Saturday, July 24, 2010

Why Cost Isn't the Reason for Second Life Land and Population Woes

A post yesterday in New World Notes discussed Darrius Gothly's contention that creating a lower priced non-commercial land tier would help create a "Rebirth of Second Life":
It is my belief that if Linden Lab were to produce a Residence Only Sim product, price it more in line with what non-business people can pay and equip it with all the same Prim Counts, Script Limits, etc. that a full size Sim has now … they would almost overnight save their precious Virtual World. We would see an increase in people willing to spend time at “home” because they would HAVE a home. We would see sales of merchandise going up because you suddenly have a lot more residences to fill up, and we would see a rebirth of social activities because there are enough people logged in to actually make an event successful.
I'm all for lower pricing, but saving potential residents $10, $20 or even $50 per month isn't going to bring new people flocking into Second Life or keep discouraged residents coming back. The problem for most people isn't that Second Life isn't worth their money, but that it's not worth their time.

People who can afford broadband and Second Life-worthy computers have enough disposable income to pay a bit of tier. Most of them spend $100+ per month on entertainment such as cable television, movies, Netflix, books, etc. So if they are choosing to stay out of Second Life, it's not because they can't afford it, but because they choose to spend their time in other ways.

So if there's going to be a "Rebirth of Second Life", it's going to come from figuring out how to increase the perceived value, rather than how to decrease the price. A few things that come to mind are:
  • Improved search, maybe adding the type of algorithms Netflix and Amazon use to recommend likely options
  • Interest-based marketing, training and promotion
  • A new client that actually decreases the learning curve, perhaps configured for specific interest groups. 
  • More Linden Lab support for existing communities.
It's true that Second Life is losing some of their most cost-conscious residents to lower-priced OpenSim competitors. But given their place in the market and overhead structure (even after layoffs), Second Life isn't going to win out by being the cheapest virtual world, but by being the most valued.

23 comments:

Wol said...

Absolutely right, Botgirl, spot on as usual.

Lalo Telling said...

In support of your argument: "People who can afford broadband and Second Life-worthy computers" don't have those things only in order to be in SL. Neither do all of them own or rent SL homes -- thus, for them, the matter of value is devoid of economics, and the intangibles you list (and many others) might attract and keep them.

Now -- Devil's advocate time:

"[G]iven their place in the market and overhead structure" -- especially after the layoffs -- Linden Lab's new mantra of "doing less better" is not the path to any of the improvements you suggest.

I don't want to be correct about this, but: I have heard that mantra chanted before, in other industries, by companies who have run out of straws to grasp to stay afloat and are treading water. Eventually they exhaust themselves with the effort, and sink out of sight.

Something else to keep in mind, too: some of the "most cost-conscious residents" who are moving to "lower-priced OpenSim competitors" are the very ones who contribute value to the SL experience. The good news for Residents is, many of them are not leaving SL, but merely branching out. The bad news for LL is, they're "tiering back".

Maybe I'll see you this afternoon at the party soror Nishi's giving to mark the closing of her land in SL.

Botgirl Questi said...

Wol: Thanks!

Lalo: I take "doing less is better" to mean picking a few critical priorities at a time and focusing on them. Of course, the challenge is to figure out the 20 in the 80/20 rule.

This is kind of obvious when I think of it, but missing in many discussions: If you're not in Second LIfe to earn a living, you're there to have fun.

For some people that means creating stuf; for other shopping, and for most (I suspect) that means socializing. There are ways to do all of the above without owning land, or only a small amount.

I do believe that a segment of the creative class are going to bail out on owning land in Second Life, but they won't abandon the market. They can create goods on OpenSim worlds and then bring them into Second Life to sell them.

Salvatore Otoro said...

Excellent point, Botgirl. Cheaper is not the solution. I believe there are many things that need to be fixed, that would help bring back some of the players that left, attract some new ones, and keep the current residents coming back. Things like fixing the lag and the crash issues where we lose inventory should be a top priority to improve SL for all of us. When Linden Labs decides to fix the ongoing problems that have plagued SL for so long, they might improve their numbers and their economy.

Ananda said...

I think you might underestimate the size and value of the creative class in SL. My experience over the years is that many, many creative, artistic, community-based projects have risen up and been discouraged because of 3 factors:
1. Keeping the group together
2. Inability to save and make portable the content.
3. The exorbitant cost of private land.

Personally I think a *lot* more art projects and noncommercial communities would turn out to be worth the time if they were affordable over time and weren't subject to being deleted and lost the moment someone comes up short on the rent.

Botgirl Questi said...

Ananda: I think of the creative class in two groups

- Non-commercial Artists: Those who primarily create works for exhibition or personal satisfaction rather than for sale.

- Virtual Goods Creators: Those who primarily create works for sale, although they may also participate in more "artistic" venues

I think you were mostly referring to the first group, right?

I have participated in a number of collaborative projects. I definitely think your point #1 is common. This is not due to land, but rather human nature, I think.

