Business

New lottery in town: SLMillions

Bartholomew Gallacher 16. Februar 2007 0Kommentar

There is a new lottery in Second Life, called SL Millions. The driving force behind this lottery is Lederberg Investment, a group run by Mar Lederberg, who seems to live in Geneva, Switzerland.

Here is the deal: you buy one ticket from them for 500 L$ and get the chance to win 1.000.000 L$ per month. The other million will be split among several people. They spoke to the Lindens and made them crystal clear that they already have the claimed money, to make sure they are serious about it and just not want to take the money out of the peoples pockets. Well, even if still „only“ L$, 1.000.000 L$ is quite an amount of money. Right now the best selling rate for L$ is about 277 L$ convert into 1 US-$. This means that the jackpot is equal 3610.11 US-$. Still quite an amount of money in real life and you can make much things with one million in world.

They are also claming that they are donating about 10-25% of the income to RL charity projects, like the Red Cross for example.

Well, what to think about it? This is something were already big in world money is involved. They are trying to be good businessman and take their lottery for serious, so much is certain, because they want to stay.

But: if you want to be a good human being, you just can donate money on yourself to the charity organization of your choice. You don’t need a lottery to do that.

The maths is simple. To make this business sustainable they need at least 4000 sold tickets per month, otherwise they are going to be in a loss. Add the social component to it with the minimum of 10%, this makes then 2.200.000 L$ of monthly income they need or 4400 sold tickets. After this point they are going to be profitable.

These are quit big numbers they need to sell, so they need a big vendor network, which they already have. This is one point. The other point is: when I attend such a lottery I’d like to know with whom I am making business and where to catch him. Ok, I can get their represantatives in SL. On their website are even to phone numbers I can call and an email adress, terms of services and so on.

All very fine and professional, but the most important thing is missing: an adress. Yup, right. Of course I’d like to know from which country these operations are based and where to reach them with snail mail. Even in the oh so virtual times of Second Life. But there is no imprint on their otherwise very professional made side, nada, nothing. And this is, of course, a big lack for me with this lottery.

Don’t get me wrong: they talked with the Lindens and if ever there would be a serious need to reach them, you could either do it the way with Lindenlabs or trying to call them. They are doing a serious business inside the world, take it serious, so no need to be afraid to buy a ticket from them. But I am old fashioned and miss the imprint – seriously. Period.

Where BMW is, Mercedes-Benz will follow – and vice versa

Bartholomew Gallacher 13. Februar 2007 2Kommentare

I’ve stumbled right now about an article by Pham Neutra from the 9th February. It again shows that the saying in the topic is absolutely right. BMW shows in world their clean energy technology only so far right now.

And Mercedes-Benz? Well, according to a press notice from the 15th of February (seems to be published too early, why should Pham Neutra know already otherwise?) they are entering Second Life officially on the 20th February 2007.

They are not only entering it with one island only, like BMW has right now; no, they’ve got nine islands to their hands, which are not opened at the moment.

It seems that they are actually taking a different approach on their presence in SL than BMW does; there are already some pictures in the blog entry from Pham Neutra showing the Mercedes Sprinter, although not from the region itself, since the region is still inaccessible. They are going to celebrate the opening with a live concert and there is also a blog, too, about it, although still not working at the moment.

So, the competition of the German carmakers in SL is heating up and I wonder where this development is going to lead now.

Article about „The new economy in Second Life“

Bartholomew Gallacher 7. Februar 2007 0Kommentar

Yesterday there was a very good written article about "The "New" New Economy in Second Life" in the German web magazine Telepolis written by Karin Wehn (English: Google).

It is a very good written article about the economy – or the lack of – in Second Life, what SL is, why Lindenlabs did not herald the 3rd million resident and so on, the stability of the grid, how some land barons got rich and so on and on. Also has some very interesting pointers to other sides or articles.

Well worth a read. Very important is perhaps this link to the official economic statistics from SL: http://secondlife.com/whatis/economy_stats.php. Just about 229 users had in December 2006 an in world income from 1000-2000 US-$, 140 from 2000-5000 US-$ and 90 greater than 5000 US-$.

You should always keep those statistics in mind when you think you can get there rich very fast and live off it. Mostly not happening for you, until you work really hard and are really good, so better scratch it.

The conclusion of the article is: the usage statistics should be read carefully. While Second Life is innovative, it is still unstable as a business platform and the downtimes can hinder the business for sure, so that it is no wonder that the declared priority from Lindenlabs is to stabilize the grid. Some are also in doubt if Secondlife is here to stay or not, because the prerequisites to connect to it are quite high and it should be more userfriendly in terms of usage.

I doubt it, of course, but we are going to see.

Serverside to be opensourced within three years – or so

Bartholomew Gallacher 3. Februar 2007 0Kommentar

 I’ve stumbled about an interview with Mitch Kapor through a blog entry of Prokofy Neva about a possible happening decrease in land prices. Seems the interview has been edited since then, but the lines Neva cites where there. Definitely.

