Faster credit processing... but higher fees

[Pamela Galli]

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Qie Niangao wrote:

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.

---

I will be among those who will now be waiting not days but weeks for my money, since I will be waiting weeks, not days, to cash out.  This is my punishment for being  someone who makes a living in SL. Only then will the fee be a "trifling percentage".

[Pips Fetid]

I'm not totally sure if this holds true for everyone, or if it's just some accounts, but last I knew, we were limited to $10k USD per transaction, so someone who made $20k in a month would be hit with 2 $15 fees. Still a lower percentage than the 1.5%, of course, but that's $30 to LL instead of $15, and no way around it. (Unless, of course, not all accounts are subject to that somehow.)

[Darrius Gothly]

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Qie Niangao wrote:

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. <snip>

---

I think your view of the Merchant base is skewed Qie .. or maybe mine is. You said "mere $100"? For a vast majority of people, cashing out is mostly for pocket money or to fill in a hole here and there. Those that have a positive cash flow in SL are not making BIG positives. They are mostly getting ahead of their expenses by maybe L$5000 to L$20,000 per month.

It took approximately L$26,000 to make a full $100 cash out after fees (selling and cashing out). My perception of the Merchant population is that those making L$26,000 in one month .. above their expenses .. are what we'd call the Upper Middle Class. There are a good number of them but not near as many as those falling behind expenses (and luxury expenses such as the stuff they want to buy). Put together though, the number of Upper Middle Class and lower income Merchants far outnumber the High Rollers.

I think the net effect will actually be to shift the cutoff line higher. A lot of those barely able to cash out once every 2-3 months will no longer do so, they'll just spend the money in world. Those cashing out more often will cash out less often so they can climb above the $3.00 minimum. Those above the cuttoff line that are now cashing out more often .. will do their best to not only reduce their fee payments, but will do what they can to keep more money out of LL's pockets as a negative reaction to LL's money grab.

It might do well to watch the LindeX update every few minutes over the course of a few hours. You'll see that Linden Dollars placed for sale increments in small chunks: L$4000 to L$10,000. Every once in a while you'll see a big chunk hit, but those are not that frequent. I tend to believe those small chunks are the little fish you believe won't bother to cash out. But if they're selling L$4,000 worth at a time .. what are they intending to use the cash for? Buying back L$?

[Darrius Gothly]

Basic accounts are limited by default to $2,500.00 USD per 30 days. You have to apply to increase that limit. LL is well known to run folks through the ringer to get that increased.

[Pips Fetid]

Is that for withdrawing USD from your account, or selling L$? The account I'm speaking of is a tier 2 business account - can sell $20,000 USD in 30 days, but still can only withdraw $10,000 per transaction.

If that's the limit for withdrawing USD, it makes it even harsher for those of us with lower limits.

[Qie Niangao]

---

Darrius Gothly wrote:But if they're selling L$4,000 worth at a time .. what are they intending to use the cash for? 

---

Paying tier, maybe? Granted, it doesn't make much of a dent in the monthly fee for a private island estate, but it would pay for some mainland.

I very much agree that folks will try to avoid these fees, simply as "rational actors" in the economy. And I think you're right: some will undoubtedly now spend L$s in-world that in the past they would have cashed-out. All of which reduces any additional revenue the Lab may have hoped to generate from the higher fees.

We'll probably never know whether they really intended this to generate more revenue.

[Darrius Gothly]

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Pips Fetid wrote:

Is that for withdrawing USD from your account, or selling L$? The account I'm speaking of is a tier 2 business account - can sell $20,000 USD in 30 days, but still can only withdraw $10,000 per transaction.

If that's the limit for withdrawing USD, it makes it even harsher for those of us with lower limits.

---

Oops! I got it wrong. (blasted old-man memory!)

I'm just a Basic account, not a Business account. Here are the numbers I see on my LindeX Exchange: Sell L$ page:



[Darrius Gothly]

---

Qie Niangao wrote:

We'll probably never know whether they really

intended

this to generate more revenue.

---

True dat .. not for sure anyway. But in those cases where the true meaning cannot be known, I prefer applying "Best Logical Reason" methods. And considering that Ebbe did mention that improving cashout times might result in extra income for LL, I tend to lean toward that reason. After all, they are in business to make money ... I hope! LOL

(Now .. where did I leave my mind-reading helmet ... ??)

[Phil Deakins]

I know that this little bit of discussion has had a few posts before this one but...

The amount that a user is allowed to cash out can be changed, upon LL's discretion. It's not set in stone. What IS set in stone is the minimum amount that LL will pay directly into a user's bank account, and that is US$10,000 - the figure you mentioned. It may just be coincidence though.

[Qie Niangao]

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Darrius Gothly wrote: ... Ebbe did mention that improving cashout times might result in extra income for LL...

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Well foo. When they just blurt it out like that, it takes all the fun out of Battery Street Kremlinology! :smileytongue:

[Rya Nitely]

---

Darrius Gothly wrote:

---

Qie Niangao wrote:

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. <snip>

---

My perception of the Merchant population is that those making L$26,000 in one month .. above their expenses .. are what we'd call the Upper Middle Class.

