Saturday, January 28, 2006

The Growing Depth of Second Life

It is now well over a year since I came to Second Life (Thank you, Doctor, for the not-so-gentle nudging). This world has grown tremendously in that time. I don't have the exact numbers ready, but I am sure that the number of residents more than quadrupled; and so will have the area of land available. But Second Life has not only grown in area or number of residents. It has grown in depth, too.

Lately, when I was feeling bored a little, I went visiting some of the old spots I remembered from my first weeks inworld. Many do not exist anymore; SL changes fast. Others were nearly unchanged. And others had "grown". The had not grown in size but in depth. It is a little hard to describe, what I mean with that. But I will try.

An interesting example is the Celestial shop by Starley Thereian. I admit, that she does not carry a lot of items that would fit my size and taste, but I liked the architecture when I visited it first, maybe some 10 or 11 months ago. It was a kind of temple in white, very "clean" with a clear focus on the presented products, which were shown as pictures along the sides of long hallways. The shop was moved once during the last year (without changing shape) and got accompanied by another shop of a friend of Starley's. But when I visited this week everything had changed: no temple anymore. It had been replaced by a few large stores at the side of a street connecting Celestial with shops of her friends.

The new Celestial Store. No, you can't see in this picture, what I am describing in this article. It has to be "felt" ...

The outsides of the buildings show the rather realistic textures like you find them in Midnight City or Amsterdam, too. The interior design was dominated by stone, polished wood, "precious" materials. Light effects and shadows have been "baked into" the textures, like it is now the standard with many of the better builds. The goods are presented along the walls of the main floor. Some items had additional presentation space on little emporiums throughout the building. If it weren't for the fact that nearly all the goods were presented as "pictures only", this shop would not feel alien in the better parts of a downtown shopping area of a larger western city. (The Mischief shop on Illusion island goes a little further even, with "packaged" clothing on the shelves. It does not "feel" so deep and real, though, for some reason.)

A more famous example of realism in SL: the streets of Midnight City

Celestial was not the only example of growing depths I witnessed during that sentimental journey, of course. Many still existing sites had grown in a similar way. I did not "like" some of the results - and I don't want to single out Celestial as a glowing example of SL architecture. I am sure there are many more and possibly more artful examples out there. Still ... there is a trend.

The Amsterdam sim, maybe the finest reproduction of a "First-Life-City" theme so far in SL

And I like this trend. The added depth makes it possible to emerge even deeper into the experience we call "Second Life" (which actually is part of one whole indivisible Life).

When I told an SL friend about it and showed the Celestial shop to her, she raised her eyebrows and told me "Nawww, I don't like it. It is so much mimicking RL. Why can't builders try and create something really new and innovative, creative ...?" I considered that for a while and realized that Tina was right; especially with regard to those sites where I "felt" that added depths. Most or them were trying to re-create something or a style already existing in First Life. And I asked myself what might be the reason for that. I found two possible causes:
  • The human brain is a highly associative mechanism. It is trained with many patterns from First Life. Give it some clues and it fills out a lot of missing details from experience leading to a high "perceived realism" in a virtual experience. (Read True Names by Vernor Vinge or Otherland by Tad Williams if you want a nicely packaged explanation for that mechanism.) Anything truly new and creative, that does not trigger those associations, has to work just wit the impressions provided.
  • If a builder recreates something that is existing in First Life, he or she knows about a lot of details and just (?) has to add them to the creation. If it is something completely new, all the little details have to be created out of the blue. If you consider how much background, how much unconscious references to a long human history actually is behind every piece of architecture, you realize that this is a gargantuan task. It took Tolkien 20 years to build the background for Lord Of The Rings. That's why you "feel" a deep and wide world behind every sentence in these books.
But that should not be taken as discouragement for fantasy (or fantastic) buildings in SL. It just seems a plausible explanation for the "feeling of depth" I often encounter at the First-Life-mimicking sites - and not as often near fantastic designs, no matter how creative, innovative or even esthetically pleasing I find them.

Sunday, January 08, 2006

A Modest Proposal for the Future of SL Land Development

In the light of Robins announcement of wholesale auctions of 10, 20 and 40 sims in bulk, starting next Monday I just could not help thinking about some endpoint - or at least "next step" - in this development. How could the future roles of Linden Lab and residents look like in the creation process of Second Life?

It is becoming clearer and clearer, that Linden Lab's resources (especially manpower) are strained to the max. The growth of Second Life as a world and the further development of Second Life results in just to many maintenance jobs and development projects for such a small company. The wholesale land auctions are just another sign of that. Linden Lab is simply not equipped with the resources to design, create and distribute new land at the rate Second Life growth needs it. And its not really their core competency either. So they are letting residents do the job, a working model which has proved rather successful in other areas in the past.

