A Venture Into A Journal of Virtual Worlds

I should have mentioned this a while ago, but somehow I’ve been distracted. Last year I was contacted by my friend, Dr. Yesha Sivan, senior lecturer at the Department of Software Engineering, Shenkar College of Engineering and Design, Israel. I’d first met Yesha previously at SLCC 2008 and caught up with him again at SLCC 2009 in San Francisco. He inquired whether I’d be interested in writing a paper for his Journal of Virtual Worlds, a scholarly publication that contains a myriad of articles related to virtual worlds.

This particular issue was to hold articles on Technology, Economy and Standards. In other words, which technical standard protocols could make virtual economies more vibrant? Yesha was especially interested in having me, an actual virtual business owner, provide an on-the-ground point of view not normally elucidated by academics. I agreed, and wrote up an article for the Journal, which was published in late 2009.

I chose the topic: Barriers to Efficient Virtual Business Transactions, which really was a platform for me to rant about things that should be rectified. Like most virtual business owners, I encounter logistical problems so often that I and most others don’t even think twice about the insane work-arounds we constantly undertake. I tried to explain some of the basic ones, such has challenges to shared ownership of items and businesses, difficulties in advertising, permissions peculiarities and fulfillment follies.

The paper’s abstract:

With the availability of business transaction capability within virtual worlds like Second Life, enterprising individuals and teams have established businesses that operate entirely within the realm of virtual reality. These wholly-virtual business operations act much like real-life businesses; they must develop and manufacture products or services, advertise, sell and fulfill deliveries. A complete lifecycle of business events takes place within the virtual world.

The virtual business owner is presented with a seemingly complete set of tools to perform all actions required by each stage of the business lifecycle. However, over the past several years virtual business owners have begun to discover limitations and missing elements in these business transaction protocols. This paper will identify the more notable limitations facing today’s virtual business owners.

Hopefully my thoughts are shared by other virtual business owners and I hope even more strongly that those charged with creating virtual worlds will resolve these issues so that much stronger virtual economies can emerge. I'd love to hear your feedback on the paper in the comments below.

You can find the entire journal here, and my paper in particular right here (PDF). Enjoy!

Anatomy of a Box

In an attempt to increase sales, I’ve been fiddling with my product boxes, and thought readers might be interested to see what I’ve done.

But first, the problem: In this case, sales were low, and my new theory is that shoppers get most of their information about product simply from the visual on the box cover.

In the past (and currently) I’ve tried live demonstrations, which are pretty much mandatory for moving particle effects that cannot be properly shown on any box picture. I’ve also tried notecards: every box at my shop delivers an explanatory notecard upon touch.

But the images on my boxes were previously quite simple, having only an action shot and the product name. It occurred to me that the nature of the product was not clear by merely looking at the old boxes. You had to either run the demonstration or read the notecard to "get it". I believe the demo and notecard are extra steps that some shoppers wouldn’t bother to do, and that they’d rely only on the box image.

My strategy was to replace the box images with something much more informative. But what to put on them? Here’s what I did:

(Click on the image above for a more detailed view)

• Consistency: Every single box has exactly the same style, size, fonts, layout and colors. The idea is that once people get familiar with one box, they will much more easily read other boxes. This is the same way grocery products are labeled.
• Information: The familiar “i” icon can be touched for immediate delivery of an informative notecard. If shoppers don’t recognize the “i”, it says “Click for Info!” as a reminder.
• Quantities: The number of prims and objects is stated. While this doesn’t make much sense for particles, which are most often a single invisible prim, shoppers often ask this question. Answer it here before they can ask.
• Permissions: Another question that is frequently asked is the object’s permissions. Unlike clothing or skins, particles are often sold as Transfer, no-copy.
• Description: This is a very important feature, I believe, as it may be the only way some shoppers find out what the item actually does, because it is faster than reading a notecard. The trick is to clearly capture the essence of the product in as few words as possible.
• Colors: I used colors to help people understand the permissions scheme, with green and red helping to convey the meaning. 
  
• Titles: While the product name is an obvious inclusion, it should be prominent and not confused with anything else. Also, I've added my store name as a bit of extra advertising. 
  
• Image: The most difficult feature is the image, as it must carry a vision of the product at a glance, much like a book cover. The image has to accurately portray the product in a setting that matches the product’s intent. The background must complement the product, and the viewing angle, model's "look" and model’s pose must also match the theme. This turns out to be fairly difficult to do, and took me the most time to do. Above you can see an image of one of my particle effects that tries to show the feeling of the product's motion in a still frame. These are very hard to do.
  

What did I not do?

• Price: I did not put the product price on the box, even though this appears to be a common practice. My reason was simple: once on the box, you kinda have set the price permanently, unless you redo the box texture and upload again, at your cost. Imagine trying to have a sale where all 200 products suddenly must have new textures! In any case, the price is available by simply mousing over the box.
  
• Language: You’ve probably noticed that all wording on the boxes are written in English, yet many customers speak other languages. I debated whether to have multiple box covers, but in the end felt that it was far too much work to do, and the information portrayed would be much greater than before in any case. It's my belief that most people are accustomed to seeing English products - and my monitors tell me that by far the majority of visitors to the store have set English as their language.
  
• Fractional Textures: It’s possible to save a bit of money by creating textures that hold 4 box images in a 2x2 matrix. You could, for example, fit four 512x512 box images into a single 1024x1024 texture. By adjusting the offsets on your boxes, you can display the desired image only. This could save you 75% of your upload costs, and visitors would have a simplified texture rez experience (fewer, but larger textures to load). I didn’t do this, but could have if I had the time to do so (it’s more work to do this). One issue with this approach occurs when you need to change one image - you might end up redoing the other three, or at least must keep track of several versions of the multi-texture.

It was a terribly large amount of work to redo all my boxes, as I have around 200 different items for sale at Electric Pixels. The better part of two weeks was spent designing, shooting, photoshopping and uploading. But in the end, I believe it was worth it, as sales have significantly improved since the new boxes went out. The most interesting effect was that different items are being sold now - proving that box images are indeed very important for shoppers.

Hide Your Products!

I performed an interesting experiment this week at my store, Electric Pixels. Like most SL business owners, I’ve experienced a downturn over the past year, and it’s still not great. However, by keeping my expenses low I’ve managed to survive. But there’s still a concern over how to grow sales. I’ve tried various strategies, including completely rebuilding my shop in a new way to be more inviting to visitors.

