Lee (striver) wrote in blog_sociology,

The profit motive.

Any time you get a bunch of people together doing anything, someone will find a way to profit from it. I'm not going to delve into the pros and cons of that here except to show how it appears to be effecting online communities.

One of the most important factors in the equation is finite resources. Things like bandwidth, storage, software and server power can be very expensive on a large scale, not to mention the cost of support personnel. Yeah, you can debate how much all this really costs on a site like LJ but the bottom line is the bottom line. Every penny more in costs is a penny less in profits. In modern business, companies take every penny they can.

This is even more extreme on resource intensive services like second life. They can only handle so many people online at once. Two years ago the online population at any one time was between 50,000 and 80,000. The numbers are the same today. They have had almost zero growth over two years. At the same time, there has been a constant flood of new accounts. That indicates a constant turn over of almost 100%. People are leaving as fast as they are coming in.

Members tend to complain that Linden Labs, the company who runs second life, isn't doing the right things to retain membership. But retaining membership is not in the best interest of profit. It is usually the new members who spend the most when everything is still new and interesting and exciting. It doesn't take long for members to fill up their inventory with junk and stop buying so much.

So the best way for Linden to profit from SL is to get people in the door, get what money they can out of them, and shove them out the door again. This is not a good formula for building community. But is it really smart to think about the future on a platform that could, and likely will, be made obsolete quickly?

I was recently looking at a post I did in January 2003 showing some of the stats from LJ at that time. 832,563 total users and 307,692 of those had posted in the previous 30 days. Compare that with the current stats of 25,078,440 total users and 906,963 posting in the past 30 days.

This again shows an extremely high turn over with very slow real growth. Good for the bottom line but not for community stability. I am seeing this happen all over the computer communications industry. Give people some exciting new toy to interact with, get them into it, harvest money, and send them packing. This isn't what the membership wants, of course, so they think the company is doing everything wrong. But the company just has a different agenda.
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It's the attention span of people online today that cause a rapid turn-over. When the internet was new and shiny, people hung around in one place a lot longer.
These days, with so many sites flooding the on-line market, a site has to be pretty special to encourage customers to have any sort of staying power. Even more so when an exchange of money is taking place.

I'd also be interested to know the number of people who visit a site once, sign up, then never visit again. I imagine it's quite high! I know I'm guilty of it!
Well, I have been in a position to observe the flow and behavior of new members in SL on a fairly large scale (personally remained in contact with over 2000 new members over several years). About 90% who come in get involved in some way for at least several months. About the same amount will still respond if contacted after one year. But after that even most active members fade out.

There are some who make accounts and don't return immediately, but they usually do return eventually and get involved. There are also people who just abandon an account and open a new one. That is harder to track because they often just start over and don't contact old friends from the other account.
I see the same thing in Facebook, although it's not a paid service, people sign up, add everybody they can think of, pop in every day for a month or two, then disappear. There are a few people that I see on a regular basis, but otherwise, 85% of my friends list are ghosts.

Something that I find interesting about Facebook - it is a free service, paid by advertisers... but boy, do people like to bitch about the service and when changes happen! Somehow, they feel entitled to service as they want it, not as FB sees fit to maintain their profit.
Well, you are really only looking at a part of the economic picture there. What exactly is the attraction that facebook is selling that they are able to make money off of advertising? It is the content produced by the users themselves. What gives the owners of facebook the right to keep all the profit that is essentially generated by a large group effort that they are really only a small part of? They have the the ability through control of the system. That doesn't give them the right. So those actually producing the content do have a right to speak up about how it is managed.

As I mentioned in my post I kinda sidestepped the issue of the pros and cons of that system. But to understand it better think of the basic premise of communism, from each according to their means and to each according to their needs. With capitalism it is from each according to their means and to each according to the value of their contribution. With fascism it is from each according to their means and to each according to how much control they have over the situation. Many also call this corporatism, which is what we have here.

Again, I won't delve into the rightness or wrongness of that in principle. But it is not good for the overall health of the organization in the long run. It is short sighted.
I don't know what FB's business model is, besides targeted advertising, to be honest. I am what one might consider a light user. I don't play games and I block all of the applications and don't venture away from my update feed. I just think of it as one of those sites that I use, I enjoy, but if it disappears, then so be it. I would be SO much more upset if Livejournal went away.

You ask a good question - What gives the owners of facebook the right to keep all the profit that is essentially generated by a large group effort that they are really only a small part of? - I don't know. What does give them that right? The fact that they're paying people to run the site, paying for the infrastructure, footing the entire bill for the operation? If a user creates content that prompts somebody to go to a different page, and they see an ad that they click on and purchase a product... should the credit go to the person who made the initial post? Should they get a cut of the advertising revenue?

