So LL Residents and anyone else who would seem to care about the health of SecondLife's economy which also directly relates to the health and viability of Linden Lab as a company, here is my take on the latest Linden Lab Q2-2011 Economic Summary.
The reason I am posting my comments on this LL Economic report is not as much the dissappointing results reported, but moreso to expose both the fact that many of the reporting charts are trivial & missing some critical data elements and that the creative license that the LL author used to sugar coat the bad news or squeeze the most excitement out of the little good news was to the level of embarrassing.
Before I begin, here is the link to the Official LL Q2-11 Economic Summary
, by clicking on it you will get a new window of the LL page. Keep this window up as you read this blog so you can use it as a reference. I will talk through the report's sections from top to bottom. So let me go through a few of the latest Q2-11 charts and report summaries.DAILY COMPLETED REGISTRATIONS:
In the report's introduction, the stats in this section is used as an anchor highlight statistic to tell us that this something for all of us to get excited about. And when you look at the chart without taking a critical look at what is being present, you would be inclined to agree with LL that this is a good sign.
But for any LL / SL resident with any experience about the virtual world, you would quickly see that this stat by itself has little value to provide any true picture of what to get excited about. This chart shows total
completed daily registrations. What LL is not reporting in this highly summarized chart are two critical breakdowns of this number which would escalate this chart from trivial to a very telling and valuable bit of information.
There should be two charts created in this section:
- A 3 element chart showing TOTAL & its NEW CUSTOMER vs ALT account creation ratio. Without this breakdown, we all do not know if most of the new and growing completed registrations are just more ALTs for existing customers. ALTs are not strong GROWTH accounts and does far less to generate new infusion of cash vs a NET NEW RL User would.
- The TOTAL & its PREMIUM vs FREE ACCOUNT accounts being registered.
So to Rodvik, if you want to provide a more clear view of SL's economic health, have your team enhance this section. Until then, the LL Author of this report should not brag too much this section being a HIGHLIGHT growth indicator - its incomplete trivia.AVERAGE MONTHLY UNIQUE LOGGED-IN USERS:
So this is a section where the stat is valid (in fact I am happy that they are reporting an industry standard benchmark) but the LL Report Author took creative license on interpreting the results to make a bad picture look good.
Notice how this Q's results are explained as being 2.8% better than last quarter.
First of all, comparing this stat to last Q is not that important as what most analysts would be looking at is how this Q compares to the longer term history. Since LL reports current Q to the past 5 Q's, I am looking at the bigger picture. Yes its good news that SL saw a growth in unique logins, but its still in a recovery mode from a presented peak in Q1-2010 and still about 2.5% below this peak.
Second, as you read this report, notice how the Author decides when the current Q is compared to the previous Q vs comparing this Q to the longer term history of last year. Let me help you out - when its bad news the Author compares to last Q only, but, when its good news the Author compares against the more important longer term history.
This is the embarrassing part of the report. Does the Author not think we are smart enough to look at the charts and see bad new for ourselves? It just make the Author look like a Propaganda Flinger
So this section shows the most clear factor of BAD NEWS for SL and yet the Author spins the results with a very brief "its not that bad now lets quickly move on" summary interpretation of the results.
This is one result that I am sure everyone noticed and what keep Rodvik awake at night as a CEO. Why? Well for many reasons:
- It shows that User Hours continues to slide this Q and has been throughout the past 6 reported Qs. The trend is that total time spent in SL is constantly declining. No signal that the trend is breaking or turning around - even with Rodvik at the helm.
- Its down 11% from its peak in Q1-2010 which means that since Jan 2010, users are now spending 13 million hours less time in SL than now! Even compared to last Q, SL has lost ~ 1 million hours of user activity.
- This stat also sheds clear light on the truth behind the first stat of completed daily registrations. If daily registrations have significantly increased but user hours has declined, it tells me that most of the new registrations are ALTS since a single human SL User is often logged in with only one of his/her ALTs (the time logged in is shared among the ALTs he/she controls).
- This is also a potentially disturbing indication that maybe a lot of SL User Accounts are being abandoned since users have walked away from the game. What chart I would love to see reported is a chart showing total registered accounts and what percent of the accounts have Last Logged In within the Last month, Quarter, Year. This would clearly show the rate of account abandonment and turnover.
