Second Life Economy: In Recession, Or Cultural Inflection?

Here in the United States, there's currently a bit of back and forth on whether the economy is in a full-blown recession, or something else.  An understandable controversy, at least partly because it's difficult to measure the economic activity of 300 million people.  You'd think it'd be easier to figure out in a closed society of 600,000-1.5 million, but that doesn't seem to be the case.  Over at the ever-acidic Second Life Herald, Jessica Holyoke puts together some compelling charts that seem to prove Second Life is in a recession-- and like clockwork, the post's Comments explode with reader counterpoints that seem to undermine that claim.  Particularly fascinating there are observations by someone called SqueezeOne Pow, who believes that analyzes like these don't factor into account different activity patterns in large international communities.  Specifically the Japanese and Brazilian users of Second Life, who rank in the upper tier by population, but are generally separated by language barrier from the English-predominant economy. 

According to Mr. Pow, who reports on visits to their regions:

Brazilians in general either can't afford to buy L$ or have their own sim full of cheap shops and camping to cater to those people... Japanese content seems to sell for much less than English speaker content as well. There are some crazy, highly detailed products being sold for a fraction of what similar content is priced by English speakers.

If I read him right, these behavior patterns are skewing the economic stats in a way that's going unrecognized (or unappreciated) by the English-fluent majority.  As I've noted before, half the active user base isn't spending L$ on anything in-world, and if Pow is on point, large portions of the population don't particularly care if they have a positive monthly cashflow.  Is a society really in recession if a majority of the people in it don't give a damn either way?

Comments

[Hal]

Your post highlights the overriding truth about SL's economy - it's too new to predict accurately. SL prices will probably eventually find their own level, even allowing for the different cultural attitudes toward community and commerce, but we're not there yet.

We're building a common culture, that's going to take time and will be a bumpy road. The most pressing issue is surely security right now - if Linden don't set systems in place to limit content theft then all bets are off. The designers making SL's best stuff will just leave.

Linden know the problem but are ducking it - i've even had posts to the official Linden blog blocked for 'moderation' - i'm not sure what forbidden keyword i used but it think it might be 'steal'.

This is not good...

[Laetizia Coronet]

The thing is that you don't really need L$ to enjoy a lot of what Second Life has to offer, and with an abundance of freebies around you can even upgrade your look without spending a penny.
My guess - and it's nothing more than that - is that the majority of people are just in SL to interact with each other. They don't need anything more than what's there to have for free.

The new crowd which have come into SL after it became free to do so - like myself - are a completely different bunch, overall less interested in SL as a whole, as a culture or as a community, and more in their own circle of friends. And that's not strange if you're not paying for it at all. (Mind you, I am not saying *all of us* are less interested, just a larger percentage.)

Mind you, that's all just guesswork - I haven't crunched any numbers. Hamlet, yours is *the* SL blog - has your reader base grown at the same rate as the number of Residents? My guess is that it hasn't, which would prove my point.

[Wangxiang Tuxing]

Wagner, I am sorry you ask this question because the answer is very simple. And the answer is : yes.

Good night.

[Sophrosyne Stenvaag]

I think you and Laetizia are onto something. It may be that the importance of the economy to SL - and of FL business activity in particular - has been wildly overstated.

http://slambling.blogspot.com/2008/02/dutch-banks-depart-second-life-some.html> Al Kronos has bemoaned the departure of two major banks from SL, but I've been toying with the idea that that's a *positive* development, a sign of SL's cultural maturation: we're not just a colonial space of FL anymore, but evolving our own distinct goals, desires, success stories, cultural heroes.

Likewise, when we created the community of Extropia, we thought that what we were offering of value was self-governance, employment and leadership opportunities. We've found through surveys and direct feedback, though, that what people want is social entertainment, and lots of it, and few want an active role in development or commerce.

Is this an influx of people more closely tied to old-media traditions of passive entertainment? Is it an inevitable product of drawing from further down the Rogers curve of adapters?

I don't know - but I agree that the trend is real!

