Possible Downsizing, and The SL Land Economy.
I really hate to blog about this but it's reached a point where I feel I have to. I've been involved in Second Life for 3 years in August, and been involved with land since not all that long after I started. I love Second Life. I love the people that have become what I consider real friends, I love what I do here. I love the fact that a mother of 3 with no college education has just as much of a chance to get ahead as anyone else in SL.
When I first started mainland it was a lot easier. I just kept a close eye on the land list, and jumped when I came across a good deal. Sometimes I decorated it a bit, and then I would sell it a little higher and make a small profit. CP Costello who was real mentor to me early on always said that all land sells eventually and that used to always be the true.
In late 2006, early 2007 LL stopped full sim auctions for a good while and land slowly skyrocketed to 15-20L a meter. Then all at once, they flooded the market for the first time in my land dealings pulling the price down to 5l a meter. I ended up losing about $1500usd, but was more upset because everything I had always known about land had just changed. A lot of land dealers quit. It was to much of a blow and/or they just lost all trust they had in LL. I stayed because, well like I said I love what I do. I really enjoy dealing with land aside from the crashes. Well since then there have been a few other smaller crashes. When they happened I sucked it up, counted my losses, and carried on.
Around the time of that first big crash I bought my first Estate sim Nerdville for $1675usd. I can't tell you how proud I was. I saw it as a symbol of all I worked for and the start of a new land adventure for me. After Nerdville I slowly grew my estate's as I was able to. I even started an IPO and grew even larger with the help of investors. I had down times and periods where it was slow, or I made no profit, but it always bounced back to a level where they at least paid for themselves.
I hate to admit it but the last few months I have not been able to keep up with what LL has thrown at me. They flooded the mainland for so long that mainland sales are at a near halt. They changed island pricing to $1000 which was a big blow considering how many of us had paid $1675 for them. Nothing like devaluing your paying customers investments by 40% in one blog announcement. They also started offering open space sims at $250 dollars. At first I was excited about this move, but now I think it's playing a part in my full estates sitting largely unrented.
Basically what I am trying to say is that my estates are growing more and more bare, my mainland sales have slowed drastically, and the way sl has handled the economy is having a huge effect on me. I'm working on reorganizing. I have already converted two full estates to 8 open spaces in hopes that there was more demand for them and they would rent better. I'm trying out different things and doing anything I can to pull myself out of this rut. If it does not improve very soon I will have no choice but to downsize and take a few of my slowest renting sims off the grid. I don't want to do this, but it's either that or let them go until they bleed me dry and I lose it all, and I'm not about to lose 3 years of hard work. I'll downsize some estates, and concentrate on other aspects of my second life like content creation, consulting, and keep a foot in mainland because it's my favorite thing to do here and easy to take breaks from when things are down and come back to when I feel its more stable. If it gets better down the line I can always work to grow estates again, but right now I might have to downsize just to keep my head above water. It might not be the smartest move to share all of this, but I think it's just best to be open and honest, and I'm very upset with the changes LL has made and how it has effected the economy. They need to stop worrying about services like the Enterprise Support system and start working on making things right for the users that made sl what it is today.
Technorati Tags: - Sarah Nerd's blog
- Add new comment
Delicious
Digg
Technorati- 1212 reads
I'm really glad I posted
I'm really glad I posted this because I've been given a lot of advice and kind words. I've gotten a few new renters this week, and I think I might run some suggested specials or sim events to perk things up.
I'm glad you did too.
I think it serves an important purpose beyond this situation. Too many public CEOs try and hide bad news. And while I can certainly appreciate damage control, I think the few companies that have failed while attempting to make a good faith effort might have survived if the CEO's checked their egos at the door.
I've been studying this closely, and I feel safe in saying that investors don't lose confidence because of bad news. They lose confidence because CEOS clam up and disappear when things don't go exactly as they predicted. Example: Cadence Juran(CEO: MNM). She spent all that time using Y2P as her personal advertisement space to make the IPO a success, but it's been two months since she graced shareholders with her presence. And the shareprice reflects that at a current value that is roughly 10% of the IPO price (full disclosure: I own 0 shares of MNM).
So, I'm proud of you Snerd. You keep it honest and people respond to that. Wish I could count myself among your shareholders, but I expect you know quite well why I don't.
simchronicity
It's interesting to read your post today Sarah - I just finished writing a tough post on my own blog (http://deliciousdemar.blogspot.com) about something similar.
Here's a quote of part of it:
"Recently, I have begun to have some concerns about the land business in SL - I am hearing from many land owners that renters are harder to find, and I am not sure of the direction Linden Labs is planning to take into the future. I am worried that keeping a low cash reserve is dangerous - if I were to lose a significant number of renters one month, I would be in danger of defaulting on tier payments, without enough time to sell off assets if it became necessary."
For the first time ever, I am suspending dividend payments so I can build up some cash to handle the next bomb that LL throws at us. So at least I have a couple of months of a cushion to get out from under the massive tier payments I have, in case the revenue can't cover it.
