The Second Life Economy Also Needs a Stimulus Package: Here's Three Ideas

Sprawling across several regions, boasting multiple levels and entertainment areas, the SS Galaxy luxury cruise ship is by far one of Second Life's largest builds, a popular social hangout with private cabins for renting by the week or day.  (When Residents plan a virtual marriage ceremony, many of them schedule their honeymoon there.) 

As of last Monday, it's also one of the most unlikely victims of the ongoing global recession.  "With the effect of the world economic downturn," ship builder Bill Stirling announced on the vessel's website, "the Galaxy project is unable to sustain itself.  After two years to the date of this project's start and large amount of resources spent with no recovery in sight, the financier of the Galaxy has decided to call it quits."

This is far from the only indication of real world economic turmoil rippling through the metaverse; in an unscientific survey of New World Notes readers, 46% said that the recession had directly affected their Second Life activity.  Many are scaling back their expenses and their discretionary income, virtual though they may be. 

All this happens as American politicians debate a massive stimulus package to help save a global economy on the verge of collapse due to the sudden devaluation of derivatives tied to US housing mortgages.  (And some say virtual economies are bizarre.) The consequences of that chain reaction of fail have been worldwide, with housing defaults in California eventually leading to the bankruptcy of Iceland.  (Which again is an outcome that's even stranger than the loss of a virtual cruise ship.)

Considering all this, it's fair to say the Second Life economy also needs a stimulus package, to encourage spending and investment.  And unlike the US government, Linden Lab is highly profitable at the moment, and can better afford to assist the Residents and entrepreneurs that have done so much to make it successful. 

What should the stimulus package contain?  Three ideas immediately come to mind:

Massive public works projects: The Lindens have already sponsored these, such as the Department of Public Works launched last year, paying Residents a decent income to help build new content on the mainland.  ("Shovel ready" indeed.)  These projects could easily extend to all the other dormant projects on the Lindens' ledger-- for example, land surveys, and finding more choice locations for the Showcase.

L$ stipends for regular log-ins:  For in-world business owners, the most vexing thing is the lack of new customers.  Most people try Second Life, never to return.  One key reason for their departure is a lack of funds, combined with an unwillingness to purchase Linden Dollars for real cash, or endure the small payout to be gained from sitting in a free L$ camping chair.  This is understandable from the noob's point of view-- why should they make any effort to spend their money before being convinced there's enough valuable content to spend it on?  The solution: reward new users with a small but substantial L$ cash payment, every time they log in.  That'll help retain new users while also helping customer-hungry storeowners.

Bail out successful sim owners:  Large land and estate owners are most in danger from the real world recession, since they pay hundreds of dollars or more a month.  Many of them have managed to create thriving themed communities, nightclubs, and other areas that have become tremendously popular, but not always self-sustaining.  Each of these which closes down is a great loss to the community and the economy.  Therefor the Lindens need to establish a program that identifies those most in jeopardy, giving them discounts or even waivers on their monthly payments, to get them through these winter months.

What other ideas would you suggest?  Doing nothing, however, no longer seems to be an option.  Failure to act, as President Obama said in a slightly different context, could be disastrous.

Thanks to Nimil Blackflag for the SS Galaxy tip.

Comments

[Crap Mariner]

Um... there's something not quite right with the phrase "Bail out successful sim owners."

If they're successful, they don't need bailing out.

-ls/cm

[Nimil Blackflag]

actually i'd like to cite that i found out about the galaxy going under from crap's blog. :( and damn it makes me sad to see it go...

[ArminasX]

I might add that a reduction in tier fees of say 10-25% would give a good kick start too, since it would lower the bar that businesses have to jump over. As it is now, there are quite a few businesses that were running on the edge and the current situation is pushing them under. And remember, fewer stores means lower economic activity.

[Toxic Menges]

If LL were to set search so as to render the gaming of trqffic figures obsolete, this would free up the infrastructure to better allow new users to grasp the basics of SL before getting frustrated and never returning. Add to this the very good suggestion of rewarding those who log in regularly, and spend that money, then you have the kickstart that the economy may need. LL systems must be able to tell who is gaming, either by lack of movement of avis, or some other system. Let's free up the system to allow new residents to have half a chance with an already steep learning curve. Those that are spending, will still spend - we need more people people inworld spending. LL should also be marketing SL as a cheap form of entertainment - a cheap night at a gig, a great night out with friends - why isn't the correlation between a social setting in rl and sl being drawn upon?

