Business in Virtual Worlds, Second Life

Second Life Second Only to YouTube and Facebook

While new user growth may be stalled, while retention rates may be dropping or flat, and while the ‘golden age’ of Nike and CSI and BMW may be over for Second Life - it still ranks as the third fastest growing Web-based site according to tracking powerhouse Nielson, at least in the UK, behind only youTube and Facebook in total user minutes.

Data from the Lab shows a similar trend. As Hamlet Au reported over on New World Notes that:

“Most concerning for the Lindens, the total number of Premium accounts (Residents who pay a recurring subscription of $6-9.95 a month, depending on plan) has been steadily dropping since January, slipping over 3500. That means less revenue from subscriptions and virtual land ownership (since you need a Premium account to own land.)”

And yet, he also finds that there are more ‘high rollers’ on the Grid, looking at economic stats that suggest that:

Despite the user plateau, nearly 80,000 Residents more are now engaged in economic transactions– and not just petty cash, because the L$10-50K spending cohort is among the largest to grow. In other words, of that 80,000 who joined the cash economy, 17,000+ spent some $37 to $187 worth of Linden Dollars last May.

And that “those who are already in-world are in there longer. Why vanishingly less are willing to stay with them there (nearly 1.5 million new accounts were created since January) remains the key mystery.”

Now Nielson, the folks who bring us the TV ratings among other measurements, concludes that Second Life is an up-and-comer:

““Whilst the social media wave continues to have the biggest impact on Internet behaviour levels, it’s important not to forget that some of online’s more traditional sectors continue to perform well. The representation of sectors such as games, search and retail - through sites such as Second Life, Google and Asda respectively – show the health and vitality of the entire online arena.” ”

There is, of course, a mystery in all this. One of the theories is that bots are chewing through the Grid, racking up 24-hour “user sessions” as they camp for those dribs and drabs of Lindens while in-world retailers struggle to keep their stores afloat. But another theory might just be that our picture of a user has changed. The beach house, socializing user of yesterday might very well have been supplanted by teachers and students, businesses and trainers - who knows, maybe the hidden economy is all off on those closed islands, with IBM happily playing behind its firewall or Cisco or whoever holding business meetings over on some corporate sim somewhere.

I’ve also long proposed that in a virtual economy where nothing decays and where there are no sinks (at least in WoW there are NPCs to buy up your grinding junk in order to maintain some scarcity) that at some point, the value of objects will drop off a cliff - why buy a house when they’re free, or next to free? In a land of plenty, where does scarcity come from? The object economy is a pyramid scheme - it only keeps chugging along if the objects keep getting bigger and better, or if the user growth keeps climbing exponentially.

So that leaves the high rollers - and whose to say that schools or businesses don’t WANT freebies - they want the best, they’re Cisco or Cigna afterall. So they’ll drop some change on some Scope Cleaver couches and hair from Armidi or wherever.

Perhaps the real economy has shifted, as Philip famously predicted, to a service economy - one built on helping folks solve problems, not on furnishing their beach houses. Meanwhile, the brands, which struggle to make SENSE of Facebook - how do you make money on random pokes, afterall, continues to struggle with Second Life as well - how do brands, which prefer to communicate in 30-second snippets and maybe a viral thing here or there, make money in environments where the users are deeply engaged? Throw up a billboard on GTA maybe, throw some free skins around in Second Life (see Evian), but struggle to crack the question of how a 30 second brand makes an impression in a 296 million minute world.


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