But this model (maybe its a bit early to talk about a model before the first testrun even started) still has some flaws or limitations:
  • The auction model - which is perfect for the current single sim auctions - is not really the best one here. Different Linden-prepared sims can currently fetch different prices at the auctions - because they are different and can be cut up and resold at different prices. A block of 40 fully terraformable sims is more or less amorph and the pricing should not be different in structure from private sims.
  • The timeframe open to land developers for implementing their concept for the new terrain (terraforming etc.) is very short. Even a large team will have a hard time realizing something "special" in just one week. 10, 20 or 40 sims is a large terrain.
  • The monetary incentive for groups of residents to put a huge effort in this new land is still relatively low. They can optimize it for a quick sale but the margins realized with each single sim will still be in a range that will barely justify putting more than a few hours work it - if you look at First Life salary levels.
Most important to me is the last point. I would love to see more creative developments for the mainland. And I am sure I will see them - among ugly results of that new process. But professional results will mean a lot of effort. And we are talking about some serious investments here. This is not "for fun" any more (or semi-"for fun" like Bedazzles projects) but can only be done for profit. And this means that - at least in the long run - every hour put into such a development project should yield a ROI similar to a First Life project. The more (possible) profit, the better the results in Second Life.

A "private continent" like this (of the Gigas Group) currently is hard to create and maintain on the mainland and hard to bill for, with added risks for developers and residents renting land her, on private islands.

So, why not give residents a larger piece of the cake - and an incentive for putting more work into making Second Life a much more attractive "place to be" - making the cake bigger this way? And that would not be too hard. LL would just have to extend the current operating model for private sims a bit and combine it with some features currently only working on the main land.

The Proposal:
In essence I would like to make it possible to transfer more "ownership rights" and a part of the revenue stream related to land to residents or groups:
  • Linden Lab sells - or auctions - large blocks of sims to residents or groups. I will call these (groups) of residents "land developers". After the land is in the hands of these developers, a "development time" begins.
  • The development time for sims is limited - but not to just one week. A max development time is OK but it should be somewhere in the range of two or three months at least. During the development time only members of a designated group have access to the land and only a reduced tier has to be paid. As soon as the land is opened up to the public or the first parcel is sold, development time ends (and full tier payments are due).
  • At the end of the development time the new area appears on the map either connect to the mainland or as a (large) island. Some projects will benefit from such a connection while other work better as an island. At that time parcels on these sims can be sold like any mainland parcel. A right click on the land and some mouse clicks should put any parcel in the land listings or in the hands of a buyer.A resident that buys such land owns it like he would own any parcel on the mainland currently.
But - and that's a very big "but":
  • The tier, that this resident pays for owning the land, goes to the original developer(s) - minus a small commission to Linden Lab for handling and bookkeeping!
  • In return, the developer(s) will have to pay a monthly fee to Linden Lab. This fee is comparable to the current rent you pay for a private island.
The profit for the developers would be the difference between that monthly rent and the tier payments from the residents owning parcels on this land. Assuming for example, that the rent for a whole im would still be 195$, the sim is cut into 16 plots of 4096, with tier payments of 25$ each, this difference would be 205$ a month (16 * 25$ - 195$).

But, of course, developers would have the option to change the monthly tier payments for land on "their" sims. They could make this land cheaper to own or more expensive than current mainland. Its a free market, or should be!

The result
Implementing this proposal would result more or less in a kind of franchise model, where residents or "resident corporations" develop and maintain parts of Second Life - and would get a chunk of LLs revenue stream. It would be a true win-win in my opinion:
  • Most of the effort involved with "creating new land" would be on the developers side. Linden Lab can focus on developing the platform and maintaining the grid.
  • The developer's ROI would be based on selling the land and in addition they would have a sustainable revenue stream from residents owning parcels on their land.
  • This would provide enough motivation to put much more effort into the development and creation of truly innovative landscapes and community concepts.
  • More variety would be available to residents looking for land.
  • Competition between groups of developers would lead to innovation and would ensure reasonable prices for buying and owning land.

Currently it is cheaper for residents to own land in a zoned residential community then to live on the mainland (Anshe's Pinewater sim depicted here). With "resident-developed" sims a premium price would be justifiable, if land here could be sold as easily as mainland, IMHO.

Some aspects of this proposal could be realized with the currently already practiced model of renting private sims. But selling/renting land currently is much too clumsy on non-mainland sims and involves a lot of risks on both sides (buyer/renter and seller/landlord). Combining some aspects of private sims with others of mainland sims would lead to much more streamlined processes and new opportunities for SL entrepreneurs.