The original philosophy of the shop was to make it easy for visitors to shop. I had experienced visiting many stores where products were scattered across several rooms, resulting in awkward situations:

• Having to find out how to move from room to room (might require opening doors, navigating difficult stairways, or even - argh - teleports!)
• Fighting with camera controls to scan the area
• Not realizing there was yet another room around the corner

I felt that the segmented shop design might be a detriment to sales because impatient shoppers would not put up with the troubles of locating items within the store and quickly move on to other places. After all, the next location is merely a click away.

My approach was to make an open store, where all “departments” were visible; no surprises, everything clearly marked. However, sales never were quite as good as the previous store design.

Friend Peter Stindberg suggested (more than once) that one issue with the new design might be texture rezzing. Because all my departments are visible, the SL viewer must load all textures within view - and this takes time. I didn’t really notice this effect since my computer and network are pretty good. However, those with less than adequate equipment could have been presented with a scene full of anonymous grey boxes. I wasn’t so sure, but thought this was worth an experiment.

My approach was rather trivial: I simply placed a obscuring wall in front of each separate department, closing off the view of the product boxes. This would eliminate a ton of texture rezzing for any visitor. Of course, once the visitor entered a department by passing through the obscuring wall, they’d have to rez the textures for the relevant product boxes. But there would be far fewer to rez at one time.

What was the result? Strangely, sales actually doubled for the days following the wall change. This means that Peter’s hypothesis was correct! My thoughts:

• Visitors with poor equipment saw grey product boxes and impatiently left before purchasing
• There are likely a great many people with poor equipment. Perhaps the majority? (Hm, what does this imply for Blue Mars??)
• Visitors are drawn into the now hidden departments to see what’s there because the wall obscures everything

There may be other effects happening here, but in any case it seems to have improved things. Experiments are a Good Thing. 

Hunting for the Answer

 

Over the past few months I’ve been conducting a business experiment. It has to do with those ever-spreading grid-wide hunts.

You probably know all about them, but if you don’t, they’re simply very lengthy treasure hunts, made a whole lot easier by extensive use of teleportation and landmarks. You start at the first landmark, and by finding the potentially impossible-to-find hidden item, you get the clue (and a free gift) to proceed to the next hunt location. It continues through a long string of locations, sometimes numbering hundreds of stops.

Those stops are, of course, SL stores. Participating in a hunt as a vendor takes some effort; it’s more than just dropping a goofy-looking sombrero in an obscure corner of your carefully designed shop.

There are usually a lot of things for shop owners to do during the hunt. Typically torrents of group notices flow by, usually to rearrange the order of the hunt due to dropouts or ejections. Policy matters evolve or dramatic incidents occur. Hunters themselves sometimes require assistance when they get lost or give up. And you have to create a truly unique and interesting gift to attract people back to your store.

So why would a shop owner would bother to take on this extra work?

The theory is that the flow of hunters will result in increased sales: while they’re frantically searching through your shop looking for that pink-ribboned halibut, they’re certain to be amazed by the top quality of your for-sale items and snap up a blingy purseful.

But is this true?

I had to know. I entered a series of hunts over the past several months. Today I examined the stats from such three hunts, including one of the biggest: the May-June SL Discovery hunt, which involved over 500 SL stores across the grid. I also examined statistics for the OMG and FITS hunts.

Aside: 500+ stores is a tremendous number, and traversing the entire chain would be an unbelievably momentous feat. Even more astounding would be the effort required to sort through 500+ gift items, which I suspect almost no one actually does.

The analysis is straightforward: using the SL transaction log, capture the names of all unique avatars who purchased the SL Discovery hunt item. These individuals were clearly in my store, at least briefly. Then compare these names to the names of those who purchased any other items during the same period.

This should catch any hunters who happened to purchase something while hunting, or even those who returned afterward to shop. There is a possibility that someone may have purchased something before they were hunting, but as you’ll see, that’s highly unlikely.

And here’s the results for the May-June 2009 SL Discovery hunt:

• 2854 unique hunters visited
• 38 hunters purchased at least one item

In other words, only 1.3% of the hunters actually purchased something. I must say the traffic was fairly large, but even so the amount of sales was tiny compared to the traffic.

How did the two other smaller hunts fare? Even worse. The conversion rate for the FITS hunt was only 0.9% and the OMG hunt was an even lower 0.7%. Total sales were reasonable from the high-volume SL Discovery hunters, but dismal for the other two hunts due to far less volume (346 and 536 hunters, respectively).

What does this mean? Several possibilities:

• Hunters just want to hunt, and have little interest in shopping
• Hunters are freebie-types who typically don’t buy anything anyway
• Hunters are overwhelmed by the size of the hunt and don’t have time to shop
• Hunters are overwhelmed by the size of the hunt and can’t remember to come back
• Hunters are not interested in the type of products being sold
• Hunters have too many free gifts to bother buying anything more

Some conclusions:

• Hunts are a fair amount of work
• Hunts tend to provide minimal value to the vendor, at least in my case
• Hunts are popular; many people enjoy doing them
• The only hunts really worth participating in are ones with very high volume

Will I be doing further hunts in the future? Possibly, if the hunt’s theme is more directly related to my product line and it’s high-volume. But how to find them? That’s a whole other story.

Oh, you’re wondering what the chart is at the top? It’s the frequency of visitors for the SL Discovery hunt over two months by day. More than half of the traffic comes through the first week and then it drops off quite drastically, but that’s likely because I was #23 on the hunt. 

Good thing I wasn’t #532.

Falling Revenues, Explained?

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.

 

More research was in order, and I came up with the graph above. The Blue Line is the revenue. As I began operations in early 2007, the business slowly grew, and it seemed to reach a bumpy plateau through September 2007 through August 2008.  From then on things just went south, with little effect from any of the business experiments.

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.
 

  

Now here’s the interesting bit. Suppose we add another line to the chart, representing expenses. As I’ve said many times before, revenues must always exceed expenses. Suppose our expenses were as represented by the Green Line. We would have been losing money starting last October, and probably given up shortly thereafter.

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.
 

  

Is there anything that can be done? Yes, certainly. In this theoretical chart we’ve realized something bad was going on and taken quick action to reduce our expenses. Notice that the Green Line is always below the Blue Line. This is the only way to survive.

