Rene Erlanger

Jo Yardley wrote: That is why they need to cut tier for SOME people in SOME cases. For instance for first time buyers, to get more people to rent. Give new people a discount for a while. Give long term sims a discount as well, reward them for sticking around for a year or more. Bring back the difference between real estate, educational or commercial sims, diffferent tiers for adult, mature and general sims, etc, etc. Just look at the RL real estate business, go with the market, you've got to be flexible. Or as I suggested earlier, a tier break for those sims/groups that get enough "votes". i think out of all your suggestions......i'd be inclined to impliment the bolded text ones.....get more people buying Premium Subscriptions and owning plots of land on Mainland by incentives & discounts. That would hopefully help increase their income by a few million....and also bring back demand for Mainland (i.e prices per sqm) . 43% of Mainland is under Linden control (including abandoned lands placed back on the market for sale)....so there's plenty available for new land owners.....just needed re-parcelling for new entrants. Regarding your other suggestions......LL would have to crunch the numbers and see what is feasible without jeopardizing their future profitability. Most of my sims are 5-6 years old....so I'd love a discount! .......doubt i would get it though! Don't get me wrong Jo...i do like your Discount suggestions, the ones you describe as "crazy ideas"....they are innovative to say the least.....but might be too complex for LL adminstration wise (eek their Billing Dept!!). I just feel all these ideas are a bit late in the day.....2008/ 9 when the RL recession was just beginning, was the time for LL to be creative with their accounting!

Seven Overdrive wrote: Agreed on your two points at the end, although, I'm not convinced that any non-SL ventures will translate into major benefits for SL, including the much desired reduction in tier fees. One can hope they would be willing to take the profit from one product to prop up another. I guess the fact that this thread is relatively quiet on the subject, may be an indicator that there just isn't a huge demand for lower tiers after all. Not really.....i'd love for Tier prices to come down.....i've been singing that tune for best part of 3 years on these Forums. The loss of all those Estate sims in the last year...has kind of opened my eyes, in that SL might have had it's day in the sun! Sadly, I no longer think cutting Tiers is a feasible prospect anymore....not with their current business model (a decline in both concurrency & Estate sims)

Amethyst Jetaime wrote: What is missing in this discussion about LL profits is that tier may not be their largest profit maker. I was told straight for the horse's mouth a couple years ago that classifieds were. (I was surprised at the time and made sure I had heard what he said correctly). It could well be that marketplace commissions are now days, since so many people use the marketplace rather than inworld shopping. The other missing element with this discussion of tier costs is that there are now more sims running on one server than there were back before the tier increased so much. The more they stack on a server, the higher the profit from the monthly tier payment and servers are a lot less expensive than they were even 5 years ago. One way to make the highest profit is to offer something unique or exclusive, provide excellent customer service and charge a premium price. SL is not the only virtual world out there anymore, let alone the most popular place to socialize and connect on line and frankly their customer service is appalling compared to the way it used to be. For every person that posts here that their personal experience is so great, I hear 10 - 20 times the number of people complain about it in world. While the economy is one of the reasons people have given up their sims, half or more of the people I know that have given up estates do so because they no longer feel they are getting the service they should when they spend hundreds or even thousands of RL dollars on tiers per month. This latter group includes myself. Another way to make a high profit is to offer things people want a lot cheaper make your profit on volume. If this weren't a valid alternative. Wal-mart wouldn't be the largest and most profitable retailer in the world. Lower land prices will bring more landowners. More landownership mean people spend more time here and more money on buying things for their land and their avis, with LL getting a cut of the action through MP commissions and the Lindex as well as higher demand for land for stores. More landowners mean more venues where people can go to enjoy themselves. More enjoyment attracts more people to SL who will spend money on their avatars and eventually land. That's simply not true at all...payment of Classified Adverts is done using Linden dollars....it's just another "sink" that extracts from the existing circulating money supply. The Lindex is controlled by balancing out sinks & sources. Even the figures for Classifieds expenditure don't tally up if one directly converts it into USD.....one could total up the costs of Top 200 classifieds (as a guideline) and divide it by 260...and you'll see it's nowhere near the $6 Mill usd p/mth made from Sim tiers. To but it into perspective $6 mill USD is like 1.6 Billion Lindens!!! ...Just by looking at the 1st few pages of expensive Classifieds I can already see we're talking in millions as opposed to anything near to a Billion???.......i'd be surprised if Total Classifieds amounted to much more than 50 Million Lindens per week (or 200-250 Mill per mth) Marketplace commissions are another "sink". Dartagan Shepherd extracted from Q3 Financials for MP total sales figure and applied 5% and divided by 260....it amounted to about 76000 USD p/mth total for commissions (did not account for Enhancement fees)......annualised it would be around $1 Mill USD at Q3 run-rate.......again it's not going to be anywhere near Sim tier incomes. I use to be a believer of your analysis (even up to a year ago)..-> "Lower land prices will bring more landowners. More landownership mean people spend more time here and more money on buying things for their land and their avis, " I'm not so sure anymore, regarding SL general popularity or demand for it, it's old Tech.....and most importantly the Platform won't scale.....ex-Linden employees have said as much! It would have to be done in a different way....SL is a mothership and to it would have smaller Grids connected to it (different login)....like Fantasy World, Vampire World, Gaming World, Gorean World etc etc.....and connected via Interportability technology, which they started developing with the OS Grids a few years back.

