The Economic Truth of Earning Income in Second Life

 For most of Second Life’s existence, Linden Lab has pushed the idea of users of the service being able to make money from their labours. This line is apparently being pushed again from the appearance of articles extolling the financial opportunities in Second Life[1].

Linden Lab benefits directly by the various fees and costs imposed on transferring money in and out of Second Life, the cost of subscriptions and tier.  They also indirectly benefit from their customer base, for without the imagination and hard work of their customers Second Life would be a sterile, barren ground with minimal attractions for the casual consumer.  As one of the few virtual worlds to have become financially successful they have discovered a business model where not only do their customers pay them in many different ways to be able to create and sell their wares for the “fun” of a minimal return but Linden Lab also use the products created and the supposed financial success of these people as the basis of their marketing to attract more people to use the service. 

So, in these economic times the chance to make money becomes more of a selling point to some than the entertainment aspects of the game. This is not a bad thing in itself, as one of the strengths of Second Life is the appeal it has to many differing interests. Strictly speaking, you can make money from Second Life, the chance of it being anything approaching a decent return for the labour, time and skills learning time invested is another matter all together. 

For the purpose of this analysis I’m assuming that people who read these promotional articles infer that Second Life can provide a usable real life USD income and I’m using US figures for the comparison.

The current US federal minimum wage is $7.25 ph[2].  Assuming a 40 hour week over a 12 month period this averages $1256.66 per month.  Of the economically active in the US the number of people earning $100,000 or more is 13,215,000 or 6.24%[3].

Second life is different in that in the US 68% of adults earn an income[4]. In comparison, the number of unique users logged in during the 30 days preceding 1 Mar 2010 was 1,083,856[5]. Of those, 68948 or 6.36% of people earned 1L or more of income[6].  Obviously Second Life is primarily an entertainment platform and so the need to generate income is not the imperative it is outside Second Life and the primary focus of income generation is to service the various entertainment needs of the customers of the service[i].

In February 2010, 68948 people had a Positive Monthly Linden Flow (PMLF)[ii].  As the chart below shows, only 1.64% earned approximately the minimum wage or above.

	Total Unique Users with PMLF	Number of Unique Users with PMLF and earning over $1,000 USD per month	% of total PMLF
Sep-09	66805	1201	1.79
Oct-09	68608	1269	1.84
Nov-09	66815	1197	1.79
Dec-09	69633	1258	1.80
Jan-10	72137	1314	1.82
Feb-10	68948	1136	1.64

And only 25 people earn more than $100,000 per annum ($8,333 per month), which is 0.0036% of all those with a PMLF, compare that to the figure of 6.24% mentioned earlier for those in the physical US economy.

Looking at the figures again, a consistent 83% of those with a PMLF earn less than $50 per month.  This figure rises to 89% when increasing the threshold to $100 per month.

	Total Unique Users with PMLF	Number of Unique Users with PMLF and earning under $50 USD per month	% of total PMLF
Sep-09	66805	55816	83.55
Oct-09	68608	57422	83.69
Nov-09	66815	55812	83.53
Dec-09	69633	58490	83.99
Jan-09	72137	60633	84.05
Feb-09	68948	57549	83.46

These figures are gross they do not include any expenditure required to maintain the Second Life presence required to generate this income[iii].

The conclusion so starkly drawn is that there is truth in the statement that you can earn money in Second Life but the chances of it being even a partial income replacement is significantly smaller than participating in a real economy and the need for you to spend more than 40 hours a week to do so is extremely likely.

As always – if it looks too good to be true, it usually is.  As a rule of thumb in Second Life, the only person who financially benefits is Linden Lab.  Don’t be fooled by the marketing.

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[1] washingtonpost.com

Second Life Financials/Future, VLENZ No 164, March 08, 2010 Virtual Life Education New Zealand

 [2] US Dept of Labour http://www.dol.gov/dol/topic/wages/minimumwage.htm

[3] Wikipedia http://en.wikipedia.org/wiki/Personal_income_in_the_United_States

[4] US Bureau of Labor statistics Mar 5 2010    http://www.bls.gov/news.release/empsit.nr0.htm

[5]  logged in users:  LL data http://s3.amazonaws.com/static-secondlife-com/reports/marketplace_stats/2010-03-01/logged_in_users.xls

[6]  in world business profits: LL data http://s3.amazonaws.com/static-secondlife-com/reports/marketplace_stats/2010-03-08/in_world_business_profits.xls

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[i] LL does not identify the types of income received by those with a PMLF.  Looking at the range of income generating activities, the assumption is that this group will include amongst others; gamblers, adult personal service providers, consumer retail, content component generation and sales (subcontractors hired to produce bespoke scripts or other build components and those component makers of textures, scripts and sculpts who sell premade packs), currency traders, rental land owners and land traders.

 [ii] A definition of how PMLF is derived is not provided by Linden Lab.  Due to the breakdown of income data I believe it is the income received by the account during the month rather than from transfer from Lindens to USD or paypal withdrawals.  However this is calculated, it does not account for any account subscription or land costs paid directly to LL in USD nor does it include any USD or Linden payments to private landlords.

[iii] Anecdotal evidence suggests that the majority of those with a PMLF do not make a return for their labour.  For most customers it subsidises, or just covers, their tier payments.