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.

AvaModo Launches

 

I’m always up for an experiment, particularly a business experiment. I’ve been hinting recently at starting up a new business venture, and today we’re launching it. It’s quite different from my other operation, the Electric Pixels Particle Shop.

The new venture is called AvaModo, and it’s business is to help new residents overcome the difficulties of virtual appearance. AvaModo will provide top-class white glove treatment through the entire process.

In chat rooms all communication is done via text, and the only aspect that distinguishes one is their style of writing and typing. But virtual reality is a different form of communication, where it’s more than just type. Your appearance is also very important.

Why? Like real life, feelings are stirred by the visual appearance of an avatar. If the avatar is of the opposite gender, you may feel and act a bit differently, for example. If the avatar is a common, default model, you may feel the personality behind it is new and doesn’t really know much about Second Life – and you automatically treat them a little bit differently without even noticing it.

New residents often arrive in the virtual world and mistakenly assume the protocols are the same as the chat rooms they are familiar with. But they’re quite wrong, and don’t realize the effects of their default avatar until much later. They could be taken less seriously than more carefully prepared avatars.

Well-composed avatars do attract attention, but preparing one is actually a difficult and time consuming task, particularly if you are a new resident that doesn’t yet know what to buy and how to arrange items. I know many readers of this blog spend considerable time working on their appearance, but those readers already know how to do this. Instead, AvaModo focuses on new residents who need a quick start to their virtual appearance.

What happens with new residents who don’t know what to do? Two possibilities: they proceed with a default appearance and unknowingly suffer silent discrimination, or they might happen to have a knowledgeable friend who can painstakingly take them through the detailed process of developing a unique and effective avatar.

But now there’s a third way: AvaModo. Our staff includes avatars with considerable experience doing just that: creating unique avatars in record time. European residents will work with Amber DeCuir, while Western Hemisphere activities will be handled by my business partner, Haley Salomon. We’ll conduct a personalized assessment to determine your precise needs, and then prepare a unique and coordinated avatar design including shape, skin, hair, animation and even a starter wardrobe to enable you to project the exact personality you want.

AvaModo is not for everyone; it’s designed for new residents who need a quick start, for example if they are to attend an important business meeting or interview in Second Life and they are not sufficiently experienced to create an appropriate avatar on their own. Even more elderly avatars could use AvaModo if they just can’t manage to make themselves look good.

If you are in need of a complete make over, or know someone who does, please send them directly to AvaModo!

Name O Matic

 

I’ve been busy again on yet another secret project, this time creating a brand new virtual business with a friend. One of the many tasks required by a new business is the selection of its name. This, you might think, would be a straightforward piece of work.

And you’d be wrong.

The name of a business is an extremely critical step that should not ever be taken lightly. The name of the business is important because:

• It is the way clients will find you; if wrongly formed, they’ll have a hard time finding you
• The imagery conveyed by the name will flavor (or stain) your business’ reputation forever

Let’s talk about these two goals for your virtual business name. First, its find-ability. What we want is a name that can be easily recalled, spelled and typed. Here are some key properties to consider:

• Length: your business name should not be very long, perhaps 7-12 characters. Compound names could be a bit longer, more about them later on
• Spelling: the name should be spelled as unambiguously as possible. Think of it this way: anyone mis-typing your name into a search engine won’t find you. Avoid losing those customers by making it as easy as possible
• Availability: Obviously, your name should not be in use by someone else in world. Make a list of competitors’ names so you can compare with your ideas. You might also consider snagging the corresponding domain name (the .com at least), and if you’re really serious you could even search (and register) the legal name with your jurisdiction’s authorities - but make sure you follow any required legal regulations
• Pronounceability: As most in-world advertising is done by word-of-mouth, your business name had better be something that people can actually say aloud. Say it aloud yourself to make sure it works. How many ways can it be pronounced? Try to select a name with a single, obvious pronunciation
• Positivity: Your name might look great, but what does it mean to those using other languages? Best to do a quick check to ensure you didn’t select something silly. A great tool to do this is http://nicetranslator.com
• Uniqueness: Yes, we already made sure your name is not a duplicate (or even similar to another business), but you must also verify the name is not similar to any common words. Consider the search scenario again if you use the name “Fashion”. How many hits would be found? Your name would be mixed in the results somewhere. Avoid that scenario by selecting a name that is totally unique and has only one possible search result: you

The other goal of naming is the “color” of the name. Whether you realize it or not, most words carry a connotation with them. They may be positive or negative, elegant or ugly. The point is that words trigger feelings in people, often unconscious feelings. If the words conjure feelings that don’t match your business, then you are automatically at a disadvantage, because people will already feel strangely about your business before they even visit!

The name’s flavor should not only have some relationship with the products or services you provide, but also evoke professionalism, positivism, quality, confidence and of course, hipness. The best way to test this property is to clear your head, then quickly stare at the written name. Ask yourself, “What was the first image that came into my head?” and “How do I feel when I see that name?” Then imagine what your customers will think and feel when they do the same.

There’s one often-forgotten aspect of name-flavor: Expandability. While your business name might match your products and services very well today, what happens in the future when you expand your product line? Will the name still make sense? Take a few moments to consider where your business might end up, and make certain your name still fits.

But how, exactly, can one come up with a name that meets all these needs? You can stare out the window and hope for divine intervention, or use one of these awful online generators, but there are a few tricks that can help the process immensely.

Get a thesaurus, or better yet, use an online thesaurus, such as http://thesaurus.com. Think of words that describe what your business does or produces, and use the thesaurus to identify alternate words that meet the criteria above. Hopefully you’ll end up with several candidate words.

Still with the thesaurus, search for words that evoke the qualities you want your business to exude. For example, if you sell intricate clockworks, I’d search for words like “sharp”, “precision”, etc.

Armed with a bundle of good words, try producing compound names by putting the words together in different combinations. Don’t just think them; write them down and look at them. Say them aloud, and cross out the ones that don’t feel right. You will soon have a short list of pretty good names.

An alternative to a compound word is to use either a suffix or prefix. Like words, suffixes also convey feelings, so the same process can be used: write down combinations, say them aloud, throw away the lousy ones. A short list have you soon will.

