I’ve been puzzling over this one for months now, and I think I might have figured it out. The revenue (sales) at Electric Pixels has been dipping lower and lower for months now, but why? I had several theories, including:
- Bad economy
- Everyone already bought what they needed
- All shoppers are tied up in Grid-Wide Hunts
- Freebies are so good that no one needs to buy anything
- Competition from elsewhere
- Aliens from space
To counteract the trend, I’ve been conducting all sorts of different business experiments, such as different advertising, new products, and even entering Grid-Wide Hunts (which, by the way, definitely increase your traffic substantially.) However, none of these actions has significantly affected the decreasing revenue trend.
However, the interesting part is the Red Line. It’s the United States Unemployment Rate, scaled to fit overtop of the revenue line. The unemployment remained more or less constant until, guess what, June-July 2008 and kept rising thereafter. At that moment, my revenue started to fall. It appears that there is a direct correlation between US unemployment and SL revenue, at least at my shop. Revenue seems to be inversely proportional to unemployment.
This intuitively makes sense. As increasing numbers of people become unemployed in the US (and presumably elsewhere to varying degrees), they cut back on non-essential spending, including Second Life. Thus, overall revenue decreases.
Is this the same for all SL stores? I don’t think so. Like Real Life, different products and services are needed at different moments in time. Who wouldn't want to be a repo-man these days? I am certain there are several thriving markets still going strong in SL, but in my case much of my product is (was) sold to those building new sims. And we know what happened to that activity.
I believe this is what has happened to many businesses in SL over the past few months. More than a few businesses were operating on a just-barely-breaking-even basis, and a financial storm such as we’re experiencing would kill off many of them.
In some cases the amount of expense cutting may have been too much for the business to survive, and those business expired anyway. But how does one cut expenses? That’s a topic for another post, stay tuned, dear readers.
Is this all bad news? I don’t think so. We’re witnessing in SL today a process of evolution within the business community. The less efficient businesses have either died off or must become much more efficient. The well run businesses will survive. When the smoke clears, we’ll have a virtual world filled with well-run, highly efficient businesses ready to take on anything. And that can only be good.