---

I have a feeling that this is a vast underestimation. I came across a very regular merchant the other day who was complaining about only making $US700 a month. There are many people making decent money here, not jut a small number of Anshe-level people. I would say merchants earning $US500 to $US5000 a month make up at least half the 60 million.

I imagine that the first reaction to the increase in fees is many people will be applying to increase their trading limit, and wait to withdraw 5K instead of 2K.

[Rya Nitely]

---

Darrius Gothly wrote:

---

It might do well to watch the LindeX update every few minutes over the course of a few hours. You'll see that Linden Dollars placed for sale increments in small chunks: L$4000 to L$10,000. Every once in a while you'll see a big chunk hit, but those are not that frequent. I tend to believe those small chunks are the little fish you believe won't bother to cash out. But if they're selling L$4,000 worth at a time .. what are they intending to use the cash for? Buying back L$?

---

I haven't really noticed this. It always looks to me like there's either nobody at 249 or just one seller in the L$100,000s, and I add to it. Then I watch it go through. Then there's nobody again, until another huge order comes in. But it might just be the time of day that I trade.

Edit: Reading your post again, it's actually quite funny. You don't really believe that a lot of people are regularly cashing out $US15 to $US30, do you? :smileyvery-happy:

[steph Arnott]

Yes there are a lot that cash out US$15 to US$30 regularly.

[Darrius Gothly]

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Rya Nitely wrote:

---

Darrius Gothly wrote:

---

It might do well to watch the LindeX update every few minutes over the course of a few hours. You'll see that Linden Dollars placed for sale increments in small chunks: L$4000 to L$10,000. Every once in a while you'll see a big chunk hit, but those are not that frequent. I tend to believe those small chunks are the little fish you believe won't bother to cash out. But if they're selling L$4,000 worth at a time .. what are they intending to use the cash for? Buying back L$?

---

I haven't really noticed this. It always looks to me like there's either nobody at 249 or just one seller in the L$100,000s, and I add to it. Then I watch it go through. Then there's nobody again, until another huge order comes in. But it might just be the time of day that I trade.

Edit: Reading your post again, it's actually quite funny. You don't really believe that a lot of people are regularly cashing out $US15 to $US30, do you? :smileyvery-happy:

---

Actually .. yes I do. Not "regularly", more "sporadically". More precisely I believe that a majority of cashouts are in the $20 to $100 range with a peak near $50. Remember that at $100 each on average, $60M is 600,000 cashouts.

My suspicion is that most people cash out not because they need to pay bills but because they hit a psychological threshold. Those are typically at $20, $50 and $100. Cashing out at $20 with a $1 fee (plus fees for selling L$'s) makes that almost worthless, so a lot of people probably push that up to $40 or just wait until they hit $50.

But the real kicker is how often they can hit those thresholds. The Merchants that garner the most traffic are by far the oldbies, have massive inventories and spend lots of time managing their business. But they are also rare in comparison to those Hobbyist Merchants that have a few (or a few dozen) items for sale, very low expenses and just cash out once every month or three cuz they can.

[Phil Deakins]

I wonder if different posters are thinking of the phrase "cash out" in different ways. It's not an LL expression. It's just an expression that we use.

There are two processes:- (1) sell L$ for US$, and (2) move the US$ balance into an external account such as PayPal or a bank. Both of them could be thought of as 'cashing out'.

If things are pretty much the same as they were some years ago, most SL business people aim to earn enough to make their tier. Cashing out to them would be coverting L$ into US$ for their tier, and they could well be the majority of the small increases in the Linex's Sell section that you reported.

We do see people posting that their SL income supplements their RL income, and US$50-100 from time time, preferaby quite often, would suit that purpose. I believe that those people are a lot scarcer.

What I'm getting at is that, in all probability, the majority of so-called cash-outs aren't really cashing out at all, but merely turning LS$ into US$ for the purpose of keeping their SL hobbies (land) going - tier. So you two may have been talking at cross-purposes.

[Rya Nitely]

I'm sitting here watching the LindeX. I have never seen a small order go in. I'm not saying they don't, it's just that whenever I watch the Lindex, which has been very often over the years, I never see it. Right now an order of 140,000 just popped up and I'm watching it go through. When it completes there will be nothing until the next large order goes in.  I mean orders over 100,000. This is the usual trend. Ok, that order just completed, now there is nothing. Darrius I don't understand why you are seeing anything different to what I can see. Small orders are not common.

[Tari Landar]

---

Phil Deakins wrote:

 

What I'm getting at is that, in all probability, the majority of so-called cash-outs aren't really cashing out at all, but merely turning LS$ into US$ for the purpose of keeping their SL hobbies (land) going - tier. 

