O'Reilly Webcast: Virtual Currency in One Hour

ah good morning everybody and thank you for joining cheer we are going to talk about virtual currency in second life first let me introduce myself my name is Tom Hale and I've been around the digital media stage for about 16 years first add macromedia then at Adobe endowment in lab and the tag here says my name is T Linden because in Second Life all employees of linden lab are given a name which is there in world fame and minus T minutes so should you join second life and look for me IM t winded i'm very happy to have you guys with Davis morning and I am excited to talk about a virtual currency so I wanted to start by kind of feeling a little bit of an anecdote about how i came to second life and when i was leaving adobe anything for the next thing for me to do one of the things that I using my criteria was making sure that whatever company i joined had a really really great business model and so when I was deflected line I realized that suddenly I've had a great business long a failed business model is not on the problem at second light leaves dissolve it has a tremendous there's a small log on virtual currency as well as other things we're gonna talk and focus on the virtual currency kind of model today i'll talk a little bit about why i think it's such a great business model in this in this presentation of course i want to say kudos apologies default beer to provided the wonderful graphic you can check out somebody writes of all beard oregon get a t-shirt if you like when you think about virtual currency you have to put it in the context of your you're thinking about applying it and in terms of today's talk i want to kind of put it in one or two of these buckets because virtual currency has very different about meaning and context and when you think about the difference on complications that might utilize it so for example in gaming virtual currency is most often related to purchase of of indian goods or element that actually came to gameplay in online communities virtual currencies can actually be non-monetary they can be about points for status or prestige or actions that are taken that evangel a leaderboard and give you more status and prestige in the community and that's very different from an economic spiritual currency in social networks virtual parentheses can be both mediums of exchange and mechanisms for exploring status and prestige in virtual worlds one of them's its most interesting about virtual currencies is that most often are a mechanism of exchange and so we're going to focus on probably by definition to gaming and virtual world uses of virtual consciousness presentation but it's really important to note that if you look at properties for categories of of activity on the web all of them have a lot to gain and learn from virtual currencies and the waves are managed in fact it's most interesting to me that in the face of the lap 12 month virtual currencies have kind of come up as the business model answer to that question that was posed in the first slide which is that what's the best business model for an Internet company or an Internet service virtual currency and many times is one of the short list answers of how do we make so let's talk about what really drives in virtual currencies well it really goes to sort of obvious but virtual currencies are generally something to be purchased you were to buy something which is a virtual good and the consumer motivations behind purchasing virtual good start primarily with this sort of need to establish identity it's a form of self-expression this can take the form of customizing your avatar of buying clothing items or brand items that represent what you want to project it to the world around Norfolk community around you and in Second Life this often take the form of clothing there's a gigantic fashion community in Second Life further enables people to express themselves with an incredibly wide range of choices about what they were err what they say what they what they with their time telling people buy the clothes that they wear and this is very very much an analog to the real world the choices that we make about the clothing that we wear or the objects that you attach to our ourselves and to our identities in the real world actually turn went directly into the virtual world in many cases people are making the same kinds of choices about what they want to express in the virtual world is a view in the real world the second consumer motivation for virtual goods is doing more and this is primarily expected in the game context you can take about either purchasing or working hard to earn gold to purchase a virtual item or virtual good that increases the capability of your character with utility of the game or utility of the platform in the classic example of this is as you level up in any kind of MMORPG generally the virtual goods are part of the steps that you need to take to level up and you're given more capability more utility if you do this and of course this is when some interesting practices and games such as gold farming where users spend hours and hours and hours in the game creating virtual goods or earning status and powers and then leverage that kind into money by selling those goods to people who have less time who then consume the person and can take those powers and capabilities that haven't invested trying to get there a proven model and has actually come to preeminence in any kind of gaming circles under the model that it's very easy to get started in a game and then as you are becoming more and more invested the gameplay or in the channel girl that you're you're playing you begin to sort of invest about in the virtual good instead of paying upfront fee or even a monthly fee you're buying virtual goods along the pathway and for this is a model in or originated in Asia over the last you know 10 years or so and has really function family and starting to be to the answer to many many many gaming companies saying how do you make my in the space the third one I think this is actually more of a social value but it's related to the other two it's about building relationships a virtual good they can eventually the mechanism by which you build relationships with other people in your community or even outside of your network by giving them gifts or sending the messages and in fact I think this is a very very kind of broad concept making it some pitch broader than just virtual good it actually goes to all many forms of communication you think about the picture that I took while is on the train looking about fuji and i sent that to a friend thing i'm thinking of you that's a communication act but in some sense the photos is the kind