Posted by T Linden on Apr 28, 2010 9:30:36 AM
Highlights for the Quarter
The Second Life economy kicked off 2010 with strength in many key indicators in Q1.
- User-to-User Transactions totaled US$160 million, a 30% increase year-to-year and an all-time high
- Total Sales on Xstreet reached US$2.3 million, an 82% increase year-to-year and a 24% increase over the previous quarter
- Total L$ exchanged on the LindeX totaled US$31 million, a 9% increase year-to-year
- Residents active in the Economy reached 517,349 in March, a 2010 high
- Monthly Unique Users with Repeat Logins peaked in March at 826,214, a 13% increase year-to-year and an all-time high
Drivers of the Economy in Q1 2010
Strength in the Second Life economy in Q1 2010 was the result of:
- The creativity and energy of Second Life merchants, estates, and businesses, particularly around seasonal holidays, such as Valentine's day, and cultural events such as the release of the movie Avatar
- Linden Lab investments, primarily in new user acquisition via affiliates and search engine marketing
- Winter seasonality
This year, February 14th (Valentine's Day) marked the highest ever single-day sales on the Xstreet marketplace, with Valentine's Day sales about 50% higher than the 30-day trailing average, and 28% higher than the previous all-time high (reached on December 24th, 2009). Even though Xstreet only represents a portion of the inworld economy, it's a reasonable proxy for the economy as a whole. The outpouring of new virtual items, fashion, events, and gifts around Valentine's Day is a testament to the richness of Second Life and the passion of Second Life Residents.
The James Cameron Effect
The popularity of the world-wide blockbuster movie Avatar had a positive impact on the quarter. The movie made the concept of an avatar understood around the world, and introduced the word "avatar" into common usage. In addition, the success of the 3D effects in the film, supported by the advent of 3D televisions and the increase in theatrical venues and releases capable of displaying 3D content, have created a halo effect around 3D immersion. As a result, searches and organic traffic to Second Life web properties increased in the quarter.
Attracting new Residents
In Q1, Linden Lab took incremental steps toward spending to promote Second Life to potential Residents. In Q1, we started to test various strategies, including search advertising (primarily with Google), affiliate programs (where partners and Residents can earn affiliate fees for driving qualified traffic to Second Life), display and video advertising (on YouTube and other properties), as well as email activation and engagement campaigns. While the amount of money spent by Linden Lab on marketing in Q1 was relatively small, it was a key driver of the increase in Monthly Repeat Logins (see chart below) to 826,000.
We also invested in a few key parts of the experience in order to drive greater engagement in the economy by all Second Life Residents. In March, the introduction of the ability for purchasers to easily transfer in-world Linden Dollars to Xstreetand the Linden Dollar balance merge on Xstreet had a significant impact. Daily Xstreet sales jumped approximately 25% immediately after the introduction of easier methods for Residents to access their Linden Dollar balances. A portion of the jump in LindeX activity was also a result of these changes.
The introduction of Linden Homes drove an increase in the number of premium subscribers, both from new Residents, and existing Residents, many of whom reactivated their premium subscriptions in the quarter. Linden Homes also drove Xstreet sales, as Linden Home owners purchased items to decorate their homes, such as furniture themed to match their Linden Home and media players. (For a closer look, browse Linden Home themed items.)
Our investments in infrastructure also continued in Q1. In Q1, we migrated our data center from San Francisco to Dallas, increasing reliability and reducing latency. At the same time we moved our most critical MySQL database to the latest generation of server hardware. These investments will result in greater uptime and improved performance.
The introduction of Viewer 2 in public beta did not have a meaningful impact on the Second Life economy in Q1 2010, though we will drill down on the impact of Viewer 2 and the investments in the New User Experience in the Q2 2010 economy post.
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