I have also had problems with #2. The irony is that as a group, the Creative Class wants to keep stringent copy protection that makes it impossible to back up collaborative works, and often difficult to transport (if any individual set up the permissions and ownership incorrectly.) This too, is not a problem of price.

#3 is certainly an issue for big projects that require a 1/2 sim or more. Quite a sims sponsored by educational institutions have been moving to OpenSim grids, and as Lalo mentioned, a few artists like soror are either packing up or considering it.

Although I personally think that artists are a very important group as far as their unique value to Second LIfe culture, I don't know how much actual harm it would do Linden Lab if even a thousand or two ended up leaving. Especially if they are going after the "look like your RL self" or "be a vampire" audience (which are the two main banner advertising pitches I've seen recently).

As for virtual goods creators, I think that it's a balance between expense and revenue. The game is going to change when/if external meshes can come in, especially for non-scripted items. I personally think that the Second Life as a whole will be better off for opening to imports from free community sources such Google Warehouse, but I realize that individual creators, especially whose work is somewhat generic, will be harmed. I've been playing around with a post on this topic and hope to include it sometime next week.

Adric said...

Which economy exactly are you living it?

Botgirl Questi said...

Adric: I do think the economy matters as far as how much money people will spend per month. But I don't believe that lowering tier prices would make people spend more, stop people from leaving or attract more newcomers.

I think that focusing on creating a better user experience would have a positive effect on all three factors no matter what the economy.

sororNishi said...

I have to agree that people who move out of SL do so for other reasons than pure economy. ... and that lowering costs would not necessarily increase the influx of new people.
Some of SL's problems are so ingrained they cannot change them... e.g. SL's one server for four sims as opposed to InWorldz one server, one sim system.
SL has to go for the luxury end of this VW market as you rightly suggest, and that means top service, top quality, top product... so...in that I think you are totally correct.

Andabata Mandelbrot said...

Excellent post Botgirl, but if I may say so, you're only thinking of SL as attracting individuals one by one. And there are social dynamics.
I'm a professor and lecturer. I've used SL to provide context for programming classes and labs, and for R&D since 2006. And given the cost, I must weight the benefits of a society, of a rich, diverse space (SL) with the cost differential of simply using an OpenSim installation. For many educational institutions, that cost is significant, because you can't really have a single sim for the entire institution, if you're planning to move lots and lots of courses to use it. So it's a very high per-student cost.
And obviously, this means that instructors are not in SL while they're in OpenSim, and that students are introduced simply to a 3D platform, not to a rich 3D society - and that's a huge loss of opportunity for new users, in my view.
And notice that as students, these would be users that would have support to learn the interface, and so could potentially be more likely to adopt it. And they'll build their own careers, so they'll eventually be in a position to further the adoption of virtual worlds - but will they understand the value of virtual societies or just think of 3D simulations and 3D meeting spaces?
The world has moved a lot since 2006. The most active and capable SL educators I know have been flocking to OS grids or building their own, one by one. They haven't abandoned SL completely, and regret the diminished variety of items, of people, but it's a cost issue.
So... LL has the option now still (but for how much longer, that's a tricky question) to open, profit from L$ validation and other fees, or go the way of CompuServe or AOL.

Marianne McCann said...

Well said! On one of the points...

"More Linden Lab support for existing communities."

Ths is, IMO, a biggie. Unfortunately, the scratches most of their community and RESI team folks, which makes this a LOT harder to achieve. Look at the change in Burning Life/BURN2 for an example

Brinda said...

Secondlife experience has always been a steep learning curve... the nature of the beast is that it's not easy.
Having said that, depending on who's counting, tens of hundreds of thousands of us have invested the time and money to take that experience and attempt to make Secondlife the place it could be.

If one looks at those in Secondlife that are successful, success as defined by those enjoying the experience, I think you will find our greatest needs are not cheap land, or media on a prim, or web access.
How about a company that listens to us. We are customers... customers today that so often live in fear of the next fiasco here that degrades our investment.

I have recently read that the retention rate after a year is 1%... Secondlife isn't easy.
But if Linden Lab wants to improve those numbers? Listen to those that have made Secondlife.
Stop trying to "Put Lipstick on a Pig".
Media on a prim, viewer 2.ought oh,voice, web access... these aren't working. Try fixing search, maybe have some of your employees use a third party viewer and find out why so many people use them instead of commanding "All employees WILL use viewer 2.ought oh. Try to stay with a server version that works and use that money to fix groups.

Listen to us, we know what works.
Listen to us or we stop paying your wages.

Botgirl Questi said...

soror: I like it when people agree with me. It's a somewhat rare and precious event! I have no clue as to the technical limitations Linden Lab is dealing with due to the aging legacy infrastructure. From almost all accounts, despite the problems in Second Life, it still provides a more reliable experience than OpenSim competitors.

Andabata: Yes. I was only thinking of individuals who weren't engaged in anything requiring multiple sims rather than institutions or power users. I agree with you that for anyone buying multiple sims, price is a very important issue. Not only monthly tier, but also the startup costs.