For all you SL Analysts / Observers, watch this number over the following Qs. Rodvik needs to turn this one around and so far that is not happening. Lower online activity directly relates to lower economic activities - including for the Merchant community trying to sell products.AVERAGE MONTHLY ECONOMIC PARTICIPANTS:
I will honestly admit that I am still not sure what this stat is all about. But I did decipher that the lower the number - the worse the situation. As was pointed out above, take note - BAD NEW = Compare to last quarter only and quickly move the reader onto the next stat.AVERAGE EXCHANGE RATE:
This reported stat is one LL could have pretty much saved virtual space on the report by not reporting to the community. Since LL completely controls and manipulates the $L/US$ exchange value by the amount of its own selective participation in the Lindex, they can hold the Exchange rate at pretty much what ever value they want. so unless the SL economy completely collapses, LL will always be able to make this value look steady and healthy.
What you will notice in this section is how the Author saw an opportunity to brag about how the results are better than LL's longer term history, especially for a stat that LL can fully manipulate. The Propaganda Flinger in action.
move on to the next stat.....L$ SUPPLY
This stat looks like exciting and positive but to me I do not see how the $L cash reserves held by customers is any indicator of strength or weakness. Until it is understood why Customers are holding more Lindens vs cashing it out, the stat is just an interesting stat. It could just as easily indicate that the economy is staling out as LL Customers are holding onto vs spending their L$. For example, if someone buys from my store, that indicates economic activity but since I cash out my profits every week, you should see a drop in overall reserves.
Also, the Author reported that they have been changing the factors that goes into this report. So, you dont even know if the increase or decrease is an apples-to-apples comparison.LINDEX VOLUME:
Two things about this stat.
First, as per normal in this report, the Author sees an opportunity to compare this Q to a longer term history of Q2-2010 because it makes SL look more healthy.
Second, this report is also missing a major breakdown of activity which would be a lot more telling and more valuable a figure. LL should break this report into TOTAL VOLUME and also the TOTAL LINDEN PURCHASES FROM US$ vs LINDEN CREDITS TO US$ (i.e. inflow vs outflow of Lindens to US$).WEB MERCHANDISE SALES VOLUME:
So this stat is one that again looks exciting but without a larger picture, this could actually be bad news. It looks awesome that LL can show how Merchandise sales volumes on the Marketplace has increased by as much as 38% from last year (PS - this fact is getting old but notice how the Author brags about the long term amazing growth).
But now as a Merchant who makes about 70% of my sales in the SLM marketplace and 30% from inworld sales, this stat does not and cannot show if the increase in merchandise sales volume is at the cost of lost inworld sales. This is what so many Merchants have talked about for a long time. Has SLM created a market environment that is forcing / encouraging SL Customers / Shoppers to leave the inworld community to shop on the web? If they do, what is the impact of inworld sales of merchandise - how big has the inworld drop in sales been? And if shoppers are discouraged from exploring and browsing the inworld to shop - how many impromptu sales are being missed?
Its already known that a lot of Merchants have been reducing the number of inworld store, and reducing the size of their stores (i.e. smaller parcels, abandoning shopping/mall sims, moving to renting at a mall, malls shutting down). So LL might be excited that SLM sales have rocketed - but they do not show the full economic impact of how much LL has lost in reduced Tier revenue and reduced inworld sales.
This is not a stat for LL to brag about unless they show how it plays with the bigger picture. All indications from all the Merchant discussion boards are that LL is gutting inworld Merchant activity and moving it to SLM.WORLD SIZE:
Last stat provided in the report. Well its like all the other stats that are bad news. And, as I just explained in the last section, this stat shows evidence how LL could be forcing a reduction in inworld activity because of policies and activities like strongly promoting SLM and the encouraging SL Residents to spend more time on places like Facebook instead of promoting inworld activities.CONCLUSION:
So, as you can see, the LL Q2-2011 report is not great news at all. It shows that even with Rodvik at the helm the SL Titanic has still not shown signs of turning away from the Iceberg ahead. And it also shows that the LL Staff feel its better to try to sugar coat the clearly bad news than to just be objective and call a spade a spade.
So, what are all your thought on the Q2-2011 Economy Report as well as my analysis of the report. throw your comments in here! As this analysis blog post is posted during the annual RL SLCC ... someone there ask Rodvik these questions.