of gift it's a transfer of information a transfer of a feeling I'm thinking about you at this time and making those kinds of experiences between individuals very very easy turns out to be a very interesting business I'm sure people are familiar with the phenomenon a Facebook of a people buying gifts for other members of their network on their special day their birthday for Valentine's Day or whatever and this is a pretty interesting trying to model here if you think about these three interlocking consumer motivations depending on the kite that type of site or type of value that you provide to your users you might mean one way or the other and mix these three values in different amounts now of course on the other side what's the publisher motivation and why is virtual goods virtual currency a very good business mall well we talked a little bit about this before the truth is that most of the value i would say around and motivation around getting into virtual currency virtual good in fact that this is a correct implementation level you're not monetizing the ads or eyeballs or advertisers you are monetizing their users themselves and so to the degree that you can engage users he will monetize them themselves and that's a very powerful strong relationship with the customers correct and it tends to be if you're successful on it both high margin business in a 50 business so the model fear appreciate forward the free-to-play model that I describes where you get into the game you get into experience for free and then as you sort of begin to advance or invest more in the game you begin to pay for virtual goods along the path and of course the venue virtual currency the hybrid model is an interesting one where you have both maybe a premium subscription model this is like second life Glenn conscience dragons any other games where you're both paying a subscription fee and have a virtual goods model there's the direct consumer model where you are preventable publishing the virtual goods and creating the virtual goods and selling them directly and then there's a model like affected life which is really more user generated content second life or Linden Lab doesn't create content other than search starter content what happens as most of the users themselves create the content sell the content make a market economy the other motivation here of course is the fact that not only the direct monetization and a direct relationship with the customers it's actually a great business if you think about the kinds of dollars you can you can earn for customer as a flight or the game publisher as a world creator with virtual goods you can expect to extract two or three dollars per month but in some cases you can extract very very large lump sum stuff in a triple-digit average life from valuation is your problem monetizing some of your customers you know many times sometimes and thousands of dollars over the lifetime this is this is quite interesting again against direct but also because the numbers involved for pretty significant to put it in context if you were to think of Google's dollar per game users you might see Google let somewhere between twenty and thirty dollars for the user per year by contrast if you can pair that with something like the Second Life we actually extract something like 70 to 75 dollars per unique user per year on now the number of unique users in second wife's case is much much smaller obviously but the depth of monetization is and then the last point of a publisher motivation is the degree of engagement not only do virtual goods if we are purchased to enhance your identity become part of a model where you're invested in the identity that you created in the the avatar or character that you filled or in the powers of the end in the gameplay that she's invested in but also you're invested in the community and you're vested and representing yourself to that community this is a phenomenon second line that we observe very deeply which is that our average kind of customer engagement is over the question two years at the same time there's a financial investment if you've spent oh I don't know ten or fifteen dollars your investment isn't that great you're not spending a tremendous amount of money but you have spent enough money that that you've got an asset or not whether to the investment in the armor and swords that used to play the game or in the identity that you created that deep engagement sometimes very attractive to think for any site publisher great so by by the way back up let's talk about the business models I want to make a very clear distinction between the publisher created content user created content publishers created content is probably something more along the lines of a game where all of the content of the world is created by the game publisher whereas in second life or something like in view most of the content is user created and the business models that fall out of those two those two models are listed here in the direct model obviously you're selling the virtual goods yourself so those sales candy trauma source of revenue selling the currency to enable the purchase is the other source of em and this is sort of probably the most common model that you see around virtual currency also we're starting to see more platform fee kind of business models where vendors or publishers are going to brand to try to establish grand partnership and extract a platform for you for bringing the virtual goods into their world there's also emerged a set of companies that are doing this in kind of a cross platform across world way solving a lighting problem of the technology travel in the indirect model what's interesting about this is that because you're not directly selling the goods to the consumer it's a user-generated content model where the users or in our case we call them the residents are exchanging goods back and forth the types of businesses that fall out of this can be the transaction fees that enabled the exchange of the goods and services advertising listing fees the services exchange fees around extracting from the virtual currency US dollars or going and purchasing US dollars or any other real world currency for virtual currency and these models are a little different they tend to be more focused on the micro transaction on the idea that you are enabling someone with the purchase of a virtual currencies you should go into an environment and not have any carrying costs and any friction on the transaction the only friction in especially in our cases when you leave or enter the system and so as a result or sort of an advantage I intrinsically in terms of making your transaction frictionless in terms of staying in the virtual currency the