Growth slump threatens gloom for SL businesses
By Adam Reuters
SECOND LIFE, July 11 (Reuters) - A three-month slowdown in the growth of Second Life’s population and economy is putting the squeeze on some virtual entrepreneurs, even as others report that business has never been better.
According to data released this week by Linden Lab, the number of active Second Life users declined for the first time ever in June, falling 2.5 percent to 495,000 from the previous month. And the total number of hours spent in Second Life climbed only 5 percent to 21,815,700 in June, the lowest percentage increase since December, 2006.
Although many Second Life residents and businesses have blamed a summer slowdown — at least in the northern hemisphere — month-to-month growth in the key 30-day login figure has been sluggish since the spring, falling 0.2 percent in April, climbing 6.6 percent in May, and falling 0.7 percent in June.
“I have seen a decrease this month, but I’m going to blame the fact that I have not been creating many new things lately, plus it’s summer and most folks are vacationing with their families, away from the computer,” said Wynx Whiplash, owner of Wynx’s Whimsical Wonders. “If it doesn’t pick up a bit by September, then I’ll panic!”
“I would say business is still better than ever, but I would agree it doesn’t seem to be growing as fast as it was at the beginning of this year,” said Barnesworth Anubis, a well-known designer of furniture, clothes, and pre-fabricated houses who helped to build Reuters Island. “I know a lot of other people are feeling a more serious slowdown.”
MORE LAND, FEWER PEOPLE
For businesses, the challenge of slowing population growth is exacerbated by the ever-increasing amount of land being created by Linden Lab. While much of Second Life has always been sparsely populated, more land plus a dearth of new residents makes it ever-harder to draw enough customers.
“I have noticed a slowdown in spending in the past few months — vendor sales and land etc. — ever since they started making SL bigger with all the new sims,” said real estate entrepreneur Darren Oates. “I think it could be due to size vs. residents, hence more listings, more shops, (and) not as many people in the sims as before.”
The shifting business climate has forced Second Life businesses to adapt by moving to new locations and boosting marketing spending.
“Personally my business has been picking up lately after a huge slump, although this is more to do with moving to an island and increased advertising and recognition,” said clothing designer Kya Eliot, who owns the Escape store.
“Before this move however I was definitely seeing a slowdown in both traffic and sales. My sales are noticeably lower than at the beginning of the year and have only picked up since I have been advertising more aggressively,” she said.
Despite the demographic trends, it is still easy to find business owners who are doing well.
“Actually, I have had one of my best business months ever,” said Chaos Mohr, who deals in virtual real estate and also consults to start-up businesses. “I think that if Linden Lab keeps moving forward, and keeps to its promise of offering better support for its members, that certain kinds of businesses will thrive here — the ones that fail are generally the lazy ones out to make a quick buck.”
HI-END PROFITS HIT
While the total number of profitable users has increased since April, from 34,474 to 42,597, the growth has come almost entirely at the low end. More than half earn less than US$10 per month, and 90 percent earn less than US$200.
Some of Second Life’s most profitable businesses are clearly being affected. The number of users with monthly positive cash flows of more than US$2,000 declined by 5 percent from May to June, to 405. And the number of users earning more than US$5,000 per month fell 8 percent in April, was flat in May, and dropped 5 percent in June, for a total of 132.
Reliable information about the Second Life economy as provided by Linden Lab can be difficult to come by, with frequent data feed outages. The statistic that directly addresses the health of the virtual economy — the amount of Linden dollars spent over the previous 24 hours, essentially the Second Life gross domestic product — is vulnerable to manipulation and fails to account for round-trip transactions or payments made via PayPal.
The statistic does, however, shed some light on trends within the economy. After an average of 30 percent growth from October to March, the amount of Lindens spent rose only 3.6 percent in April, fell 9.8 percent in May and increased 9.6 percent in June.
Bart Heart, head of real estate firm Bart Heart Estates, said the slowing growth in Linden spending can partly be explained by a migration to third-party payment systems like PayPal amid persistent problems with the Lindex currency exchange system.
“I’ve noticed a slow down in residents paying with L$,” he said. “PayPal is now about 75 percent of our transactions, where two months ago it was about 50/50. I prefer L$ to PayPal, but with the issues that Linden is having I have no other options at this time.”
(Additional reporting by Eric Reuters)