Seven Overdrive wrote: Then they can slowly bleed to death. LOL I do remember when they increased private islands to $295.00 per month, they made the statement that it was because people were willing to pay that, and many were, eventually after the grandfathering and protests in the forums died down. They really had no choice but to pay or not own an island anymore. But that was also when they were heavily trying to turn SL into a business platform. Of course companies could afford fees like that. Now that the whole business love affair has passed, LL is left with just us commoners to support them. So if i read you right, they can only slowly bleed to death at this point rather than cut prices to try and grow participation in the platform again? And it is true.. I am not an accountant. Then again I wouldn't be very keen on listening to accountants about a company's finances that have never had access to the books either. :matte-motes-wink: I agree with your analysis...that $295 tier rise were aimed at the RL businesses that were flocking in at that time...and the likes of you and I became the casualties....as we're stuck with these excessively high Tiers. There are pieces of that Financials that we know to be true or a good approximation. We know Tier income is likely to be around $70-75 mill usd per annum, we know Premium subs income is around $7-8 mill usd...and with the other extra bits of income from Lindex comm and anything else that's chargeable at USD (some land auctions), SIM set-up costs.....that LL are around the $100 Million USD mark in revenues. The problem area are the overhead costs and trying to get a handle on those. We do know the amount of employees and we could apply industry average salaries to those, we could also obtain information on typical rents for the size of property in Battery St. The tricky area for me at least.....would be guesstimating all the Server generated costs, storage, insurance, maintenance, software, hardware, leasing, bandwidth....etc etc If it i had to make a stab at it though....I would say LL's profit margins hover between 10 -15% (15% is very optimistic on my part).....so on $100 Mill revenues.....we're looking at Net Profits before CT Tax around $10-15 Mill.usd So now you can see why your suggestion of reducing the Tiers by $100 per sim per month...is not really feasible and likely to put the company into the red! It's a real gamble to assume that if LL lowers the Tiers by $100 p/mth, more people will buy sims and concurrency might be boosted. You might be right....but what if you're wrong? Is there really a demand to join SL? is there really a demand to own sims? I only see 2 courses that LL could pursue, that might help reduce Tiers in the future.....either a) Spend real $bucks marketing SL across the Internet much like IMVU did over the last 4 years and really grow its concurrency or b) develop other revenue streams non-SL related, so that there's less reliance on SIM Tier income.

so reducing Sim Costs by $100 ....hmmh, let's see what that translates in terms of reduction in LL Income 23377 Estate Sims 56.4% of Private Estate regions are Full Regions So that amounts to 13184 Full sims, lets say 2000 are still grandfathered ($195 tiers) that leaves 11184 Estate sims => 11184 x $100 x 12 => $13.42 Million USD Yep, overnight LL would most likely go into the red! Thats why Tier reductions won't work in LL's current situation. Then again not all SL'ers are Accountants! :matte-motes-wink-tongue: .

I have 2 premium accounts...because of my Mainland (land) dealings.....no regrets...easy decision to always renew.:matte-motes-silly:

If you own a Sim on Mainland ($195).....the next step is 1.5 sims ($292.50) It would be much better to have those little Tier steps as you mentioned.

There really isn't any room for Tier cuts at the moment....as much as I would welcome them. They need to get away from the Sim tier model and it's reliance on it.

