Guest Editorial: What’s Wrong with High Fidelity

The following guest editorial is by Dale Glass, who had an interesting perspective on the economics of the social VR platform High Fidelity. I asked him to write up his thoughts to publish on my blog, and here they are:


What’s Wrong with High Fidelity

by Dale Glass

I showed up at High Fidelity a some months ago, looking for greener pastures. Second Life isn’t living up to its potential in my opinion, so I started looking for alternatives. I checked out several, and HiFi is the one I fell in love with. The source code is available, the system is far more flexible than SL, it actually supports VR, JavaScript is far more sane than LSL, the community is amazing… but unfortunately, there had to be problems.

I quickly found the Federated HiFi Users Discord, and one of the first questions I had to ask was: “This is very neat, but how is it going to make any money?”. Not only is HiFi free to use, but it’s pretty much impossible to give the company any money if you wanted to.

High Fidelity is a bizarre thing for a business to make. If it had been named something like “Open Metaverse” and was run by a volunteer group, it would have made perfect sense. The very structure of HiFi seems to be made to resist corporate interests and to be usable by a group of random people spread around the globe. The entirety of the source code is open, the architecture is distributed both for hosting domains and assets, and the local currency is a cryptocurrency. Now, none of those things are in the most anti-business state possible (for instance, HiFi has exclusive control over the cryptocurrency), but it’s not a terribly business-friendly design either. Normally such designs come either from projects that are Open Source or Free Software from the start, or from projects that normal people aren’t expected to be interested in paying for anyway and that expect primarily corporate clients, like databases. But HiFi decided to try to target the average person at first, and that’s where things get weird.

The main issue for High Fidelity in its original incarnation is that there is no business plan in sight whatsoever. Accounts are free. Charging for hosting content won’t work because domains are self-hosted, and so are assets. And skimming off user-to-user transactions isn’t a viable plan because it requires a huge, thriving economy which has yet to materialize, and that the company doesn’t seem to be trying very hard to support.

Compare this with Second Life. I used to think that SL’s model of selling people virtual land was a weird idea that should be done away with, but now I think that it was actually a stroke of genius. Virtual land provides a huge incentive for people to reliably pay a fixed amount into Linden Lab’s coffers, and businesses just love that sort of periodic, predictable payment. And the way SL land works provides an incentive to buy more of it: right after you buy your first parcel you find out you have limited space and prim counts, and start thinking: “if only I had a bigger one…” Even SL’s deficiencies work in its favor here. Should one want better frame-rates or a bit more privacy, it’s possible to build in the sky. But most people want to keep something on the ground, so that of course that quickly eats into one’s prim limit, which adds yet another reason to give LL even more of your money. And there’s just that people can see how big your parcel is, so having a large one can certainly be a point of personal pride. SL’s model very nicely reproduces the impetus to keep up with the Joneses.

The benefits of this model don’t end there – Second Life land allocation corresponds directly to server usage, so as the user base grows or shrinks payments and the needed resources stay in sync with each other. And since the payments are periodic and automatic, Linden Lab also derives some benefit from people who pay for resources and then forget to use them.

Of course, Linden Lab also took care of ironing out any issues that got in the way of making money – such as stopping the fluctuations of their currency, and making it as convenient as possible to get money into and out of Second Life.

This is why despite being old, not making the news anymore, and slowly shrinking, SL is still chugging along and doesn’t seem to be in any kind of imminent danger.

So let’s review how High Fidelity could possibly make money from the way things are right now:

Accounts? No, accounts are free. And in the current state, nobody would pay for one.

Hosting? No, HiFi delegates that entirely to users. It’s the likes of Amazon and Digital Ocean that make the profit here.

Registrations? True, HiFi does charge $20 per year for place names. But I can’t imagine this paying for much more than HiFi’s coffee budget. There are way too few domains around for this to amount to anything.

Charging an amount for converting USD to and from HFC? They already do so, and this is often the suggested solution to HiFi’s woes, but it’s not viable. Let’s suppose HiFi taxed transactions at 20% (which would be very excessive and cause people to transact outside of HiFi). Let’s also suppose that an employee can be had for $50K/year (which would be unrealistically cheap in California in my understanding). Then it would take 416 people, using $50 worth of HFC each and every month to pay for that single person. Supposing HiFi could exist with just 20 employees (the current team page has 60 people), that would require it having 8,320 such users. People with such an intense desire for virtual goods are going to be very rare, meaning the number of active users in such a scenario would be far higher, probably at the very least in the hundreds of thousands. With HiFi currently being deserted and not growing any, this is a completely unrealistic expectation.