There are about 20,000 sims on the grid now - double what it was six months ago. And there are what, 50,000 users concurrently, and maybe a few hundred thousand in all? That's a lot of sims for not a lot of residents. So far I have been able to keep decent occupancy - not what it was a few months ago - but decent. But for the first time ever, I have parcels that have sit empty for months without a nibble. Like you I have converted a couple of sims to Openspaces, and right now, they are saving my ass. I have tried advertising without much impact, have tried some themed areas - all to no real avail.
I am worried that by the time I have taken care of the shareholders I have and bought back their shares so that I own myself, as it were, the land will be worth nothing, and i will have spent three years building something up only to have it vanish before my eyes...
dd
Well, it's not THAT bad...
You'll have had the honor of paying me a dividend. That's gotta be worth something.
I keep trying to wrap my feeble mind around LL's motivation. And the only thing I could determine is it's just good ol' fashioned cutthroat business. Land slingers make a profit providing renters tier-free land. LL wants the tier money. So they create land out of thin air, drop the price, voila, undercut the slingers, more moolah for them.
For me that wouldn't work. Their shady habit of dropping prices at whim would make me hold off. Afterall, they could do it again at a moment's notice. LL's really good at causing disaster with unexpected announcements and providing very narrow timeframes to adapt. I understand LL is in it for themselves, what more could we expect? But the execution sucks. If LL's whole strategy is limiting its users abilities to capitalize, what's the incentive for businesses? New users? Expansion? Oh yeah, content. Huzzah.
It's reassuring to know that while my friends are losing their asses in the land biz, guys that play female avies that are escorts will be able to mask their voice to sound more feminine. Very AOL.
Cocky Dagger over at ISE frequently posts news in virtual worlds, to include potential competition for SL. And there's a grip of competition coming out of the woodwork.
I'll get off my soapbox. Must get pretty tiring to read, really. But I think your needing a cushion more than justifies the retention of a dividend or two. CEO's job is to increase my wealth, dividend or no. Defaulting on tier wouldn't increase my wealth. Simple.
In closing, I'll simply say that I look forward to Anonymous2's input. Where'd that guy go?
km
Anonymous2 here
Konner et all, LL is in fact a business for profit. The two current forms of revenue generation are land sales and tier payments. Server space and the value-added VR software system that has been developed IS the product. LL needs to adjust the sale price of the product as they see fit in order to continue to remain an economically viable company. It's simply a matter of supply and demand.
What you and SNE and other "land barons/investors" are advocating is the following RL equivalent: I invent a new game-changing product (no pun intended). At the outset, I sell that product to early adopters for $100.00 USD. My product is an outstanding success with the "early" adopters. I eventually sell my product to all of the "early" adopters and now it's getting harder to sell.
In the meantime, certain costs have dropped (server space) and certain costs have increased (development/marketing/maintenance etc). On balance, expenses have INCREASED. I therefore need to adjust the price of/add more value to the product in order to increase the number of "non-early" adopters. The price adjustment is not an evil plot to do damage to "early" adopters. It's not an attempt to disrespect early adopters. You need to do what is required in order to survive and grow. You may question the tactics on how to accomplish this but do not ever question the reason or motive. What is it about all of you that would make you want to think so badly about people? (ie. we are the early adopters that helped make SL and now they don't care if they hurt us ... shady habit ... cutthroat business etc). In your collective world, LL should not lower the price of land because IT WOULD HURT ME. I should not lower the cost of my $100.00 USD product because it would hurt the "early" consumers. APPLE should not lower the costs of the iPhone because it would hurt the people who paid $499.00 USD. You see kids, adjusting the price of your product is a means of increasing revenue in order to stay viable and add value etc etc etc. GET IT? No evil plots, no desire to hurt people that helped make the company what it is today. Just a natural desire to survive so that we ALL can benefit from what has been created. Not just YOU.
So called Land Barons are the equivalent of the people who paid $499.00 USD for the first iPhones.
I'd like to offer a more positive potential win-potential win view. People who purchased the first iPhones for $500.00 USD may one day find themselves owning a valuable collector's item worth much more. Land barons today may find that what they own (and the experience they have) may prove to be much more valuable in the future ;) In the meantime, enjoy land ownership (not every joy in life involves the dollar bill), break even or better on tier
and accept the challenge of trying to make a success of your business. If you can't generate the additional money lost per sim (after monthly tier payments), did you really have a business?
Finally, does anyone know what percentage of the SL GDP is due to "land barons" and the SL "investment" community? What if it were 2.71% or less? What if 97.29% of the SL GDP is generated by individuals/companies with only one or 2 sims? Could you then understand why your interests may not be completely represented in the grand scheme?
Adjust, adapt or fail. Being cutthroat or shady has nothing to do with it. Those conclusions are not even rational from a business perspective. You go where the market and the product/services take you. Then you might have a chance of thriving and doing right by as many people as possible.
As always, taking the opposite side of the argument not because I will convince anyone but so as to make the discussion more thought-provoking.
Anonymous2
Didn't Apple give a discount
Didn't Apple give a discount or something when they slashed iphone prices?