Dartagan Shepherd wrote: Well, that's what I meant earlier about LL numbers and stats never reconciling. Phil still recently blurted $75 million in "profit", not gross or net. Oddly enough you'd have to ask "define profit". Until they start giving some financials that actually make sense, the whole thing could be an embarassing conversation without knowing the real figures. I'm sure it's amusing to them, either way. Phil is not an Accountant....he might be talking about Gross Profit (Sim Tiers less direct costs)...no way is it Net Profit, otherwise they wouldn't have had the lay-offs in 2010. The clue was in those lay-offs which were around 100 employees....let's assume average salary of $50k, thats a saving of $5 Mill usd......that should give you an idea of their Net Profit levels We know they lost 1500 sims in last 13 mths ($4 Mill income lost)....hence why i stated that another 3000 - 4000 Estates sims handed back during the course of the year, would probably put them close to break-even point. Hence why it's extremely risky to cut Tiers at this present time.......and why Rodvik indicated that LL will focus on non-SL related products. They do need to develop other revenue streams......so that their business model won't be as heavily reliant on SL Sim tier income. The only way I can see Tier breaks in the future ....is for LL to develop other products as per Rodvik speech...and instead of 70-80% of their income coming from Sim tiers....bring that down to 50% or less, then they could reduce Tier prices right across the board....otherwise it's a non-starter! .

Dartagan Shepherd wrote: Linden Lab claims $75 Million in profit. Not sure that's right...more like $75 Mill. revenues.....not Profit. Tyche Shepherd has made an approx calculation of Tier income....---> Monthly Tier Estimates - Private Estates c.US$4.920 Million, Mainland c.US$1.008 Million So total Tier income per annum is $72 Million....no way it would be $75 Profit! At best with the Lindex and all the other extras...it might be around $100 Mill revenues. I would say profit is around the $10-15 Million mark.

I don't think they can cut Tiers now...it's too late! :matte-motes-dont-cry: They should have done it when it was on an upward growth curve. The hike from $195 to $295 in early 2007 was the mistake.....if they wanted an increase, it should have been between $225 to $250....and not the 50+% Tier hikes. The only way to reduce Tiers now, is to choke off FREE accounts and spread the burden of cost by introducing a modest monthly fee (say $5-$10) to all users......but with concurrency declining over the last 24 mths....its only likely to accelerate it. LL are notoriously frugal when it comes to Marketing & Advertising costs...so they could not plug that concurrency shortfall with more new accounts. In short they can't do it.....not when the 2 main drivers are heading Southwards (Concurrency & Tier Income)

leliel Mirihi wrote: It's an almost 50% drop if you go back to the historical high of 89k in the fall of 2008. Yes I know a lot of that was bots. But it's also the same time LL suddenly announced the 66% increase on homestead prices as well as many other very unpopular moves. Those were some dark times in SL, many people were very pissed off, and concurrency was dropping fast. Again you answered you own statement....Traffic Bots! How many Bots?...10k, 20k or more.? That's why i take the concurrency before the Traffic Bots ban with a pinch of salt. In reality 2008 concurrency might have only been slightly higher than Jan 2010. They hiked the prices, because they did not anticipate the excessive growth in the demand for Open Space Sims (its proper name at the time)...it was the most popular land product at the time! LL wanted to jump on the gravy train for these OS sims and used sucking up of resources and bandwidth as the excuse.......to increase the Tier pricing from $75 to $125 p/mth. Due to the Resident's backlash (i was at that Jack Linden's Office Hours session)...LL later decided to phase in the increases in stages....it ended up being nearly 2 years later that it was set at that $125 price tag.

Precisely! That's why i disagree with price- dumping too.....Merchants that panic!

If you own the sim...or occupy most of the land on the Mainland sim, you can ask for the servers to be changed via "Live Chat" support. I've successfully gotten away from being a guinea pig twice in recent times.....for both an Estate sim and a Mainland sim. I asked to be placed on a Main Grid server.

Pussycat Catnap wrote: Its great for merchants - no longer need to pay fees for a shop. Its great for consumers - quicker shopping. But its death for both of them, just indrectly - because it kills the very thing driving them to each other. Short term gain at the cost of long term survival. Great last line quote....almost worthy as a signature! :matte-motes-tongue:

lol- good post Deltango For the record, I'm in agreement with all the other "right" statements listed in your post.....in some cases I've expanded on.

