Increased supply spurs fear of Second Life land glut
By Eric Reuters
SECOND LIFE, August 1 (Reuters) - Newly created land in Second Life has outpaced population growth in recent months, resulting in a bigger and emptier virtual world. And with no signs of a slowdown in Linden Lab’s virtual land factory, Second Life property magnates expect land prices to fall further due to the ballooning supply.
According to Linden Lab statistics, there are 494 square meters of land in Second Life per premium account (only premium account holders can own land), up from 404 m2 in February, an increase of 22 percent. Based on residents who have logged in within the past 30 days, there are 43 m2 of land per resident compared to 26 m2 in February, an increase of 66 percent in virtual space per capita.
Ailin Graef, better known as Anshe Chung, one of the largest land owners in Second Life, told Reuters she expects real estate prices to continue to fall given the increase in supply. Dreamland, her Second Life development company, has scaled back real estate purchases in-world since November as a result.
Second Life’s rapidly declining population density contributes to an experience of vacancy cited in a raft of recent, largely negative articles about the virtual world’s suitability as a business platform. Chris Anderson, Editor-in-Chief of Wired Magazine, wrote a blog post on Monday titled “Why I gave up on Second Life” which bemoaned Second Life’s “ghost towns.”
New land sales and tier fees are the primary revenue source for Linden Lab. New land is introduced into Second Life either by Linden Lab selling private islands, or the auction of mainland parcels.
Yesterday, Linden Lab raised the starting price for mainland region auctions to US$1250, but even the new starting bid is well below market value, experts say. The low opening price makes it highly likely that all new land created by Linden will be sold.
“The lowest anything has gone for recently is US$2151.00,” said Carl Henderson. Henderson, known in Second Life as Carl Metropolitan, serves as Executive Director of New Citizens Incorporated (NCI), an organization to orient new users to Second Life, and authored the materials for NCI’s Basic and Advanced Land Ownership classes.
Second Life’s “land barons,” who trade large plots of land before developing them, agreed that even after the increase, the minimum asking price for new land is so low Linden can introduce land into Second Life at will.
“If [Linden Lab] dropped 200 sims in auction today they would all get bid on,” said CP Costello, a Second Life land developer with an inventory of 17 sims. Costello said starting prices for auctions would have to reach US$2000 before land buyers would scale back their participation.
While Costello remains confident in an ever-increasing resident demand for land, other land barons are getting out of the game.
“Large sales of Linden land are making traders nervous,” said Martin Squeegee, who recently ceased trading land due to decreased potential for profitability.
Jack Linden, the Linden Lab employee whose team coordinates mainland auctions, said the company closely studies a variety of metrics in deciding how much new land to bring online. “This includes the sell prices for those regions, the overall average price per meter, premium uptake, auction high/low, average close prices and many more,” he said in an instant message interview with Reuters.
“Mainland price has been on a fairly controlled and gradual downward trend since early this year, when it was arguably too high at L$12 per meter. We’re now at a healthier L$8 - L$9 per meter,” he said. “We’re pretty careful about how we manage land supply,” Jack Linden said. “Clearly a lower L$ per meter level helps new premium members step onto the land ownership ladder.”
NCI’s Henderson, despite his real estate expertise, stays out of the market. “Mainland land prices in Second Life are essentially unpredictable for more than a month or so out,” he said. “There are too many variables — the most important of which is Linden Lab and their amazing land printing press.”