Which one should you choose from the short list? You don’t. Your friends and trusted associates will. That’s right, gather up a small group of friendlies, hopefully from different backgrounds, and throw the short list at them. Don’t give them a lot of time, because you’re looking for initial reactions, just as potential customers will react. You might be surprised what they say, but trust them.

You’re done, right? Nope. Open that browser and register the name. Right now! 


(image courtesy of GapingVoid)

Who Are You?

I’ve been wondering about my customers. Who are they? Where do they come from? How did they find the store?

The first step is to get some statistics. To do so, I conjured up a simple monitor script that quietly tracks visitors when they appear. That’s all – it just records very basic information about those nearby periodically. You can even purchase monitoring tools similar to this yourself if you’d like, there’s plenty for sale on XStreetSL. Maybe I’ll package up mine and put in on sale someday if there is interest.

The results? Well, there is plenty to analyze in the two months of data I’ve collected, but the first analysis I considered was language. My theory was that most of my visitors would be English speaking, since that is the language of the majority of my promotional activities. The results show that yes, English is by far the most popular language of my customers.

But it’s interesting to note that significant numbers of visitors are non-English, with large numbers of German, French, Spanish, Italian and Portuguese. The third biggest group is in fact “unknown”. That means the avatar has not specified their language or does not permit it to be seen. Many other languages are represented in much smaller percentages.

So what does this mean? Some ideas:

• I market too much in English and not enough in other languages
• My products appeal to English speakers and less so to other groups
• Perhaps English speakers shop more than other groups (do they have more money?)
• My insignificant multi-lingual efforts have produced a less significant visitor draw in those languages

But the number one theory is that those non-English speakers probably speak English as a second language anyway! Stay tuned for more analysis in the future.

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.

The Second Life Product Lifecycle

I realized that I am not doing my job properly. I mean, my store doesn’t seem to have new products appearing on the shelves as often as it should. Does this mean I am not spending time building new particle effects? Not at all – in fact, a recent inspection of my increasingly poorly organized inventory reveals a dozen partially built products and another ten that are actually completed but not yet put out for sale. This is not good.

I thought about how this came about, and realized that building a product is only part of the story. Each product has a lifecycle that must be traversed in order to be sold. My problem is that I am not following the lifecycle. Be it due to interruptions, social priorities, RL distractions or downright laziness, my product ideas have not been flowing through correctly of late.

So you want to understand the mysterious lifecycle? Here’s my steps to creating a successful for-sale item:

• Need. Somewhere you must find the inspiration for creating a great product. Often this is simply a need expressed by someone you encounter. They may not explicitly express this need, but you may observe their need. For example, someone might be visibly struggling with some aspect of SL. That’s a need you can fill by removing or reducing their pain.
• Idea. Once you have inspiration, you have to conceive of something that will fill that need. This step may take some time, as you may have to mull over several different approaches before you come across one that is feasible to build. Yes, this means you have to mentally work out how you will build the item before you get started. It’s not that hard, though – just make sure you have a reasonable chance of successfully building it.
• Prototype. Now that you’ve figured out how to build it, you must TP to your favorite sandbox (or in my case, my Laboratory) and get down to it.  Use the approach identified earlier to actually build something close to what you imagined. Do your best, but recognize that it won’t be perfect.
• Experiment. This stage is where you really try out your new item. Actually, it’s not you; it’s someone else. You have to find some friendly, honest, reasonable and talkative beta-testers to give your product a good run through.
• Refine. If you selected appropriate beta-testers, you will have received some very useful feedback on your new product. Listen carefully to them, because they will look at the product in ways you didn’t expect. Then refine your product by making the changes they have suggested. Even if you don’t entirely agree with them.
• Box. Your product is finished. Not really, since you probably have to box it up. This means placing it in a vendor, creating informative notecards, box photography, setting descriptions, etc. Then you have to assemble it all together into a salable unit.
• Price. You might think this is just part of boxing up a product, but there is quite a bit to the art of price-setting. I’ve written about this controversial step in the past. The only quick out on this step is if your product is a variation of an existing product where the price is already established and you need only copy the price.
  
• Place. The completed box or vendor has to be placed where customers may make purchases. Where is that, exactly? Your store? A mall? In a vendor somewhere? Depending on the nature of the product, it may be sensible to place it with related items to increase the probability of a sale. Choose the location carefully!
• Place again. Wait, we already placed it, didn’t we? Yes, we placed it on sale in-world, but there are other places where it can be sold: XStreetSL and OnRez are examples of third-party services that can sell your items to avatars.  Put the box into the third party’s vendors and set up placements on their websites for the new item.
• Advertise. No one will buy your new product unless they know it exists, so you have to tell them. It’s way beyond the scope of this article to describe the techniques of advertising, but whichever methods you use, use them now!
• Promote. Now you’re finished, right? Nope. You have to continually promote your new item. Mention to friends that it exists, tell others when it is appropriate to do so. Give out samples or freebies occasionally. Make sure the word is out that you have something interesting to sell.
• Monitor. Sit back and watch what happens. Is the new product selling? Is it not selling? Why? Ask for feedback from those who purchased it, and if you can, ask those who did not buy it. You may be surprised at what you find out.
• Retire. Eventually, the product stops selling at a useful rate, and you must decide whether to have it occupy your valuable prim space. If the product is boxed, then only a single prim is used and therefore it isn’t a lot of trouble to leave it around. On the other hand, if you have a 750 prim flying elephant that hasn’t sold in 16 months, you might consider retiring it.

To be successful, you really have to make sure all of these steps are addressed. Following these tips can make the difference between a successful business and one that fails, even though a great product was created.

At this point you probably have noticed that the “Build” portion is only one of many steps. There may be more steps that others use, but for me this seems to do the trick. But it is indeed a lot of things to do, isn’t it? That’s why I sometimes don’t keep up. But I will this week. Honest. For sure.

The Perils of Remote Contracting

I love to help people achieve their dreams by making gadgets or particle effects to suit their desires. But sometimes it’s just very difficult to do.

Sure, I try to follow my own advice on contracting, but a recent engagement posed some difficulties. I really try my best to work with customers who often desperately need something unusual. In this case I had not one, but two key barriers to overcome:

• Distance. The requester was located many time zones distant. Due to the difference in times, we rarely found each other online at the same time. This causes many delays in discussing the product design, as you often resort to drop-notecards that are picked up and replied to the next day.
• Language. This particular engagement involved a requester who did not speak any language that I spoke. That’s ok – I believe in translation services if they can be used interactively. Sure, the automated translators often produce poor translations, but if you are with the person, you can paraphrase and confirm. This should lead to a good understanding and agreement on the work to be accomplished.

