11 May 2008

MetaMetric observations - March

Meta Metrics -

No data exists in a vacuum in fact all data is relative-

SecondLife continues to dominate in the older demographic age group. SL provides a platform in which so many more adult VW residents participate and the oldest age groups indeed show the greatest activity on the site. According to March statistics, when there were over half a million people in Second Life. 59% were 18-34 years olds and they spent 50% of their time here. However, in the 35 plus age demographic, which represented only 40% of the March population, this group spent 49% of their time in SL.

Index Of Interest - What is the IOI
The IOI of Second Life

Lets create an index estimation: % of time spent here divided by % users. This is a great way to quickly judge participation and interest by segment or group. For the age demographics, the index for the over 35 year old population is1.22 and the index for 18 - 34 at .85. Using the IOI we see clearly older people are using the site more relative to their numbers.

Gender breakdown over time is also revealing. When SL opened in Sept., 2003, women represented 35% of the population spending 22 % of the time in SL, versus men, who represented 65% of the population spending 78% of their time here. For women the IOI was .63 versus an index of 1.2 for men. In March of 2008, this figure hasn’t changed for men, it is still at 1.2 while the IOI for women has grown to .76. Women, most likely older women if also pay attention to the age IOI are playing Sl more and more. Older women and online games, yes studies from the internationa game developers association, MSN, AOL and Nielsen Net ratings all confirm this. Women’s IOI is growing and will continue to grow on SL.

The IOI of Nations
Of the top 10 countries who participate in SL, the United States has an almost 36% participation in population, the largest of any country, followed by Germany, the UK, Japan, France, the Netherlands, Italy, Canada, Brazil & Spain. However if we look at time spent and the IOI we see that the Japanese have th highest IOI at 1.38 , the Dutch 1.29 and the Germans1.22 spending more of their time here relative to their population than the US or Canada (both slightly over 1.05) , with the Brazilians having the lowest of the 10 at .70. What this would mean for the marketing team at SL could be profound. We will try to get some metametrics on amount each country spends inworld for enxt weeks show. What is the ROI of the IOI?

Growth & Slagnation
In terms of premium accounts we have seen the slowest growth recently, with a less than 1% of the population having premium accounts as of in March of 2008. This is relative to 1.5% of residents a year ago, and almost 28% of SL-lifers in January of 2005. However, while percentage change may sound like a disaster, the sheer numbers be-lie that figure.

At $9.95 per month, (I use this figure as a monthly charge, because users are added though-out the year. The base number of users in March is less than base number in subsequent months, so even though a yearly rate is 72$, we can reasonable estimate using $9.95 / mo for revenue) This premium membership means annual revenue of almost $11 million dollars, up $1.7m from a year ago and up from $630,000 in 2005. Having a smaller percentage of the population buying premium accounts is not as significant if the population is growing as fast as this one is.
The Pop U Nation
Sl increased its population by over 150% from last year. From March of 05 to March of 06, the population increased 615% . In absolute numbers, though, we are looking at over 13 million registered users, not 164 thousand, as was the case in March of 2006. Although the rate of growth is slower, the numbers in dollars spent is huge. Spending this quarter, in Lindens alone, was up 4% from last year .

What about land?
Resident owned islands and mainland are up 115% over last years figures, with the ownership of islands leading the way. There are 143% more resident-owned islands right now than a year ago and mainland ownership went up only 42%. As we know, islands cost more to both buy and pay tier upon. Individuals are deciding still to buy their own places, but the trend seems to be towards larger parcels, owned by companies or groups, or for investment with the longer term goal of renting.

This brings us to our top story on recent land price drops.

More land: Good or Bad for Second Life, and for whom?

More land at cheaper prices means there is more available for newcomers who wish to settle down, or buy for investment purposes. The lower price makes the land more affordable and therefore more attractive to new and old buyers of land.

