What's the Trouble with Ten Percent? Tateru's Take (and Mine) on SL's Low Retention Rates

Over at Massively, erstwhile NWN contributor Tateru Nino has an in-depth look at that obstinately unbudging 10% retention rate, the number of people who try Second Life, and are still logging in three months after account creation.  It was that percentage when Philip Linden revealed it to Tateru in a New World Notes story last year, and despite a host of fixes and improvements, 90% of new users still leave.  Is that such a bad thing?  You'd think so, but Tateru makes this provocative aside: 

Whether that ten percent figure is actually good or bad depends on who you ask. Some people will tell you that that figure is actually very good (one MMO operator tells me that it is - but won't let me name them or give me their own figure), other pundits think it's terrible.

This got my gears spinning, because as it happens, we do know the retention rates of at least one other MMO: Habbo Hotel, which is partly comparable, because it's also free to try, and depends in large part on user-created content.  Last May, it had about 8 million active monthly users, making it the most popular MMO after World of Warcraft (and much more popular than WoW in North America/Europe, where Warcraft has only about 5 million subscribers.)  Impressive numbers-- even moreso, when you consider Habbo's equally low retention rate:

- Habbo launch date:                                        2000
- Active monthly users:                                     8 million as of May 2007
- Number of accounts created since launch:     80 million

In other words, it's also 10%.  (I got these figures from notes taken from a GDC presentation on Habbo I wrote about for GigaOM last September.)  And unlike SL, Habbo does not have a high learning curve, or demanding system requirements.  As I speculated in GigaOM, "[T]urnover is a necessary part of [retention], as kids experiment with numerous different avatars, before finding the community and the identity they want to stick with."  This is also partly the case with SL, considering the high percentage of "alt" accounts.

Last week, I wondered if Second Life had reached a conceptual barrier that would keep it confined to being a medium-sized world.  I assumed 10% retention was proof of that.  Now thanks to Tateru (and Habbo), I'm not so sure.  Maybe the real trouble with 10% is that people often mistakenly assume this to be a bad sign.

Comments

[Dedric Mauriac]

Although we are still at 10%, many virtual businesses in-world are looking at a steady decline in sales dropping (more sharply in March/April). It appears to be directly related to the liquidity of the economy for the younger residents (less than 6 months) freezing up. Ten percent retention may be ok for the grid, but something is holding back younger residents from making as many transactions as they used to. It is this result that everyone is looking at why SL isn't doing so well and trying to find a reason to blame it on (gambling ban, account non-verification, scripted pay info restrictions, over-hyped media, competition, allowance reduction, etc).

[CyFishy Traveler]

My thinking is perhaps that SL itself appeals to a certain KIND of person, which may be only 10% of the total population. I'm still trying to figure out what that person is like.

[Ann Otoole]

some will say sl is full of people with no real life worth paying attention to. Others will say sl is the 10% of the populace that has some mental issue. Others will say some of this or some of that. but that is all speculative and has little basis in scientific method.

I say it is simple. how many people do you meet in sl more than 3 months old that has an IQ under 120? none? good answer. SL is way ahead of it's time and the top 10th IQ percentile is who sticks with it.

when you arrive at the simplest solution you just heard God talking and you chose to listen.

[CyFishy Traveler]

My thoughts would have been more lengthy, but I was interrupted by a phone call and decided to just hit post and get back to it later.

Dedric--I think the biggest reason that new people aren't spending Lindens is because they now start with nothing at all. When I signed up, I at least had L$250 to start with and another L$250 just for linking to my PayPal account. This gave me money to do my first few texture uploads so I could attempt to make custom clothing (very badly at first, since I had no clue about optimal sizes or template mapping) and then I was coaxed into spending money on some prim hair. Then I dumped some spare change from my PayPal account into the Lindex, and the rest is history. But I don't think I would have gone down that road as easily if I hadn't had a little something to start with. The idea was presumably that having nothing to start with would encourage people to provide payment info and buy Lindens, but simply hasn't worked out that way. Frankly, it's a lot easier to fall into the habit of spending nothing when you have nothing to spend. And it's a lot easier to fall into the habit of spending money when you have money to spend.

As for what qualities those 10 percenters have, well, yes, a certain amount of intelligence would be one of those qualities, but also certain likes and dislikes as well. There are probably very bright people who would find SL boring because they prefer the tangible to the cerebral.

[Indigo Mertel]

Dedric, have you considered that the unwillingness to spend is related to bad economy in RL? I know a number of people who joined SL with the idea of spending no money. Number one thing they want to learn about is how to make money in SL, so that they don't have to spend out of their pockets. Many are not willing to have an extra cost in their family budget for what they perceive as a game which can be played for free.

Those who end up to stick around are the people more willing to spend, who recognize that SL is not just a game after all and that it may be worth to invest a bit of money into it.

[Cyn Vandeverre]

That's a great realization, CyFishy, about the seed money. My spending behavior echoed yours, and I was intending to not spend any money in SL at all. Three months later, I'd bought some land. I remember the days of wincing at a $L10 upload charge....

[Nicki Clary]

Many of the new users who I've seen drop off have done so because of hardware problems. Their computer worked with SL but not well and they haven't gotten around to upgrading. My guess is that this is an issue with quite a few non-gamers who join. I also think that in a few years it will be less of an issue, as more people's computers will be handling the graphics content of 3-D worlds.

[Carlos]

It depends what the definition of "active monthly users" is. If that means "paid" subscribers than actually the "conversion rate" would be 10% and and the retention rate could be much higher. For example, 80 million sign ups, 30 million free and paid users, 8 million paid users.