SWOT Away Those OpenSpace Problems

I haven’t yet reacted to the OpenSpace controversy, but today I will.

I believe it has been a bad thing for some, but of little consequence to many others. It just depends what you are doing in the virtual world.

I watched with interest when OpenSpaces were announced, because, like you, I secretly lusted for my own island. A place where I could control things, with limitless prims and a décor to match my tastes. I saw OpenSpaces as a possible way to achieve that goal, as they were quite a bit less expensive than a full island. But there was a problem. According to the Land Store, you have to own a full island before you were allowed to buy even a single OpenSpace.

Today I own an 8192sm mainland parcel, more than suitable for my business, with a tier of only USD$40 per month. It’s a great situation, as my business provides more than $40 per month in revenue, so all costs are easily covered, with plenty of profit leftover. Buying a full island would increase my tier to $295 per month in addition to the horrific task of moving an active business. I could not justify spending an extra $255 per month just to get more space and control. You do not run a successful business by spending without expecting a return on your investment.

In other words, I would have to do something profitable with the extra space to recover the $255 increase in monthly tier. But I could not think of anything, other than hair-brained schemes that probably would not work. So I discarded the idea, for the time being.

But then land prices decreased (although tier did not). Tempting. But how to recover the extra $255 every month? One approach, used by many others, is to rent out the excess space to others who cannot afford a whole island. But wait, I want the WHOLE island to myself! What to do? The answer, it seemed, was OpenSpaces. Here’s the formula:

• Buy a whole island and commit to paying $295 per month.
• Buy several OpenSpaces at an additional $75 per month each.
• Rent the OpenSpaces at a rate higher than $75 per month each.
• Cover your costs through the profit on OpenSpace rentals.

Hey, this could work! If I charge $XXX per month to YYY renters, I cover ALL my costs, including the $295 for my home island! Easy money!

There’s more. If I can cover my costs, why don’t I do more? Yeah, if I have twice the number of renters, I can pull in a significant profit. Wait, why not 4X ? Or 10X? I’m rich!

I went through this logic, as appears did many, many others. But I did not proceed. Why? Because I did an analysis that any business owner should perform. It’s called “SWOT”, which stands for: Strengths, Weaknesses, Opportunities, and Threats.

It’s pretty straightforward. You simply carefully consider each of these aspects with respect to your business idea. Let’s take an abbreviated tour through the OpenSpace rental scenario:

Strengths: There are some great strengths to this proposal, including the potentially large profit, covering expenses for a whole island, and even getting to meet many new people through the rental operation.

Weaknesses: Hm, as the business expands, the amount of administrative and management work will probably increase, so the benefits are not obtained for free. There's lots of work to do.

Opportunities: The excess space on the home island could be used to develop a new business or other operations. Additional OpenSpaces can be added ad infinitum. Groups of OpenSpaces could be joined together for events or other joint activities.

Threats.

This is the dimension that stopped me cold. Threat analysis says, “What could happen that is out of my control?” and “If that happens, how can I prepare to meet that challenge?” If you cannot handle the possibilities, then it is perhaps not a good idea to proceed. Here are the threats I saw:

• Linden Lab could change their OpenSpace ownership policy. For example, what would happen if they dropped the requirement that you must own a full island before purchasing an OpenSpace? Well, the customers would simply rent their own instead of yours, and you are instantaneously completely out of business. There is no way around this scenario, you’re dead – unless you intend on picking up the entire island bill yourself. (Note: this was actually mentioned as a possibility by the Lindens at a recent office hour!)
  
• Other rental operations could set their prices artificially low and drag away your customers, even though their pricing may be lower than they can sustain over the long term. This could prevent you from having ANY renters. The only way to mitigate this risk is to be prepared to drop your prices, perhaps significantly. Perhaps lower than you need them to be to break even. Oops, this suddenly isn’t so good.
• Linden Lab could change their pricing structure for either OpenSpaces or full islands. They have done this in the past, and there is no way to predict the future. The only way to mitigate this one is to simply be prepared to raise your rental rates and hope your customers can handle the extra cost. Obviously, some may not and your carefully constructed cover-the-costs model is broken.

At the time I felt these threats were more than sufficient to scare me away from the idea of becoming a landlord. So I declined to proceed with buying islands and OpenSpaces, in spite of others suggesting that it could be a good idea. “Look at all the landlords with so many islands! Look at the money they are making!” Yes, but those threats were always there.

And, as it turned out, one of them came true. At least it wasn’t the worst one.

Today I’m still in my $40 parcel, profitable and relatively happy. But there are many landlords who are very unhappy because their business model is broken and they are caught holding investments that are not paying back. Even worse off, I fear, are those who use OpenSpaces as a community facility. They are different from the business operations I’ve described above in that they generally rely on donations. Their fundraising may not be able to make up the difference, and they may shut down operations.

The moral of the story? Always SWOT before you leap.