last of course is the hybrid model which is combined with with other elements and I think one of the things that actually sets when the lab and such a life apart from many of the virtual worlds is that where games is that we have a model which combines with its concept of land which is sort of a persistent hosted States and the interesting thing here is that you know some of our customers pay second line for linden lab on the order of hundreds of thousands of dollars per year for the service and that kind of monetization is is both interesting because of its scale but also highly how you persistently took the reason why they get paid that amount of money is because they actually built a business and our funding that cost their business and maintain that back to life so I want to make a distinction here between what we've been talking about which is virtual goods and virtual currency and a virtual economy because one of the things that really sets Linden Lab and second life apart is the fact that we're not just a virtual currency in the directions mom you're not just a virtual goods model where we're using that virtual currency to buy virtual goods or consumers are doing that we're actually an economy and the trick of those of course is that once you have a virtual economy you should run into some of the challenges of managing a virtual economy what that's what's apart is that in many in many cases people are entering into the virtual economy with the intent of making money they will create goods that will sell goods and they will collect virtual currency and at the end of that people try and take that virtual crunching extract US dollar profits from it and have this creates a number of interesting challenges for any company for trying to pursue those not the least of which is trying to manage that economy so I'm going to turn to discussing a little bit about the Second Life economy as a way of context around virtual currencies so why is this interesting why am I somebody who is interesting talk about this what's interests what's what's here on the screen is our quarterly trends of several of the key metrics around our Second Life economy we track a lot of metrics but these four are probably most interesting to look at and we'll start me up the left upper left-hand corner one is the total of users user transactions on a quarterly basis and its measured in millions of US dollars you can see in the last quarter it was 144 million total exchange that's a pretty interesting pretty interesting number if you think about it kind of on an annual basis that's roughly a 500 million dollar gdp for four second lines and that puts us somewhere in the range of several small countries in the real world economy an Epson on a nice trend over the last four quarters the next metric of course is the amount of virtual currency exchange the low injection will talk about local indexes and what this number V of what you see is the Christians of steady as city today can come the flight grove of exchange between residents where they are actually trading the virtual currency for u.s. dollars and you abolish commercial the third metric is a quarterly extra sales extra is our web catalog the number here is is interesting not because of its scale because it's only about 1% of the overall economy but because of its growth rate you can see that it's going on a nice growth rate from its inception in an accelerating prorating recently all over the function of user hours which is the amount of time that will end in the world and I've also been on a nice a nice growth trend the interesting thing about easier hours is that if you actually aggregate this and look at it on per user basis the average amount of time that people spend in second life is roughly 40 hours per month and if you think about it from the perspective of entertainment that's roughly 10 hours a week maybe two countries movies that's a pretty interesting investment especially when you consider that is the mean the average which means there are obviously some people who are much less engaged but some people who are much more can be engaged great so now that we've sort of established that our economy is large and interesting let's actually just quickly talk about the elements of the virtual economy obviously there's the environment think that context for the for the virtual economy there are the virtual goods which are the things that people want whether they're user-generated republished strips and regenerate is discussed but then there's the virtual currency and I think this is important I want to read the words here word for words you guys can think about them a virtual currency from our perspective if you read our Terms of Service in this language destruction summer comes service is a limited license right to use a feature of our product are not redeemable for any some of my ear monetary value and that's a very important piece of language because it defines it defines what what the virtual currency is it's not a currency it's a it's a right it's a limited license and you you know people are free to trade that limited license amongst themselves but it's not something that pitch is a a redeemable crunchy and there is the marketplace which is the mechanism for the listing promotion for shipping services we have a marketplace that is both in the world and that's actually built into the software of Second Life and we have a marketplaces up on the web which is called x3 and it's easy to browse and sort of more in the TV ecommerce model and then there's an exchange which is really a mechanism for the purchase of redemption the currency and I'll make the point that some virtual economies have those exchanges on their domain as we do the lindex is a second life property it's available from our website we run it we manage it from some game publishers or virtual currency publishers maker exchanges they exchanges happen off of their domain and that removes them from the for many of the interesting challenges around mentioned virtual currency and then of course there's the money supply itself which is the amount of currency in circulation if you are not if there's no exchange and there's no way to take the virtual currency out of virtual crunching into a real world currency the money supply becomes less important although it is important when you consider what we exchange rate would be to make sure you're you're very cognizant money supply the second all right now let's talk just briefly to sort of set a high level pattern for what the virtual economy looks like here we have second line you know there's in world experience there's the xstreet web marketplace as I discussed there's the lindex currency exchange and we've made