Edit: I just saw the transcript of an inworld meeting, where Gwyneth Llewelyn reported some new new functionalites for inworld tools. If this came true it would be a perfect complement to the proposal outlined here.

Tuesday, January 03, 2006

The SL Economy in Review – 2005 December

A new year has begun – in First Life and in Second Life, too. What was most surprising to me – though, maybe it should not have come as a surprise - are the similarities between those two worlds. It was the first Holiday Season I spent in Second Life. Before it started, I was wondering if residents activities would slow down – because they would be occupied with First Life obligations – or if it would be the busiest time of year in SL, too. The second assumption seems to be true. Nearly every numerical record imaginable was broken: in world sales volume, number of residents, concurrent residents, turnover at the LindeX etc. The SL economy – like the First Life economy – seems to heat up enormously in these last weeks of the year.

That is very interesting “news” in itself. At least it is to me, who still feels like a newbie after less than 12 months in this world. It is a clear indicator that for many residents SL is not “just a game”. It is part of their life. And they spend these weeks frantically buying presents – for others and for themselves - doing bigger investments, spending more – not less - time in world, decorating their houses according to the season and so on. The true “Citizens of the Metaverse” even spend lots of Christmas – and New Years Eve, too – in Second Life, partying, chatting, dancing, generally having a good time; with their SL families and the friends they made in world. A look at the number of residents online on the evening of the 23rd, the 25th and the 31st or December showed numbers not significantly smaller than on other weekend evenings (3,500 to nearly 4,000). Only the evening of the 24th (around 3,000 concurrent users) seems to be focused on First Life.

I know many people who would shudder in horror at these numbers and talk of socially inept, isolated people living in a cold, cold world of bits and bytes far from the “real” world of warm social relations with “real” people. I am not sure of that diagnosis. Some relationships in Second Life seem very real to me (others not, buts that’s not so much different from “real” life). But at least those numbers show that “Second Life as a business environment” gets more and more interesting – and bigger; more details on that aspect below.

The last month was not only one of growth and of frantic shopping but included some other
interesting events in the economic segment of our little world, too. I refrain from repeating all of those I mentioned in my previous weekly posts, but would like to mention - among others:

  • The Killing of the Telehubs
  • Compensation for Poor Landbarons
  • The End of the Developer Incentive
  • Breaking the 100,000 Barrier
  • New Land on the Horizon
  • Linden Lab working the (Money) Printing Press

But first ... the raw numbers:

Cold facts
In the last month the official population of Second Life grew from some 16% from around 91,000 to nearly 106,000. In the same time the average number of concurrent users present inworld at 8pm SL time grew some 10%. It has been more than 4,400 concurrent users on average in the last days – which might still be small compared to other MMOGs but signifies a dramatic growth over the course of the last year, too. And exponential growth is a funny thing. If these growth rates were sustainable (which they are probably not) this would result in more than half a million residents and nearly 15,000
concurrent users at the end of 2006.

The number of concurrent users inworld grows rapidly but not as fast as the number of residents

Some residents tend to talk these numbers low as “just PR fog”. The argument usually is, that many of those residents will leave SL soon, and the number of premium accounts does not grow nearly as fast. That is be true. But even all those basic accounts spending only a little time inworld for a while are driving the inworld economy. It is a different kind of user base but surely an interesting one for all those selling something to these users – be it virtual goods, land or services. All the other indicators clearly show that this growth is no PR stunt.

The average daily trading volume at the LindeX grew from something around or below 4 Mio. L$ to now 5 Mio. L$ per day. That is nearly 19,000 US$ per day at current exchange rates; some 450,000 US$ over the course of December. The exchange rate was relatively stable over the whole month at 266L$/US$ with some small peaks.

The daily inworld trading volume (“US$ Spend Today”) signalled on the homepage was more than 200.000 US$ over the last two weeks (I only measure that number since mid December). This is a (unbelievable) large number and I really would love to interview Lawrence Linden about what is measured here exactly. Every resident (not only active ones) would have to spend 2$/day to get this results. But no matter what is measured exactly, the trend is showing upward, too.

LindeX in overview

More detailed data for the SL economy will appear in one or two weeks on the SL website. A more detailed analysis will have to wait since then.

And now back to "events" mentioned:

The Killing of the Telehubs
This month showed the end of the telehub based transportation system in SL. With Version 1.8 every user can now jump directly (with exceptions) to any point in the world of Second Life. This was announced in November and implemented in mid December. It was – and will be – very significant for the SL economy. Location – at least nearness to a telehub is not important for a shop anymore. All the land around the telehubs lost value dramatically. The L$ lost more than 5% of its value in the days after the announcement and has not recovered.