Whereas I agree that technology prices shift, we're dealing here with a service that is also the core backbone of their income. The land economy is central at the moment to Linden Lab.
All they had to do was be a little bit of imaginative with their price cut. A drop of USD$675 gave them room to be creative. They could have offered existing owners a discount on their next purchases or a flat rate of purchase and offered new owners islands at USD$1200, and it would still have been a price cut.
Sure people would have still complained, but they'd have had less to complain about and would have felt a little more valued.
Hey Anonymous2
I wondered where you were. I've diluted this thread with my opinions and frankly, they're redundant. But I do want to clarify.
I'm not asking for LL to kiss land barons' collective asses here. I'm simply against content as their continued cure-all approach. While LL's approach in making land cheaper is obvious, what I see it doing is damaging their relationship with people who own larger stakes. LL's rarely good about giving warning. And people who buy large parcels of land are going to slow down or stop. They may become desperate, further diluting the market. LL will have to follow suit and continue to drop the price, eventually making it ridiculously cheap in an attempt to survive on tier alone.
As a prospective land buyer, I would be inclined to 'wait a little bit longer' knowing it's just going to be cheaper (like I do with new technology as you mentioned). The land baron/LL relationship is symbiotic, even if they perhaps cut into tier or land sales. Further, their indifferent stance on ad farms (I suspect because ad farmers pay tier as well) is already straining the relationship between LL and Joe Premium.
Instead of content content content and fun distractions that just haven't worked so far, I think LL needs to be fostering a positive relationship with current users. I stay with a company because they're familiar, reliable(beyond reliability to screw me over at a moments notice), and dependable. Customer service is a joke. I see maintaining a relationship with current land owners as exponentially easier than attracting new land owners. And maintaining current users that have vested interests is easier than obtaining new members. In the push for content and new members, I worry that LL is ignoring their bread and butter. And if land owners fail or it gets to the point where land dealing is no longer viable - can LL handle the losses?
Nobody Fugazi is probably right. Much of the allure of SL was unrealistic expectations where land slinging was concerned. I'd add the unrealistic interest and gambling to that. And if that was always the allure, then content was likely never a major component. And that isn't going to change now. If this was simply novel and the novelty has worn off, well, it was tiring while it lasted.
So yeah, what I'm saying is LL needs to cultivate a sense of community, needs to show themselves a reliable, and foster a relationship that makes leaving SL unattractive. This won't happen with new distractions. At least, not new distractions alone.
Dunno if that clarifies my argument. If I'm wrong, well, then I'm wrong. If it's unrealistic and far-fetched, well, in the absence of hard data, all I have is speculation.
Best.
Konner,
Hey Konner,
Arguments received.
Quote:
"I see maintaining a relationship with current land owners as exponentially easier than attracting new land owners. And maintaining current users that have vested interests is easier than obtaining new members. In the push for content and new members, I worry that LL is ignoring their bread and butter. And if land owners fail or it gets to the point where land dealing is no longer viable - can LL handle the losses? "
LL obviously reserves the right to adjust land/tier prices
in such a manner as is necessary to increase demand. I go back to my question about what percentage of land ownership is by the so called land barons? If it's not as significant as you think, then yes LL can handle the losses. Based on the actions taken by LL, I believe the answer is fairly clear. Can LL or any company handle the losses incurred when the PAYING customer base doesn't increase? INCREASING NEW MEMBERSHIP IS PART OF THE BREAD AND BUTTER. Ok call it jelly if you like.
Perhaps the difference in perspectives is related to the following:
Assuming that platform quality issues etc etc are improved, will the new membership/revenue spike come from land barons attracting the masses or will it come from one new member/one new company at a time creating content/community/interaction/value? Simply put, a reason to return. I go for the later with absolutely no disrespect or lack of appreciation to the pioneering land barons. Or at least the ethical ones that did not cause a billion complaint tickets to flow through the system causing tons of revenues to go down the
eau de toilet and tons of potential residents to never come back. I can imagine.
As always another perspective. I wonder how close my take on LL's perspective is to reality ... time will tell I guess.
Anonymous2
I don't get it....
I guess what confuses me is that if the future revenue model for LL is monthly tier and setup fees - what difference does it make to LL whether they are paid by an individual buying one sim, or a land baron? Presumably, the same number of people want land - so whether the tier is payed by me to Linden Labs, or by someone else - their revenue is the same.
What worries me is that LL has created false demand by lowering their prices - a lot of former renters now own their own sim, and the sim they used to rent is sitting idle. In the end - what is going to happen is that as the setup fees go down, the islands owned by land barons are going to empty out, and they are simply going to have to abandon them. Unless LL can find a way to continue to increase the population (of unique individuals - not bots and alts - and individuals that have the money to buy land) at the same rate as the rate of increase in the land mass, I suspect you might actually see a contraction of the land supply as people default on their tier and/or abandon their islands. In addition, I think you will see a new market in cheap sims being sold resident-to-resident.
