Friday, 23 February 2007

The "Virtual Economy" - not for real?

I was looking at an article recently in The Register bemoaning the fact that the statistics on SL were being over-hyped by Linden Labs, and that the "virtual economy" was actually a small niche market. The article was effectively poo pooing SL as a marketing medium, concluding that

"this economy has a population about the size of Ilkeston, Derbyshire, or Troutdale, Oregon. And each business has the prospect of a market of no more than 100 people in one place - a number easily accommodated by a church hall"

The article's maths were based on the number of concurrent users, and the incidence of people actually doing trade in SL (premium accounts, buying $L etc.)

This raises an issue about the validity of the SL "Virtual Economy" as a force to be reconed with. When you look at the numbers (as in The Register) you find that there aren't actually a huge number of people dealing in $L. In fact, $L dealing is all about land, the craft industries of making artefacts or scripts, sex and gambling. OK, there have been attemtps to move into modelling RL financial institutions with things like the "World Stock Exchange", but this has proven to be a pretty amateurish undertaking which has exposed great holes in the financial governance of SL.

This got me thinking about the "paying" residents, and the state of the "virtual economy". I believe that the “virtual econonmy” really refers to the “hobbyist” SL users (who are also the same ones who were made up by LL’s suggestion that freeloaders should be blocked at times of high traffic).

Meanwhile the “commercial” or “educational” users of SL are more likely to be the ones outside of the “SL Virtual Economy” (i.e. not actually “trading”, but will be renting land or islands from LL). I think the argument goes that “commercial” users of SL (i.e. the IBMs and BMW’s of this world) will be happy to pay LL for the privilege of using their servers (i.e. rent for a private island) but won’t want to get involved in dodgy dealing of $L (as demonstrated by the the World Stock Exchange in SL) particularly as there are no controls or policing of transactions.

This extends further into how businesses permit employees to use SL... again, would you like to sign off my expenses if I were to put in for e.g. “£50 to cover purchase of $L” when I then can’t show how the $L were spent (is a really good hairstyle for my avatar a good use of business expenses????... or can you prove that I’ve not been purchasing dodgy animations from virtual Stringfellows??!)

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