[Dedric Mauriac]

I agree about basic accounts not having money to buy things. That is only one of many factors that has hurt sales. Basic test accounts used to get 50 L$ per week as long as they logged in for the week. Information entered for accounts is no longer verified. It would not be hard to game the system and create many alt accounts, and then have a bot program that will log in with each account once a week. The other problem is that L$ translates to US$. The large number of people who sign in within the past 7 days would be a bit expensive.

Bailing out successful simulator owners doesn't sound fair to the rest of us. I would like to see something similar to lowering the monthly payment on the first island purchased to the original $195. Offer is applied after one year of ownership. This gives simulator owners a reason not to cut and run before the first year of ownership ends since they'll see a light at the end of the tunnel.

[Shockwave Plasma]

Potentially this could also be linked to encourage more people to be Premium account holders.

[Koinup Burt]

Currently, this is one of the most crucial issue for the Second Life growth and development.
Some of the most popular and belowed sims have been closed, others are on the way.
Some days ago, I was surveying the most popular sims on the Koinup Places Directory (http://www.koinup.com/places/ ) and teleporting in world to check it out, well I saw that some of them were closed or completely dismissed.....

I think that land owners are not provided with enought tools to get huge traffic, visitors, metrics device, and analytics to track their business and they have even less chance to create reasonable business inworld.

Today, if I invest some money and time on a website (spending for a good server and webdesign), still I have the chance to get significant income from adsense, other advertising network, link exchanges, etc...

but for virtual land owners, none of those possibilities are possible.
If you are a sim owner you don't have enought tools and metrics to sell advertising, you don't have tools to make enought marketing and get huge traffic, .... but at the same time, you still continue to have a big monthly fee to pay.

I think LL should make much more for land owners (beginning with a better streading of the traffic ) or otherwise reduce significantly the costs

[koxinell lane]

This wouldn't be very fair to support some sim owners, and not the others.
It would result an unbalanced situation regarding that some of them would get a financial support from Linden Lab.

[Jhuzen Ketsugo]

I wish LL would recognize the struggle that SIM owners face on a regular basis. After 18 months of ownership, with a faltering economy, I wish I could extent relief in the form of rent reduction to my Vendors to keep Retrology alive, the fact is, if I can't keep the SIM full of vendors, then I can't keep my SIM.
They are facing hardships and aren't able to pay even very reasonable rates, I fear that the current situation is not sustainable for any of us. The new rise of the Freebie culture makes it hard to compete as well. It is such a complicated set of issues.
Truth be told, I have never made a single dime to take out of world, have invested thousands of US dollars, and am enjoying a break-even status, which is the best I can hope for and all I ever did really. If it starts to become impossible to break even, it will seal our fate.
~ Ketsy

[Jovin]

It's land and prims. That's what drives the SL economy - the purchase or rental of land and subsequent prim usage as you create your first build - only to find you need more prims and need to get more land.

If you want greater retention, and we do, then give people something to stay for - resurrect the First Land initiative but with a difference. Give Residents that sign up a FREE parcel of land for say 3 months - it would be maybe 512m of non-tradeable land, you're free to use it for whatever you like but you can't sell it. After the 3 month period you have to move out, make your way in the wider virtual world, and your parcel is given to the next new signup.

We could use reclaimed existing mainland or create a new continent - call it Noob Hill - but at least this way you stimulate the SL economy by encouraging the very activity that makes SL work in the first place - and you do it by using the resource Linden Lab have most of, virtual land.

I realise existing landlords will cry foul - but long term it works for them too - as new users leave their free First Land they (hopefully) will want to move somewhere else. Long term it could stimulate the land market not damage it.

Giving bailouts to sim owners will never happen, and probably should never happen. Who's going to decide which sim qualifies and which doesn't? That's a ridiculous nightmare solution. Handing out free money is equally ridiculous - if Linden print more money to cover it then the economy devalues and crashes, if they don't then someone has to pay for it all with raised tier fees - guess who?

I actually suggested this idea once before as a possible way to stimulate signups - i still think it's a viable idea but now there's an even better reason to consider it.