Tier price has, however, not gone down, and this is indeed a very good economic move for Linden Labs. They can only gain from more land. More land is available and therefore more opportunity for them to collect more tier money each month. It is a win / win situation for them. They do not lose in this arrangement. Land being bought from them for less money might mean a smaller initial fee for them, but in the longer run it means greater monthly tier revenue, which more than makes up for lower initial purchase price. For example if the price of an island drops from $1675 to $1000, LL is out that $675, initially, but if the drop in price means that even one more person buys the land t is made up and quickly too. The monthly tier cost of $295 makes up for it within 2 months.

The reason *why* LL is releasing more land can only be explained in 3 words *more tier revenue* Any kind of subscription base, which is what tier represents, a monthly payment. adds to the bottom line of the companies predictable revenue stream. This potentially increases the subscription base of the business model for LL, a very solid financial move. Land sales represent a much greater percentage growth over the past year than amount of outright linden purchases, or even growth in premium accounts.

I spoke with 2 large land owners, Elliot Eldrich and Melody Regent.

Elliot has been grandfathered in tier price since he bought before November of 2006, . Although neither of them are completely happy with the new influx of land and drop in prices, overall, they had more to say on various land related and service issues.We also spoke about how the decline in the RL economy has potentially hurt SL. I will quote directly from my interview with Melody Regent now - Melody owns 15 sims, and is a RL real estate agent.
I asked her about the fact that tier pricing has not changed, though land prices have fallen. She said in the slexchange foum that land prices will, ” …fall so low it is worthless. There will be so much available that tier pricing will be crazy. No way to make tier. Many were struggling already. This will make it worse. “ I asked her what she meant by this statement. Her resonse was , “land owners will do whatever is takes to get people to rent on the sim they own. This means undercutting values drastically. I have already heard of someone PAYING people to take land.”

Elliot Eldrich points out that the asset server problems, the problems with transactions being cancelled on a recurring basis, have also contributed to a decrease in sales on his sims. As land owners they are directly responsible for the tier fees on their property. At what point do the monthly fees begin to eliminate the profits that are generated by the rentals of their rland to tenants, and the cost of the services provided outweigh again monies realized for either further investment or profit. Both parties do state that the high level of service they provide for their tenants keeps them liquid, which is a testament to the market correcting failure in things like a good landlord. And of course as more people come to Second Life, as they have been, the potential for more customers also continues to grow.

Elliot Eldrich said the greatest improvement he would wish to see is greater stability on the site. He said he would like to see a couple of weeks go by without a single announcement saying “don’t do any transaction.”

Time is in essence real money here. Elliot also stated that the service LL provides is an issue, just as the service he provides is, but he hasn’t heard of any landowners abandoning their holdings.

He stated that while the RL economy is bad at present, especially in the USA, a few points are to be made here - although this means of people do not have the extra money to spend on creating SL, it also means that only in SL, where one doesn’t have to pay what might be $4.00 a gallon of gas soon, you will still be able to go somewhere special this summer.

And while tier prices aren’t inconsequential, relative to what you can get in the inflationary environment RL is proving to be in the US, it does provide a great form of entertainment, community and fun.

I asked Melody what effect the decline in the RL economy would have on SL land. Her response was brilliant - she said, ” None, people will still do what it takes to lead the life here (SL) they cannot have there (RL). You may also want to note, however, that the RL economy’s slump isn’t hitting all countries yet, so with SL being an international platform it can skip any woes one particular country can have.”

Another point made is that the USA is certainly not the only player.

Melody Regent is heavily invested in SL. She owns 15 sims, and maintains a very high level of service. I asked her if the recent drop in land values affected her in particular.
Her response was this, ” I have lowered the prices slightly on the sims. I am also taking two full sims, and converting them into Open Spaces. Those are the future…for now.”

She also mentioned that the OpenSim will force at some point LL to revaluate the tier pricing structure, but that she thought they will hold the price on tier for as long as possible.

Heavily invested landowners do not seem to be leaving anytime soon, the increase in land available will only be a bonus for LL and future residents who pay less per sim.

and that is our MetaNews

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