And there is one thing that LL may have underestimated. Land barons do their first line support for them. I have about 200 renters - and they tend to contact me first when they have a problem - which is exactly what I am there for, and one of the reasons they pay more to me than they would to LL for their land. The services of helping them get settled, teaching them about lag, fixing their problems, assisting with Estate tools, and a whole host of other things that basically allow them to avoid submitting tickets to LL. and I would venture to say that the level of support they get from us is far higher than what they will get from LL.
It seems to me that LL's approach is not simply to lower prices - that is only a part of it. What they appear to be doing is creating new land products as well (like the Openspace - which while they are not new, were certainly marketed differently and made very affordable). so, we will likely see Openspaces becoming available to any resident - mainland becoming available to any resident, and a host of other new land products - maybe new prim limits, maybe different island sizes, or perhaps even different levels of estate tools for different prices - who knows? I just hope it's not a ponzi - where the model for success is based on an ever increasing user base - because I am not sure that is in the cards for SL.
I think in the end, Konner is right - LL saw that land barons were making a profit - and wanted a piece of the action. which is fair enough - that's just smart business. and for those of us that own land, I think this is a critical time - there will be those that are able to maneuver these new waters and survive by differentiating themselves, or by getting out while the getting is still relatively good, and there will be those who cling to their land and don't adapt and lose a lot of money wishing things were like the good old days.
I think the heady days of massive profits in the land biz are over, or will be soon. So my best advice to any land owners that rent out or sell land (myself included because I find this very difficult) is to cut whatever emotional ties you have to your land, and start finding ways to adapt to survive. The trick is going to be to find the new model, probably at a lower margin, that fills needs in the new reality.
dd
Estate Management
Tier is the killer in the end, an argument could be made that tier on estate land is too high because although there are better estate tools available, that does indeed mean that estate managers take care of matters that usually Linden Lab would have to take care of.
Estate owners provide land for users and allow them to trade land when they are not premium members.
Estate owners save Linden Lab time and money by taking care of billing of residents.
Generally such a model would lead to a discount on tier fees, not an increase on the mainland model. However we're all still under the Linden Lab umbrella for now and there are perks on estate land.
Sorry, I'm going off on a tangent!
anonymous2 to delicious drmar,
Quote:
>>
What difference does it make to LL whether they are paid by an individual buying one sim, or a land baron? Presumably, the same number of people want land - so whether the tier is payed by me to Linden Labs, or by someone else - their revenue is the same.
>>
Price stability on tier. Tier and land prices are the cost for entry into the SL paying customer base. LL was allowing anonymous paying customers to dictate the cost of tier and therefore one variable in the cost of entry for new residents. By continually lowering land prices to eventual insignificant levels, everyone can be their own land baron and LL can control the most significant company variable - the bottom line.
Also, what if the number of responsible land owners are small compared to the number of mediocre/unethical land owners. So you've relinquished control of your main revenue source AND partial control of the new residents initial and most important experience. It's one thing to get screwed on a pair of virtual underwear that don't fit and you can't get your money back even when it was stated that you could.
But when you are paying "rent" (perhaps one of the more expensive costs for most residents) and get screwed ... jeesh I'm outta here. Or the land owner is rude/control freak/paranoid. Those are first impressions that last permanently.
Quote:
>>
I would venture to say that the level of support they get from us is far higher than what they will get from LL.
>>
Again for ethical land owners who take pride in and enjoy the role, I completely agree. But again, you are talking about playing a role in the most important aspect of the user experience - the initial "I'm a paying SL resident" experience. As in RL, most people would prefer to own than rent. The lure of ownership is strong.
It seems to me that good experienced land owners have a really good future in SL providing land management services. I as a land owner would be looking for ways to adjust and grow. The skills that you have developed in SL are valuable for SL. I believe that if you walk away it would be like the horse-and-buggy people that walked away when automobiles were introduced. Horse-and-buggy naysayers already had the 4 wheels and chassis in place. To all ethical land owners in SL: THIS IS ONE CASE WHERE YOU SHOULD
REALLY PLACE THE CART BEFORE THE HORSE!
As always, looking at it from another perspective.
Anonymous2
Let's switch this up a bit.
First let's address the "what ifs"
The first question you asked, regarding the ratio of land dealers to simple land owners? I don't know that answer. My concern was about the message it would send if the land dealers failed.
Second, "As in RL, most people would prefer to own than rent. The lure of ownership is strong."
Then why aren't they? I suppose the answer is going to be simply 'it costs too much(or it did).' Because of the recession or whatever, people are going to rent from land dealers knowing fully well that they're paying more than they would if they owned. And that was apparently LL's logic too.
My arguments were NEVER geared solely to the land business. My complaint was that LL is always pushing content while customer service remains poor. Decisions are apparently made at-whim or out of desperation. LL has shown me that they only take an authoritative stance on an issue if A) It's immediately profitable to do so or B) Their lawyers tell them to. I am not convinced they are listening to their customers. I am not convinced that SL citizens feel that their opinion matters. I think these things imperative for a sense of community.
What if:
People are choosing to rent because they don't want a huge parcel of land, but don't want to suffer the threat of ad farms?