It seems like Linden Lab is going after the consumer market and not focusing on commercial and educational organizations. If I were CEO, I would take a hard look at reducing cost for educational organizations, perhaps through a referral fee for new premium Second Life residents who initially were brought in through their sign-up portals.

Marianne: I was thinking mostly about listening to existing communities and seriously considering their key concerns and requirements. I've commented elsewhere that an Agile approach to development would be beneficial with an active "customer" participating who might be best represented by key community leaders.

Brinda: I agree with you. The loyalty and enthusiasm of the Second Life community has been one of the worst casualties of the last few years. With the return of its founder, there's a small window of opportunity for a massive perceptual sea change that could turn things around. But it will take not only a compelling new vision for Second Life (which hasn't been articulated yet), but also ongoing concrete action that can be verified by the community.

Ananda said...

yes actually the people I was referring to are the vast majority of the people I have really spent any time with in SL, which are people who both create and consume the place, who start out with this notion of making neat things and places, but inevitably are forced by cost issues into either giving up on their dreams or going into a commercial business here, at which point they are *then* forced to consider IP issues and to abandon collaborative efforts.

The coded-in IP system deserves much of the blame for this, since you can't just carry on a project if one of the people walks off. But really the big problem remains - unless you are willing to put down at least $125/mo for a balky half-functional island or $300/mo for a full island, you are simply out of luck for creating a controllable area and community. This is really a lot of money for most people. A sim or two and you're talking about mortgage payment or rent not getting paid! Yes I'm saying cost is why we ended up with people pretending there's a content creator class and then there's the great unwashed masses. Those masses are not uncreative, they simply don't have the opportunities because of cost of entry.

Or in other words, I still think you are dead wrong and base this on years of experience and multiple attempts to make such places.

Botgirl Questi said...

Ananda: I'm not denying that there are many people in situations such as you've describe. But neither of us really know how many. It is 500? 1000? 5000? 20,000? I wish we had hard numbers on how active Second Life residents spent their time and money.

Of the million or so residents who log in during a month, I wonder how many are in situations such as you describe versus those who are in Second Life for primarily social or creative pursuits that require less than 1/4 sim.

Botgirl Questi said...

What's really killing Second Life's growth is the low retention rate.

If Linden Lab marketing generates 500,000 new sign-ups in a year, a 1% conversion rate to premium users would create about $600k in new annual revenues.. If you could improve usability and bump that up to 5%, that would be $3 million in increased revenue.

A drop in land prices woud have virtually no impact on attracting or retaining newcomers. Usability and a focus on connecting people's interests with Second Life activities would have a dramatic positive impact.

Ruina Kessel said...

Botgirl, I think you are correct.

I also think Ananda is correct.

I think that LL actually creates a situation where there aren't the things you suggest, Botgirl, because it's cost prohibitive as Ananda mentioned.

Putting aside the customer service issues (which is, granted, huge), LL is not going to *make* the places people will want to hang out. That means residents have to do the making. I have not worked with people on a collaborative project, but I have talked to plenty of people that find the lack of interesting, well made places (in which they might hang out or socialize) in SL off-putting.

So, I'd say, it's not one or the other, but the sum of both that contributes to the problem.

Botgirl Questi said...

Ruina: Good points!

I would love for tier to be cut. But an across the board decrease in tier that would be large enough to matter, would have a multi-million dollar impact on Linden Lab's bottom line. Especially in light of the recent lay-offs, I just can't see that as a viable option at this time.

Ruina Kessel said...

oh yeah, that's true. I'm honestly not sure that LL could actually save their own asses at this point. It seems kinda like they painted themselves into a corner - set out to be the 'luxury' VR, as you mentioned, but then sucked so badly at everything else that they're driving away the people they want to keep. I honestly think it will take something very drastic to even give them a hope of having any kind of significant increase in SL's population and retention.

周伯啟江彥璋 said...

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Tycho Beresford said...

I've been looking more and more at Blue Mars, mainly because of the low price of land for residential housing. If LL allowed people to buy Homestead sims without first having to own a full sim it would only help retention.

As far as needing land to be creative, I think that would only apply to a very small set of the population. Most of my creative work is scripting which I can do almost anywhere.

Yordie Sands said...

I believe you are right, Botgirl. I keep wondering how Second Life might have improved for me if the initial orientation and Help Island been more hands on. Perhaps expert areas to help new avies get started. And the Welcome Areas are often places where noobs are preyed on rather than helped along. Some new thinking, new technology and human resource commitment might help. Yes, it costs money.

Kranfel aka Vesper Kling said...

A lot of what u say is true. But I certainly can afford Second life but when i dont get any support while I have big problem that only LL can solve, then I look at other worlds.

I think like this; why am I paying membership in Second life? I wrote a ticket the 19th of july and another one three days later about a land issue (a bug in their own sim). But no answer at all! I cant use my land (mainland) because of this. They sacked 300 employees and now it shows....

So now i am looking hard att inWorldz and I like what i see (and I saw u ;)
http://kranfel.blogspot.com/