[Echelon]

In order to stimulate growth of the player base, I would reccomend bringing back a variation on the old weekly stipend, except with certain enhancements. Firstly, the stipend is based on in-game activity, not logins. So the player would be incrementally rewarded for adding friends, teleporting to new regions, and joining groups. The benefit from each would slowly diminish over time so that after a month or so the player is interacting on the same playing field as everyone else. Another potentially helpful benefit for new players would be a heavy discount on content uploads. Again, this would have a limited time frame/usage amount to prevent abuse. I think both of these things would help new players become integrated into the player base and creating content. Currently new players face the double challenge of trying to wrap their heads around SL while also being near penniless. This leads them to search for easy cash which unfortunately tends to lead them to some of the more unsavory corners of SL first. Not a good way to make first impressions.

[Sioban]

I'm sorry to see the SS Galaxy go. We've had a successful partnership with them, both as a "destination" and in joint events. Galaxy is a massive and well done project, it's disappearance is a loss for the whole grid.

Speaking more generally (not about Galaxy), though, I think quite a few people who launch ventures in SL don't realistically plan their business. As in RL, you have to lay out a pessimistic budget of costs and income and plan to lose money for at least a few months while you develop a community/fan base and get your name out there. Over the last two years, I can't begin to count how many ventures I've seen open and close within months. In addition to a lack of financial planning, some people don't recognize that a successful venture has two parts: the building/products/etc AND the community. They'll build a great place but not have the interest or ability to develop the human side. Similarly, I've seen venue owners who are great with people but have terrible builds that are hard to negotiate and don't suit the function.

On a related subject, advertising/promotion in SL really frustrates me. Some aspects are easier than RL, but in many ways it's more difficult. We have a quick and free connection to potential guests/customers via groups and the SL events listings. How do you know which groups (other than your own) are the most effective places to send notices? Trial and error mostly. What about paid advertising on the blogs and news outlets? Is it worth the money you spend (and some of it isn't cheap)? I run a charity. Is it justified to spend charity dollars on advertising of which I don't know the impact? Every dollar I spend is one less dollar to the children. Then the landscape changes so quickly. Blogs and new sources open and close. Which ones are read by people who will remember what they see there and come to your venue/shop/event? The level of professionalism varies greatly between blogs/news sources, as well. If I pay you money, you should (barring major disaster) do what you say you'll do and when you say you'll do it.

Ironically enough, the best overall advertising day in and day out is the free stuff: SL events listings and our own groups.

[Skate Foss]

Re: L$ stipends for regular log-ins

As nice as that sounds, I'm afraid that will go the way of First Land. Greedy Land Bots totally destroyed a wonderful idea that introduced and cemented many noobs into becoming premium and regular residents.
It would not take long for L$ stipends for regular log-ins to become corrupted.

I'm very sorry to hear that the Bill Stirling will close the Galaxy.

[Jovin]

OK, put my mouth where my mouth is and posted the 'Noob Hill' idea as a Jira New Feature suggestion. Feel free to comment/support/criticise (be kind!) here - https://jira.secondlife.com/browse/SVC-3821

[Arcadia Codesmith]

Formulating and deploying an aggressive anti-bot purge is a prerequisite for any incentive program to work.

Let's take money for landowners off the table and instead focus those funds on people who make innovative builds, and those who create interesting, compelling experiences for others (such as performing artists). No subsidies for those who buy a flat slab of land and slice it up into checkerboard islands. What makes the Galaxy noteworthy is the build, not the water she sits in.

[Ananda]

Here's another one to consider: Lower the cost of entering the land/linden economy on the bottom end. Currently the tier structure is massively regressive, small land owners are charged tier prices at much higher rates than large land owners.

We could define a new "citizen" class by lowering the low-end prices and making it much more attractive for people to "buy" (rent) land directly from LL on the mainland. This would drive more people into being Premium members.

This could be combined with the public works and giving out larger stipends again, but only to land-holding residents. Think of it as restoring the Middle Class. ;)

[Caliburn Susanto]

Not at all surprised to see the SS Galaxy sunk. I went there on New Year's Eve, having had a wonderful time there the previous year, and discovered nothing going on, nearly all the shops closed, and nobody renting cabins (that I could tell). It was a ghost ship. Oh well, I figured, I have my album of photos taken there -- that is all that ever remains of SL builds in the end, anyway.