It's simply too difficult or time consuming to manage land.
Problems adding payment info are preventing people from buying land?
The drop in price is making people hesitant to buy land right away?
In judgment and decision-making psychology, there's a concept known as entrapment. Simply put, people won't abandon an investment when it's failing because they don't want to feel like it was a waste. So I think land dealers will keep at it until there's no other option. But this won't help with attracting current residents that don't own land. The content approach might help get new people here, but what percentage of users own land?
A2, my use of this situation was to suggest a trend in questionable decision-making that seems insensitive (that is, ignorant to) the desires of the userbase. My suggestion was that LL needed to redouble efforts in ways OTHER than content. They need to stop listening and hear. Foster a sense of community and belonging, not tension and uncertainty.
I do not know what LL is attending to where the end-user voice is concerned. They may already be doing these things. What I don't want to see is the metaverse equivalent of Star Wars Galaxies.
You kind of sidestepped Del's point where land dealers being the first line of defense is concerned. The point is that LL takes an absurdly long time to handle land-related issues right now. Instead of having 1 land dealer contacting them, they would have 10 land owners. Land dealers have a symbiotic relationship with LL, they have a significant monetary interest. I've heard 'stories' of people waiting 30-90 days for various simplistic things. Those may be outliers and exaggerations. But I do know LL is slow. I think a land dealer is going to be much more willing to accommodate that slugishness than the everyday user. Why? The everyday land user is presumably not making a profit that can mitigate the expense. They're just paying fees for land they can't use.
The issue here isn't just land. The significance of land is that this decision directly affects their income in one way or another. What I have been trying to argue is that LL's decisions come off as spur of the moment or desperate. And their look towards the future always touts content in such a way that it seems to be their only remedy. Simply put? There needs to be more than just new content. Content IS important, but each emerging rival is going to have content. It's going to have features that compete with LL. While instilling a sense of community in citizens won't fix everything (after all, as Machiavelli said, it's better to be feared than loved because people hurt the ones they love) it would be a novel solution when cutesy videos on how to make dildos haven't worked.
I don't want to continue to get hung up on land as the sole focus of my argument, because it isn't. I probably wasn't clear on that point. But if it's okay, I'd really like to focus on what LL could do aside from pushing content. I don't think this one decision is going to spell disaster for LL. I think it is componential to a larger problem always responded to with the promise of new and exciting content.
KM
I'm feeling the squeeze too
At first I thought it was the new search, I'd expanded my holdings based on demand, I was full, too often and turning away business never seems a good move and everything was rosy, although I was fully aware of the pitfalls.
I get im's asking about land so I know the market isn't dead, it's just not as buoyant. Maybe people are cheaper than me, offering better services, finding better marketing techniques or maybe there's too much land and not enough demand and then of course there are RL issues with rising oil and food prices and slowing economies.
However like you I love the land business and have no intention of rolling over. I will either do business with the ninjas again or downsize a little but there's also the summer factor to take into account and the fact that new developments will arise.
Chin up Sarah, diversity is good.
It's not easy, is it?
I've a foot in the land market too - I rent out three full and five openspace sims. Renting means of course I've taken ( a business choice) the purchase price of the sim on my own back.
But - all we really have here is SL imitating RL. I think it's wrong that some people in SL kinda expect the laws of supply and demand, and that of capital to be suspended here. I beieve people who think that they should be are, if I'm being charitable, naive, and if I'm being less charitable, selfish in their belief that they have a right to keep on making profit.
On the capital point: a sim, once bought, is not worth anything except what you can get for it. If I asked my accountant what value I should put on them, he'd say zero. A lot of people think that because they paid for something it must be worth something, but RL business isn't like that. Nor is SL business. The "devaluing my investment" is something I hear often by people who don't get business bookeeping.
The new land store is an interesting question though - we moan because its new prices have made SL more affordable to its citizens, to some extent bypassing the need for land barons of any size, like me and you. However, the reason why the prices have dropped is that the process is now automated - it doesn't need the Concierge Lindens running around like mad placing stuff by hand. Remember the 5-day delays on sim placement because they were so busy? Therefore if SL had kept the price the same they'd have got it in the neck for profiteering.
Have we become obsolete? Partially. I still think there's room for small land barons - but we need to provide something other than just a block of land. Ciaran's post the other day on his level of involvement with his renters is one approach, my approach of providing lan connected to an existing SL community is another. But we *are* becoming niche now.
Hm.
I have to say, Alan, your point about naivety is well-taken. But I don't think anyone expected the land business to be 'viable' forever. And unless we're to delve into metaphysics, the supply-and-demand argument doesn't work since LL creates the new land. In RL there is a finite amount of land. The supply is limitless. And according to Sarah's post, the frequency by which LL issued new land has increased exponentially.
I do agree that the bubble was meant to burst. But I take issue with the insensitivities governing LLs practice of creating new land. That is, seemingly at whim. I guess the argument would be "LL never asked people to put a stake in their land business.' And it really is their business.
