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Summary:

Om just passed on a fascinating entry from the blog of Tristan Louis, an application development VP with financial giant HSBC. Inspired by Clay Shirky’s scathing (and somewhat disputed) takedown on the media hype surrounding Second Life, Louis began crunching the economic activity numbers available on […]

Om just passed on a fascinating entry from the blog of Tristan Louis, an application development VP with financial giant HSBC. Inspired by Clay Shirky’s scathing (and somewhat disputed) takedown on the media hype surrounding Second Life, Louis began crunching the economic activity numbers available on the virtual world’s homepage, and in the company’s financial stats section.

SL cash transactions Dec 5Was Second Life as small and as sparsely used as Clay claimed? Tracking the financial numbers and the users who’ve entered the world since August, Tristan Louis came up with a somewhat contrary, and entirely staggering, conclusion:

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. [emph mine]

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.)

So summing up Tristan’s analysis: Second Life is people light (relatively), but cash heavy (absolutely.)

Of course, the “if accurate” is key. (I’ll check his figures with my demographics expert Tateru Nino [see below], and add any assessment she offers in an update.) Initially, I suspected that Tristan Louis’ numbers included last November’s infamous “numbers game”, in which an unknown Second Life user quickly (and constantly) transferred a very large bloc of Linden Dollars back and forth from one account to another, making the homepage’s “US$ Spent Last 24h” figure artificially jump by nearly a million US$. (First reported here, and confirmed by Linden Lab, the company behind Second Life, here.)

According to Tristan Louis, that isn’t the case: “The reason is that the burp happened on a Friday (if I remember well) but I took my data on Mondays,” he tells me by e-mail. “I remember witnessing it and thinking it wasn’t right so I accounted for it by ensuring that the two adjoining dates compensated for it.”

And while SL is relatively light on users, on Tristan’s view, that’s going to change very soon. He also ran an analysis on the growing user base:

“[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 [emphasis mine]… 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,” Tristan concludes. “… [T]his 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 Linden Lab is going to be a very strong player in the future.”

Again, I caveat the copious charts and graphs Louis offers, which may be missing an assumption or two. Read it all and check for yourself here.

Update, 1/6: Tateru Nino has her analysis of Louis’ analysis online here. She points out that many user-to-user transactions are not meaningful, in the sense of Linden Dollars passing from one actual person to another actual person, but even factoring in that, the economic activity is still considerable:

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.

Read it all here.

Also, on Tristan Louis’ own blog, Clay Shirky himself offers some thoughts, and Louis replies.

  1. […] sure I care. If you do, then check out Wagner’s post on GigaGamez. No comments Share/Send Sphere Topic: Reporter’s Log Tags: SecondLife […]

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  2. […] GigaGamez (01/05/2007) – Second Life: People Light, Cash Heavy? […]

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  3. […] Via GigaGamez, I found a fascinating post by Tristan Louis, an application development VP with financial services group HSBC. Louis’ post is about statistical analysis of Second Life numbers relating to how many users there are, how much money is spent, and other economic data. […]

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  4. As someone that was almost hired by SL as a developer I have to say either they aren’t making CLOSE to those numbers, or they are greatly not passing on those numbers to their employees.

    Salary for a data warehousing, data mining professional with 10+ experience was less than 80K a year and in silicon valley dollars vs. the rest of the US, that’s attrocious, especially if they are pulling in 250K a day.

    They may be moving a virutal economy equal to 250K US a day, but that doesn’t mean they have remotely that amount of income.

    If we want to throw virtual ecomonies around, give them the factored $1M US… WOW still beats them ;)

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  5. yeah, second life is pretty cool,

    but yeah wow still dominate over it though, still it’s a fair bit of money lol

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  6. […] To expand the metrics for evaluating Second Life and its importance, Tristan Louis set out to measure economic activity in the game, and has some intriguing findings, notably that power users are spending about $50 to $60 a week in the game. As Wagner James Au notes at GigaGamez , this suggests that Second Life is “people light but cash heavy.” Tristan’s post prompted a back-and-forth with Clay in the comments, which is worth reading. […]

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