid.  Does anyone have any idea how *long* people can get by using abandoned land, ripped items and so forth?  It's essentially forever.

Lax enforcement has bred a culture along with it, and that is now paying its dividends.  I don't mind 'free' per se; there's an acceptable place for that.  But I do mind when I see yet another merchant destroyed because their entire product line has been ripped *again* and *again*... it doesn't take a filed DMCA to be processed each time, when the criminals are so incredibly blatant.



It was great to hear that tier wouldn't change for the next year going forward.  So long as you weren't a nonprofit, of course.

Hey, I'm a land baron, and I directly compete against those who would abuse nonprofit pricing to compete against me.  But to smack educators with a phenomenal price hike during a phase when most legitimate operators can do *absolutely nothing about it* midyear ~ well, who is next?

And then to offer to lock in their rates if they pay up immediately ~ who made that decision?  Are they so completely out of touch with their customers?  Whatever ills there were going on that I'm not aware of ~ congrats, I now feel like I'm doing business under the very worst kind of third world 'government' possible.  The very people who *would* have been your biggest supporters... never got the chance.



So $L were oversold for years, which culminated in the LindeX disaster last spring, amongst other things.  Now the economic stats have gone dark.  That's very dry news that few seem to care about, but I have to wonder, who is at the helm of the economic ship?  Reports of stability don't mean a hill of beans.  The housing market and Madoff investments were rock stable... until they were not.  Taking raw number reports away from us is a bad, bad sign.


This is like a report on poppy production in Afghanistan, without even mentioning the situation on the ground.   As someone dedicated to being here over the long haul, and still in most ways the biggest fanboy of them all... I'm deeply concerned.

Like it or not, the residents and Linden Research are defacto partners when it comes to the success of the grid.  It hasn't been very rosy lately.  And that's fine, it's been a tough economy.  But the first critical step to recovery is admitting the problem: many of these woes were self~inflicted by egregiously bad policy decisions.

Hey, I'm eager to help.  I have a very deep personal stake in the success of this world.  But I would really like to see more transparency, so I can tell if I'm (a) able to make a difference in a positive way or (b) simply enabling a course of action that will make things worse.

The common wisdom is that Second Life is winding down.  New shiny won't change that.  What will change that, is a sense that our actions here matter, that we as residents by and large are trusted partners, that our equity won't evaporate and that our future won't be gambled upon a post~resident corporate dream which will never, ever come to pass.


Desmond Shang, Guvnah
Independent State of Caledon

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Des said it best: "What will change that, is a sense that our actions here matter, that we as residents by and large are trusted partners, that our equity won't evaporate and that our future won't be gambled upon a post~resident corporate dream which will never, ever come to pass."


We are all in this together...

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Total world size fell 1.4% from Q2 and grew 7.2% year over year.

LOL i bet if abandoned lands were actually cleared up and not left to accumulate month after month especially with all ive heard and experenced through friends these figures would read dramaticly different for the fallen sims.

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Oh, dear.

Those who do not know history are doomed to repeat it.

Try googling the term "stock market" and "pyramid scheme" and such with the term "Second Life" and you might broaden your horizons...

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I don't know what's more painful.

Watching these terribly sanitized Linden reports shorn of important data that used to be transparent and is now dark, or watching the noble gyrations of people like Desmond.

The number of people who spent more than one dollar inworld used to be the only real number in SL. It still is the only real number (496,000 or 480,000), but it's called differently now and it's not clear the same thing is being counted. "Economic participation" could include alts to whom dollars are transferred rather than all accounts who spent out money.

This number steadily grew for years and years, no matter what. Then, all of a sudden in February of this year, with the secret 2.0 development and such and the mangling of search, it began to dip. It went back up again. Now it's declining.

Not good.

Basically, every land baron's story in SL is a microcosm for the problem of Linden Lab. Every land baron succeeds when there is growth, but as soon as there is a dip in occupancy and a slowdown in sign-ups, he suddenly faces fixed cost that eat away his gains and then begin to turn the upside down.

What I've always called "mainland mystery math" is when people think that they are doing something "good" by "ploughing the proceeds back into the business" when in fact expanding when there will not be continued growth means getting stuck with a whole bunch of unrented land.

Basically, this is what has happened to the Lindens, writ large.

They have no choice but to use the same methods that land barons have had to use to try to pull out of their death spiral:

o lower prices

o raise volume of sales

o offer more freebies and loss-leaders

o redesign and repurpose

o spend more on advertising

o tighten up customer care to retain customers

o diversify offerings for different tastes

o increasing content sales

o supplementing with consulting

o abandoning land

The Lindens have done all that. And -- I'm not sure it will work.

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So let me see... because a bare minimum of information provided seems to show things are only slightly sinking (with the exception of web sales, which is a direct reflection of the fact people now don't shop in world because of the problems which still exist with search after at least 6 months) we all should ignore our own eyes and not see all the abandoned mainland (land showing owned by gov. Linden as well as those parcels we can see which obviously aren't in use but just haven't been reclaimed back again)... we should ignore our own business figures showing sales are dropping monthly... we should ignore the fact LL still hasn't effectively fixed search and we should all ignore that support no longer works and when putting in a ticket for help because phone support can't fix problems anymore (even region lag issues) they can only tell us to put in a ticket and wait months and months for the ticket to not even be openned... all this is ignored because some pretty graphs make it appear things are level here?

Ok, I'm not going to bother to clean up my sentence structure above. Anyone who can follow LL's logic that things are good can understand me too I guess.

PS: anyone who has been in world for a while knows, like most businesses there are seasonal cycles here. Don't look at Q2 to Q3 to compare, it's more accurate to compare Q3 2009 to Q3 2010... and most of those metrics have declined. Even Phillip knew he couldn't fix it and has abandoned the sinking ship. And the biggest proof of all, if anyone wants to buy me out for what I paid to get into business here, I'd happily sell and leave, and I bet most others here feel the same.

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