In fact, I'm totally surprised such a massive build lasted as long as it did. At first, of course, everyone wanted to see it and "oooo" and "aaahh" and wander the ship. However, in a limitless visual environment there is a constant craving for moving on to the next sight, and the next, and the next, rarely returning to most. Any build that is not 24/7 orgy is doomed to be passe. Yes, I am cynical.

Also, people are just CHEAP. Sure there are a lot of factors. Certainly, first life comes first - home, family, medical expenses, FOOD. However, the level of entitlement that is prevalent in Second Life never ceases to amaze (and disgust) me. Everybody wants everything for free. "Free money", free clothing, free land, free, free, free. Ridiculous. Look at all the morons (yes, they are morons) who spend more money on electricity and wear-and-tear on their computer than they could EVER make by camping, an idiotic practice. Personally I don't even know why it is allowed, other than it gives LL fake population metrics.

So who do they think is paying for all this server space ("land"), bandwidth, and countless hours of effort to design, build, terraform, landscape, etc.? Do they help with the expenses? Do they give a donation each time they visit a build they find amazing, amusing, or noteworthy? No. How many times have you gone to a tip jar on a sim and seen hovering over it something similar to "$79,200L needed for monthly costs - Donations so far $125L - Last donation $2L". Seven CENTS? WTF? Someone recently said to me, "I kind of like wandering around SL but I will never spend any real money here. It should be free entertainment." Says who??????

I don't see this changing in future, either. Entitlement is the new god.

[Janet F]

The stimulus package is not aimed at "helping save a global economy on the verge of collapse," as asserted in this article. It is aimed at re-injecting cash in the U.S. economy, so that the country can keep on living over its means for a few more years... before the final crash.

The global economy will eventually recover from the U.S.'s failed financial and economic leadership role, and will move on. As for the U.S., it is "hangover time" I am afraid, and long-term adjustments will have to be made to our lifestyles.

[AnthonyFontana Chevalier]

My 2 L$...

- LL should be selling ads on the login window with tiered pricing. In-world goods at a lower price (with the option of having the landmark open when you enter the world) and regular old-fashion ads for Coca-Cola, etc... at normal web pricing. THEN, the profit should be transferred to the in-world economy via lower land prices.

- An economy driven by "free" goods is still an economy. It doesn't pay the RL bills, but drives traffic and has the potential to earn rl $. Google search is free isn't it? They make their money on advertising right? LL cleaned up the world by killing ad farms but they haven't turned the idea back on itself in order to bring profitable advertising to a struggling virtual economy. Instead, like everything else, LL wants the residents to do the work, solve the problem. There's crowd-sourcing... then there's alienating your audience by asking for too much without return investment.

- To push internet users to the virtual world you have to push the virtual world to the internet. LL should be focusing on a lighter browser client rather than a high end downloadable client for the computing elite. By the end of 2009. Make me CEO... this is priority #1.

- Finally, in-scene building tools must adapt. Architects, artists, and 3d modelers across the world (of which there are many in different fields) are waiting for the virtual world that allows them to dual purpose their blood-sweat-and-tear builds from programs like Maya, Sketch Up, etc... Open this up and you open up an enormous new user base. Every Pixar, Dreamworks, ILM film has hundreds of models to be injected into the virtual world immediately. Frank Gehry and the rest of the world enters a virtual space. Gaps in entertainment, the creative work-force, and rl to vw economies close. The virtual world changes forever.

[Wes M]

I'd like to add an idea to the stimulus package. I thought of it reading Sioban's message. Add to the land-owner benefits some type of in-world classified ad package. Perhaps a number of prepaid ads of a lump sum of $L to be used only for ads. The owner can use it themselves or provide to renters. Obviously the amount is based on land size.

The classified system itself could use an overhaul - right now the most $Ls get the best visibility. Including traffic levels into the ad placement would reward busy places, similar to internet search engine ratings.

[Sigmund Leominster]

I'd like to propose that from here on out, anyone using the word "bail out" should have to spend the rest of their Second Life with 9 other avatars on an Openspace where 700 of the prims are being used for banners that say "I asked for a bail out and all I got was a lousy sim."

