Results of the First Virtual World Economic Situation Survey of Second Life Merchants

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Recently a survey of Second Life store owners made the rounds, and the results of that survey were published today (I learned about it from Wagner James Au’s long-running blog, New World Notes.) One hundred and twenty-four Second Life merchants took part in the survey.

Only 22.7% of the merchants said that the current month’s sales are better than the average of previous months. 39.1% say that sales were about the same, and 38.2% say sales are worse. It would sound as though the majority of stores are experiencing at least a mild downturn.

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What was surprising to me was that 42.3% of vendors stated that Second Life was their full-time job and their main source of income, much higher than I expected! Only 29.7% said they considered their store to be more of a hobby.

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When asked if they were planning to move to Sansar or other, newer virtual world platforms, most merchants said that they were staying put in Second Life. Only 1.8% of store owners surveyed agreed with the statement that “Sansar is a great next-generation platform for my virtual business, I started creating content for it already”. Another 9.1% said they were planning to move to other platforms, such as Sinespace, VRChat and High Fidelity. More than half (51.8%) stated that they’ll stay in SL “till the end of the world”.

So, it would appear that rumours circulating that SL vendors are having a rougher time of it than usual appear to have some basis in fact. Sales are down for many, if not most, merchants. Only about 20% of Second Life store owners report better sales than average.

Another thing I found particularly interesting was that the overwhelming majority of merchants have an in-world store location (only 7.3% of those surveyed relied exclusively on the SL Marketplace and/or shopping events).

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Complete survey results can be found here.

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Does the End of PocketGacha Mean That Second Life’s Economy Is In Trouble? No.

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Image by Mediamodifier on Pixabay

It never fails to amaze (and amuse) me how much I have been blogging about Second Life recently. As I have said before, I never intended to blog about SL at all! This blog was originally about Sansar and Sansar only, and then last January I broadened the scope to include all the newer social VR platforms (High Fidelity, VRChat, Sinespace, etc.). And then, I decided to start sharing my 11 years of accumulated knowledge of how to get the best steals, deals, and freebies in Second Life with you, my readers. And those posts generate a fair bit of traffic, too.

Lately, I have been covering other aspects of Second Life, such as the upcoming ability for Premium Second Life account holders to choose a new first and last name for their avatar. That one blogpost is now by far my most popular, with well over 2,500 views!

As you probably know, gachas are a big, big thing in Second Life. Which is why I was so surprised to hear that PocketGacha was shutting down, even though it had thousands of users and earned lots of money:

  1. Just over $300,000.00 (DOLLARS…not Linden!) were transacted via the two HUDs [PocketShop and PocketGacha] – generating real sales and real money for creators. This is demonstrative proof that those who feel SL is not “real life” are grossly mistaken. Small cottage industry brands (People!) benefit and, in many cases, PocketEvents proudly contributed to their lives and well-being. A number and fact we are very proud of.
  2. Over 30K unique users engaged the two HUD’s during this time. While we have no idea how this compares to other events we can say this: given an average of 30K users on SL at any one time it seems a healthy percentage of the grid at the very least tried and embraced the shopping HUD platform with us.

I used and enjoyed PocketGacha myself, and I loved the convenience of the service. So why are they shutting down? The PocketEvents team explains:

With that said the team has felt of late that now is the time to move on to new ventures. Those age-old words of “always leave a party when you are having fun” never rang so true.

It’s no secret that PocketShop never really resonated with shoppers like PocketGacha. Just like PocketGacha we worked to address the needs and wants that so many voiced. Creators wanted traffic driven to their mainstores. We did that. Shoppers wanted less lag and instant gratification at events without having to fight to TP. We did that too. HUD based delivery of Demos to try in private…check. Just like PocketGacha we looked to be more than an event but a solution to the most common wants. Yet, despite it all, shoppers were less than impressed with PocketShop.

We have spent two months trying to understand if this lack of engagement was a result of anything we did, a failure to properly market the idea, or perhaps a fault of the HUD design. Nothing made sense as those who did use the HUD found it just as easy as the popular PocketGacha HUD. What we surmised is that in the end shoppers better associated us with Gacha and their seeing beyond that was difficult.

There is no doubt as well that SL commerce is changing. The boom-boom days are long in the past. While perhaps the top 1% of brands might still be doing fine (though I’m certain not selling what they once were) the new and emerging brands are finding it harder and harder to connect with shoppers. The drastic drop in new users in SL and an inability to retain these avatars has led all of us to this juncture. In some ways we have reached the point where we are just selling sneakers to each other. Or, to better quote the old adage, “delivering pizzas to each other.” Because, really, how many sofas can one own after years in SL? The people at Linden Lab are smart. I am sure they know this as well and are working on solutions. Let’s all hope.

The finale to this perfect storm is that the world of events is becoming saturated to the point of being destructive to one another along with the brands that try to balance doing them. While the old-line events may thrive to a point (I think, again, not like they once did) new ones arise it seems each and every day and SL is starting to feel like a town of 50K people that has built 50 shopping malls. It’s just too much for the current market.

