Tristan Louis, an application development VP for HSBC, recently made public his economic analysis of the pertinent numbers available on Second Life’s website. For those of you who don’t know, Second Life is the highly controversial MMO 3D digital world in which paying subscribers interact in ways analagous to real life. The only things truly connecting it to reality are a) subscription fees for high-tier membership plans, and b) its in-game economy, which can be exchanged for real money. Like all real currencies, the exchange rate from “Linden Dollars,” as the currency is called, to USD fluxuates.
But back to Louis’ economic survey of Second Life. By dissecting the pecuniary affairs and the raw number of users who’ve subscribed since last August, Louis arrived at a conclusion that affords us a new perspective on Second Life:
On average, the number of logins over a 60 day period seems to be about 35 to 40 percent of the total population reported. The people who log in, however, seem to spend a fair amount of money ($50-60 a week) within the Second Life economy.
If accurate, this would mean that some 200,000-230,000 active Second Life users are on average currently spending more on their in-world experience than any existing online world by far. (For comparison, a World of Warcraft subscription is but $15 a month, and that’s money paid to the Blizzard/Vivendi, not user-to-user.)
To summarize Tristan Louis’ conclusions, Second Life is relatively sparse according to its amount of active users, but absolutely economically lively based on the average amount of cash trading an active user’s hands. Furthermore, even though Second Life doesn’t have an enormeous amount of active users, Louis predicts that that’s all going to change:
[I]t looks that, under the most conservative growth rate, we will see 3.5 million users registered and over 600,000 using the service by the end of April 2007. Under a liberal interpretation of the data, those numbers would shift to 9.6 million and just under 7 million. However, in the most likely case, it is probable that there will be 7.2 million users registered with 1.6 million logging in over the previous sixty days. Not too shabby.
“Not too shabby,” Tristan Louis concludes, but he also advises his readers “to go with the most conservative estimate because [his] data set is still relatively small. Even then, this type of growth mirrors some of the growth patterns we’ve seen in the early days of the commercial web and seem to support the contention that LindenLab is going to be a very strong player in the future.”
In response to Tristan Louis’ analysis of Second Life’s economic situation, Tateru Nino analyzed his analysis, ultimately judging that although many of the user-to-user transactions aren’t meaningful, there is still significant economic activity:
The way money moves in Second Life with tip jars and alternate accounts and refunds means that probably about half of the value given is double-counted. That would leave us with roughly 75% that we could count on, but let’s go the highly conservative route and say a mere 40% of that figure represents actual meaningful transactions, where there’s a net change in the distribution of funds that is in line with the stated figure. Averaging out Tristan’s weekly samples for December 2006, and then applying our own conservative 40% figure to it, we get a daily movement of L$ equal to $269,848 USD.
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