One of the new "Infohubs"

And while the “fans of P2P teleporting” are already rejoicing in the fact that “everything is much better now and nothing bad has happened” I would say that it’s still a little early to decide on that. This is a dramatic change to the basic laws of the world SL. And it will have changes besides some added convenience. These changes surely will not mean the end of the world. But in two or three months we will see that aspects of Second Life with no apparent connection to telehubs will have changed. Some businesses will profit, others not.

Compensations for Poor Landbarons
If you like changes to the basic SL rules seems to depend a lot on what is your way of earning money in SL – and whom you despise. This was clearly visible when the Killing of the Telehubs was announced and all those hating “The Land Barons” were singing the song of “it’s their own fault”, when it became clear that some land holders would get dramatic financial problems - not Anshe, the most hated land holder of all, I would like to add; her activities are diversified enough. Others suffered much more. But this seemed not to matter much to the Anshe-Haters.

This pattern became obvious in a depressing kind of way, when Robin Linden finally announced the compensation program for telehub land: an offer of buying back land within 128m around telehubs at 10L$ per sqm. I am not sure myself if this was necessary. At least it is a dangerous precedent: Nearly every change in SL is bad for some business owners (and maybe beneficial for others). Will every significant feature change lead to a rally for compensatory measures from now on?

On the other hand the absolute damage was relatively high in this case and the fact that Linden Lab already had made the decision to switch off the telehubs while it was still profiting from the higher land prices at the auctions might justify some kind of moral obligation to do something in compensation. The effect was predictable, though: the land-baron-haters fumed and cited occasions in the past where other kinds of businesses suffered and got no compensation. “Unfair!” was the battle cry: “If they get some money I demand compensation for past (and future) damages, too!”

Many arguments pro and contra were exchanged, which had a reasonable sound to it on the surface. The facts are hard to judge, actually. There are many similarities between this and past cases of Linden induced changes (or glitches) and many differences, too. But if you followed the wording of the posts on the forums a little more closely it was much too apparent that no matter what argument was brought forth, the land-baron-haters would accept nothing that indicated compensation being a sensible decision. And most of the owners of telehub land obviously considered the compensation not enough because telehub land usually was much more expensive than 10L$ per m2. A saddening display of group egotism and sometimes personal hatred – induced by wounds from past battles maybe.

These behavioural patterns do not make the Lindens job of steering the economy any easier. The continued success of Second Life depends on both “factions” (and many others): the “creators” and the “land barons” IMHO.

The End of the Developer Incentive
Even though it was not discussed as vehemently and emotionally loaded as P2P teleporting the end of the Developer Incentive could well be of similar importance to the SL economy. Many business plans (if written down or not) currently are dependent on the check Linden Lab pays out every month to those land owners enjoying the most traffic (or dwell) on their land. This check will become smaller in January and February and will disappear in the spring of 2006.

Camping chairs, a nice way to earn some easy money
(most of the residents in this picture are "away")

The end was expected by many after the camping chair phenomenon took over half of SL. But IMHO Camping chairs just made clear that dwell (traffic) is not a very good measurement if the activities of a resident do help Linden Lab in achieving its business goals. That was the purpose of the original developer incentive and has been perverted (gamed) for some time already; like any subsidy will always be gamed, in First Life or in Second. It remains to be seen what the effect of this change will be. Business will be harder for many clubs and many shop owner who counted on the DI as an additional source of income. On the other hand, camping chairs and similar systems already made sure, that without such bait there was not much dwell/developer incentive to be earned anyway.

It is probable that some residents, who depended largely on the incentive payments will have to tier down to compensate for that missing income. That would be bad for these projects, especially the non-profit ones. And that’s a least one reason, why I think that there has to be “some” way for the lindens to encourage some projects. Maybe a system of “grants” could do this. But I can already hear the cries of “favouritism” rising … From a purely economic viewpoint the abandoning of the old form of developer incentive was probably a very sensible move. It has been some time since the money spend for that was really helping to make Second Life a more attractive or interesting environment. This money can surely be invested in a much better way!

Breaking the 100,000 Barrier
Many residents sneered on the “event” or finally having 100,000 residents in SL (counting only avatars that were logged in in the last 30 days), dismissing this number as bloated. This is true in a way. Nonetheless it is an important mark in the history of the platform and I just hope that Linden Lab will use it in its PR activities.

