Friday, January 18, 2008

Making money in SL

I posted this on the SL Exchange Forums today, but I thought it might be fun to put it up here as well... The questions was, what is the best way to make money in SL?

SL is no different than RL. Generally speaking, you can make money ethically or unethically (in RL we have laws that enforce our shared ethics, in SL we just have to rely on our own moral fortitude...)

Assuming that you mean, what is the best way to make money ethically in SL, again the parallel to RL is there.

Plan, build, work your ass off. Simple.

Planning involves research, research and more research! Find out how things work in SL - what drives people's spending habits. Typically, in my experience, people spend money on a few key things:

-acquiring things - clothes, buildings, cool attachments, toys, scripts. Create some of these, that people want, and sell them. Look at what sells well on SLX, and make something better!

-sex - although there is a glut of sex-stuff in SL - some of the sex trade makes a lot of money. Escorting, creating and selling sex animations and toys (beds, whips n chains, etc...) There are lots of niches in the sex trade as well - BDSM, roleplay, gay sex, furry sex, ageplay (and NO - I am not condoning it - just pointing out that it exists)

-land - although this is a bit gag-worthy - i often refer this to "building dreams". Fact is, a huge number of people in SL have a dream of either having something of their own (a home with nice trees and beach, or a castle, or whatever - with a partner (or partners), friends, and fun. Other people have a dream of creating something (a business, a club, a mall, a school, an art gallery, a porn palace). I can tell you from lots of experience, most of these businesses fail. but all of them need land to make it happen.

So, first you need to plan. What do you like doing? What are you good at? Can you build? Script? make clothes/skins/textures? Cyber like a feral cat? How much money are you going to invest in making money in SL? What is the business model - what is the business plan - who is the market? It is almost impossible to set up and start making money with something you either hate doing, are no good at, or or can't afford.

Then, once you have a product/service that you think will be successful, build it/create it. Take your time. focus on quality and differentiation. I would suggest, for products, find a niche market, and worry about expanding mainstream at a later point in time. For land, buy your Lindens and buy some land (i blogged an article with some ideas about this not too long ago - )

And finally, and most importantly - work your ass off. You CANNOT make money in SL without a lot of work and dedication - or if you can, I would love to know how!! making clothes/skins is not easy - and the fact is that there are tons of BIAB sellers that flood the market with ok quality clothes that are all the same! Look at the successful clothiers - their stuff is clearly a step above, shows painstaking commitment to detail and perfection, and/or focuses on a clear niche market.

lol - there is my roadmap to success in SL. My best advice for you would be to throw yourself into SL for a while and forget about making money. You need to understand the mindset of the people - get out there - have fun! Meet people, ask questions, experiment, try making things, think things through. Otherwise you are likely to come up with a product or service that YOU think is really cool, but nobody else could care less about (I learned this the hard way...)

I would be interested in your thoughts/experiences/advice...


Thursday, January 10, 2008

Reflections on Second Life's new policy on banks

Well, it's been an eventful week in the financial sector of the metaverse. Linden Research has released a new policy regarding the banking business, which has already begun to cause widespread panic in some quarters. The meat of the new policy, as quoted from the release, is this:

"As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter."

I'm not a lawyer. I dated a lawyer once, but that probably doesn't count... I don't know the applicable laws, particularly since I am not in the US. However, I have read the post and FAQ carefully, and this post looks at what it actually says and how it is said, to get some insight into what it actually means...

The wording of this is quite interesting, as are the implications and limitations it suggests. Clearly, any of the "banks" that have been operating in SL recently, which have used ATM's to receive deposits, and have provided interest on balances, will be affected by the new policy, and basically have until January 22nd to settle with their customers and remove the offending objects. Also clearly, however, the policy is limited in its application to removing objects that interact with residents inworld. While the spirit of the new policy clearly implies that Linden Research wants to shut down the banks, the method of implementation at this point seems limited to removing ATM's and other objects that collect or disburse money which has garnered interest, or any other direct return.

At this point, and based on the policy as posted, and the associated FAQ, it appears to me at least that LL is limiting the policy to interest-bearing vehicles, and businesses such as stock exchanges that do not offer interest on balances should be exempt. Investing in a virtual business and receiving dividends based on profits or market performance, for example, is not interest or direct return, and so should not be included in the targets of this new policy. The quote from the FAQ is a bit vague, as is a lot of it...

"As of today, this policy is generally focused on objects and schemes that involve real-time transfers of L$ and payment of interest or rates of return. Exchanges may or may not do this, so they may or may not be covered. In addition, we reserve the right to remove any objects and take action against any Residents who are violating U.S. or other laws. If you are unsure whether a business you’re operating abides by applicable laws (e.g., banking, securities laws), you should get a formal legal opinion, from a personal lawyer acting on your behalf. "

The wording of this is very interesting. Clearly, Linden Research is targeting payment of interest, but leaves the door open to censure other types of businesses as well, if they break the law. At the moment, however, based on what the announcement and FAQ actually say, they have not yet decided exactly what to do about any businesses other than banks. Whether or not the policy will be expanded in the future to include a wider range of activities remains to be seen. The FAQ does contain some language that implies that it may,

"There’s no guiding law or precedent we know of that tells us whether these practices are legal. Depending on what statements these so-called “banks” make, and what depositors’ expectations are, they raise the possibility that banking or securities laws may apply. If so, they would need to be chartered or registered with applicable real world regulators, and to our knowledge, none of them is."