available api's and capabilities in our platform so that third parties it builds exchanges and for 26 blunt marketplaces I think for most game and little publishers the facts which model is actually a reasonable model people can actually extend their virtual economies offer domains and this one has a very good solution content creators come to the platform they create content consumers some of the platform they want to consume content we are looking for virtual goods to answer the region situation before and that dynamic creates the sort of loop of the economy in our case it starts with Linden dollar purchases consumers purchase women dollars either from Lincoln lab or from each other they then payees both of them dollars to pay for things and receiver shal goods in return and if when those when the learner dollars will be accumulated on the Creator side where I now have a balance of the virtual currency that I want to trade in I then sell bad for u.s. dollars and this becomes a virtuous circle of the economy because for every failed as a purchase on the other side and I'll emphasize one point here's is really important which is to say when someone wants to cash out of second life and take their US dollar profit out there not redeeming them from from us about redeeming them from linden lab by redeeming in turn someone helps who is holding and willing to buy linden dollars from them and that is the sort of phenomenon of currency sales which happens on the our exchanges among third parties changes in this is the phenomenon of filling when the dollars for u.s. dollars and for people to do this we call currency traders and their feeding this apply if you will of US dollars in exchange for linden dollars currency sales is one of the mechanisms by which the economy operates and if you will value total values injected into the economy the other vector into the economy are sources of the currency and in our case we provide for some of our customers to pay a monthly subscription fee a monthly stipend and that represents new money supply entering into the economy and we also have sailed directly to consumers and I'll talk about that and we call that the money supply which is sold on the windex and that is how Linden Lab in mitigating education economy we become the direct vendor of hundred dollars to consumers but we only do that on occasion from if i were to characterize the amount of linden dollars that we sell versus the amount of lurgha dollars that are changed by our customers it isn't the vast minority low single digit percentages there is back here there's a something called the sink and this is actually how linden dollars are removed from the economy in a classic money supply management scenario sources increased from my supply chains to lose the money supply I in this state these are sort of micro transaction fees that we charge for people to promote their goods or to upload content as part of the mechanism of being a creator he's trying to market to consumers these small charges are one of the ways that you remove money supply and then the last of course is currently buys if a creator has aggregated a hundred dollars and they want to they want to actually capture some profits they will fail their learning dollars for u.s. dollars and take currency trader on the other side of that transaction will strengthen us college for linner dollars and then go around and sell it to someone else so this is sort of the model for the economy some of the players and the dynamics of it I think as a horrid it'll it'll look forward on that so the interesting and maybe most kind of non non obvious parts of this is that if you are managing the money supply one of the things that you have to do is figure out how you're going to value that currency of course our approach to this is to allow the marketplace to value the currency but we want to make sure that we provide a stable medium of exchange one of the risks of an early stage economy or an early stage virtual currency is that the laws of supply and demand apply and if you oversupply the economy that the value goes down and therefore the value of the goods that are denominating your currency your virtual goods goes down and if you constrain supply of the currency becomes hyper valued and become so it becomes difficult to actually manage the manage the value of the currency and becomes for maybe a Wild West kind of mentality if you look at the bottom image the high low average exchange rate you can see the sort of cluster of spiky red set hills on the left-hand side of the graph and that was very early on in the history of Second Life that the supply and demand equation was both changing rapidly because of so many do users coming but it was also something that was not it's not a well-understood mechanism and therefore there were from so genetics bikes in the marketplace as we need to the right you see it relatively steady trend in terms of the exchange rate between run of dollars and US dollars it's because we've been able to understand the dynamics of the market so to start you know the exchange is basically a way of people fishing is US dollars for luma dollars and vice versa they do that the market and limit by telling Reuters like most marketplaces there's a small spread of about 4 cents per dollar which is what motivates currency traders to be on the other side of transactions which then gets us out of the business of having to redeem virtual currencies for u.s. dollars and then there are small transaction fees on the buyer and seller side which enable us which is how we both sustained and defer the cost of that marketplace and if you look at the top graph you can see that we've managed to maintain the pricing of linden dollars of US dollars relatively steady and within a trading range represented by the red bars how do we do this well we're managing exchange rate we're using the sink the counterbalance inflation will basically reducing money supply by thinking is when there's upward price pressure which to say there's Morgan a man or a supply of the currency we actually sell would trade we sell into that market place therefore relieve that pressure on laser sources and we only sell linden dollars on demand exceeds supply and I generally haven't told me once or twice a week on weekend from you such as most is most riveting and this is a interesting dynamic Annette of which is that the currency has retained its capability which is of course one of the precursors for actually having a Connie to do manage to so let's talk about the money supply for a second this is a graph of the money supply as it's grown over time from sort of the beginning of the history of Second Life what you can see is that it's reached