So… Mr. Neva is upset about the possible opening of the server side. Well, I can understand him (and needs to write an article of biblical propotions again, just to say: „This is nuts“, like always…), but it is the only way to take it on the next level.

How Lindenlabs can generate money after opening up? Well, for example perhaps like this:

• You want your own server connected to the maingrid? Well, you can, but you will have to pay a monthly fee to LL for it.
• You want access to the central login- and asset-manager of LL? No problem, also available for a fee.
• Need to backup your database? Yes, do it with LL.
• You want to be able to buy and sell L$ on your own server? Sure thing, again availabe for a monthly fee…

and so on and on…  I would not be surprised if some of those ideas are going to manifest in the future.

New land coming in masses!

Bartholomew Gallacher 30. Januar 2007 0Kommentar

Today Lindenlabs dropped the bomb: there is going to be a new continent in the east! Not only that, they are adding the new regions at a higher speed than earlier (which was 4 regions per day) and putting up some mechanisms to avoid the buying of the parcels through bots.

This sounds like a nice move. Ok, the people seeing land as an investment are going to cry if the prices drops significantly, but in the end it’s better that way, because so more people are able again to get new land and for Lindenlabs to generate more income, of course.

If LL would not have taken this step, it could have been that many people were leaving the game or just not buying land anymore, so that LL would have been on quite a stock of unused land sooner or later. Now, there is a new force in the land business, a new motion and I am thrilled to observe in which direction this might leed us!

The land bubble

Bartholomew Gallacher 29. Januar 2007 0Kommentar

Darius Lehane did it, again. This time he wrote an article about the land bubble in Second Life. Quite an interesting read and he got some critical points absolutely right.

He’s right: land prices are out of control, taking off to unseen heights and are prone to crash sooner or later. Why? Well, what are you buying actually? Not really. Actually the partition of computation time of one server. One server normally hosts two sims and consists of a dual-core CPU. And servers can get added day by day, a fact unseen in the real world. So you theoretically can add as much land to the grid as you like.

Why is it going to burst? Because sooner or later the point of no return will be reached when most people are unwilling and/or unable to pay the prices. That’s why, and the fes are eating up he owners.

And if this point is reached most are going to sell their land – even with loss – just to get it away.

Another possibility, of course, would be when the Lindens are opening up the server side part of SL and you can host your region everywhere you want. This would also ruin the land prices immidiately.

So, investing into land is perhaps a short time investment in SL, but no long time investment nor a good investment at all.

New media coverage from „Der Spiegel“

Bartholomew Gallacher 28. Januar 2007 0Kommentar

The German magazine "Der Spiegel" (English translation via Google) has opened up an own avatar for media coverage in Second Life. This is after "The Avastar" and Reuters another major media player – well, at least in Europe – joining this world. The main usage seems so far to report Second Life and make some entries in a blog actually.

The avatar him(her)self is named Sponto; no surename given in the article so far. It’s a rather nice read about the impressions a newbie can get out of SL and seems to be the first in a series of entries. They even opened up a German forum on their website to discuss SL, well, we’re going to see how it is going to develop.

Second Life – a pyramid scheme?

Bartholomew Gallacher 24. Januar 2007 0Kommentar

In this article I am referring to a posting from today in the blog Valleywag about the virtual economy in Second Life. Actually Valleywag themselfes are referring to a bigger article from Randoph Harrison. It’s not the first nor surely the last article Valleywag is posting against Second Life, but one of the more interesting ones. And since it was featured today on the front page of Slashdot, thousands of people of not even more read it.

The article in Valleywag is a very opioniated piece of writing, again. The article from Mr. Harrison itself is more serious written, but they are both referring to the same fact and most of the article in Valleywag is just a big quotation from Mr. Harrison, anyway.

So, to cut it short: Mr. Harrison thinks that the economy in SL is just some kind of big, overhyped pyramide scheme. Why that? Because on the ond hand it’s simple to make Linden dollars in game but he thinks it is real hard to convert them again into real dollars after that.

To cite Mr. Harrison himself:

What should have been a relatively small SLL/USD exchange trades given media claims about millions of dollars flying around per week in 2006, in reality caused the exchange markets to distort tremendously. We could not effectively move sums of more than a couple thousand dollars out of SL without the exchange market confiscating most of our returns (through rate reflectivity). Example: in July 2006 USD/SLL was 293.0/279.2 bid/ask on the primary open exchange. Our attempts to trade resulted in settlement bids of more than 350. Interestingly, these trades tended to net returns of right around 4%, which was the prevailing dollar deposit rate.

This didn’t make sense. After all, the liquidity supposedly existed to support these simple, smallish trades. Well, when the guys running the banks and the exchange trading floor are the guys with most of the SLLs, it’s no surprise that outsiders are not permitted to extract any significant returns.