One of those problems can be overcome. But two are nearly impossible. Because of the distance, we had to communicate by notecard. Because of the notecards, we could not communicate interactively. In other words, we had a very trying time comprehending each other. The two problems worsened each other to a point where I wondered whether this was achievable.

So what is the moral of the story? When you decided to take on an engagement, make sure you understand all of the issues and logistics, otherwise you may have a difficult time.

That’s all for today, because I have to finish filling my hovercraft with eels.

Related Posts:

• Second Contracts
• Sleepy Mistake
• Funky Contracting
  

You Can’t Get There From Here

Last week I analyzed the highly successful Rouge opening, and this week we’ll examine another opening. One that you have never heard of. 

While Codie’s Rouge sim opening’s purpose was to draw people in, have fun and make connections, this one has similar yet different objectives. But what is the sim, you ask? It’s the new island by RL insurance giant Aviva!

We’ve seen this before, where RL companies pop up an expensive "billboard", usually having little idea of the culture, needs and attitude of residents. They last for a short while and then declare their experiment concluded (this is code for: FAIL). Many companies have come and gone, wondering how anyone can make any money in a virtual world. Usually the only party making any money is the virtual construction consultants who assisted the RL company.

The Aviva experiment appears to be more of the same, but it is interesting to contrast their approach with Codie’s. You can read all about the Aviva opening right here. To spare you from the reading the article, I’ve extracted the most interesting aspects. 

Aviva’s objective is actually not to “make money” in the virtual world. Instead, their purpose is recruiting to replace aging sales reps on the verge of retirement. They are:

Looking for a unique and effective way to connect with members of the younger generations who have the potential to be effective insurance agents

Now, why would Aviva think this? Because they believe that:

If you look at [Second Life user] demographics not only by age, but by education, affluence, brand sensitivity and even the male/female splits, this certainly looked to us like it had the right demographics. There are, potentially, in the population of Second Life users, [many] that would be good life and annuity agents

Right. I am certain there must be some. But they are not on my friends list, perhaps they are on yours? Also, isn’t the average SL resident an aged 35+ married female? There’s more:

Our thought was that initially, since insurance is not something that is big in the Second Life world right now, ... the first and best use of this for us is as a means of attracting new, younger agents to sell our products

Sure. And what exactly would I expect to see on a visit to the Aviva sim?

the Aviva USA island's function is primarily one of information and education. The island has a welcome area and tutorial trail with five stations of information that introduce visitors to the island and its features. It also includes a commons building -- designed in a similar style to that of Aviva USA's new real-life headquarters in West Des Moines -- that features an area devoted to its Bright Futures national ad campaign, a wellness area with interactive surveys and a timeline history of the company

and

a replica of Aviva USA's wellness bus, which tours the country as part of the carrier's relationship with the Mayo Clinic, is stationed on the island. Visitors also can walk away from the island with Second Life in-world accessories for their online characters, or avatars, such as Aviva-branded hang gliders and messenger bags

That’s pretty nice. I’ll be looking to see the “messenger bags” on avatars during my travels, or perhaps even highlighted in the SL fashion blogs.

Suppose there actually are avatars who wish to become a “Life and Annuity Agent”. Should they drop by the island and get some information from the inevitable kiosks and notecard givers?

Second Life members can visit Aviva USA's island by invitation only... the company is looking to make sure that visitors to the island are legitimate and interested candidates to become Aviva USA-licensed agents

So the sim is actually closed to visitors! But wait, I *really* want to be a “Life and Annuity Agent”. What do I do?

Potential agents can request an invitation by calling a toll-free Aviva phone number

Really? We wouldn’t want to make this any harder, would we? I’m wondering how a potential “Life and Annuity Agent” would discover an interest in that career If They Can’t Even Get To The Island First!

Somehow I have a suspicion that this venture may not succeed:

If the company recruits around 500 per year through the initiative ... [they will] consider it very successful

That’s three recruits every two days for the entire year. Sigh. Only a small percentage of visitors would likely become recruits. The invitation procedure and significant absence of in-world marketing suggests few visitors are likely and that this expedition may not work out exactly as envisioned.

Bonne Chance, Aviva!

Pictures and videos of the Aviva site are also available for your viewing pleasure.

Five Ways to Price Your Products

Lately I’ve been fussing about product prices. As many readers know, I run a particle effects shop in the Second Life Virtual World™ called Electric Pixels. The shop now has around 200 items for sale and many thousands of items have been sold over the past year. But how do you go about setting a price for an item? Or worse, how do you go about setting a price for a custom, one-time-only product?

When I started selling items 18 months ago I really had no idea, and simply guessed. This method still works for me today! However, upon reflection there should be more science applied to the problem. Here are some pricing strategies that work in the real world and may also work in a virtual world:

• Give it away! Yes, this is indeed a strategy. Contemporary web services use this technique often, and survive by selling advertising or providing add-on services for a fee. I suspect this approach may only work for certain kinds of virtual items. Or it can be used if you wish to promote your business or contribute to the community.
• Price based on Effort: How long did it take you to make the item? One hour? Two? What is an hour of your time worth? This approach might make sense to the maker, but often doesn’t make sense to the buyer. Worse, in the virtual world hourly rates are typically not comparable to real-world rates. Some makers use this technique but their products are usually very unique, and that permits them to demand high payment.
• Price based on Value: What will the customer get from using the item? Will it speed up their process? Will they be able to sell more items of their own? How much money will they get by investing in your product? Determine or estimate their value and set your price to be lower than that so that it makes sense for them to purchase. If you set your price higher, they won’t buy it because it won’t make business sense. This is why pricing on sffort sometimes doesn’t work.
• Price based on Competition: What are competing products selling for? Is your item better or worse than the competition? Should you price yours higher or lower? Again, this test sometimes causes pricing by effort or value to fail. Even if your product is a good value, a competitor could still charge less than you.
• Price based on Volume: How many of these items are to be sold? One? Ten thousand? Your effort in making the item could be the same regardless of how many are sold. A single unit sale would have to recover all your profit on that one sale, while profit for a high-volume product can be recovered over a large number of sales. Typically unique one-time products are priced much higher than high-volume products because of this phenomenon.