over six billion hundred dollars which is roughly 24 million u.s. dollars what's interesting about the money supply is that it turns over roughly twice a month on this is something that's economist called velocity which is to say for how many times is a wyndham or a dollar used in a given transaction in a given month we have 50 million u.s. dollars of transactions we have the money supply dropping 24 million for the velocities roughly to the interesting thing to note here is that as second life rose as more consumers come to it and more creators come to it we have to actually expand the money supply to maintain disability the currency and its potential expanding by watching for seven months all right so all of that has been about virtual currency which i think is obviously interested about the topic of today but of course a virtual currency in its abstract is not burning full you actually have to talk about the virtual currency in the context of the goods which people want to purchase and from our perspective it is probably worth taking a minute or so to talk about the dynamics of our marketplace in gross terms you know second life has a very very large lot of people aged I think that says takes us to the point of being a scale and having you know many many hundreds of thousands of customers were creating content the number as it stands today is to hundreds of terabytes contents of our databases with 200 to 2,000 new objects being create each day and from upwards of 100 million plus items the that's a very very large data set and the interesting thing from our perspective at set analyzing that data set in the aggregate is it free hard because there's less of a taxonomy on that you might imagine user-generated content users don't always if you will tag the identity of their object in a way that's meaningful there is metadata around it most often we may want to promote that object but it becomes something that is relatively challenging to Airlines recently however because we've introduced our web chat logs we now have actually a very very rich data set for looking at the kinds of goods and people purchase because each one of these transactions husband has a good deal with metadata my web catalog is called X trees you can see a screenshot of it down there in the bottom right there's about a million listings on registration there's dozens of categories you can see some of them from animals down to weapons vehicles even used items which I find interesting in context to virtual goods when we have tens of thousands I emergence there and what's interesting of course if you look at that list of categories you see the Avatar accessories and appearance are the top categories in terms of numbers of items in each one along with apparel but some of the interesting surprises there if you look at home and garden building components you look at the vehicles that many of these items are actually ones that relates sort of persistence page that you're customizing your building your garden your building their home again as one of the unique features of a second life that makes it interesting so it characterized this overall is overall market place one of the things that you always look at me and try and look at in the aggregate is like okay well is it a power-law kind of market items in a long tail kind of marketplace where's the concentration of the economic activity and to characterize out a little bit if you look at the catalog of items it's long tail there are no super concentrations in terms of economic activity around either categories or or items the strongest is the one that we talked about is the accessories and appearance of Carol that's kind of probably the biggest concentration but even that is supplied with them but when you turn it around and you look at the shoppers and the merchants and create the content it is very much a power-law marketplace there are shoppers and if you will create the bulk of the activity in the bulk of the economic activity there are emergencies apply the bulk of the activity and so as a result you have something more like a power law distribution with a small number of people to account for a significant amount of the activity all right before we go into the open conversation part of this I figured I would just actually quickly hit some of the most frequently asked questions about this because I fight for a while but and we're going to get into some some conversation the man fo x 20 with these questions quickly the first one which is the classic i think i've had this and every time i talked about it is are the profits rise market want i think the answer is quite clear which is that you're taxing authority will tell you the answer that question and in general any income you get if if you make income from it it becomes something taxable particularly denominated in a currency that is managed by a government so which is to say if you take care of any virtual environment and i think is the point of view is that it is fashionable how do we recognize revenues run virtual currency since it's a limited license or right that's what a virtual currency risk events and the typical approaches of the revenues are recognized over the life of the system that you're getting a license to use and whether that's 24 months or 36-month is very kind of up to fifth game publisher to determine but it's really interesting since they recognize that it's something that gets deferred i'm over the you subscribe to the life one of the questions is it expensive to support a manager virtual currency are there all sorts of considerations you take into account i think the quick answer here is it's less expensive here you might think the classic costs are support costs because you're doing the people's funds and main times over caustic go along with it there are there are technical cause but but they cost in all are not as great as you might imagine it's not prohibitive and I think and medication you know we're starting to the emergence of platforms that provide virtual currency services to other publishers one of the concept you do need to think about is managing fraud we do a very good job of managing fraud we have an algorithmic and human resources dedicated to managing the fraud problem and it's very straightforward and we are able to look at behaviors for triggers of fraud and then arrest them pretty quickly and we can a fair amount of time energy making sure that there are there are minimal vectors for fraud on the system another classic question is what about money laundering if you can put money into your virtual currency and then take it out what's to prevent somebody from actually buying a bunch of virtual currency at one country will be to another