In a world in which an estimated 90% of businesses go bust within a year (Gartner report) we have to expect that recession or not, the center cannot hold. I have not seen the P&L account for the SS Galaxy and so cannot speak to the veracity of their claim that they are a victim of the real world recession, but asking for a "bail out" seems to me to be just plain silly.

Economies have a way of reaching a balance; bail outs or subsidies ultimately simply serve to postpone the inevitable. It's not totally unexpected that many real life small banks are actually turning down bail out money because of government conditions imposed. Some 50 banks so far have turned down bail out cash (Business Week, Feb 16). The strong will buy out the weak; people will re-align their spending priorities; prices will fall on non-essential consumer goods; the money supply will shrink; folks will relearn how to save and waste less.

Thus endeth the lesson on how Capitalism works - and it works fine if folks stop trying to mess with it or misuse it. So it will be in SL. There is no need for bail outs because folks will either find new ways to generate cash or they will go under. If they go under, they lose their land and the strong will buy it up. If no-one buys it, LL will drop the prices.

None of this requires any intervention by government - er, Linden Lab. Let the market work its rough magic. There will be some purging of the sick and feeble in Second Life, but the economy will adjust, painful as that procedure may turn out to be.

[savantadmin]

Thank you for your interesting post, I like the slant on how you wrote this post. I definitely think that a virtual office space is a good alternative for startup companies.

[Dale Innis]

This *was* satire, wasn't it? Wasn't it??

[Cocoanut Koala]

LL's biggest mistake EVER was getting rid of the basic stipend.

It primed the pump for new players, and gave them something to build on and a reason to continue.

coco

[Naiman]

Here my sugestions:

1 Linden sposnorship for Exceptional looking sims ,there are many out there , no distinction should be made if comercial, residential , theme parck or other, if its well done , and beautyfull to see needs a sponsorship like governments pay to mantain work of arts in their countries so the good things need incentives , this not only would help beautyfull place but also promote people to make nice stuff , why infact wate tons of dollars in tiers not opening a sim to make it beautyfull if you could open a sim in less than a week with a crap build just to pay expenses? Also would avoind the overconcentration of malls and rents to pay out the LL debts , since most sims are just a concentraion of malls , making a sort of spiral cycle like you make malls , u need money u need trafic u make events and all this in a circle loosing the point of making something beautyfull for the sight in place of something that needs to produce cache....

I think so a free sposnorship of those sims is a must , and if not a free tier at least a total 50 % discount , no mater what the sim is used for .... its also right that the ppl that spend time to improve Lindenworld get also a incentive in actual revenue from the work done ...

2
Remove tiers to European Owners that are highly disadvantaged compared to us owners and are so forced to have higher expenses and tiers resulting in an unfair advantage of US owners versus European oweners , I think a discount of a 20% on tiers for europeans would parify the 20% vat add on.

3

remake of the showcase adding on a special route weekly the best sims among all the showcased ones , or remove the most crap places that are in showcase , showcase is for best of the best not just many places...

4
create a team of judges that goes inquirying the sims and take care of them helping where is needed like with special dedicated servers , more suport and help in resolving lag etc... a sort of special customer consierge team expecialy made for the beautyfull sim owners .

5

[buy valtrex]

I like this comment: "There is no need for bail outs because folks will either find new ways to generate cash or they will go under. If they go under, they lose their land and the strong will buy it up. If no-one buys it, LL will drop the prices..."

[virtual office]

Matthew Beller's Second Life avatar,
designed to resemble Ludwig von Mises
Ludwig von Mises once wrote that an economist "must be conversant with mathematics, physics, biology, history, and jurisprudence, lest he confuse the tasks and the methods of the theory of human action with the tasks and the methods of any of these other branches of knowledge." In modern times, with the increasing popularity of computer-based interactive virtual worlds, it may soon be necessary for economists to familiarize themselves with the intricacies of virtual reality, lest they confuse the tasks and the methods of real-world economics with those that apply to virtual reality.

Some economists might dismiss virtual worlds as an application for economics, given that they do not contain any resources that are traditionally considered scarce (lumber, steel, oil, etc.), but a closer inspection reveals that some virtual worlds contain real market economies complete with scarce resources, property rights, entrepreneurship, and exchange. Furthermore, real people underlie the inhabitants of virtual worlds, so we can therefore analyze their economies using Austrian economics and the science of human action.