Which approach is best? All of them! Any product should be considered in all of these dimensions, and if it passes all these strategies, then you probably have a good price.

6 Ways To Run Your Business After You Die!

There’s one aspect of running a business that is often forgotten, and I fear it is totally neglected by almost all Second Life businesses: What happens when you can’t continue?

What do I mean by “can’t continue”? I mean this: you are sick, permanently disconnected, injured, imprisoned, kidnapped, dead or otherwise completely unable to do any work whatsoever on your virtual business.

In RL this is called “Succession Planning”. The idea is that you assume you’re gonna eventually disappear for some reason, and we’d better figure out who’s taking over when you do. Large businesses take great care in laying out detailed succession plans, so that when the execs go down in a fiery airplane crash, everyone knows what to do. Even small businesses take time to consider what needs to happen, if they are well run.

The issues are no different in SL, except in scale.

However, I suspect very few in-world businesses have considered this possibility. And even worse, a virtual environment poses additional difficulties well beyond those encountered in RL business disasters: anonymity.

First, let’s suppose your virtual business has no succession plan. What happens? Let’s examine the likely sequence of events for a typical virtual retail operation:

• You Die (harsh, but it Can Happen!)
  
• Your business continues to operate, since avatars can still visit your parcel and purchase items (hmm… assuming the Grid is operational…)
  
• Linden $ accumulate in your account
  
• Invoices arrive on schedule
  
• Automated payments from your account continue
  
• Fees requiring manual intervention remain unpaid, since you aren’t there, remember?
  
• Fees linked to your Paypal account do get paid, at least for a while
  
• Residents notice your absence and do their best to determine what happened, but unless there is a RL connection somewhere, it is entirely possible no one in SL will know what happened. There is nothing your virtual friends can do
  
• Your RL survivors have no idea or understanding of your virtual existence and do not realize they have a significant asset to deal with. They do not operate your business or even realize it exists
  
• Eventually your invoices do not get paid because your survivors have shut off your Paypal account, either directly or indirectly via credit card cancellation
  
• Your tier is unpaid for a long period, and Linden Lab eventually reclaims your abandoned land. Your carefully constructed objects evaporate and your business effectively ceases to exist
  

A tragedy for certain; not only for the maker, but also for residents because the maker’s wonderful items would no longer be available.

For larger virtual businesses, the amount of cash flow can be significant and the business is a non-trivial asset that just cannot be forgotten. What can be done? Here’s some ideas:

• Decide what you want done. Should your business be sold to the highest bidder? Perhaps you want to give it to a good friend who you think would be able to run it properly. Maybe it should be donated to a worthy cause or organization (who also should know what to do with it)
• Pick someone. Decide exactly who could actually deal with your operation if necessary. Yes, that hunky boyfriend may be your closest friend, but does he have a hot clue about fashion design? If your business is already owned by a partnership, then this step is easy
  
• Make a plan. Your most trusted virtual friends should know what you want them to do in case of disaster. Tell your trusted pals your intentions! And you should carefully define what you mean by disaster: “Gee, you were away for three weeks and I thought you were dead, so I sold your business. Sorry!”
• Leave the Keys. Consider leaving sufficient information with your most trusted pals so they can act on your intentions. It might be as simple as a RL name and phone number so they can contact your survivors and explain to them what needs to be done. It could even be account passwords, but they’d have to be extremely trustworthy to consider that step, especially in a large business
• Advise RL. They may not have any clue about virtual reality, but somebody should at least know there is something to do with your virtual comrades in a disaster. Leave them the account and password information (sealed, if necessary). Tell them the names of avatars to trust, since your virtual friends may be calling on your RL survivors
  
• Get a Coach. If you know a trustworthy SL user in your local area, make arrangements for them to provide assistance to your survivors. Survivors will likely have absolutely no idea where to start, what to do, or even understand what is presented to them. Get them a coach to interpret and guide

Would you bother doing this? I would consider this type of plan necessary only if you have a significant in-world business, either one with lots of revenue or one where many people depend on your operation. Many smaller virtual businesses are barely viable and probably are not worth these steps.

Let’s hope you survive a long time. Note that I don’t say, “let’s hope nothing bad happens”, because something bad Will Indeed Happen Eventually. Plan on it.

Special Delivery!

Hooking up with clients for custom work is often a pain in the a**. Here's the scenario:

• Client contacts me via IM with a vague request for some type of custom work
  
• The description of the work is unclear, so I must ask a lot of questions
  
• Client is typically offline when I am on! (Or perhaps I am offline when they are online) and we can't converse directly
  
• Negotiations occur at a very slow pace since we can't hook up
  
• We friend each other, in hopes of catching each other online and be able to talk through the work description in detail
  
• We don't catch each other because the client is in Australia or some other far away place (at least from me, anyway)
  
• Work slows and the deal fades away
  
• I end up with a bunch of "friends" who occupy space on my list, eventually requiring cleanup
  

That's not a good way to handle business. 

So I developed a couple of simple techniques that I believe overcome at least some of this silliness. 

First, I now try to negotiate via notecard when ever possible. I ask the client to write down as best they can a complete description of what they desire. Then we can edit the notecard and toss it back and forth, resulting in a semblance of a reasonable discussion. At least the avatar-to-avatar bandwidth is slightly better, and you should get a written record of the request for future reference. 

Secondly, I have created a unique "Pick Up" area at Electric Pixels marked as "Special Delivery". It's off to the side away from the main shopping area so that visitors don't confuse its contents with normal products. What do I do with it? I place custom work there for clients to pick up, even when I am not around. This way they can "Buy" the product as if it's a normal product and a traceable transaction is recorded instead of a mysterious "Gift". 

I also use the "Special Delivery" as a place to deposit prototypes for clients to come and test them live while I am off doing RL activities. 

So if you happen to come by Electric Pixels, you might see some strange things afoot in Special Delivery. Do Not Be Alarmed! 

Funky Contracting

A while ago I wrote an article describing a rather embarrassing contracting situation in which I had failed miserably to make proper contracting arrangements before starting on some custom work. I was sleepy and wasn't paying attention! Sorry! I learned my lesson, and told everyone about my mistake so they could learn too.