For all those interested in the economic side of Second Life this number is a further signal for the incredible dynamic of SLs growth process. While this market is still small in absolute numbers (for some comparative data have a look here), this dynamic makes Second Life a very exciting environment for any hotblooded entrepreneur. Growth rates of 10% per month are something you rarely see in any market. And every day new kinds of business ideas are tested, some inspired be First Life models, some very specific and uniqe to our virtual world. I see these businesses as another expression of creativity that SL brings forth, a different kind of "creativity" than that expressed by a fashion designer or builder but creativity nonetheless.

New Land on the Horizon
It fits perfectly that nearly at the same time this barrier was broken, a new landmass has been discovered in the southwest of the map. The New Continent in the north is complete and the growth of the continent did come to a standstill when the Northern Continent was discovered. Maybe it will be revived now - or another continent will be discovered. One way or the other, new land is needed for all the new residents - and as a driving force of the SL economy.

The new southwest landmass

Thats why I don't see it as a good sign, that not a single sim has been auctioned off between Christmas and New Year. I hope it is just a symptom of the land baron/baronesses waiting for "new" land - or tiredness at years end. I hope this, because a depression in the land market would be bad for all of SL, nozt just the hated land barons. More then 10% of the SL economy is selling/buying land (not taking into account the growing rental market) and I bet that a lot of the remaining 90% is fuelled by the money made in this market segment.

Linden Lab working the (Money) Printing Press
One other event besides the dormant auction market is darkening my mostly bullish view of the SL economy, though. I was a very small event, if one can call it an "event" at all. It was an answer of Robin Linden to an inquiry of a suspicious resident:

Aaron Levy: Is Linden Labs going to create the L$ to buy back the land or will Linden Lab actually buy the L$ from their own exchange for these transactions?

Robin Linden: We will create the L$. We anticipate the actual amount that goes into the economy will be fairly small relative to other sources, such as weekly stipends.

While Robin may be correct in stating that the absolute amount will not greatly affect the Linden$ value, I was a little shocked at the open admittance of this practice. A government that simply “prints“ some more money whenever it needs cash, displays a very dangerous attitude towards economic stability. Whenever such a policy guided a government in the past (in First Life), it lead to inflationary phases in the countries economy with nearly all citizens suffering. (This was one of the decisive factors for establishing the relatively independent Federal Banks of most modern states.) Printing money seems like such a simple solution at first … while it is no solution at all.

Whats worse is, that this kind of “solution” is obviously not applied here for the first time. Many of those wonderful Linden projects which are be build by residents are paid for in L$ - and now I am rather sure that these L$ are "manufactured on demand".

I wonder, how this attitude could take hold in a company that so much emphasizes the economic side of Second Life.

Sunday, January 01, 2006

Cory Edo's wishes for 2006

  • Mo' better builds. The stuff I saw people producing by the end of 2005 is light-years beyond what I saw at the beginning of the year. Better lighting, better texturing, more imaginative work overall, with care crammed into every orifice. Love it. Wanna see more of it. Nothing gets me more motivated than seeing something like the new Apollo sim (Dane Zander, are you the guy that did the new WA? You don't have to tell me, but its my hunch) and feeling that little twinge of panic - "Yeah, this guy is goooooood." Raise that bar, people.
  • Its the little things that mean so much. New pixel shaded water (I liked oily vs. the eternal refraction effect, but that's just me). Goodbye telehubs (SUCK IT TELEHUB BARONS, SUCK IT HARD AHAHAHAHA). I hope 2006 brings more pleasant little suprises for everyone in SL - something for the scripters, something for the builders, something for the everyday guy or gal just having fun.
  • All things to all people. SL has gone (for me) from being an absorbing online experience to a place where I make things I love for real cash. Companies and non-profits use it for education and promotion (not to mention fund raising). People use it to keep in touch with friends and family - or gain new ones. Artists use it to explore their creativity. Business moguls use it to break new economic ground. The more residents we get, the more new and unexpected uses we're going to see SL applied to - which increases our longevity. Can't wait to see what ideas are percolating in the heads of people out there right now...
  • More joy. SL has not only opened up a world of creative and career opportunities for me, but its also brought me out of a RL dying factory town into a place where I can meet and create with other people like me - something I can't find in my RL location. Through SL, I've gone from the quiet resignation of Crap Job A, B or C to the overwhelming (almost panicky) thrill of believing for the first time that there's a niche I can fill - that there's something I'm actually, honest-to-god good at. And because of SL, I've met the person I've been looking 'round for my whole life. SL has given me more than I could ever give in return.

I hope 2006 brings more joy to each one of you - in real life, in Second Life, in all lives.