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Faster credit processing... but higher fees

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Pamela Galli wrote:


OzwellWayfarer wrote:

Think you read that wrong Phil. $3 is the minimum, and then 1.5% thereafter up to $15 (which is 1.5% of $1000 of course).

Right. I do not care about a few dollars. But LL is already getting several hundred dollars a month from me for selling Lindens, and this fee will be on top of that and be WAY more than they need to cover the expense of cashing out.
Why the sliding scale?
it does not cost more to send $1000 to PayPal than it does $10. All it means is I will have to wait weeks to cash out, or pay an exorbitant fee. 

I think someone already suggested the reason earlier in the thread, and it's a reason that I am inclined to believe. Remember the marketplace? Why did they get into that? Because they realised that, overall, there were huge amounts of money being spent on things in SL and they wanted a cut of it. Now they think that they could also use a cut of the US$60 million a year that's being cashed out. It's just conjecture, of course, but it is typical of LL.

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Phil Deakins wrote:


Pamela Galli wrote:


OzwellWayfarer wrote:

Think you read that wrong Phil. $3 is the minimum, and then 1.5% thereafter up to $15 (which is 1.5% of $1000 of course).

Right. I do not care about a few dollars. But LL is already getting several hundred dollars a month from me for selling Lindens, and this fee will be on top of that and be WAY more than they need to cover the expense of cashing out.
Why the sliding scale?
it does not cost more to send $1000 to PayPal than it does $10. All it means is I will have to wait weeks to cash out, or pay an exorbitant fee. 

I think someone already suggested the reason earlier in the thread, and it's a reason that I am inclined to believe. Remember the marketplace? Why did they get into that? Because they realised that, overall, there were huge amounts of money being spent on things in SL and they wanted a cut of it. Now they think that they could also use a cut of the US$60 million a year that's being cashed out. It's just conjecture, of course, but it is typical of LL.

Well, like I said earlier the 1.5% alone skims almost a million off that $60 million. By the time you factor in the minimums and increases it is likely to be closer to $5 million taken out of our $60 million.

That's not covering transfer fees, that's taking up to a whopping 8% out of merchants pockets from the economy.

Loved the blog post though, first that familiar tickle of smoke being blown ... well, you knew it was a joke and that the punchline was coming.

I've got an old post around somewhere that predicted that they were going to start eating the user base like this if it declined too much rather than accept financial realities on their own dime. Here's a thought LL, before you shaft the merchants that are keeping the economy alive? Downsize.

Instead they go with the worst possible move you can make in a declining user base. 207 private regions down this year and counting.

 

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If LL needs money for Sansar so desperately, why not just make another Patterns game and disband the project because "we are too busy working on other projects" and refuse any refunds? True story, ayyy.

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(General Comment - Not aimed at anyone posting on this thread)

Business 101

Years ago I had a business partner that let greed crawl into his head .. and my pocket. We started at 50/50 partners but before long he began playing legal games and drawing up new business practices that reduced me to under 10% participation. Eventually he even shut that off. I left.

Before I left, he began hiring my "replacements" .. who failed miserably and cost him several million dollars. After I left, the replacements were also let go as the company we had grown together declined into dust. He's now on his 2nd (or maybe 3rd) business since then .. all of them repeating the same pattern.

Business 102

Many retail companies these days engage in hiring and promotion practices that dispose of well-trained and competent employees and replace them with inexperienced but very cheap labor. Any savings are eaten immediately in loss of customer base, general inefficiency in operation and "Shrinkage" (a nice euphimism for employee theft).

Most experienced employees are not directly let go. Companies no longer fire people, they just abuse them until they get fed up and leave. During the period between the onset of abuse and the eventual "rage quit", the company loses many more dollars in lost productivity and customer ill-will as the abused employees stop caring.

Business 103 - Modern Version

Any gains in income are due to Management's exellent business acumen and are thus paid directly to top executives in the form of bonuses and perks. Any losses are due to employee failures and are taken out of the employee's pockets.

Business 103 - Old Version

Any gains in income are due to the efforts of the Team and are rewarded with perks, training and promotions to the entire Team. Any losses are seen as Management's failures and are remedied by training, closer oversight and if necessary replacement of the manager.

Consequences

Each and every action has consequences. Modern business has disconnected the consequence from the action, or at best links the consequence to unrelated actions. Linden Lab is once again engaging in actions that will have predictable consequences. They have done this in the past and continue to do so now. There is no sign they will correct these mistakes in the future. If anything, there are signs they will redouble these actions by creating a new walled garden with new "Rules" in the belief that a new product will somehow alter reality. It won't.