country and and extracting it and maybe for various purposes I think the answer is we've had very fact almost no examples of this and I would say that the reason to that is that there are probably easier ways to money launder and two of you a virtual currency so thank you because you haven't seen this is kind of a nice romantic story it makes that this wild does aspect of this very interesting but the truth is simply not a phenomenon also because if you're serious about money laundering if you're trying to move ten thousands of dollars in a virtual world where they have the average transaction ID of the next you know forty cents it's pretty easy to tell that you are money laundering and if you want to actually sort of appear as a regular user of something like second line yeah you have to spend a lot of time and energy is probably no way what do people buy most we've already covered with primarily is clothing at least in our model its clothing occurrences but as I said it's very much a long tale of distribution and very much grouped by genre in action that the genres of communities apply here and people buy goods and sort of bundles that make them you know good for the people gameplay or good for the high fashion ordered for punk or goth or anime or whatever cultural vomiting which use the quad and pricing items the first verse median price and a mean price the mean prices is interesting because it represents some very very big transactions different entropia is at one point mentioned crevices and iron that was told for over one hundred thousand dollars it was like a moon base or something pretty dramatic but the truth is is the sort of most popular price points or are in the range of venus of 127 three or four dollars and so they tend to be relatively inexpensive relative to real-world kids is there a brand premium much was made as active early second life days about the brands that were coming into second life american apparel and then much was made in the press when they did not say i think the truth is is that the brand's never really were I think aligns with with second life and the virtual currency virtual goods model simply because there aren't enough people in second life to make it interesting for them what is interesting is that there are brands and second life that are resident created brands that are user created brands that could carry as much if not more weight than some of the more kind of popular know global brands it is it is surprising to many people when they learn that some of the top brands vector life are falling down in come in on the order of several hundred thousand dollars a year and this may be with one or two one or two or three people working together to build great product and to promote them in the platform and it's clear that people will pay more for those brands and it can have to have power when they price met virtual good I do believe that in the future we will start to see real world brands in particular as they look at larger platform such as Facebook you'll see you'll see real world plans going to play and I do believe in fairies a brand cranium it will be pricing power that will be accorded to do premium branch and this last question which is the one that says it's always interesting is you know if there is this virtual kind of currency and its total money supplies roughly 25 million us to forge the blended law lab hafla kind of stands out my page again is as you describe what a virtual currency page from legal terms the answer is no that's not redeemable tqr have to redeem it we don't have to keep your cash on hand if you I'd even know enough the amount of cash but it does have on hand is roughly equal feel slightly more than the actual money supply and for those of you who are either interested in or starting to think about what it's like to be making an income and virtual economy there's some pretty significant businesses to be built here I've already mentioned terms of scale at some of the top top merchants and second line onwards hundreds of thousands of dollars some of them a very small number approaching even higher than that I think what is interesting is in a recent survey that we launched to a residence we learned that of the people who are making money twenty percent said that it was their single source of income and so I think that that indicates to me that there are opportunities for people to actually make enough money to make a living out of it I don't think that is true of the vast majority of merchants or content creators in second life i think it is more of a hobby or diversion or you know kind of a game is making things and creating them and telling them it is and yet it's still interesting that if there's enough opportunities market price for people to 60 all right well I pluck a lot and I think I might you guys do you come to second line to turn off already the stickers supporting one who put on the back of your car when they made your visit and it's like I think I will open up for questions great well you've already answered some of them that the FAQ questions hit the one about money laundering so we do have a couple a couple people were asking how does land supply play into the economy there and for instance will said that Linden Lab manages the exchange rate very well but it's also a matter of managing land values and he says there seems to be more of a zero-sum game there between linden lab and residents second life makes more it's it's interesting if you look at the composition of islands there's some thirty thousand islands which represent kind of private spaces if you will in second life and the mainland which is sort of Linden maintained and Linden Forrest and Linden managed with people carving out parcels on the mainland and paying for those parcels if you look at the mix the mix of both activity and and economic value is very much dude source of private islands and what that is I think it's a reflection of the fact that that is independent supply that's more in the model of a private island is purchased someone you know maintains it for as long as they like as long as they want to keep it they can resell it but the resale activity around islands is relatively de minimis when compared with a retail activity on the mainland which is to say though there's a marketplace of exchange around land on the mainland and there's a much much much smaller one around the islands and if you sort of think about those two in relation it's almost an order of magnitude but in different in terms of volume of activity in marketplace trade on the mainland and on the islands and so as interesting about that is that the pricing dynamics on the mainland are very much a marketplace the price is