Then there’s HiFi’s attitude towards all of this. Even if HiFi suddenly became popular, for some strange reason the company seems intent on making it as hard as possible to give it any money. Buying HFC involves making an appointment (!), and even then you can’t pay for it the normal way: the company wants to be paid in Ethereum (!!). It boggles the mind that in 2019 a company working with the very latest VR technology is using a banking model out of the previous century, except for the cryptocurrency part, which while very modern isn’t particularly convenient. This of course puts a brake on what little economical activity there is in it, because even to get started one needs to find a cryptocurrency exchange, register, and prove your identity to it. I have paid another HiFi user and it was easier and faster to do it through their forgotten Second Life account. The fact that the state of HFC is so bad, that the best thing to do is to ignore it entirely, isn’t good.

So, that’s how things are. HiFi in its current incarnation doesn’t have a working business model, doesn’t seem to be making any real progress towards one, and is oddly apathetic about the one way it has of earning some cash. They are pivoting now and changing track to something else entirely, but it makes one wonder how they expected the old model to work out.


Thanks, Dale! Not too long ago, I had written about somebody saying that High Fidelity was making it difficult to give them money, but I couldn’t remember who first voiced that idea. It was you! It was such a succinct and memorable phrase that it stuck with me.

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Are Freebies Hurting The Second Life Economy?

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Photo by Don Agnello on Unsplash

I still find it somewhat ironic that I have done a complete, 180-degree change of direction in this blog: going from swearing that I would never cover Second Life at all (because hundreds of other bloggers do it already, and do a much better job than I ever could), to actively carving out a niche for myself, blogging about the various steals, deals, and freebies in SL.

My Second Life freebie coverage actually brings a fair number of readers to my blog, probably the biggest percentage of viewers overall when compared to my other categories of blogposts. In fact, my blogpost about free and inexpensive mesh heads and bodies for female Second Life avatars has now had a whopping 1,598 visitors—my third most-popular post ever.

So, I guess you could call me a freebie expert, or a freebie fashionista if you prefer. And this December has been the usual bountiful bonanza of advent gifts and hunt prizes. But sometimes I stop and ask myself: this is steady rain of freebies actually hurting the Second Life economy, and the livelihoods of SL content creators? In other words, are people not making as much money as they could and should be because of the abundance of free and inexpensive items in-world and on the SL Marketplace?

At first glance, the answer would appear to be “yes”. There has been steady rumbling from various quarters that many vendors are not earning the income that they used to. But are freebies really to blame for this?

I would argue that freebies, if handled properly by the store, can be an extremely effective way to promote a brand. For example, an attractive, well-made free item placed at The Free Dove (which usually includes a SLURL in the package) will often prompt my visit to the mainstore location to see what other products are for sale. In fact, I first learned about the store Alaskametro through their mini hunt at The Free Dove last summer (sadly, I have learned that The Free Dove has decided to stop having designer mini hunts as of January 2019). I had never heard of Alaskametro before, even though I had been an avid consumer in Second Life for over a decade at that point!

You could argue that the reason that powerhouse Second Life brands like Scandalize, Addams, and Blueberry became so well known is via freebies and inexpensive hunts, like the current reindeer hunt currently taking place at various stores on the Scandalize sim. (Technically, it’s not really a “hunt”; some store owners like Scandalize didn’t even bother to hide their reindeer.)

You pick up one colour of an item of clothing for only L$15, try it on, and like it so much that you land up going back to the store later to buy more colours, maybe even the whole fatpack! I’ve done it. You’ve probably done it too. Admit it.

Savvy marketers know that freebies and cheapies can effectively drive traffic to their stores, and increase overall sales. True, many of the people who pick up a free item won’t (or can’t afford to) buy a full-price item. But enough do so to make it worth the store owner’s time and trouble to create and promote freebies. Why else would a store like Alien Gizmo’s regularly offer free L$200 gift cards to their customers?

So, no. Freebies are not the reason for an economic downturn in the SL economy. If anything, freebies are helping content creators get the word out about their brands, and thereby earn more money.

In fact, I seem to remember a closed (i.e. not Hypergrid enabled) OpenSim-based virtual world (I believe it was Avination) which strongly discouraged vendors from offering freebies, thinking that the policy would lead to more people actually buying goods and leading to greater vendor profits. Well, I’m not sure if that was the main reason that Avination eventually closed (they had a couple of fraud scandals, and OpenSim grids tend to be rather precarious enterprises at the best of times), but I’m pretty certain that a ban on freebies didn’t help with user retention any.

My point here (and yes, in a very roundabout way, I am trying to make one!) is that freebies are a good thing. Freebies promote brands, encourage newbies to become full-fledged consumers, and lubricate the SL economy. So get out there and pick up some freebies today! Tell’em Ryan sent you 😉

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

Have you joined the RyanSchultz.com Discord yet? More details here


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.

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.