While I do agree that this kind of thing was bound to happen at some point due to the influx of real estate dealers (legitimate and dubious alike), I find LLs approach problematic. In fact, I can only come up with two explanations:
A) LL is hurting for money
B) Their solution to current issues is to thin out the number of real estate brokers that will result in more people that own less land.
It almost reads like; "Only we may profit from Second Life."
If I remember correctly, the figures suggested that SL was not really growing. And corporations aren't flocking. LLs approach seems to suggest that. And instead of M and company pushing for 'content content content' maybe they could burden themselves with addressing current issues being faced by the people paying them 8-10,000 USD a month in tier.
I'm not economics expert. Just a guy that sees the plethora of companies positioning to beat LL at their own game while LL gives people that pay them five figures a month good reason to start looking beyond.
Like I said, I do agree this had to happen at some point, but the approach...hm. The approach tells me LL doesn't value its customers. And that makes me not want to place my money in SL.
It's late here, 1.30am, so
It's late here, 1.30am, so forgive me if I'm not on form. I don't think they act on whim. I think (and I'm pretty sure Occam's Razor applies here) they've got a hundred things dragging attention left right and centre, and by the time they focus on one of them it's got a bit over the top. I've been in startups of this nature, and my experience is attribute *nothing* to malice where the real reason could be a bunch of people with not enough hours in the day.
And, on your analysis - it fails on your first point - they're *not* hurting for money, they're nicely profitable. not "screw you" so, but enough to make sure they're not in debt to the VCs and the banks. I'm actually very happy about that.
From the look of the stats and the analysis of people like Tatero Nino, we 're in a period of retrenchment right now. The people here are spending more time and money than ever before - but they're the experienced people. There's no pool of newbs to suck up lots of free land to rent.
This means that basically *all* land barons need to grow up - we need to provide the reason for people to rent from us, not because doing so means they don't need to come up with a large capital chunk. Those days, I think, are gone.
(It'd be really interesting to run a landbot over Anshe's sims, to see how much are untenanted, and whether she's dropping the odd sim too...)
No worries
For people that aren't hurting for money, I still see their approach as rather slapdash, which is why I couldn't ignore the possibility. I remain, as I have before, convinced that LL's approach leaves much to be desired where current customers are concerned. And I think it sends a message to newcomers. But then again, I like to think of a newcomer as someone that just hasn't had their first ticket responded to yet. Plus or minus two months.
Anshe's roaming around Entropia. So I gues she exemplifies your point in terms of expecting the bubble to burst. Then again, the first million is always the hardest...
Value
The value issue is an interesting one. We are technically paying for server space, but Second Life is sold as en economic platform too and land, albeit only server space, does have value. That's why people are upset at a 40% loss, but the lesson learnt from that is that Linden Lab don't respect value in the fashion their consumers do, so you take it on the chin, dust yourself down and get up again. They will fall again, if I was a gambling man (and I am) I'd bet on a figure of around 750 next. Zee said they probably won't fall by 40% again, but 25% I could see.
I'm no accountant but ammortisation is probably along the lines we should consider island purchases...not that I fully understand that concept but my limited knowledge seems to see that as how I should consider my estate purchase.
Marginal Price of Mainland
The mainland market is affected by many things, and what I am about talk about is just one small facet. I don't think it's the whole picture.
SL gets the mainland market wrong because they do not have a sophisticated model for understanding and evaluating it. Anyone who speaks to Jack Linden always hears about the 'average price' (individual vs. group) land sells for. Average price is an easy number to calculate, but rather meaningless for understanding how the land market works. And it is completely beyond me why they would break out individual land sales from group sales, except that it's another number which is easy to calculate.
In RL, I work for the company that tells the world the price of crude oil. That's not really as easy as it sounds. What is the price of oil sold today? 90-95% of all crude oil is sold on long term (usually annual) contracts, and none of that oil is taken into account when the world talks about the price of oil. It is only the oil that is pulling into a port today (or is loading for delivery within 21 days) that does not already have a buyer, and sold on what we call the 'spot' or physical delivery market which is what is quoted as the 'price of oil.' The average price for oil is not a meaningful number to anyone because it would involve the oil sold on long-term contracts and it would greatly lag the spot (immediate) market. The 'price of oil' today is the price that oil traded hands for at 4:30 GMT precisely.
Anyone who has bought & sold land in SL (or RL for that matter) understands quickly a few concepts. First, the front page of mainland land sales search is critical to understanding the land market. The front page is the price of the cheapest 100 parcels of land in SL, and these represent the 'marginal price' for land - the price a given parcel will sell for (almost) immediately.
In RL, if we were trying to figure out why gas/petrol had gone from $2.90 to $4.10 in the space of two months, we'd be baffled if we looked at the average price for oil. Average prices, by their very nature, lag the marginal price - sometimes quite considerably. If we average the price of crude oil a year ago with the price now, we'd have no way to really understand what's going on. This is precisely why SL lets markets overheat before they do anything about it, and why the pound the land market with supply long after its been beaten well past the breaking point.