We concluded that we weren’t playing in a market at all. We were suckered in by a classic pyramid scheme, albeit one with a pretty new user interface. New entrants plow real money into the game. Only the guys at the top can extract that money with any volume (and in excess of the risk-free rate of return). Attempts to move anything more than token amounts out of the game generally result in real-returns of almost exactly the prevailing USD deposit interest rate.

And here I disagree with him, strongly.

When you have an economy you can only convert some sums into another currency before the market reacts. Given the nature of SL, the number of concurrent players who visit frequently is importang, not the number of existent accounts after all. If you take this into account, you have the economy of a small city, not more. Therefore the market of course reacts very strongly on high bids.

For example, the today’s activity at the LindeX was 182.507 US-$, the money spend in world actually 1.021.595 US-$. So if you want to sell 10.000 US-$, which is about 1/18 of the normal flow of a day at the LindeX, it of course has a serious impact at the exchange rate. No surprise here. Also no surprise that most money stays in game actually.

Mr. Harrison concludes his writing with the words:

Even some corporations have dedicated marketing budgets to creating a presence in SecondLife. While few will shed a tear for the frivolousness of these companies’ spending, such adds a false legitimacy to SecondLife. Interestingly, no legitimate, real world corporation has earned net profit from SecondLife activities.

That’s because there are but a very tiny handful that profit off of the SecondLife economy. A handful of casino owners, large scale virtual land flippers, and brothel owners are responsible for nearly all of the real money extracted from the game. And they continue to attract new recruits to the bottom of the pyramid.

After all, Anshe Chung herself started out as a virtual whore, so you too can become a SecondLife millionaire, right?

And guess what? Again he’s wrong in some serious points.

First: most real world corporations entering SL don’t want to earn direct profit in SL. Some use it for teaching, others for experimenting, or to get good public relations. So your company wants to have a good feedback in the blogosphere? Well, make an event in SL, all big magazines and many blogs will cover it up. The costs? Minimal, much less than one commercial in the TV. But the coverage in the media? Very, very good. That’s the way it works and how it actually makes sense for many companies!

Also about the economy and pyramide scheme: haha. Hahaha. It would have indeed been very good if Mr. Harrison would have taken the time to actually take a look at the homepage of Anshe Chung Limited before writing about her as an example for milking of the SL economy. Why? Because Ms. Chung charges for her land in real life currencies only via PayPal, mostly US-$ and Euros, but no Linden dollars whatsoever. Period. So, of course, she knows about the problems of the LindeX and just circumvents them by charging via PayPal. Clever, that. But this shows also she cannot be an example for this so called „scheme“, because she simply is not participating at it the way Mr. Harrison describes in his article.

Also of course many builders actually charge directly in US-$, because how should they make an invoice for the hiring companies in Linden dollars…?

SL is actually more like in RL itself: some make the big bucks, the rest – well, has to see, but no pyramide whatsoever. It’s actually perhaps being a little overhyped, but when this is over it’s here to stay.

Last example: what would happen if the People’s Republic of China decided to sell 700 billion US-$ at once at the exchanges? Of course, the dollar would go down and down and down…

The economical magic of building things in SL

Bartholomew Gallacher 17. Januar 2007 0Kommentar

Today I want to write a little bit about the difference between building things in real life and in Second Life.

Building things in real life, for example a simple chair, can be hurdlesome. First you need the materials to build it, namely wood and at least some glue. Second you need the right tools to achieve your goal. Third you need knowledge and experience how to do it and a certain amount of time to actually build one chair. The more chairs you build, the more time you need. Please notice, that the important fact is that this is linear. For example, if you need in the average 45 minutes to build one chair, then you would need 7*45 minutes in the average to build seven chairs. And last, but not least, if you never build a chair before, you need to make some research first actually how to build it and of course the time it actually takes to build it has also some value.

How to gain profit of it? Well, you must reach the break even point, of course. Only if you have reached it actually you are making profit with your good; if you never reach it, you will make only a loss, plain and simple.

Since SL is virtual, we are now in the wonderland of software production (actually the same rules applies to other software, e.g. Windows from Microsoft). Costs for building materials and tools? None. It’s all in the client, Luke. Costs for building many products? None, it’s just simply copying on the server in a fraction of seconds. It doesn’t matter if you actually only sell one or one million pieces of it. So what costs are left in SL to reach the break even point for a product? Simple: research and labor costs.

So if you do it right, it’s actually from this point of view easier in SL to reach break even. But, and please consider this also, the potential crowd of customers is in SL of course drastically smaller than in RL, so you need some to make your product popular by all means. (All of this does not always apply to custom builds, of course.)

And this is also how Microsoft makes so much money with Windows. Actually the production costs per unit are constant low (burning DVDs is mostly automated, anyway), the research costs are constant and only happened once, so it’s easy to turn it into a cash cow, when many people buy it.