Today I've been reading about a similar situation involving one of Peter Stindberg's clients. Evidently Peter followed the prescribed contracting procedure:

• Negotiate with the customer before work commences
  
• Agree on the specific work to be undertaken
  
• Agree on the exact amounts and timing of payments for that work
  
• Complete the work
  
• Execute the payments
  

Peter even went further by breaking the work down in phases, so that the client had an opportunity to review, change or even stop the work process in an agreed upon manner.

One interesting aspect of Peter's approach is the breakdown of payments:

• An initial payment to begin the engagement before anything is delivered. This ensures that Peter will start work and also ensures that the client is in fact serious about the job.
  
• Separate payments upon delivery of each completed work phase.
  

Alas, in spite of Peter's excellent contracting practices, the client did not pay as agreed. And that's the problem. No matter how you do it, there is always the possibility of non-payment (or non-delivery from the vendor). Both sides take a risk. Peter's technique of breaking down the work into phases accomplishes something very useful: reducing the risk faced by both parties. Since non-payment will happen only once in the sequence, the maximum amount that can be lost is minimized to a single phase.

But even after reducing the loss, what course of action is left for the victim? Simple: tell everyone about it on the blogosphere! There's nothing better for reputation management.

Moral of the story: be wary when dealing with clients.

The Economics of Second Life Clubs, Part 3

In part 1 of this series, we described a hypothetical club’s monthly expenses, as envisioned by a typical over-eager owner. Our formula estimated an island-filling club would require approximately USD$1,000 to break even each month. Part 2 showed that generating revenue at that scale is extraordinarily difficult.

What can our hypothetical resident/club-owner do to make a go of this? Increasing revenue is very difficult, simply because it’s not directly in their control. The patrons that come by and buy or rent something will do so based on your club's features and attractiveness. You just have to provide a great product.

However, expenses are definitely in control.

Part 1 showed a basic expense model like this:

• Tier for Class 5 Island (USD$295): 80,000L
• Advertising (assume several techniques used): 20,000L
• Staff (5 staff/performers @ 1000L/day): 150,000L
• Contingency (for anything else going on): 25,000L
• Total Expenses each month: 275,000L = USD$1,000
  

Since it’s pretty clear a club could not easily generate the amount of cash required to cover the expenses, our hypothetical club owner should reduce those expenses:

• Tier: Reduce it substantially. Perhaps 1/8 a mainland parcel would be appropriate, and it costs only USD$40 per month, an enormous USD$255 less than a full island. The 8192sqm parcel would offer more than sufficient space for a club, but possibly suffer from nasty neighbors in the sim. It's more likely the club itself would be the bad neighbor, but that’s another story. 80,000L could be reduced to 10,000L
• Advertising: The club must advertise, but perhaps should pay less and use more elbow grease. In other words, our club owner should do viral marketing, in-person visits, contests, group titles, etc., which cost nothing other than time and an active imagination. 20,000L is reduced to 5,000L
• Staff: Clubs do need performers and our club owner can’t do it all on their own. However, instead of 5 staff, we’ll have the owner do more work themselves and save money for performers. 150,000L could be reduced to 100,000L
• Contingency: Disasters and unpredictable events still happen, and they are not controllable. Let's keep say, 10,000L for emergencies
  

Total expenses are now reduced to 125,000L, or less than USD$480 per month. This is much better, and perhaps even achievable. The club needs only to generate 4,200L per day, or 28 sales of 150L items (or a mere 14 sales of 300L items). Rent revenue from other retailers or residents on site is probably difficult due to the dramatically smaller space, but you might be able to cobble together some revenue from vending machines onsite in addition to selling your own items.

Once again, good quality events will attract many visitors. And if you have many visitors, you have the opportunity to sell them products during their visit - but only if they are of good quality. You can increase the probability sales by selling items somehow related to your event's theme. And did I mention that they should be high quality?

This will work ONLY if the club owner sticks to the budget. This may be one of the most difficult aspects to achieve, given all the items one can buy. Stick to the plan! If the plan doesn't work, change the plan. 

If a club in this configuration is highly successful (and ONLY IF), our hypothetical club owner could consider expansion to larger areas. But remember, Revenue Must Exceed Expenses. Or else! Start small and build up only when you can afford it.

March of the Mob - in April

As most readers will recall, I try to run a particle effects shop. Normally it does very well, but the last few weeks have been bad. While the Grid has been nominally "up" for most of the time, various database flakiness has wreaked havoc on business owners.

Sure, no one can buy when the grid is down. But it's much worse than that. People don't buy even on good days. What's happening?

This seems to be the sequence of events: Residents receive a warning, either via the Official Linden Blog, in-world bulletins, or even from friends that they should not attempt transactions (like purchases) due to various technical issues. In some cases shop owners even put up signs asking visitors not to buy during grid storms.

And people get it! They stop buying. The problem is that they don't know when to start buying. So for some days after a grid storm sales are way down. Perhaps this is because people read the news infrequently and see yesterday's warning and follow it today!

Linden Lab's warnings are a good thing. But it crushes sales for days thereafter. What's the answer? I am not sure, but it would sure help if the grid's functions were a lot more reliable. And then suddenly this afternoon I unexpectedly received this notecard from friend Celina Lathrop (pictured above):

My Fellow Secondlife residents, lend me your ear.....
Most of us i know here have a house, land, a business, a shop or a social gathering spot. Since the outage of last saturday, we have seen a drastic drop in sales, visitors etc. This is the time to take action and show our discontent. After all dont we pay the tiers? Dont we pay for lost inventory? Dont we pay for Linden Dollars? Dont we pay for land on which we conduct our business? Well its about time we started to get together and protest, as we would in RL when our livelyhood is in jeopardy. Are you tired of "Unable to connect to Secondlife. Despite our best efforts, something unexpected has gone wrong.", "Failed to rez object", "Asset server did not respond in time, object has been returned to the sim" etc etc. Lets unite citizens of SL and show our discontent to the Lindens. Join our group and IM Celina Lathrop or Mannix Mensing for info. Our first action will be a peaceful march in the Linden Village on wednesday April 16th at 5 PM SLT. Send this notecard to as many people as you want, details on the group are below..... As they say in my country, L'union fait la force, unity makes strength.