determined by the amount of demand for not supply we don't actually expand the supply on the mainland very much very often come you climb on the order of once a year or maybe twice a year some new parcels are made available and that expands supplied slightly it's really a function of the demand and that demands on the mainland is related to how much people are willing to step up to the next year of ownership which is a complete island so we don't see the same kind of need to manage would supply the land side of the equation because it's early the mayor of describing that the the unlike the virtual currency what we actually do have to be very very careful to make sure that we are monitoring the amount of supplies so it doesn't it doesn't change the value to dramatically it's a very interesting space and I think as we look at the overall kind of dynamics of land pricing we have one of the one of the things we watch at the marketplace of all is all right well which way is it etiquette and why and I think some of that goes primarily just to how many people are coming in second life that I gave a period of crying because that that you know correlates very closely with the demand which is that employs driving price drive surprise okay and Kirk did ask for one further clarification he wanted to know what percentage of me what percentage of the total economy is land sales you know that's a great that's a great question i don't actually have the answer to that exactly i can put it in context of if you look at the overall economy being 450 million of US dollar equivalent transactions every month the amount of that which is related to purchasing islands from us or land from I you know is probably on the order of oh I don't know you know 400 or 500 islands a month which would be 400 or 500 thousand dollars out of that 50 million and then if you look at the mainland transaction that you will the marketplace of people trading their parcels on the mainland again it's de minimis it's probably not more than you know a couple of percentage point so I think much much has been made about that on a virtual real estate model I think the way we think about it is a land is a virtual good but it tends to be one that's more push different less ephemeral and more invested from the perspective of the user and making a commitment to pay for something over a period of time as opposed to a one-time transaction or a virtual good that they can use as much as they want got it that makes a lot of sense okay clay is asking some interesting questions about market research and i'll just read them to you just first of all this linden lab offer tools to allow vendors to reach an optimal price sooner for example price testing with exposure to part of the market before going to full market and then it clarifies the fair marketing testing or marketing research agencies that they can use so the answer the first question is no we don't really provide tools I know there are third parties that have built tools on top of the second line platform for for market testing basically getting consumers to take either a product concept since to do if you will a focus group and maybe the advantage in that is you don't have to rent this you know building them and get 10 people from your city you can actually do it around the planet that does exist I think if you were to search on those kinds of market research firms you know with something like market research second life you'll probably find a couple of them I would say that the demographics of the second live audience and interested may not you less well let me say this is this way I think many people have the perception that second wife is predominately male it turns out that it is roughly balance male and female and then if you look at participants in the economy and particularly around virtual good it's actually skewed female and so as you are constructing your market research that's very wise to consider the demographics of the people that you venture platform so that's really interesting that is fascinating there's market research firm and sacrifice and hmm okay well here Bradley has a question and I think that you answered this so maybe Bradley didn't hear how many London dollars exist / unique user and how constant is the value well the value we just talked about how we work very very hard to keep add value constant and I think that's one of the one of the interesting things about a virtual crunchy and virtual economy is that we're trying to retain stability of the economy takes a certain value of it then and the investment whether it's time of money that people have put into the platform is is protected the the flip side of that is the true question about the incurrence you put the person you know I didn't based on our arts tabs on our website we tracked a bunch of different things but if you were just consider an active monthly repeat login which is somebody who logs in the system more than once which is to say somebody who's or committed and somebody just lodging once that numbers about 750,000 people and so if you were to do that quick amount of dividing you know roughly 24 million by seven or 50,000 that would give you the US dollar to to active account of ratio as far as i can tell that i think that's like a 30 boxes a day i'm sorry i don't i can do the math in my head that well 24 million divided by seven thousand how come I haven't about pretty much rain all right I twenty seven point seven five thank you I'm kid a sec oh no I can't do that my head either someone will tell us in a minute so um oh so we'll is asking why why are the currency stats no longer as complete as they were a year ago or less publicly available now um well i guess i would say that they're actually not any different the if you are to search on second wife economies dad you actually get the files that we continually publish their automated public tough on all things like distinction sources resides with the money supply any of the measures I talked to today are still available publicly I think what what will is referring to is that we actually had a page a web page that you had all these stats up it is still up it's not promoted as heavily as you will in the hierarchy our site but you can get to it there is one staff that compared to last year is not up there and that is the overall island supply and we work when we found an error with that that's dad and I actually don't know whether or not that error has been fixed but that was maybe one over 30 different stats about the economy so so to answer your question will it is there we do publish the lands that as part of the quarterly kind of economy update and you know I think if if if you want the information it's