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  3,000 ‘Second Life’ Businesspeople Make $20k Annually  
Posted 2006-09-07 by Tony Walsh
Annalee Newitz reports from the virtual world of Second Life on behalf of Popular Science magazine. The in-depth article cites several interesting factoids and stats, but approaches the virtual world with a "gee whiz" attitude rather than a critical eye.

Here are a few of the tidbits that caught my attention:
  • 50% of SL users are men, the average age is 32. [nothing has changed here since the beginning of the year, apparently]
  • SL has an annual gross domestic product of $64M USD
  • "There are at least 3,000 entrepreneurs making $20,000 or more a year on SL businesses."
  • "The next version of Second Life will be seamlessly integrated with the Web..." [SL 2.0? Mozilla integration was promised as far back as June, 2005 but hasn't fully been realized as far as I know]
  • "Working in SL will only become more appealing as graphics become more detailed and SL adds voice chat..." [live, location-sensitive voice chat has been demonstrated in SL by Vivox but SL-maker Linden Lab hasn't yet announced plans to integrate the technology]
I've got a few minor gripes about the story, but the most noteworthy is that Newitz writes "The banking giant Wells Fargo built its own branded island inside SL [clickback], designed to train young people to be financially responsible," but fails to follow that up with the fact that security issues subsequently plagued the branded island, and within a few months, Wells Fargo ditched Second Life in favour of There Active Worlds, ruffling some feathers.
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Comment posted by Prokofy Neva
September 8, 2006 @ 9:06 am
I think it's quite possible that 3,000 people *take in* this amount of revenue, but I never see these articles talk about their *expenses* such that we can hear what their *take-home income after costs* is. I'd like to see some more sanguine reporters follow around some businesses, RL and SL and in between, as well as some non-profits, and hear about what they really need to do to sustain their presence in SL and RL.

If they are in the land business, they could be taking in thousands, tens of thousands, hundreds of thousands of US dollars, but also paying out those same thousands in steep tier fees and other costs like managers, builders, buildings, advertising. I've come to think of the classifieds advertising -- the only form of widely visible advertising there is -- as a huge tax on doing business. I find I need to pay at least US $50-75 a month just to keep my properties in SEARCH ($30 a parcel L$) or in classifieds (L$50 or more depending on visible position). I see it's common for the top content creators to be paying $100 US just to be on the front page of classifieds each week.

Content creators, even those with land tier fees to pay, of course don't face the huge costs of those in the land or services businesses using lots of land. That's because they can make one item, then put it out to sell endless copies with or without their presence in SL, and never even actually log in.

It was amazing to me, for example, that my son, who is a pretty good content creator on the teen grid, could just leave out his wares on a 512, go fishing for weeks, and come back and cash out some US $80 from a game -- and then after paying the $22.95 for the three-month subscription, have what's left over -- for having spent a few days making stuff months ago. That's the miracle of pixel content creation.

So yes, indeed, content creators, especially those with expensive things like skins that can cost $15-25 US per item, can rake in the money.

I remember early in the year, when I was interviewed for the Fortune article, I presented various budgets and typical financial reports to the journalists to illustrate revenue and expenses. These details weren't really terribly of interest, because like LL, they want a breathless story that sounds like "wow, 3000 people make $20,000". If I could show them actual revenue and expenses, and also show them my non-profit sustained projects, and then only show a few hundred US in revenue, it's just not as fun sounding, though I find it amazing.

To me, the story of Second Life is probably a less glamorous and sort of "long tail" story. It's about somebody being able to get their big game paid for online by doing some content creation and services, so they might run half a sim with a club, entertainment, rentals, and it will cost them $0, or only $25 or whatever, and be loads of fun.

Or it's about somebody working part-time at Wal-Mart's, picking up the kids at soccer and doing the grocery shopping, and coming home and making clothing and selling at yardsales in SL and keeping their RL car in gasoline that month with the sales. There are LOTS of people doing that. Pretty much everybody in SL manages to turn a dollar, one way or another.

It's a huge, entrepreneurial machine, with many points of access, increasingly international, and increasingly viable. However, there's some real rough sledding in it having to do with high tier costs, the platform itself being down for half days at a time, or suddenly shut off during various problems caused by the overstrained asset server or rowdy griefers who crash it deliberately.
Comment posted by csven
September 8, 2006 @ 10:03 am
I caught that and noted the same things. Only Wells Fargo jumped to Active Worlds iirc.

"To me, the story of Second Life is probably a less glamorous and sort of "long tail" story."

Agree. This is more about the many than about the few. It sounds more impressive for the MSM's to cite the big numbers, but the underlying changes are much more significant. Prok is on the money here and it's unfortunate that the media needs to "sex up" a story to get attention.
Comment posted by MattMihaly
September 8, 2006 @ 1:18 pm
I read that article and am pretty dubious. Given Linden's track record of dodgy spinning of their numbers, I'd like to see some sort of proof that there are indeed 3000 users bringing in over 20k/year.