Ebbe: Whatever motivation or pressure you are under that makes this change seem like something good .. it clearly isn't. I find it hard to believe that a business person in this era still finds it better to abuse their customers and partners than to fix their own problems first.

You are investing LOTS of money in the new Project Sansar. Wouldn't it make sense to invest some money in shoring up your company's reputation and success with your existing product? Is it really your thinking that the sour taste left in the mouths of your existing customers will not extend into your new endeavor? Especially in this day and age of Massive Social Media when even the slightest mistaken word or action is amplified and repeated 1000's of times?

Please stop and think about the damage you are doing to your goals. It will serve you well to think some more .. and serve you poorly to continue running on the same practices proven to fail in the past.

"Insanity is repeating the same action over and over, each time expecting a different outcome."

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H8 wrote:

If LL needs money for Sansar so desperately, why not just make another Patterns game and disband the project because "we are too busy working on other projects" and refuse any refunds? True story, ayyy.

Did that thing ever make it out of beta? I remember they started charging for it while it was still beta. Depending on how Sansar goes, it could be another Patterns if they start charging as a beta.

Not to insult anyone with simple math, but a straightforward breakdown of the fees would look like this with a $3 minimum, based on how much you're cashing out:

Cashout $20 -- Why not? Even with a $3 minimum fee it still buys a pizza and I'm hungry -- 15%, ouch.

Cashout $50 -- 6%

Cashout $100 -- 3%

No one is getting 1.5% until you hit the $200 mark. And most transactions are likely to be well under $200.

This means hobbyists are taking the biggest hit. On the other hand, larger merchants paying a $15 maximum aren't exactly being coddled here. Percentage wise, going from $1 to $15 gives them a huge increase.

This is optimized to get the highest percentage out of a volume of transactions. That doesn't spell covering transaction fees. That spells increased monetization.

 

 

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Congratulations LL!
Killing SL in small doses!
Small traders like me, received an invitation to cross your arms.
OK understood.

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To me, whether this is good or not comes down to how fast I get the money. LL says 2 days. Ok, but that isn't all that great. Why would I pay more for that? Now, if we are talking same day, then it is worth it. Right now, I cash out twice a week. If most cashouts were same day, then I'd only cashout once a week. My cost only increases 1 dollar a week. Personally, I just don't like the minimum.

 

All that said, WHY AM i PAYING FOR PREMIUM? Heck, at least give premium members a break on the new fees.

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Medhue Simoni wrote:

To me, whether this is good or not comes down to how fast I get the money. LL says 2 days. Ok, but that isn't all that great. Why would I pay more for that? Now, if we are talking same day, then it is worth it. Right now, I cash out twice a week. If most cashouts were same day, then I'd only cashout once a week. My cost only increases 1 dollar a week. Personally, I just don't like the minimum.

 

All that said, WHY AM i PAYING FOR PREMIUM? Heck, at least give premium members a break on the new fees.

Note the caveat that "a minority of transactions may still take up to 5 days."

 

A "minority". Mmmmmmhmmmm.

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OzwellWayfarer wrote:

Note the caveat that "a minority of transactions may still take up to 5 days."

 

A "minority". Mmmmmmhmmmm.

That's just it. I'm sure LL is just being cautious, saying that most will only take 2 days. Looking at the old standards tho, this isn't really an improvement at all. Before it was 3-5 days. Now it's 2-5. Big deal! Again tho, I'm sure LL is just being cautious with those numbers, and I hope most will be handled the same day. If they are not, then this is not really an improvement, and we are all paying more.

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To those complaining remember,  the costs of doing business and being able to accept payments such as LL does and being able to pay out as LL does. requires fee's.  These fee's have just went up and they must of figured out they could not asorbe costs like they had been so they are having to pass what they can onto us.    while it might seem to some like a "evil" plot.  I do not believe it is.   it's just one of the factors of doing what they do. 

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OK, lets do bisiness. In five days that revenue in LLs accounts has far exceeded those transaction fees by 100,000% in interest alone.

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steph Arnott wrote:

OK, lets do bisiness. In five days that revenue in LLs accounts has far exceeded those transaction fees by 100,000% in interest alone.

What rate of interest do you say LL receive on the money that's being cashed out?   

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All investments, the longer one holds back paying out the higher the return. standard bisiness tactics. Retail get around card transaction fees by adding to gooods prices, so cash payers are actually subsidising card payers.

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bigmoe Whitfield wrote:

To those complaining remember,  the costs of doing business and being able to accept payments such as LL does and being able to pay out as LL does. requires fee's. 
These fee's have just went up
and they must of figured out they could not asorbe costs like they had been so they are having to pass what they can onto us.    while it might seem to some like a "evil" plot.  I do not believe it is.   it's just one of the factors of doing what they do. 

