SL Economic Report for August 2009

Second Life Land and Economy: Land Market Shrinks 17%

IntLibber Brautigan
Special to the MultiverSentinel

The Second Life economy continued to slide in July as the lack of ad-farming and any advertising on mainland caused the downward pressure of land bot runners to push land prices down to 1.11 Linden Dollar per square meter on sales of 110,796,960 square meters, a total market of 123,028,944 L$.

June, by contrast, sold 125,999,600 square meters at an avreage price of 1.17 L$ per sqm for a total market of 147,419,532, leaving July with a land economy shrinkage of 17% for the month.

Meanwhile the Linden land auction sales expanded from 1,124,912 square meters in June to 1,302,672 square meters in July. Linden Labs did not publish average prices for these auction sales to determine any change in value, although this market is about 1% of the overall real estate market. If we go by the L$ Land Sources and Sinks data, June's average Linden Auction price was a mere 2.5 L$ per square meter, however July beat that with a mere 1.42 L$ per square meter.

It is clear that there is a large amount of land on the market -- however, it is reaching market saturation and dropping to commodity prices in a clearance market, even on the Linden's own Land Auction site, where Linden mainland auction prices aren't far away from the overall average sales price.

Part of this is due to Jack Linden's policy of dumping old land and new continents onto the grid and thinking up new scams to entice people to move and pay high prices for new land that was as good as the old land. Added into this is Jack's support of land bot runners who drive down prices and make mainlanders panic and liquidate their land.

First, there was the Nautilus sims with their sailing water (note that LL did not use those 750 prim openspace sims for their sailing areas), double prim land and zoning ordinances. Then, there is Zindra, which started out as a good idea for separating adult content and enabling the eventual merger of the teen grid into regular SL, but we dont see LL taking any mainland regions offline to reduce supply of mainland. A smart land team manager would do that...but then we are talking about Jack Linden, who has never met an economic depression he didn't like.

PMLF Depressed

The number of residents with positive monthly linden flow (PMLF) shrank in June for the first time since February, down 4% to 66,787 from an earlier high of 69,401 achieved in May. The top level earners shrank more significantly, with a 6% drop in those earning over $5000 US per month from 221 to 208, and a drop from 439 to 380 in the $2,000 to $5,000 range, a drop of almost 16% in one month. Earners of $1,000-$2,000 dropped by a mere 4%, but the $500-$1,000 range dropped by 5.3%. No figures for July's PMLF have yet been released by LL.

Linden Lab's L$ sales on Lindex shrunk 30% in July, down to 70 million L$ vs 100 million L$ in June. All other economic categories saw significant drops in both sources and sinks.

I have long predicted two events will occur once Linden Lab had squeezed every last bit of profit out of the SL economy: They would toss out an IPO for LL on the market so their VC backers could make their last nut of profit, and LL would open the grid enabling other opensim grids to link up to the SL grid. I am now predicting that we are within months of these two events happening.

From this data, it is clear that if Linden Lab's land team had anyone of intelligence behind it, they would be reducing the amount of old mainland sims by 10-20% to tighten up the supply. They would also put more money into advertising on television and the internet to attract more new users, and not just on late night channels that are only watched by people in the projects.

How about marketing more?

On any given night watching TV, I can see 2-5 ads by World of Warcraft featuring Ozzy Ozbourne. Where is Second Life? LL should be advertising on the technology channels, on the business/news channels, and the fashion shows like Project Runway.

It's really rather insane that these guys still are not doing any significant advertising anywhere in the heart of an economic recession. Anybody with a clue knows that's when you have to advertise even more than usual (and given "usual" is generally slim and none, more than usual should be a rather large change in ad spending).

IntLibber Brautigan, the CEO of Brautigan and Tuck Holdings (BNT) and Chairman of the Ancapistan Capital Exchange (ACE), is a longtime commentator on the economic development of the multiverse of on-line virtual worlds.