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That would only be applicable of the majority of business owners(people cashing out anyway) held mainland and actually had to pay tier with US$. I don't find that to be the case, even a lot of larger merchants that have whole sims, rent them from another resident, and therefore pay their "rent"(which most seem to call tier, depsite it not really being that) in $L. So, the whole "may only be turning $L into $US for tier purpose, probably applies more to landowners, not the majority of other business owners/merchants/folks cashing out. I think merchants that rent land from landowners outnumber landowners, though I suppose I could be wrong, I really don't think so.

Either way, it's likely semantics...but the folks who fully cash out, as in trade $L for $US and then send that to whatever financial institution they are using...most I have found personally, are cashing out between $50-$100 each time. They are the ones supplementing their rl income with sl income, more often than not, too...and are likely in greater number than one might assume. I know lots of folks who have personally created thrresholds around that range. 

[Rya Nitely]

Phil, we're speculating on typical sell orders going through the Lindex, but the fees only get charged when you cash out to Paypal. I was assuming that people go straight from sell to cash out, but maybe they don't.

[Rya Nitely]

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Tari Landar wrote:

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most I have found personally, are cashing out between $50-$100 each time. 

---

My experiences watching the orders go through the LindeX is a little bit better at indicating a trend. I know the orders are going through one or two at a time because they complete, and then a new one comes up. A whole lot of small orders maing up those 100Ks would not complete, it would be a more continuous flow.

[Qie Niangao]

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Rya Nitely wrote:

Phil, we're speculating on typical sell orders going through the Lindex, but the fees only get charged when you cash out to Paypal. I was assuming that people go straight from sell to cash out, but maybe they don't.

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If this is the case (and it may be), then all my assumptions are wrong. I've always been under the impression that the vast majority of Lindex sales are not cashed out.

I do think this part is knowable, though. The Lindex trading volumes are still public, right? And (from Darrius's earlier comment) we know that US$60 million gets cashed out each year.

[ETA: Well, that was easier than I expected. Appears to me from the Lindex data that volumes now average about L$85,000,000 a day. That would be about US$ 124 million a year, or about twice the $60m / yr cash-out volume Darrius cited. So it's not "the vast majority" -- it's about half and half.]

[Phil Deakins]

It was just a thought

[Darrius Gothly]

Over the years, I've been a small fish .. still am in fact. Even though I ache and hover over my "business" as if my RL income depended on it, I only use it for pocket change and thus only make sales in that range. Back in the heyday of In-World Search when I was actually selling in sizeable quantities, I still would cash out maybe every other week and often no more than $200US each time. (More usually it was every other week and no more than $100US)

Being someone that analyzes processes for optimal outcome, I learned that the very best time to cash out was just before midnight SLT on Sunday night. That way I would almost always receive my money on or before Friday of that week. Cashing out Monday would often result in receiving my money Monday of the following week .. a full seven calendar days. But beating the midnight deadline Sunday meant that I generally waited no more than 5 calendar days.

My monitoring of the LindeX would thus occur starting around 9PM SLT Sunday night and continue for several hours. I would choose a time near midnight when I saw the L$ amount for sale one point above LL's "wall" was low enough that I could ensure a full sale before the cutoff time.

Watching the LindeX right now, I see no activity similar to what I have witnessed in the 9PM to Midnight window. So based on this time frame, your observations are correct. However the absence of the patterns I have observed late Sunday night does not mean they are not there; it simply means they are not there now.

But that is not the only source of my conclusions. I have a number of contacts and friends that participate in being Hobbyist Merchants. We have often discussed when they sell L$, why they sell and what they do with the money. As mentioned above, almost all of them (in fact I'm pretty sure all of them .. i just can't say matter of factly) pay their rent in L$ to someone else. What they cash out goes further into an external account, again almost without exception through PayPal.

I should also mention that there is a very large chasm between the Hobbyist cashing out small amounts and the Professional cashing out routinely in large amounts. The gap is so large and hard-edged that it's almost as if there are two separate monetary systems. I suspect that most observations are based on seeing only one or the other of the two groups.

I do agree though, without being able to peek over LL's shoulder at the actual financials we will not be able to know for sure. But as it stands, based on the information I've gleaned from friends and cohorts, I'm pretty confident that I'm seeing a pretty reliable sample set and reaching very solid conclusions.

But .. y'know .. sometimes I do have my head up my ... (Hello? Anybody in here?!?)

[Rya Nitely]

Well, as Qie pointed out, there's $60 million per annum not cashed out, so it must be used for something. Maybe it is land costs.

[Rya Nitely]

I do the Sunday night thing too. There must be a lot of people who do that. Maybe it is different on a Sunday night for that very reason, you have the hobbyists all scrambling to get their small amounts out in 5 days. The bigger players probably cash out so often they don't care about a day or two.

So, it is the timing.

[Qie Niangao]

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Rya Nitely wrote:

Well, as Qie pointed out, there's $60 million per annum not cashed out, so it must be used for something. Maybe it is land costs.

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I thought about this some more, and maybe some of the extra Lindex trades are by L$ currency speculators. It seems impossible to me given how stable the Lindex is, but apparently some folks have a way to beat the spread, sometimes. Well, there are people who claim to do that, though again, I've never understood how.