Funny that .. I've not received any notices from any other money handling service I use that fees are going up. Where do you come by this information and which services (that LL might also use) have increased their fees lately? I don't disbelieve you, I just haven't seen anything from anywhere else .. except here.

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steph Arnott wrote:

try the link by the OP on page one.

Steph .. I appreciate that you are trying to help but .. try reading my post again: 

 

 


Darrius Gothly wrote:

Funny that .. I've not received any notices from
any other money handling service I use
that fees are going up. Where do you come by this information and
which services (that LL might also use) have increased their fees lately
? I don't disbelieve you, I just haven't seen anything from anywhere else .. except here.

I not only read that statement very early on, but I thanked Innula for posting a link to it and commented on it several times in this thread. That notice does not say that fees being paid by LL are going up, it only states that their cost to process payments through PayPal and Skrill are more than they've been charging. I don't believe it and it just comes off as bogus from the way it's written. (Corporate Speak is pretty transparent when you've spent most of your professional life reading and writing it.) 

Might I suggest you take some time, read carefully .. and then think before you post a reply. A nap might help too. I just woke up from one and it's done wonders for me. *smile*

*Yawwwwnnn* or not ... 

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Have allready said that companies do not cover customer costs. LL are not telling lies in their statement just infering that  the cost was payed by them. Typical corporate non sense. Sounds good on their part but in reality just spin.

I tell you what i believe this is really about and no i can not prove it or give you a link. Share holder annual payments. Investors want a return on thier shares and LL are spending more than what is comeing in. Odd this before June,

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Ebbe has already stated (in a meeting) that LL need a bigger portion of the GDP. That won't come from land so it must come from sales. LL increased the exchange rate from 248 to 249. People will say this was based on demand and supply. I doubt it. The change was too sudden and it stuck, with no fluctuation. So, now they are increasing fees.

They want a bigger portion of the GDP. Ebbe didn't hide that. And maybe they should get a bigger portion. If the government sinks, so do we - that's why we pay taxes. I don't like paying taxes or fee increases. I work so hard for my SL money, although I do enjoy the work. But I hate giving away any of it - mine :smileymad:

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If it's true that Ebbe said that, then it seems that what somebody said earlier, and I agreed with, is the reason for the changes. It certainly could be.

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Rya Nitely wrote: LL increased the exchange rate from 248 to 249. People will say this was based on demand and supply. I doubt it. The change was too sudden and it stuck, with no fluctuation. So, now they are increasing fees.

I'm not sure if you're suggesting that they need to increase fees to make up for the different exchange rate, or as an added measure. That is, I'll be darned if I can determine whether the slightly lower-valued L$ helps or hurts the Lab's bottom line. (My hunch is that it would make no difference whatsoever, even if it weren't such a tiny change.) I do quite agree, however, that the new exchange rate was engineered, not a result of market forces: as you say, it's much, much too stable a change to have been a market event.

Also, I read the fee increase to be a direct result of changing processing methods to expedite cash-out. Usually that would mean switching to a slightly less bargain-basement third-party transaction processor, but if LL is going directly to PayPal, no other third-party (for all currencies?), maybe they're only trying to recoup the cost of whatever development went in to speeding up the old process (which was ridiculously slow).

In any case, even if the fee increases have no offsetting costs, I can't imagine such small amounts could even fund a single Project Sansar engineer, so I don't think that's a motive.

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Qie Niangao wrote:


Rya Nitely wrote: LL increased the exchange rate from 248 to 249. People will say this was based on demand and supply. I doubt it. The change was too sudden and it stuck, with no fluctuation. So, now they are increasing fees.

I'm not sure if you're suggesting that they need to increase fees to make up for the different exchange rate, or as an added measure. That is, I'll be darned if I can determine whether the slightly lower-valued L$ helps or hurts the Lab's bottom line. (My hunch is that it would make no difference whatsoever, even if it weren't such a tiny change.) I do quite agree, however, that the new exchange rate was engineered, not a result of market forces: as you say, it's much,
much
too stable a change to have been a market event.

Also, I read the fee increase to be a direct result of changing processing methods to expedite cash-out. Usually that would mean switching to a slightly less bargain-basement third-party transaction processor, but if LL is going
directly
 to PayPal, no other third-party (for all currencies?), maybe they're only trying to recoup the cost of whatever development went in to speeding up the old process (which
was
ridiculously slow).

In any case, even if the fee increases have no offsetting costs, I can't imagine such small amounts could even fund a single Project Sansar engineer, so I don't think that's a motive.