Wagner James Au calls it a sign of an SL recession, saying:

This closure comes despite Pocket Gacha and a related HUD being used by a reported 30,000 unique users transacting over $300,000.00 “DOLLARS…not Linden!” across the service.  What Pocket Gacha lead developer Oobleck Allagash tells me suggests a larger economic trend I’ve also noted elsewhere — less emphasis on virtual homemaking, and more on Second Life as a social media experience:

“That shopping is being affected, especially in the area of Home and Garden, due to a minimal amount of new users and a lessening interest in creating sim builds,” as he puts it. “After all, how many sofas does a 10-year old avatar need? Photography has been a saving grace to a point but at levels nowhere near what we saw a few years ago.”

In other words, as more and more of the Second Life experience is shifted to virtual fashion/lifestyle screenshots and video on Flickr and YouTube, there’s less need for virtual land, and less need for housewares to furnish that virtual land. All that remains is what’s core to the user — their avatar, and their avatar’s appearance (clothes, mesh bodies, poses, etc).

I’m not sure that I agree with Wagner that Second Life is undergoing a recession, and I also don’t agree with the PocketEvents team’s assertion that there’s simply too many stores chasing too few customers in Second Life. Stores and brands are always going to come and go, and some of the newer ones have been phenomenally successful (as anyone who tried to teleport into the Scandalize store this weekend will certainly attest).

I spent a good chunk of time signed into Second Life over this past weekend, visiting various stores, and I can assure you that there is certainly no shortage of shoppers. Now, mind you, I can only attest to the health of the avatar fashion market as I see it; Oobleck may indeed have a point that the level of SL home and garden shopping has gone down somewhat.

Although Linden Lab certainly has sales figures for the SL Marketplace (which of course they don’t share with us, other than giving an aggregate sales figure at events such as the 15th anniversary), they really have no way of knowing how well items are selling in stores that operate on the grid. All they (and we) have to go on is word of mouth, and the news can be contradictory at best. There has always been, and there will always be, good news and bad news. Some vendors are doing well, and others close down. It’s all cyclical, I believe. New vendors enter the marketplace as older vendors leave it (or, more likely, leave their goods to sit forever on the SL Marketplace; Linden Lab really needs to put a date filter on Marketplace search).

Second Life is constantly evolving and changing over time as it matures. This does not mean that it is in a serious decline. As the recently published academic book Living and Dying in a Virtual World: Digital Kinships, Nostalgia, and Mourning in Second Life states:

At fourteen years old, Second Life can no longer be perceived as the young, cutting-edge environment it once was, and yet it endures as a place of belonging, fun, role-play and social experimentation.  In this volume, the authors argue that far from facing an impending death, Second Life has undergone a transition to maturity and holds a new type of significance.

I do believe that Second Life will endure and that it does have a long and successful life ahead of it, although the overall number of users may continue a slow decline as more people make the move to Sansar and the other new social VR platforms and virtual worlds. Many will no doubt keep a foot in both Second Life and the newer worlds. I know I will!

So, don’t worry; the shuttering of one Gacha HUD does not mean the end of the world.

Money in the Newer Virtual Worlds

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Image by TheDigitalWay on Pixabay

The best things in life are free
But you can give them to the birds and bees
I want money
That’s what I want
That’s what I want
That’s what I want

Your love gives me such a thrill
But your love won’t pay my bills
I want money
That’s what I want
That’s what I want
That’s what I want

Money, the Flying Lizards


In-world currency systems are an integral part of many social VR/virtual world platforms. Second Life can be seen as the perfect example of a virtual world whose popularity exploded once people realized that they could make money on the platform, inspired by a 2006 Businessweek cover story on Second Life entrepreneur Anshe Chung:

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This blogpost is an attempt to provide a comprehensive overview of how the newer virtual world platforms have implemented in-world currencies and set up systems for commerce.

Sansar

Linden Lab has, of course, 15 years of experience working with Second Life‘s economy and in-game currency, and they have applied that expertise in the setup and operation of the economy for their new virtual world, Sansar. You can buy Sansar dollars in two ways, directly in bundles or via the Sansar Dollar Exchange (SandeX), a currency exchange. There are more details on the SandeX in this document:

 The SandeX is the official virtual exchange of Sansar, run by Linden Lab, where you can:

  • Buy Sansar dollars at the current market rate.
  • Make limit buy offers at a requested exchange rate.
  • Sell Sansar dollars at the current market rate.
  • Make limit sell offers at a requested exchange rate.

All SandeX transactions are subject to transaction fees.

Market buy and sell

Market buys and market sells are the quickest ways to purchase or sell Sansar dollars on the SandeX. The SandeX automatically matches your order with the best exchange rate. The quoted exchange rate includes transaction fees associated with buying and selling on the exchange.

Limit buy and sell

Limit buys and sells allow you to specify the amount of Sansar dollars and the exchange rate you are willing to accept. The SandeX automatically matches up buy and sell offers as they come in. If you are buying, you must have sufficient funds in your US$ wallet to pay for the buy order.