Although only "banks" are specifically mentioned in this passage, the reference to security laws might be telegraphing future plans to regulate, or outlaw, stock exchanges and other businesses that require registration and regulation to operate in RL. We will have to wait and see. In part, I presume it will be based on the behaviour of the stock exchanges, for example, and/or the number of complaints that are received from LL about them.

What is clear is that the rampant speculations being made about the new policy are just that - speculations. What it actually says, at the root, is that LL will begin to remove the ATM's and other objects of banks that have promised interest and other direct returns on investment. Everything else is implied, hinted at, or being left as LL reserving the right to do something else in the future...

So, if you have money in a bank, what to do? Well, clearly there will be a rush on all of the banks, and a lucky few will be able to get their money out. Some banks will close their ATM's and restrict withdrawals. None of the banks will be able to honour withdrawals of all of their depositors balances before January 22nd, and so will simply run out of cash. The good ones will likely keep track of investor balances and develop a plan to recompense them as they are able to liquidate their assets. Some will likely go underground and try to continue to operate without an inworld presence.

In short, who knows?? Try to get your money out of the banks if you can, and then wait for developments. There's nothing else you can do.

As for the WSE, Luke's announcement seemed pretty upbeat and unconcerned about the new policy, and I think for the time being, the WSE should be ok. how long this lasts is anyone's guess. I would expect a serious run on all the exchanges as people try to cash out once the WSE is back up and running. You'll need to make your own educated guess about whether or not WSE will be viable into the future and act accordingly.

Any thoughts and comments would be appreciated.


Monday, January 7, 2008

It's a new day. It's a new dawn....

So.... 2008 is here, and the change of the calendar tends to make us all get a bit reflective about the past and the future. 2007 in SL for me was a year of highs and lows - but I guess it was in 2006 as well, and in RL it has been every year! lol The human condition, I guess. But I have made a few New Year's Resolutions (which normally I think are silly) about how I am going to conduct myself in SL over 2008. Maybe they are just reactions to the way things have gone over the last few months, but regardless, here they are.

1. Stick with what works. 2007 was a great year for me in SL in many ways - I have spent a lot of time on the land biz and have had some success, have met some amazing people, and have had a great time doing it. So, I am going to continue to focus there in 2008. Although I am not going to expand dramatically in the near future, I am going to keep working on making all of my estates better, keeping them full, and streamlining things so they all run smoothly. This will be my main "business" focus in SL, in terms of time, since it is the engine that drives whatever I do here.

2. Protect myself. SL is a dangerous place... There are not enough rules and regulations, and I was bitten a few times in 2007 by fraudsters, liars, and cheats, both financially and emotionally. I did manage to do well with some investments, and of course have made some great friends in SL, but I am going to be increasingly careful about separating business and friendship, and about building some safeguards into whatever I do. Unfortunately, this will likely mean that I have to stop being the kind, forgiving, generous landlord and person that I have been up to now. I have neither the time, nor the faith any longer, to keep it up, and I simply can't support losing time and money trying to solve everybody's problems any longer. So, while I will always be fair and ethical in everything I do, I am going to have to become more strict in dealing with tenants, business partners, etc... In addition, I am not going to invest in any more businesses in SL, be it through WSE or elsewhere. No more joint ventures, no more being the silent investor in a new business idea. They have met with some success, but not universally, and I just don't have the time or inclination to spread myself any thinner.

3. Better SL/RL balance. I won't be in SL as much in 2008 - I need to have more focus in RL. I plan to spend most of my time in SL on the business, and cut out all the other stuff, so that I can focus on RL more. It has got to the point where the stress of SL has actually had an impact on RL, both in terms of being pressed for time, all the time, and in terms of SL just making me feel stressed and worried. It is enough to run the estates without all the other stuff. It's not so much that i don't like doing it all - but I seem to have become a resource for a lot of people on a lot of issues and i tend to spend all of my time in SL juggling 5 IM conversations about 5 different things all the time. Sometimes more! lol I need time to think, time to create things, and time to have fun!

omg i sound like a whiny bitch. lmfao. In the end, I can't be anything other than what I am, so I am sure that I will continue to try to be nice and fair and will probably be taken advantage of by people - lol. Perhaps this has actually been part of my success - people know that I will cut them a break if they need it, so they keep coming back and referring their friends... We are all people first, I like to say, and shit happens... But when that shit hits my bottom line, I have to take action. The debacle with kejo merlin and KJL has taught me some valuable lessons...

I don't want this post to sound negative (even though it kind of has...) - in most ways things are going great and I have learned a lot, done a lot, and met some incredible people. I am still committed to Second Life, to all the people that live/work on Delicious Estates, and all the investors that have put their faith in DDE. Come what may, I will make good on my commitments, and will take care of the people that are important to me in SL (all of the above!)

So, as we enter a new year, I'd like to wish you all happiness and success. Let's all continue to try to make Second Life the place we all know it can be. :)