It's interesting to note that the very small but consistent change in the exchange rate came very soon after the announcement that the monthly premium fee was being slightly reduced (and that VAT was no longer being added to the fee, but that may have been independent.) They may have been experimenting with balance of income sources.

In the second Lab Chat Ebbe Linden was asked about the progress of faster payouts and he openly discussed it was being worked on but that it might be a way of increasing Lab income in the process.

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Qie Niangao wrote:

<snip>

In any case, even if the fee increases have no offsetting costs, I can't imagine such small amounts could even fund a single Project Sansar engineer, so I don't think that's a motive.

They stated that $60 million was cashed out last year. That's not petty cash. Assuming that the average cashout amount was $100.00 then their previous $1.00 fee amounted to 1%. They are now increasing that to 1.5% which means their net increase in income from fees on a strict percentage basis amounts to $300,000. Again that's not small change.

BUT .. they are also charging a minimum $3.00 fee so that the average $100.00 cashout will actually pay a 3% rate not 1.5%. So on a realistic minimum fee basis their total gain in income from the new fee is $1,200,000. I do not consider $1.2M as an underpaid engineer. Rather I see that as TEN very well paid engineers.

No matter how the real nuimbers shake out, and even if the average $100.00 cashout does not wind up paying the full 3% rate on average, it's still a pretty sizeable amount of money.

The cost to develop a new gateway and fraud prevention methodology to increase cashout speeds should be at most one engineer for one year. So in the first year they will have gained a profit from this of about 9 engineers. After the first year it's all gravy.

So Ebbe? With your increased income from cashout fees, when will we see the addition of at least 3 new engineers and 10 support personnel?

You gonna take more son, you gotta give more too.

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Qie Niangao wrote:


Rya Nitely wrote: LL increased the exchange rate from 248 to 249. People will say this was based on demand and supply. I doubt it. The change was too sudden and it stuck, with no fluctuation. So, now they are increasing fees.

I'm not sure if you're suggesting that they need to increase fees to make up for the different exchange rate, or as an added measure. That is, I'll be darned if I can determine whether the slightly lower-valued L$ helps or hurts the Lab's bottom line. (My hunch is that it would make no difference whatsoever, even if it weren't such a tiny change.)

I was suggesting the slight increase in exchange rate works like an increase in fees. We are selling our lindens for less, LL buy it for less and then resell at a higher price. Maybe 250 is not far away. It might be small amounts but all those small amounts add up. Merchants would know this - small amounts flowing in constantly make a significant amount in the end. This is a suggestion only.

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None of this really matters to me, but I'm sort of obsessed with financial statistics, so I can't help myself: Maybe there's somewhere that shows the true distribution of cash-out transaction sizes, but without such data I would guess that the median is much less than the mean: That is, I'd expect a few Anshe-level folks to cash out huge amounts (like $20K/mo each), and a whole lot of creator types to cash out smaller amounts. (Even still, though, I can't imagine: who would ever bother to cash out a mere $100?) There won't be many of the "high rollers" -- but it doesn't take many to account for a big share of that $60m / yr total volume.

Those high rollers get hit with a much higher percentage increase: fifteen-fold, to the maximum $15 / transaction. As a percentage of a $20K transaction, however, it goes from 0.005% to 0.075%, so it just doesn't matter to them.

So, if half the total cash-in volume were made up of these $20K transactions, that whole class would generate $22,500 per year, an increase of $21K. If the other half were made up of $500 transactions and sellers didn't respond at all to the new fees, that would generate a $120K revenue increase (from $60K to $180K), and were that to happen the $141K total increase would go some way toward funding one fully-loaded developer-year.

And, to be fair, it's very possible the Lab actually expects that kind of increased revenue from this change -- but they won't get it, because people's economic behaviour responds to change. The hypothetical $500/transaction group will almost surely switch from weekly to monthly cash-outs, or whatever they need to do to get above the magic $1K mark where the maximum transaction fee falls below 1.5%. Say they respond by waiting until they have $2K (where the fee is 0.75%). That would actually generate a $15K reduction in LL's revenue from this group as a result of the increased fee. (The high rollers might respond some, too, but it's such a trifling percentage of their total transactions that they couldn't be motivated to do much.)

Now, it may be that folks don't want to do what these increased fees encourage. In fact, it could be really hard for some folks accustomed to cashing-out weekly to now wait a month between transactions (especially that first month). And I'm certainly not arguing in favour of the higher fees, when in fact I don't think they'll really generate enough revenue to pay for the Linden's time writing the blog post about it.

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