[Geuis Dassin]

Just speaking from the hip, not having read the article yet, I would tend to say that yes it is. My overall sales figures for several things in my store have fallen off by about 40% in the last 4 months. I attributed this to advertising at first, so have modified my classifieds several times but have had no discernible positive effect.
The other aspect that backs this up is that my SLexchange sales have also fallen by a similar amount.

[Wangxiang Tuxing]

@ Sophrosyne : the fact that the SL economy could have been "wildly" overstated (by whom ??) has nothing to do with the fact that it is today (or not) in recession...

[Sophrosyne Stenvaag]

@Wangxiang: You're quite right: that fact goes to the *relevance* of recession in the SL economy to the culture and lives of SL residents.

That was the point I believed Wagner and Laetizia to be making, and the one that I intended to make.

[Wangxiang Tuxing]

@ Sophrosyne : sorry to contradict you, Sophrosyne. Economy is an objective fact which has nothing to do with culture. This is an error that both you and Wagner are doing.

[Myg]

If a Linden dollar falls in the woods and no avatar is there to pick it up, does it still buy a freebie hair?

[Tateru Nino]

I'd give the piece more consideration if Holyoke got her math right.

[Pavig Lok]

After the initial time setting up their avatar and playing Barbie (tm) buying clothes and general fun stuff, most folk in SL settle down to other forms of activity that may not be reflected in the economy. Far from being a negative I think this shows that the platform is maturing into more than a mere novelty or more fancy version of The Sims (tm).

To try and figure out what people were doing in sl instead of buying stuff I went and pop-quizzed a bunch of people last week with "what did you do in SL today" to get a cross section of activities, and see what percentage of them would be classic economic activities. I meant to write a blog post on them - and still may - but I present them here for your perusal.

Mis Graysmark discussed issues around writing her episodic novel in SL with writing enthusiasts and some bloggers and SLLiterary magazine folk.
Mister Colossus played a live gig to a bunch of people.
Mis Ruxton went shopping for a skin and attended a gallery opening.
Mis Pfeffer uploaded two animations she made for valentines day.
Mis Uralia made some textures and chatted to her friends brother.
Mis Withnail threatened a naked man in a PG sim with a chainsaw, "grew chest and leg hair, skinned my knee, got a combover, pretty spiffy looking if i say so myself, and bought this here pr0n mag and vaseline".
The hobos went on a field trip to Straylight with their lawn mowers to do some gardening.
Mister Otoole bought a Japanese Naval uniform, tinkered with his ballon barge and went for a short flight, attended a friends birthday event before retiring with a friend talk about nautical combat for a bit.
Mis Dinosaur made an avatar that is large, pink and geometrical, while Mis Sol played practical jokes on the New Citizens Plaza guard dog.
Mister Kharg participated in a group healing session.
Mister Afarensis built and scripted an antique loom.
Mister Wrangler went to some clubs and danced, took some photos, then arrested a club owner for laffs and made two new friends in the process.
Mis Arai set up iceteroids in a new gas nebula and made a pirate robot.
Mis Steadham went to see some friends and did a bit of window shopping.
Mister Ur saw some art, watched some terraforming, offended someone by mistake, cheered up a friend by pretending to be jello, taught a newcomer to use their camera, tinkered with a tutorial, wrote some notecards, met some people, discussed some things, and the list goes on.
Mister Walcher finished his hats, if they're ever REALLY finished.
Mis McCann took some pictures, explored a couple sims (mostly Japanese ones), did a small amount of building (mostly recreational), and talked with both friends and inworld family.
Mister Oddfellow did a magic show.
Mister Yering talked to a newbie, fiddled with a thing, and made a contraption.

As you can see - several people bought stuff, but most engaged in activities with no financial component (apart from photos and textures). Admitedly this cross section is just the people I came across who were willing to speak, and perhaps not representative of the whole of SL, but interesting nonetheless. This group of activities "feels" slightly less commercial to me than I imagine it was a year ago.

[Tracey Sassoon]

Great read :)

[Jessica Holyoke]

Wow, thanks for picking up on this. But following up on Tateru's comment, what part of the math are you disputing precisely? There are estimates used which were clearly explained in the article, but that doesn't make the "math" wrong.