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Wednesday, January 28, 2009

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rightasrain

hmmm...not that anyone really cares anymore, but this data doesn't seem right at all. The OpenSpaces were about 25% of the total SL sims.

from comments on my post back in October (http://rezzable.com/blog/rightasrain-rimbaud/linden-ceo-price-change-needed-optimal-second-life-experience) we figured out that:

32,000 [total regions] sounds about right according to their website 26,665 at end of Sept + 1,171 added so far this month (is 30% down from Sept level btw) = 27,836 "owned islands" and then if you toss in 5,000 for mainland you get to the 32,000 roughly. Funny how they pull out mainland from the owned land on their website but include it in their datasets. Anyway, so then...13,000 if that is right, is about 1/2 of the "owned islands" which is what I have been saying all along is that there is no growth on the grid...merely conversions of full to voids.

So, it is much more likely that a massive percentage of new regions in 2008 were voids, er...OpenSpaces.

And further, measuring land mass--in a virtual world is nonsensical anyway. It is more proof still, even today as the sims are being deleted, that the "land business" is in shambles and people still need to figure out just what the virtual world is good for anyway.

Further, what are they willing to pay for versus consume for free?

Desmond Shang

Regarding what might be missing, or 'off' - as asked above:

>>"It's clear that there was an outpace of landmass compared to what the rental market and estate purchases could normally absorb," he continues, "taking in consideration that peaks [in] concurrent users and hours spent remained fairly steady with a slight decline shift in Q2 2008."

In my view he is right on target with the above.


>>"This whole Openspace pricing mess obviously created turbulence in the way money has been flowing during and after the bubble."

Disagree here. From a user perspective, the Openspace product concept was a good one: a lower cost region in a pricing 'sweet spot' with the same privacy and space advantages of a standard region intact. The problem was not a 'market bubble' per se, it was an ostensibly superior product that competed mainly with the Company's own existing business. Given time, perhaps most of the grid would have become openspaces. This wasn't so much a land bubble or a tech bubble so much as simply getting a newer, better product - like buying a newer iPod to replace your old one.

As I understand it, apparently it took more technical resources (i.e. servers, and thus: money) to support openspaces, and hence there was a problem with the openspace business model. That's a bad thing, but not a market bubble. The market for openspaces was fine. There is a difference between a market bubble and a pricing error.


>>"He also thinks this is a culprit to a dip in overall in-world spending: "That would explain less demand for rentals and mainland parcels," he argues, "Resident spending possibly shifting to land tier payments as well as initial Openspace purchases, rather than perhaps spending it on products, and causing the price of land to plummet in the resident-to-resident real estate market."

Disagree, for two reasons.

First, just about anyone in business well knows that new residents spend a fortune on stuff early on, and then spending tapers off. The farther we get from the 2006/2007 boom the more we'll see it taper off, though I think the biggest drop is already behind us. The residents from that boom time are now buying less, more experienced, and many are now trying to sell their own wares to the next generation.

Second, there was less demand for mainland, and standard island rental because you could rent an openspace and get about four times the land area for roughly the same price. Often with estate manager controls and all the rest. Who wants to be cramped in with neighbours when you can have all that? The customers for these came from mainland and private estate standard regions. Openspaces heavily drew down the market for standard regions. And when openspaces ceased to be such a sweet deal, a lot of people got angry and simply didn't go back. The mainland had been flooded with new regions, private estates grew basically unchecked also during that time, and because of all that here we are today.

Bryon Ruxton

Thanks for the post and comments,

First, I want to say that the area in red was not exactly geared towards representing Openspaces that were lost, as Hamlet mentioned. It is meant to reflect the outpace of landmass supply, caused by the sudden rush to Openspaces, which has distorted the market compared to the actual landmass demand.

The amount of openspaces lost would be less than the total of red space. However, considering that Zee didn't mention full regions that were possibly lost (he only mentioned the added total in 2008), as a result of the Openspace land debacle, the red may very well represent the overall mainland shrinkage when observed in Q1 of 2009.

Under a fully sustained growth of landmass from 2007 levels, Q1 of 2009 would have ended at about 170 millions of sq.meters. It may now very well end up at 1550 millions of sq.meters with a 10% contraction.

That's a slight slow down in growth but it remains fairly in line with peak concurrent users levels. This contraction should actually benefit real estate as a whole for realigning supply with demand levels, and therefore restore land value to a better price per sq.meters.


rightasrain,

I think we diverge on the meaning of "growth".

You are correct to say that landmass did shrink last quarter and will shrink some more in Q1 of 2009. But do not confuse a 10% contraction following a spike of 60%, with a remaining projected growth of 50% at LL, to an absence of growth. That’s besides the point from a general growth perspective.

You should actually consider that this landmass shrinking is actually a benefit for the potential recovery of the "land business" in my view, rather that the opposite.


Desmond,

The market bubble rapprochement is a contraction of the price/sqm on mainland during the bubble and the aftermath of undervalued or overvalued property depending on where you stand.

It’s slightly different and can sound backwards compared to real world bubbles, but nevertheless the premises and cause to effects are similar in my view:

In March of 2008, LL proceeded to a rapid overblown valuation of Openspaces to unsustainable levels relative to resident incomes and other technical elements.

In other words, people were misdirected to buy a 4-bedroom house for the price of a 2 bedroom one. Only to be told 3-9 months later that they were gonna have to pay for the 2 extra bedrooms if they want to keep them all, because of the initial pricing error. In the end people could not make the payment and decide to cut their losses by selling or canceling their land losing their initial payments.

While this excess of landmass supply didn’t affect private regions directly, the resulting price contraction on the mainland, and the imbalance between supply and demand created, fall under the definition of a Real Estate bubble to me.

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Wagner James Au
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