there for you to grab okay good my first question I don't really understand and maybe it's the way it's written so it was from a knee earlier and she was asking about US dollars against euro and the yen the Second Life aim to be stable against the dollar or against a basket of currencies we primarily except Linden dollar or window dollar purchases are primarily made by US dollars paypal is our primary vehicle along with credit cards most of those are denominated in u.s. so we don't we try not to take into account currency fluctuations or talking about a balance of currencies so I get me answer that is no it's us all of them okay good well that's all the questions I have unless other people want to chime in with some others here I think I got all of them but now's your chance folks no go away now oh so okay here's for kitty well the Nebraska version of the Second Life he connected to the Linden Lab virtual world economy I what's in Nebraska version Nebraska is the on premise behind the firewall version of Second Life that companies organizations educational institutions governments use or we'll use the cosmetics the publicly available yet will use to simulation and for training purposes or for collaboration small group collaboration or events products is not available yet but still be denominated by code name of Nebraska and I think in terms of the answer the question I think I'll prefer that until i switched on when Nebraska team is going to La Strada fair enough and then play is asking another good question are there virtual goods and competitive game any examples of generating that he can look at think you want to go in the business or is in business their virtual goods in competitive danger but you know the virtual goods are spreading like wildfire and virtual crunches was very like wildfire throughout the evening and social gaming and virtual world and social chat base I mean there's probably you know i would say at the end of 2007's or something like one no no I should venture capital into funding for virtual world so there are quite a few companies and if I were to start getting them now I think it would probably wouldn't get off the phone for another 60 minutes you know the one that I think are interesting to look at I would look at IMVU you know I think they recently announced some very successful results and I think they are also probably closer to a second wagon that they allow third party content creators to create content from problem okay alright so if someone's interested in going into business in the virtual economy what would be a good resource for them okay well I'll mention one and I gave a quote from from the proprietor of the Shelf Haslem earlier in the presentation engage it is the conference around virtual goods they just held this conference it's a great it's a great place there are many many websites as if you were to literally to let your fingers do the walking and Google virtual goods you'll come across four or five there are research firms that are starting to cover this space I don't want to you know if anybody out too much so you can you can discover themselves but there are there are many many firms any good books you know I don't think I know of any good but I would say that this is such an emerging space and that the state of the art is is evolving so rapidly that you're better off with another one okay maybe O'Reilly should do a book well we're we're thinking about it so Rob Prasad has one question how is the virtual goods marketing changing with platforms like Facebook the social network platform does this affect the second life is there yeah I kind of touched on this in the beginning when you think about those three values you know whether it's the utility value the identity value or the communication value and i would say it actually has probably popularized and you know the idea of sending someone a dollar birthday cake on facebook okay a relatively absurd but but i think what's interesting about it is it's sort of its I've never done it but I'm guessing that Facebook's reach has made it more of a mainstream activity that is very much any kind of communications aspect for virtual goods and as I said we're kind of probably more weighted towards the utility and and identity creation fighter virtual good but that is not to say that we're not a social platform one of the interesting deaths of subsection wife is we do a billion minutes actually more than a billion minutes of voice each month and that's you know it's sort of it's kind of unbelievable when you think about it because billion minutes avoid Geist about eight billion in fact I'd probably 100 million active active users and we have probably a million so certainly there's a whole lot of communication and a whole lot of expression but on second life and virtual good worship were part of that great okay I think we're about out of time and I just want to thank you so much tom this was this was a great great webcast it was I think we all got a lot out of it and and you covered a lot of ground to really well thank you very much and thanks everybody for attending today I'm honored and humbled actually buy this this incredible sort of phenomenon that I get to look at on a daily basis straight job but thanks for thanks for tuning in wonderful so thank you everyone else for joining us today and I just want to say one more time Oh a couple two quick questions first of all can people buy that second life sticker for their car you know I don't know what someone should be able to and it will take a look at that and then the other question is I know we're going to have the recording available some people are asking if you'd make your slides available and SlideShare or your site or something like that I don't know so you certainly don't have to but they want well let me let me run a fire legal department make sure we're all cool with that you know I think most of the information shared today is actually available today publicly so I don't think there's anything untoward well we'll have the full recording and often everyone will link to that very soon so thanks everyone I'm going to close the meeting out now and if you want to grab a copy of the chat transcript you have to copy it from the chat room and you can do that now on a Windows machine you can do select all and copy and then paste it in text file on a mac it's a little more tedious you have to actually copy the whole thing and then paste it in txt file if you don't get it in time before I close the meeting just email me at webcast at o'reilly calm and i'll send it to you right away no problem there so I'm closing the window out now thanks everyone bye-bye

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