Shockwave Yareach proposed a provocative solution to the shrinking Second Life grid last week. His idea is that merchants should be be required to own land for the privilege of offering goods for sale on the Marketplace:
Linden Lab's making land irrelevant for shoppers means businesses aren't keeping stores in-world anymore. Thus the funds to keep the sims up is going away, and the sims are going away too . . . The solution is to put limits on the Marketplace. The number of square meters you own divided by 100 and added to 10 is the number of items you can have on the Marketplace.Ironically, Linden Lab's successful promotion of the Marketplace has had the unintended consequence of depressing land ownership. Nevertheless, I think Shockwave's idea would do little to revitalize Second Life's declining grid.
The reason merchants elect to bail out from stores in in Second Life is that they don't generate enough sales to cover their costs. That's sometimes due to poor products or bad decisions about location or marketing. But the recent mass migration seems to be caused by a significant number of residents choosing to shop on the web instead of on the grid. Unfortunately, requiring merchants to pay for land they can't monetize would simply drive away content creators and reduce the number of virtual goods available to Second Life users.
Adding new regions offers no inherent benefit for Second Life users. The majority of current regions are usually unpopulated. Take a look at the map at any time of the day and there are only scattered concentrations of green dots. What Second Life needs is more users and more attractions, not more land.
The challenge Linden Lab faces is declining revenue. I think the problem is that they've reached the limit of their tier-based business model. Second Life is mostly funded today by handful of very large land holders. The growth market for Second Life are the millions of potential casual users whose primary interest would virtual goods and entertainment, not land.
My advice to Linden Lab would be to transition to a business model that is focused more on monetizing the sale of virtual goods, rather than the sale of virtual land. I'll explore that idea in a future post.