It's not a well thought out plan. It's the bumblings of unsophisticated kids who haven't got a clue what the hell they are doing. They don't mean bad things - they just don't have the right people pointing them to the right tools to evaluate their markets.
If SL wanted to get sophisticated, they'd need to develop a methodology to evaluate difficult numbers like:
- What is the price of generic mainland selling for today?
- What is the benchmark type of terrain?
- Do different terrain types sell at discounts/premiums to the benchmark land?
- How can the market sales be made more transparent?
Bots do all of these kinds of analysis, and there is no reason SL cannot do the same. They just need to take the time and resources to develop a methodology and use some critical analytical skills.
All this information has been given to Jack, though I doubt he nor SL will put resources into complex analysis of their own markets.
Anyway, there are my unsolicited thoughts. I'm going to go back to fun things now which have nothing to do with SL.
--Skye Whitcroft
Average Prices
Jack's average price always amazes me, I don't doubt that he's right but if you want to realise the value of your assets quickly you'll look to the base price. The average price isn't very helpful.
You also need the price of land in a particular sim, all sims aren't equal. The whole search engine for land isn't as detailed as it needs to be either, it's not easy to find the right plot.
They just need to hire a few
They just need to hire a few of us. People that deal with and love every aspect of the sl land market, know it well, and have an understanding of the end user who we deal with on a daily basis. They seem to be on the outside looking in, but don't really understand whats going on inside.
Your on the button Sarah - Modesta Heying
I totally agree with you on this one. No matter how much the Lindens spend time inworld, they will never understand the land business because they really have nothing to lose. Even though they run second life, they seem to be clueless on the land market. Who ever pays attention to the average land price? Most of us spend time scanning the first couple of pages of land search, or ask other land traders about their prices and prices of others. I really never see any lindens hovering above the new sims before and after the auction to check on the prices.
It would be great if they hired someone with real experience in the SL land market but I won't set high hopes on that dream. And it's true what you said earlier in one of your blogs or on sluniverise, land market isn't the same as it used to be; Land will not sell by itself. It's alot of hard work and planning, even with that we can lose our shirts.
No, I'm sorry, I think
No, I'm sorry, I think you're still getting this wrong in your head. The problem is here you're still making the false connection between what you paid and "value". They were never 1:1, let me show you:
I paid 1600 for a sim. This included 1 month's free tier, which meant I really only paid 1300 (I'm in round figures). Now, say I needed to offload that. My buyer, being intelligent, would want me to pay for the moving cost. They'll have to pay tier from day1. So at the every most, my 1600 sim was only worth 1200 to anyone else!
1200 is what someone who is *desparate* would pay. There was back then still more buyers than sellers - which pushes the price *down*. Looking dispassionately at my business, I'd have hoped for about 900 for a sim sale, based on what I'd seen in thr forums.
*that's* what the sim was worth. Not 1600. That's the difference between purchase price and value.
These days, there will be sims bought at 1000 being offloaded at 300-400. That's what your sim is worth. 300-400. Even tho you bought it at 1600.
It's like this in real life. When Toyota drop the price of the current car even tho it's identical, your 2007 model's value drops thru the floor. When the credit crunch hits the value of your house, It just drops, even tho nothing physically has changed. It's the market. It's RL.
And that's what's happening in SL too. Investment in fixed assets, like sims, has always had its downside risks :)
The problem is, that a sim
The problem is, that a sim is an intangible asset. It has no value *at all* in terms of accountancy except for what someone might want to pay for it.
so what you get is people saying "I paid 1600 for this and now it's worth nothing" - it was *always* worth nothing from the moment they bought it. There's a huge difference, and one that's commonly got wrong, between "what is this worth?" and "what can I sell this for?"
The two are *not* the same. :)
I think LL actually *do* respect value. There was value in having the Concierges run about the grid setting the sims up for you. Now it's automatic, the price has dropped. LL have passed on that saving to us whenever we buy a new sim. The only problem is as I described - the people who mistake "sell value" for "worth"
Thought experiment: If in RL I buy an item, it costs me X. If I need to sell it one week later I'll only get 75%X - that's the way life goes. However if I keep it in perfect condition, if the creator drops their prices then I'm only going to get 75% of the *new* price at best. This happens all the time, especially in computers.
So why should a sim be any different? SL doesn't have an expemption from the laws of economics! :)
Agree and disagree
My point about value is most based upon the fact that the base cost of a new sim affects the resell price, over time that price will be lowered which will obviously mean any resell price would be lowered but you're right in the fact that it's worth what someone else is willing to pay for it and that generally you won't sell a second hand sim for the same price you paid for it. There is of course therefore the chance that you won't be able to resell your sim at all, which would indeed mean it was worth nothing. Sims do get abandoned.
However there are exceptions, a sim sold as a going concern with beautiful landscaping and a full rental list can fetch more than a brand new sim. This is where the SL model becomes a little bit muddled. All sims aren't equal.
I can't imagine how hard this was to write.
But I commend the honesty and agree that shareholders deserve nothing less than the truth.
Since your investors can't react (or overreact) to this news on the open market, I'm curious whether your buyback offer stands.
