In-World Economy Tanks? Part 1

Wednesday, August 20, 2008 Wednesday, August 20, 2008

It has been a strange time for many in-world businesses in recent weeks. Specifically, it’s lack of sales. I thought it was just me, but evidence seems to be growing that in-world sales are being hit, and hit badly.

Sales at my shop have grown in a more or less predictable manner since the shop opened in spring 2007. However, ever since April/May 2008 sales (and corresponding traffic) have leveled off. Worse, my sales have dropped off precipitously in this month of August, sometimes to only 50% of “normal” levels.

And it’s not just me. Damien Fate of Loco Pocos complained on Plurk of having only a very small percentage of normal sales on one particular day, and Jacek Antonelli reported not selling her wonderful Squidograms at the expected rate as well. I know of several friends who have closed their operations in the past few months as they are unable to make tier, even though they had in some cases been successful for years. Word from the virtual grapevine indicates similar issues at many in-world businesses. There are no doubt some businesses running just fine and a few could even be growing. But I suspect they are the exception.

I posed the question to SL Plurkers and found that several had also experienced a downturn, although some attributed the change to “seasonal” effects. A few indicated their business was up – but it appears the wedding industry has a seasonal upturn at this time of year.

What’s going on? I’m not totally sure, but I have a few theories:

  • Seasonal Effects. The Northern Hemisphere’s summer often sees many residents limit their virtual time to enable more RL time, and fewer online means lowered sales. However, as mentioned above there are certain industries that can see upturns during this period: weddings and related operations, such as jewelry.
  • Windlight. Perhaps it’s just a coincidence, but my revenue issues seemed to coincide with the introduction of the Windlight viewer. How could this affect sales? Well, for one thing the SL population growth leveled off at about the same time. Even today I constantly encounter people who are afraid of Windlight, avoid Windlight, don’t have a PC that can run Windlight, etc. Did Windlight scare off a big chunk of customers? Does its hardware requirement cause some users to leave or others to not bother signing up?
  • RL Recession. In the US specifically, it’s a bad RL economic moment. People lose homes, jobs and generally don’t have as much disposable income. Lack of disposable income means less in-world spending, thus lowered sales.
  • Pseudo-Grid Issues. I’ve written about this before, but my always-logged-in spies tell me that on some days Linden-issued warnings appear, asking residents to avoid making transactions, building or manipulating inventory. Bingo, sales stop. They stall for days until people gain the confidence that things actually work. A related effect might also be occurring: as people can get on the grid to chat but not to transact, they may be getting accustomed to that mode and their buying habits could diminish forevermore.
  • Population. Or lack of population growth, specifically. We’ve heard of horrifying persistence stats from new SL signups, and thus older residents increasingly populate our virtual world. And guess what? They already have most of the products they want and don’t need to buy as much as a newbie might.
  • In-world Competition. I’m mentioning this as a possibility, but I don’t believe it is the cause. And who else makes Squidograms or Loco Pocos tiny avatars, anyway?
  • Chain Reaction. I’ve heard tales of sims being more or less given away by owners who can no longer afford the tier. It’s my impression that quite a few landowners are operating only at a break-in level and any economic disturbance could easily put them under, such as any of the phenomenon above. As these “former” owners drop off, their purchases also disappear, as do the purchases by their customers of items required to participate in the closing sim (like specialized outfits or equipment.)

Do you operate an in-world business? How has your revenue fared in recent weeks?

It’s bad times for some; that is certain. Will it change? I am not sure, but it seems to me that there are some steps that could be taken to recover the in-world economy. Let’s examine that in an upcoming post.


Unknown said...

I'm finding that sales have picked up in the last few weeks, and some customers who left a few months ago made their way back after they got over the initial gas scare -- or maybe they never drive anywhere anymore and sit in their rentals now, I dunno.

But, yes, it's Windlight. The Lindens and their geek coterie have a real blind spot about this, because they think you can "adjust" for this but you can't. We all get how to "turn it off", duh. But the minimal requirements even to have it at all as an option -- merely as an option! -- are already too harsh for many computers, some only bought a few months ago. It's annoying as hell. Windlight is a killer.

The other thing to remember is competition. You aren't getting the new people. The new people are Spanish, Polish, Japanese, and they are going to their own language sims -- you have to fight very hard to get some of them, through ads in their languages, taking out rentals in their malls, etc. -- it's work, and costly, but eventually pays off.

Alexa Daikon said...

I have actually been in SL since june 2006 and recently I've been barely logging in for various reasons, stress with RL and needing more time there, getting a sudden addiction to Warcraft, and also, my puter hates the new viewer.

Back when I got this thing in 06 I wasn't a gamer at all, then I got into SL. Back then puter ran it fine and everything was dandy, now it's like walking through sludge. This is also probably why there haven't been as many new sign ups- the system requirements list is ridiculous, and now this glorified chat room needs a hardcore gamer computer.

It's sad really. SL really is nearly a glorified 3D chat room with some bonus features like the economy etc, but there's no winning of it, no light at the end of the tunnel, you don't go on to kill things- mostly you go to parties, chat, hang out, shop, and now since they've decided to make the graphics amazing people are probably only chatting and not spending and new people are being turned off from being stuck in sludge.

I guess through this rambling I'm just saying that it's getting way too high tech for the average joe, so they don't bother. Sad really, but true.

Tenebrous said...

Great post... I like your explanations :)

I agree with the other opinions that Windlight is a major factor in this issue - and to think even *more* features are presumably being packed in, for example shadows and more realistic lighting!

IYan Writer said...

Great post Armi!

We don't have shops but do get a lot of newbies, so I can judge that. There was a slump in newbies in May/June, but with July and on they are back to the pre-WL levels. Not many of them are interested in investing real money in SL though - camping, freebies and cheap stuff seems to be the norm.

Peter Stindberg said...

I should mention that my translation services sold better in August than in July. July was almost exactly the same reuslt as January. But August exceeded July's results after only 2 weeks.

Anonymous said...

I'm not sure Windlight had affected inworld economy I think on the contrary that it could make more interesting Second Life for other kind of persons ....
that usually are quite cold towards virtual worlds, as artists, creative, photographers....
as you can see here:

or here:

Windlight is a fantastic tool for creativity....

Once fixed the issue for old machine and old video-card...Windlight could also improve the interest for Second Life

Unknown said...

I say it was the change of search.... in April/May.

Classified ads once worked, on the most simple of levels. People searched for stuff, people went to the store, people bought the stuff.
Now, paying for classifieds is pointless, yet any SL business owner still has to place them just to even be mentioned in the search.

Anyway, I say it mainly all had to do with the change of classifieds in the search.

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