leliel Mirihi wrote: You're telling me these people quit sl and went to other grids just because of the market place? That sounds a little fishy to me. Regarding this earlier quote....research is your best bedfellow! i.e Merchants have left SL because they're no longer profitable and cannot afford to rent SL land in relation to in-world sales. http://www.hypergridbusiness.com/2012/02/credit-card-thieves-attack-opensim-grids/

leliel Mirihi wrote: That just reinforces my first question. If the people are still here but they aren't buying inworld and they aren't buying on the market place then where are they? Either they're not buying, their purchasing is spread out more evenly among merchants due the the market place, or they're not here. You''ve answered your own question (bolded text) ...spread out across more Merchants. MP is great of lazy Merchants or ones not knowing how to market their own products in-world......MP does it for them more or less. In-world you have to work in bringing your own traffic. You cannot just plonk a shop in a middle of the sim and adopt "If you build it, they will come." approach...it's not going to work! The problem, it's no longer a level playing field....we've had Shopping websites since 2005 that's not the issue ----> Onrez, SLEX later XStreet and now Marketplace. The key difference is the way LL have promoted Marketplace to the forefront of purchasing SL goods.....that's a racket and unfair to in-world Merchants who pay them Tiers for their land! Within the official LL Viewers....there's a "Shop" button with a nice shopping cart right next to your BUY $ and Linden $Balance. You hit that button and it opens up Marketplace...yet we're in-world where most of the Merchant's shops are located!!!. Meanwhile the Viewer Search facility for everything related to finding in-world locations is nicely tucked away on the left-hand side of screen with a "Looking glass icon" As a Noob, which button are you going to hit first....if you want to shop for SL products?

ROB34466IIIa wrote: I dunno ... I see a drop there in the long run of about 20% (rough estimate). You have a statistic too about in-world traffic / sales like that ? Its about 16% drop. 58k Jan 2010, about 48/ 49k nowadays (drop of 9-10k)....but that graph is over 2 years, so about 8% drop per annum. I have statistics for my own shops - i.e Unique visitor counts and sales for 4-5 years.....traffic dropped like a stone around Spring 2011...it no longer had any correlation to concurrency graph.

Shimmy Shemesh wrote: Merchants are a solid part of a popular places survival. Entertainment venues rely on merchant rentals to pay tier. Without it. They would not be able to afford the cost. . People do not donate and tip enough to cover employee wages (which is a vital part of a thriving economy) and tier at the same time. . Removing the money from circulation only leaves you holding a bag of money and people standing around saying : "thats the trickle up affect" On average, just in wages, a popular place pays out to their hosts, over 100,000 lindens a month, (not including the tips they make). Those hosts in turn, spend that money in world, either by rent, or clothing. If the company you pay puts up a net to catch all the money, and doesn't put it back into circulation then you will slowly see your economy decline, and in this case, the market place is that net It is hurting businesses as we speak, and already showing its adverse affects Very good post Shimmy....a cause & effect that both Pussynap & Qie alluded to previously. Banning of Avatar camping (not the traffic Bots)....had a similar effect on the economy back in 2009. Decreased the fluid movement of money supply

Deltango Vale wrote: "That might be so Deltango...but they are the same problems that have been around since it's inception" -------------------------------------------------------------------- @ everyone Sadly, the company is out cold on Valium. That means it needs to be sold to someone willing to turn things around. It means a large capital injection to rebuild the technological infrastructure - to make SL much more realistic - to make it run fast - to make it robust and flexible. Residents are craving more realism with fewer hassles. Then there needs to be a complete revision of previous policies. Second Life is an escape from RL. That's why people (grown-ups) came here in droves. Residents don't want a bland version of RL; they don't want Disney II or WoW II or Facebook 3D. They want to socialize in an information-rich, alternative reality. Merchants was a clean and robust property-rights structure. Linden Lab is currently satisfying nobody. Die-hard fans are finally throwing in the towel. If LL had a CEO like Cary Rosenzweig (IMVU)....Second Life would be flying right now, we'd have at least double the concurrency if not triple (that's if we solved the scaling issues...or created a 2nd Grid and linked via Interportablility to orginial grid i.e Aditi linked to Agni) I think SL needs to be sold to a company that has some sort of vision of what SL could be. Sadly although the SL concept was revolutionary...its platform archictecture needs to be changed and re-created from scratch with a more robust SL ver 2.0 SL is becoming old tech......Mesh is not the saviour (most other MMOG already use Mesh)