Here are the details:

First March of the "mob" April 16th 2008 with the motto: "either stop charging us, or fix it!" at the Linden Village and Office, Kirkby (178, 207, 44).

What group to join: Screwed by Lindenlabs Inc

Some basic group rules: no spam, no other business, no nothing except discussion about the topic at hand. Please keep this is in mind, the group is open enrollment, but we will not tolerate misuse

PS: Dont blame the Havoc 4 team please, these guys did an excellent job, and the problems we are facing cant even be remotely connected to them /me thumbs up

Someone's taking action on this long-term issue! Organized by Mannix Mensing based on Celina's idea, the march intends on raising the priority of this issue with the authorities.

The reliability issues, while inconvenient to most avatars, are really hurting business owners. And I'm not the only one noticing this.

While everyone complains about these problems, a quick look at JIRA's "Popular SVC Issues" shows that none of the top ten have anything much to do with this:

1. Stopping texture theft and stop spreading of stolen items
2. New Permission Request "Resize only"
3. Region crossings are occasionally slow
4. Friends list inworld intermittently doesn't show online friends/Not Updating
5. Notices failing for larger groups
6. Prims set for sale - prices are incorrectly set when multiple prims taken to inventory and rezzed
7. Eliminate all parcels under 128m from all land search functions
8. New Feature Request - llTeleportAgent
9. Viewer is logged out during failed teleport
10. numerous reports of objects, notecards, scripts, gestures "missing from database"

Well, maybe that last one is kinda related.

See you on the 16th!

The Economics of Second Life Clubs, Part 2

In the previous post of this series, we described a hypothetical club’s monthly expenses, as envisioned by a typical over-eager owner. Our formula estimated an island-filling club would require around USD$1,000 to break even each month.

Part 1 generated some discussion, including this thread, where experienced club operators and musicians correctly point out that I don't know much about clubs. Yes, I certainly don't know much about clubs. But I do know about running a business, and remember I'm describing what I frequently observe: over-eager, non-business-savvy avatars attempting to build a club. Successful clubs would definitely not make these same mistakes. 

With the demise of gambling, there are fewer ways to generate huge revenue. Here’s some basic approaches, although I am sure there are a few more.

• Sell items in the club, especially things relevant to the club’s theme
• Operate a store near the club to take advantage of the hypothetically massive traffic arriving at the club
• Rent mall space near the club for others to take advantage of the hypothetically massive traffic at the club
• Rent residential space near the club, leveraging the theme of the club in residential design
• Charge permission to “sales people” to inhabit your club and sell items or “services” to the patrons. Hmmm...
  
• Finally, Tip Jars. Nothing more need be said about them

Once you have some ideas for making revenue, we need to do a sensitivity analysis. In other words, exactly how much of each would we need to break even?

• Selling items at the club and in a store: Let’s assume a typical sale is 150L. Thus we’d need to sell 1,833 items per month or an average of 62 every single day. Or one sale every 23 minutes all day every day of the year. How likely is that?
• Renting shops/residences at 300L per week: 230 shops must pay the 300L each and every week. Hmm, how many prims can we offer them? If we give them 50 prims, that means there are only 3500 left for the club! Also, where exactly do you put 230 shops?
• Renting shops/residences at 600L per week: 115 shops may be easier to fit, but it would be much more difficult to find 115 viable businesses that could afford 600L per week, especially when there are many places charging less. Again, how likely is this to occur?

All of the above mistakenly assume you’ve got 100% participation. In reality, our hypothetical club owner will find they must grow sales/rentals over time from a zero start. Also, due to regular turnover of residents, grid issues or other mayhem, they may find only a fraction of the potential income is actually there on any given day.

Clearly, the club owner must use a combination of approaches to even hope to achieve profitability, and do each competently and efficiently. Here is a possible target state:

• Sell 40 items per day at 150L each: 180,000L
• Rent 50 shops/residences at 600L per week: 120,000L

That gets us close to the break-even point. But even so, both of those numbers could be very hard to achieve. A business plan this thin would be laughable, if it wasn’t in Second Life.

Worse, if our resident had a store that generated 180,000L per month, why not just run the store and throw everything else away? You gotta love the music to persist.

You can see why clubs vaporize often. In part three of this series, we’ll examine some techniques for making the business equation work.

The Economics of Second Life Clubs, Part 1

We’ve all been to them: those great clubs with dazzling dance floors, animation balls, fun people, and if I’m lucky some particle effects too. They can be a lot of fun to visit. And then suddenly, they disappear! Why does this happen? I suspect the following lifecycle takes place all too often:

• Resident enters Second Life and discover they really enjoy clubbing
• Resident gets over the “what is all this?” stage of SL existence and wants to do something useful and long term
• Familiar with clubs, Resident decides to create one of their own. A big one, of course. Actually, the biggest!
• Resident builds club, advertises, hires, operates and thus creates a truly large operation
• Club fails when Resident realizes they don’t have enough money to run it

Sigh. I’ve seen this happen several times, as many of my particle clients are club owners. Sometimes it’s quite sudden, while other clubs die a slow, withering death of agony.

Why does this happen? I suspect a prime cause is a misunderstanding of the most basic business axiom: Revenue must exceed Expenses. I follow this rule absolutely, and I believe anyone who does can do nothing but succeed.

Let’s examine the typical club as set up by our hypothetical resident. Remember, they want to make it big, so we will assume they are building out an entire island, and are sufficiently capable to do a lot of the building themselves. (Don't laugh - I see this happening constantly!) Here’s the balance sheet:

Hypothetical expenses per month:

• Tier for Class 5 Island (USD$295): 80,000L
• Advertising (assume several techniques used): 20,000L
• Staff (5 staff+performers @ 1000L/day): 150,000L
• Contingency (for anything else going on): 25,000L
• Total Expenses each month: 275,000L = USD$1,000

That’s a fair bit of change for a very basic no-frills club. Not to worry, our Resident/Club-Owner needs only to offset these expenses by generating more than 275,000L each month.

Oh. How do we do that again?

Well, we could require visitors to pay a cover charge. Um, nope that won’t work, because there are lots of clubs without covers. They’d take the customers instead! We can’t rake in cash from gambling, and we can’t charge them for drinks, hot wings or those greasy deep-fried potato chunks, either. So how can a club make some Lindens? Stay tuned for part 2 of this series...