I won't disagree that their approach seems shortsighted. People get extremely upset when they spring surprise changes (have they not looked into the effect of change on humans?) - one friend said, "They suck you in, then they fuck with you!" and I suppose she's right!

You actually present a pretty pertinent question here that I didn't really respond to yet because I wanted to look into it. Facebook has a different economic base: strictly advertizing. So really, the more active users they have the better their income. This is the direct opposite of sites that depend on member spending. So if, as you indicated from personal experience, the same slow growth and high turnover is happening on facebook then obviously there is some other contributing factor besides economics at play here.

So let's take a look at the facebook statistics page...a site where more active users would mean higher profit instead of lower...

More than 400 million active users
50% of our active users log on to Facebook in any given day
More than 35 million users update their status each day

200,000,000 users log in every day? Facebook started in 2004, a year after the earlier post I made about the stats here on LJ. They have gone to 400 million active users in the time LJ had gone to 2 million. Unfortunately they don't give the total number of accounts so we can't really make some comparisons there. But clearly, 400,000,000 active users in 6 years is some seriously strong growth.
oh...just did the math...there would need to be about 5 billion total accounts on facebook to have the same turnover percentage as LJ.
Wow, those are impressive numbers.

I was only going by what I see on my very limited friends list - but I'm in the over-40 crowd and I'm sure I am not the average Facebook user.
SL hasn't had zero membership growth in two years, and concurrency figures have significantly changed since two years ago. You can see some long-term charts here.

Furthermore, LL is quite concerned about retaining members, just, different sorts of members. They're worried about churn but they also believe that long-term residents are likely to just carry on, as if they didn't have a good reason to stick around they wouldn't still be there. (This has some truth but is also a bit short-sighted.) They have been making significant changes recently to attract new users, and also retain them, with programs such as Linden Homes.

There is a simple reason that they would do that, or try to do that: LL doesn't make much money from user-to-user transactions. They make money from people buying land, all of which goes straight to them. They make some money from people cashing in and out but it doesn't account for that much of their income from users - that's land. People who come in, buy $100 worth of dresses and shoes and sculpty penises and then leave don't result in much profit for them.
As moderator of this community I suggest you read more carefully and do a bit more research before you jump in and start blasting away at anyone posting here.

"SL hasn't had zero membership growth in two years"

No one said it did. In fact the point we are discussing is that they have membership growth without active member growth. I almost always have a population hud when in SL that gives me constant readouts of the current number of people online. I have done that for years now. It ranged from 50,000 to 80,000 two years ago and that is still the range. There are about 71,000 online right now. When it gets much over 80,000 they start having serious asset server problems. That is zero active member growth. Which indicates a high turnover rate.

Some of the charts you refer to show total number of people logging on over specific periods. That of course is an entirely different statistic but it still backs the point. Even more people logging in but the same number of people online at any one time indicates even faster turn over. If I saw two million people on at once two years later that would be active member growth. That simply isn't the case.

And of course they are working to attract new members. That is exactly what I said. But retention of more members is simply not possible with their current infrastructure and it has pretty much reached it's expansion limits. It is just in their best interests business wise not to retain members that have stopped spending. They aren't in this for altruism.

As for member to member commerce, that is all irrelevant, of course, because the spending spree of new members includes property ownership fees and member fees. Most members that have been in there a while just become 'hobos' or leave. They don't need property. The club they started failed. They sold the property to the next noob who wants to start the "hottest club in sl". Google that phrase in quotes and you get 13,000 results, pretty much all defunct and long gone second life clubs and that is just the tip of the iceberg. All built by new people who have dropped a bundle in SL then stopped spending.

But SL isn't alone in this. Every social networking site is doing the same thing. Even LJ. Massive membership increase with very low actual active member growth. What we are doing here is observing something happening and discussing the possible sociological impact. I'm not even criticizing Linden labs. Just observing and looking at the sociological implications. I suggest we stick to that.


February 16 2010, 23:21:36 UTC 5 years ago Edited:  February 16 2010, 23:21:59 UTC

As a poster in this community, if you're going to immediately reply to somebody disagreeing with your opinion with the poorly-veiled threat "As moderator of this community...": cheerio.

No wonder it's on the skids.
unfortunately for your theory several people have disagreed with me and even corrected me in this community just today with no problems, so I doubt you will find an audience for your hostility here. Goodbye then.