A Hard Rain’s a-Gonna Fall

What is there to do on Boxing Day except sit around eating, drinking and randomly surfing the net? Lots of things probably, like spending quality time with my loved ones, or taking some exercise, or doing something socially useful by serving turkey to vagrants at the homeless shelter, but I fearlessly embraced the crisps/lager/web option, so that I would have something to post about.

I did try to stay on-topic by browsing through Second Life-themed blogs. Amongst the numerous posts on various pressing issues in the world of SL fashion, there were contrasting views on what the future holds for the grid.

There are definite signs that SL residents are feeling a chill from the cold financial winds that are blowing through the real world. “The Quiet”, an iconic piece of SL sculpture, is due to disappear next month, as its creators can’t keep up with the rent. More generally, hundreds of sims are being abandoned, after Linden Labs increased the tier fees and decreased the prim allowance on the class of land known as “Openspace”. The flight of corporate investment is an old story, though you don’t read about it so much now that Reuters have closed their SL bureau. Even The Electric Sheep Company, who pioneered SL marketing for RL companies, are talking gloomily about a virtual recession.

Not everyone is downbeat though. Dennis wants to convince us (and perhaps himself) that the virtual economy is likely to grow in 2009. Perhaps not coincidentally, Dennis is in the business of organising virtual trade shows.

My own view is that Second Life will survive, since there does seem to be a critical mass of users who are willing to pay a few dollars a month to play out their various fantasies, or at least watch whilst others do so, but nobody except L-Labs is going to be making any serious money.

4 Responses to A Hard Rain’s a-Gonna Fall

  1. dshiao says:

    I’m closer to virtual tradeshows than Second Life. Hopefully, my rosy forecast re: SL come true. On the virtual tradeshow front, I’m very confident with regard to growth and upside – you can take that to the “bank” 😉

  2. Sigmund Leominster says:

    In the virtual world, about 90% of businesses fail as a matter of course. Remember, many of the people who join Second Life (or other virtual worlds) are not business people but want to “give it a try” and starting one in SL is pretty low cost. So it is unsurprising that you hear about “businesses closing in droves” because that’s to be expected!

    There will be some effect on the SL economy as a result of Real Life recession, but there will also be opportunities for folks with spare cash (and balls) to take a few risks and snag up bargains, such as virtual land.

  3. secondlifeshrink says:

    I guess that I’m coming at this from a psychological viewpoint rather than a strictly economic one. There is a recession, people are worried about losing their jobs, houses and healthcare, and they are cutting back on their discretionary spending. Spending doesn’t get much more discretionary than buying virtual products from virtual shops in Second Life, especially when you consider than a resident can get a perfectly adequate SL experience without spending any L$ at all. All the signs are telling me that the SL economy is going to contract rather than expand.

    It was never that big to start with anyway. The SL economic statistics do show a lot of transactions going on , but the vast majority of them are US$2 or less in value – in November only 304 sales topped US$2000. The quarterly figure of US$100 million in transactions sounds impressive, but Wal-Mart manages that in only 3 hours, and turnover is not the same as profit – just ask the management at Woolworths.

    Only 181 residents took home more than $5000 last month, out of an active population of close on a million, and out of that five grand they had to pay their Linden Lab charges, so the number of residents actually earning anything close to a comfortable living from Second Life commerce can’t be more than a handful.

    I think that there is a space for Second Life, but as an entertainment service rather than as a place where money can be made.

  4. secondlifeshrink says:

    In response to Sigmund’s points: the article he links to is about the failure rate of RL businesses – run by business people rather than amateurs – when they try to expand into SL, and, as he says, it’s about 90%. Furthermore the 10% who “succeed” do so in terms of achieving marketing or recruitment goals for their offline activities, rather than building an actual profitable business in SL itself.

    I’m still not convinced that it is possible for any more than a tiny number of people to make serious money purely from in-world commerce.

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