Creators can sell their creations on the Sansar Store, and can also receive statistics on how well their items are selling. There is as yet no in-world commerce like they have in Second Life.

Sinespace

Sinespace has two in-world currencies, called silver and gold. According to their wiki:

Gold

Gold credits can only be purchased for real money by spending users and can be converted back to real money by Sine Wave virtual goods partners.

Gold credits trade at 100 / 1 fixed ratio with USD$

Silver

Silver credits are free promotional credits given to users as rewards for participating in the community.

Silver credits cannot be converted to real money but can be used by creators to promote their content to new platform users who have not yet purchased gold.

Sinespace has a Marketplace built into its client software, and a few vendors like BlakOpal have also set up in-world stores.

High Fidelity

High Fidelity has attracted a lot of recent media attention due to the fact that they have decided to set up a blockchain-based in-world currency, called High Fidelity Coins (HFC):

  • Blockchain Technology: Our new currency, High Fidelity Coins (HFC), will be a public blockchain with a consensus group of multiple parties. A blockchain is essentially a digital ledger of transactions. We are using blockchain technology to track and record transactions made using HFC. All information on a blockchain exists as a shared database, which means the records are public and verifiable. It is not centralized. We are also using the blockchain to store information about digital asset ownership in High Fidelity. This enables us to protect intellectual property by embedding certification in items in the blockchain. HFC will eventually be convertible to local currencies or other cryptocurrencies at popular exchanges.
  • Cryptographically-secured Wallet: Users will be able to participate in transactions using their Wallet, which will be an app on their tablet in High Fidelity. Your Wallet is secured using a security picture and a passphrase which includes ECDSA public-private keys pairs. These key pairs are used to sign each transaction.
  • Proof of Provenance (PoP) certificate: This certificate is generated for every transaction between a user’s Wallet and the Markeplace. This certificate’s ID is stored on the blockchain. The certificate contains static properties that can help in identifying the item and the owner. These properties cannot be altered, except by transfer of the PoP Certificate. Currently, we only support objects that contain a file type .JSON. Support for avatars and other file types will be coming soon.

Currently, the only way to get some HFC (a free one-time grant) is to go to the Bank of High Fidelity domain at their open times and meet with the banker. Here’s some more information of HFC from the High Fidelity website:

We are currently giving out the currency for anyone interested in participating in the closed beta for High Fidelity Commerce. If you want to get your inital HFC grant, you first need to set up your Wallet.

These coins are to be used as currency for any commerce transactions in the Marketplace. Since we are using blockchain technology, all transactions with HFCs will be publically recorded and stored.

Your Wallet will be secured using ECDSA public-private key pairs, security picture and passphrase. Learn more about your Wallet here.

HFC is not intended for speculators to hold and should be used in transactions in High Fidelity. HFC is intended to be a stable currency and used to support a healthy and vibrant virtual economy for digital goods and assets.\

High Fidelity has an online Marketplace where vendors can sell their products (users can also access the Marketplace listings using their tablets in-world). Avatar Island is the first domain set up in HiFi where you can try on and purchase items for your avatar in-world.

VRChat

VRChat currently does not have any sort of commerce or in-game currency, although there is a thriving real-world business for people designing and rigging custom avatars for VRChat users. It will be interesting to see what happens when/if the company decides to implement an in-world economy on the most popular of the social VR platforms.

AltspaceVR

As I recently reported, AltspaceVR seems to be gearing up for commerce, but at the moment, there is no commerce or in-game currency system in place.

OpenSim

Different OpenSim grids have different solutions to the problem of an in-world currency. Every grid has in-world stores which offer merchandise for sale. Some grids issue their own currencies; others use the Gloebit system, which has the advantage of being one standard currency which is transferable and usable across a large number of participating OpenSim grids. The Kitely Marketplace is a popular shopping mall for the many OpenSim virtual worlds:

Kitely Market can deliver items to all Kitely avatars, as well as to avatars on all other OpenSim grids that support the Hypergrid. Our marketplace also delivers items to avatars on several non-Hypergrid grids that have been set up to receive deliveries from our system.

Kitely Market has been used to deliver items to thousands of OpenSim users on more than 100 different OpenSim grids.

Virtual Universe, Decentraland and the Other Blockchain-Based Virtual Worlds

Virtual Universe, Decentraland, Mark Space, Staramba Spaces, VIBEHub, Ceek, and Terra Virtua (among many other products in this increasingly crowded marketplace) are issuing their own blockchain-based cryptocurrencies or tokens for future use on their platforms. all of which are still in development. The product closest to a launch date appears to be Virtual Universe, which plans to start a closed beta sometime in the fourth quarter of 2018.

I’ve already strongly warned potential investors to do every. single. scrap. of their homework before investing a penny in any of these blockchain/cryptocurrency ventures (link). Caveat Emptor!

Other Social VR/Virtual World Platforms

I can’t think of any other metaverse products which have in-world currencies at the moment, besides the adult virtual worlds like Oasis and Utherverse/The Red Light Center (these links are safe for work). If I’ve missed one, please let me know in the comments, thank you!