leliel Mirihi wrote: But the other grids have significantly smaller markets. Are these people making the same amount of money in the other grids as they were in SL prior to the introduction of the MP? That's the part that sounds fishy to me and why I think they left for a lot more than just the MP. Nothing fishy about it.....it's making losses here in SL and paying $295 Tiers due to a lack of sales (& traffic).....versus making very small profits (or break-even) on another platform with much cheaper & affordable land. There's no denying that was helped along by bad polices & strategies....and a sense of neglect from LL leliel Mirihi wrote: But all else being equal there should still be the same number of people wanting to buy things, so where are they? I think the decline in the user base and concurrency is what's really causing the reduction in sales and these people are leaving due to LL's bad track record over the last few years. Also the new, and worse, unworldly search was introduced at the same time as the MP. Really you could explain this trend as a series of unrelated coincidences that interacted together. Nope....your products on Marketplace are pooled into one big basket of SL goods! One is more or less powerless for those products to be seen....it can be the best thing since slice bread, but if it sits at the bottom of the pile in keyword searches....you're not going to be making many sales! For MP searches, .you can only rely on 3 things - effective keywords, Enhancements and attractive photo & description.....then you're left to the power of the Gods....the MP Search engine! No one is certain on what algorithms it searches on....we can all make guesses! In-world with a main-store, we have more control over our own marketing....we don't have to solely rely on ALL Search engine, there many other marketing methods that can bring in traffic and ultimately sales. That's a critical difference. One doesn't feel lke we're competing against others and dependent on one Search facility.......much much greater flexibility for In-world marketing. The concurrency hasn't dropped off that much in the last 2 years....look at the 3rd graph. The average daily concurrency is a slow gradual decline.....it is no way proportionate to the drop-off in In-world shopping traffic and In-world sales. I have been recording in-world data for over 4 years...like unique visitor accounts or Classified advert click-throughs......these are not pie-in-the-sky theories!! There's a good reason for recording such data.....i.e existing and future trends!

Ann Otoole wrote: Clear the smoke out. The day SL goes below a certain line revenue wise LL will simply cease to exist. Bill Gurley will cut LL to bits and sell it off to get whatever he can. He has said as much as a general business principle on his blog over a year ago. LL is working on non SL stuff now. So am I. Well at least you're the only one here along with Dartagan...that can see the danger signals if SL continues to lose Estate Sims at the rate of knots....in that it will wipe away their remaining profits and eventually reach their break-even point. Without proper insight to the full Financials it's not easy to determine what that figure might be....but we know 1500 sims will yield a annual loss of around $4 Mill usd income.....so I reckon if another 3000 -4000 Estate Sims were handed back, that would probably pretty much do it. That wouldn't necessarily end LL or SL....as they'll probably do another round of staff cuts to lower overhead. It's a race against the clock Ann......they need to develop non-SL products that will sell and become popular. No guarantees on that score. PS The bleeding has stopped this week! The Estate sims total actually grew by 1 Sim ! .

leliel Mirihi wrote: You're telling me these people quit sl and went to other grids just because of the market place? That sounds a little fishy to me. Nope, not only Marketplace...just the general climate of the economy...including copybotting too.(LL not effectivel dealing with it) I never doubted that the MP had an effect on inworld traffic and has thus caused some places to close down. But does it really matter that much to a merchant if the sale is inworld or on the MP? A sale is a sale after all. You don't get it ....and i explained it, in another post, the difference in the potential sizes of regular income to be made from a well marketed In-World store compared to Marketplace with it's very limited Marketing options My point is I don't think the MP is the main reason SL is in a decline. I think people are leaving more so for other reasons. If it's due to a number of reasons, traffic moving away from In-World to Marketplace would certainly be near the top...if not the top reason. Customer service wasn't nearly as bad 5+ years ago. There's a limit to how much people can take and for how long. I agree it was better when Linden employees were manning "Live Chat" support I know, I was here. Doesn't mean the prices aren't too high now. The Sim prices were always too high, for what you actually get. Open Sim grids have proven it can be done at a heavily discounted price, but they don't carry the same amount of overhead or staffing levels as LL. Yet saying that, I've always felt that Sims should have been priced around the $150 USD range and not $295.

That might be so Deltango...but they are the same problems that have been around since it's inception......the only difference is that Merchants were able to ignore all the glitches as they were still getting decent traffic.....and therefore decent sales. To give you an idea how it has effected "unique visitor counts".....if i optimised my lands and got a no.1 spot for the most popular keyword in that sector...that shop would have gotten between 150 -200 unique visitors in a day (as far back as 2010)....now with that same high ranking position, it will only yield between 40-50 !! That's is a huge drop-off Concurrency has declined since 2010.....but it's only by a small amount each year and not the cause of such a large fall in visitor counts. The goal posts have moved............to Marketplace!