I just wish Linden would engage in some 'honest' PR, because as Prokovy points out, there is some cool stuff going on there. It is, unfortunately, obscured by the unwarranted hype that Linden whips up.

Comment posted by Prokofy Neva
September 8, 2006 @ 1:25 pm
I'll bet the Lindens would say, if asked, that due to matters of confidentiality, they can't tell you the names of these people, etc. There are some heavy hitters cashing out lots of bucks. 3,000 sounds a bit high to me. There are only 9000-10,000 logged on at peak times now, 4,000 sometimes, so to posit that as many as 1/3 of the people logged on are making that kind of huge amounts of cash seems unlikely. Of course, some of those making a lot of money never log on, they just leave their dance poses or whatever to sell endlessly in vendors or off third-party shopping sites, while they play WoW. My favourite siggy these days from a famous island dealer shows one of those life-logger things that says: hours in SL this week: 8 hours in WoW: 295.
Comment posted by Secureplay
September 8, 2006 @ 9:18 pm
OK, if we believe the $64M in total revenues (why not?) lets move the total number of active users of SL up to 640,000 (so the math is easy)... we are seeing gross revenues of $100 per player / resident per year... a really low-end MMO kind of figure.

If we assume that the actual figure for active SL users is closer to 320,000 users, the figure is closer to a high-end MMO - under $17 per month per player.

This clearly doesn't include Linden's revenue but it is probably a good bit more than Linden's revenue (land rentals and currency exchange are not likely to represent a large portion of the "SL GDP").

If we think of Second Life as an MMO and the in-game business people as its "live team", the game isn't very efficient - after all 3000 people earning $20K a year is less than a live team would actually be paid. (and, as Prokofy notes, the article generously misses the "expense" side of the equation).

If this is a "platform" for virtual business, its going to go bust pretty fast.
Comment posted by csven
September 8, 2006 @ 9:42 pm
I wonder how much gambling affects the numbers.

Win $50.
Lose $50.
Win $50.
Lose $50.

The system says $200 exchanged hands. But in reality, the endgame was $0.

If I go to a store and buy something for $50, but I later return it and get a refund, the sum isn't $100. It's zero.

Who knows how much of this is a zero-sum exchange.
Comment posted by Prokofy Neva
September 8, 2006 @ 9:58 pm
The transactions per day have long puzzled me. What do they really mean?

Gambling is huge in SL. When they used to have a running ticker of "objects sold in world," it was a running stream of "Lucky 7" slots and money balls and stuff all day long, and that's probably why they turned it off.

I wonder if they count the payments to Currency Linden to exchange L$ into dollars, I guess they do. Then do they count the currency coming in as well? So that means every transaction of buy-sell currency is recorded? I sell $50,000 L to cash out or pay tier; somebody else buys that $50,000, into their game it comes, double counted?

I guess it has to do that -- because it is recording transactions, total volume changing hands. So the $10 uploads going into the sinks; the $10 I might accidently pay by selling a TV back to myself to undeed it, etc. it all shows up.
Comment posted by Brace
September 9, 2006 @ 8:20 am
"3,000 ‘Second Life’ Businesspeople Make $20k Annually"


damn my allergies is actin up again...

*blows nose heartily and tosses the kleenex into the same bin LL pulled those numbers out of*
Comment posted by Tony Walsh
September 11, 2006 @ 8:27 pm
Hi all, sorry I haven't jumped in here, I was out of town for 4 days without a computer. I'm catching up on a billion emails right now, but I'd like to thank everyone for their comments--csven, I corrected the "There" reference, I had intended to cite Active Worlds but apparently had a brainfart instead.
Comment posted by Prokofy Neva
September 14, 2006 @ 9:23 pm
I'm just listening to the AGC panel taped by Mark Wallace with the greats talking about the Metaverse

And I'm perplexed once again as this time, Cory Ondrejka says there are now 10,000 people making a profit -- making more than they pay Linden Lab -- but at the same time, out of the many millions in US dollar transactions (sorry I lost the notes and there isn't a transcript of this yet, just audio) only $1.7 million US is cashed out. That has to inlcude cashing out to pay tier. So out of that $20 million or so taken out of the game per year, 10,000 people would only make $2,000 US per person, and that wouldn't even count the payments for tier. OK, so perhaps of these 10,000, some 3,000 take the lion's share and are able to make a living wage. Anyway, this all needs questioning and nailing down.
Comment posted by Prokofy Neva
September 14, 2006 @ 9:23 pm
*$1.7 m cashed out *per month*.
Comment posted by Tony Walsh
September 14, 2006 @ 9:40 pm
Yeah, I was listening to that today as well, Prok. It all depends on technicalities, I suspect. I can actually buy 10,000 people making a profit, since you don't need to buy land to sell merchandise. Does making a profit include the collection of stipends, I wonder? Technically, netting over $1L is considered a profit, isn't it? I might transcribe those stats and add them to my list for comparison.
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