Why Is In-World Spending Up Even As Population Plateaus?

While glancing at an old post on virtual consumerism, I noticed this capture of the spending chart from the Linden economic stats, above left, tracking how many Residents were spending L$, and how much.  That was in August 2007, roughly the time when Second Life's population hit a plateau of about 550,000, where it still persists. 

So here's the interesting thing: take a look at the May 2008 spending chart, above right.  Despite the user plateau, nearly 80,000 Residents more are now engaged in economic transactions-- and not just petty cash, because the L$10-50K spending cohort is among the largest to grow.  In other words, of that 80,000 who joined the cash economy, 17,000+ spent some $37 to $187 worth of Linden Dollars last May.  (So probably not free money campers.)  What's happening?

This seems at odds with the general sense of SL businesspeople, who suggest we're amid in-world recession.  "I'm really worried, Hamlet," one of them told me recently.  "Sales at our stores are just dropping off." 

Maybe it's more plausible that we're in a pockmarked downtown, which is impacting some industries but not others.  How else to otherwise explain this influx of high-rolling consumers?

Comments

[csven]

Combination of effects? Transactions for lower cost "pirated" goods combined with the activity surrounding education?

[Ann Otoole]

Sales are off primarily because residents cannot buy anything most of the time with the deplorable state of the database system. Fortunately LL is apparently using IBM consultants and will be using the legendary IBM fix strategy of throwing hardware at a problem. I hope it helps but I know it will only help for a short period and then another wad of hardware adds will be required. At some point, as many large companies have learned the hard way, adding hardware no longer helps and actually erodes reliability. Let's hope LL crafts some architecture improvements to hold off the diminishing returns effect.

As for me I spent (invested really) more than I usually do for various reasons. And I managed to get out and do some tipping too. Nowhere near as much as I use to tip hosts and DJs but some is better than none. I hope my spending helped some other folks have faith is something that is increasingly hard to keep the faith in.

[RightAsRain Rimbaud]

other interesting point related here is that selling merchandise in SL is more complicated, takes more effort and requires more expensive skills to meet appetite of consumers. So perhaps, the average buyer is in fact buying more--but they demand more also. Last year a dress was leading edge if it had a little flexi in it--now is lacey, sculptie to justify high-end status. We sell a lot of panic discounting also, which short-term may drive sales, but longer term kills creators interest in makin stuff.

Stats are not so easy to pick apart really, LL gives the clues but is careful to avoid giving the links between the data that would allow us to understand economy more clearly.

My guess, is that most of the increase is in land rental fees. We started our first area in August 2007 and I would say trend on our sales are up a little from October/Nov timeline. But we are investing a lot more effort to get this. People who were inworld in 2006 should have reaped the 2007 boom better and no doubt now are feeling they they workin' harder to make less than 2007.

[cala]

Er, perhaps the stats are showing what anecdotal interviews with specific businesses can not. Overall businesses in SL *are* growing - and the number of successful businesses (those with PMLF) is also growing.
I attribute the growth to the increased Quality of products available (sculpteys, baked textures, newer less laggy scripts, Havok testing, etc) and also to *some* business owners working harder, innovating, experimenting with what advertising works and how to keep their customers happy. Skinmakers that haven't adapted to Windlight will fail. Land Renters that can't offer an attractive unique build and/or Openspace sims will fall behind.
Innovate or die, it's absolutely a Wild West environment with lots of changes, but as the numbers show, those who can lead the way will succeed, and the rest will Baaawwwwww.

[Teal Etzel]

I see Second Life as a very cheap form of entertainment. If you already have the computer and internet connection its cheaper than many hobbies/sports etc.

During the great depression cinema was boom industry because it was a cheap form of entertainment where people can escape their problems. If the economies of the world get worse we might see virtual worlds boom because they could fill the same psychological need.

[Patchouli Woollahra]

It has to be remembered that the first age of flourishing for Second Life, where we had our first Residents coming inworld, also occurred during a recession.

The benefit of the Linden Dollar as a microcurrency is that the miniscule value attached to each ellz means virtual goods have less resistance in the way of being bought. It also helps that we have a economy whose prime reproductive factory is a mere set of checkboxes called "Allow Next Owner To:", with minimal recurring costs beyond tier, advertising and regular upload fees.