Let me know if there's any (realistic) way I can help. Would be an honor, really.
I'm not quitting or leaving,
I'm not quitting or leaving, I'm just downsizing most likely unless theres a drastic change in the next few weeks. If any shareholder has an issue with my current choices, they can just im me and we can try to work out a deal or plan that will be realistic for everyone involved. I'm not out to hurt anyone, but I also can't control the current economy in sl. This is not something I want to do, just a matter I feel I have no other choice in. If the economy improves, and LL finds ways to bring in new users, and new buyers I'll go back into growth mode again. But just in case anyone got the wrong idea, I plan to be around SL as long as there is a sl.
The bringing in new users is
The bringing in new users is the fundamental point here. What are *we* doing to positively influence that process?
Me? Nothing. Therefore I believe I have very little right to complain....
resorting to geese
Intentionally or otherwise, LL have stumbled into a classic resort strategy = damn the operating expenses as long as you can sell real estate. The crash of the Tamarack development is typical. Now LL have persuaded themselves they can sell as much real estate as they like because they can create land at will. They cannot. Supply goes up, the value goes down. LL can certainly churn out endless vacuous acres, but spreading a limited population thinner and thinner on the ground is a recipe for exurban boredom, not a vibrant virtual world. Someone else will come along with a virtual word that provides density and excitement. In it's day the Amiga was a hot computer, but I haven't seen one in a shop for a while.
Expand forever on junk coins, or junk tulips, or junk shares, or junk bonds is not a strategy that has ever succeeded, although every couple of generations some idiot persuades themself they've finally had sex with the golden goose and the egg will be along real soon now. LL are pumping the goose with junk acres.
It seems to me that this strategy is largely driven by poor decisions in the early stages of building the codebase. System performance is almost impossible to improve because a monolithic codebase means you change the skin and find you've trashed performance in some other area. You cannot afford to worry about resident concerns because doing so is technically so challenging. So what you do is offer the Kapor strategy where the bright and radiant future is with business. Sadly that assumes that corporations will eagerly accept the atrocious system performance that is driving residents away. The education sector is not going to put much money or effort into a platform that repeatedly upgrades the system requirements. Education cannot meet those requirements.
LL's present strategy will eventually reduce the world to a vast collection of prettified chat rooms, tiny and isolated groups of residents sitting in the depopulated and devalued exurb asking themselves when the next exciting product from Xcite will be available.
Tech planning
It seems to me that this strategy is largely driven by poor decisions in the early stages of building the codebase. System performance is almost impossible to improve because a monolithic codebase means you change the skin and find you've trashed performance in some other area. You cannot afford to worry about resident concerns because doing so is technically so challenging.
I agree completely. They have painted themselves in many corners - from groups to UI to asset server. What was needed in past 12 months was a drastic overhaul of the core and a freeze on new features (except perhaps H4, which was crucial for sim stability (say LL)). What we got was Windlight, Dazzle, and now shadows.
- IYan Writer
Education
"The education sector is not going to put much money or effort into a platform that repeatedly upgrades the system requirements. Education cannot meet those requirements."
I agree very much with this and I'm speaking as someone who buys hardware for education and knows how the thought process goes. They won't stay engaged if Linden Lab keeps raising bar, education will seek alternatives. They already get a discount but that won't count for a fat lot if they have to keep buying improved hardware on a faster lifecycle than they are comfortable with.
I haven't dug into the statistics, but....
There may be other factors as well. Bear in mind I haven't graphically logged in for about a month at this point, but...
Some things that enter my head:
Again, I'm not sure - but Linden Lab flooding the market and dropping prices certainly did not help matters. It seems as if they actually want to cut out the middlemen - and they may need to do that just to support themselves.
The new CEO? Not sure if that is a factor either.
Second Life Consultant
Indeed.
But having already stated my complaints to exhaustion, I'm inclined to wonder if there's a fix readily available? LLs instability and wanton disregard for the land dealers that have, like it or not, provided a bridge between newcomers and LL, are being sorely dismissed.
That's the part I care about. The impact it will have on the future. And do we really think content will be the answer?
M linden confuses me. I thought Phil stepped down because 'people didn't want a creative visionary' but a business-savvy sort. Answer: Yes, we do. Question: When's he going to show up? Actually, if the recent events indicate anything, he DID show up. And he's gunning for land owners.
I´m here Konner
I heard the Analyst Rating for SNE went down from "BUY" to "HOLD"
I think you mean 'Halt'
SNE IS on the WSE after all.
And you know what? I wish it wasn't. Because if it were on any other exchange I'd have dove right in and snagged up every share I could. Sarah knows I don't 'trust' where the exchanges are concerned, but Sarah exhibits qualities I've found sorely lacking in many CEOs. And if I ever end up running a publicly-traded company, you can guarantee Sarah would be one of the people I'd be trying to emulate.
And while I'm at it, I'll simply say Sarah's husband is lucky he found her first. *shrug*
Land in SL
Strange thing is, if you buy land in SL you never OWN it!
That´s why renting always better..