An Open Letter to Linden Lab over its XStreet SL policies!!

This is essentially the contents of a notecard I passed to Pink Linden after yesterday's Linden Lab Commerce Team Office Hours (the 4pm session).


PREFACE:

Premise 1: Linden Lab runs and develops Second Life to make money for Linden Lab. I have nooo problem with this. In fact, as long as you do it in a legal, moral, ethical and sustainable way, do more of it!

Premise 2: Linden Lab has some stated Linden ethics for operation (the Tao of Linden) that, at times, seem to be in clear conflict with #1.

Premise 3: There are good people who work at LL and there are also some ego-tripping control freeks who treat residents and their ideas as nothing more that dog doo.

INTRODUCTION:

If you are reading this, you are probably aware of the "Roadmap for Managing Freebies" as published by Colossus Linden in the official SL blogs.

If not, the announced changes are:

• minimum commission charged on all items of $3L or 5% whichever is greater (vs 4% on everything)
• listing fee of $10L/month per item for any item listed at $1L or more
• listing fee of $99L/month per item for any item listed at $0L

The rationale for the changes is to "improve the shopping experience" by reducing "clutter" on XStreet SL.
Per Colossus:

We've received feedback from our users that the volume of free, cheap (L$ 10 and under) & stale listings in the Xstreet SL Marketplace did not make for an optimal experience for shoppers or merchants.

There are several problems with the above statement, the least of which is that Linden Lab really did not solicit feedback from ordinary USERS of Second Life. I can't think of a single user who would honestly say, "OMG, free and cheap items on XStreet are negatively affecting my shopping! I don't want them!"

LL certainly didn't discuss the proposed changes or problems with any shoppers that I know AND they only mentioned the changes in passing to a very small subset of merchants during a well-hidden office hour session (which only 40 people can attend due to SIM capacity).

In fact, most XStreet SL merchants, including myself, were completely caught by surprise over the announcement. There was never any attempt to solicit feedback through normal mechanisms (like polls or emails). Yes I'm a merchant, and yes, they have my email, and no, not one communication with me.

ACKNOWLEDGING PROBLEMS:

First, there are problems with shopping on XStreet but the solutions offered by the Lab will NOT address the real fundamental issues created by poor design and organization of the site. Using fee increases to solve structural problems may be more about short term profits than about actually making shopping better for users and encouraging long term, profitable growth in the XStreet SL marketplace.

While the protest against the new fees has been incredibly loud in the blogs, there is still a committed group of larger merchants with higher priced items who are strongly in favor of the fees. Probably since they will be the least affected by them and/or they will decrease the competition and/or they are part of what Prokofy likes to call the Feted Inner Core (people close to Linden Lab who get special privileges). Still, it's short-sighted.

UNINTENDED CONSEQUENCES:

What may actually happen from the fee changes are:

1. A massive reduction in the number of good freebies available. Many merchants who are giving back to the community will no longer be able to afford keeping their freebies active on XStreet SL. There are many great building tools, HUDs and AOs that are only available as freebies because their creators GPL'd them. It will become harder to find some of these items since they will only be inworld. The result will be less new content (ie. from loss of building tools).
2. Freebies will now be used purely as advertising items. That's bad.
3. No more or a lot fewer demos for hair, skins and shoes. Many merchants have to have demos because their products aren't compatible with all avatars.
4. Increased prices in general due to the listing fees and minimum commissions as merchants have to recover costs somewhere.
5. Increased competition from other third-party shopping sites. Already many merchants have left XStreet and/or have relisted their items elsewhere.
6. Reduced overall sales from XStreet SL if merchants leave completely.
7. A lowering of confidence in using Second Life as a platform for new business ventures as the rules constantly change.
8. One unintended consequence will be moving a lot of freebies into the $3L class where the item's sale effectively zero's out the minimum commission. HOWEVER, merchants may not realize that ALL these $3L sales will be triggered and reported to the avatar. $0L sales can be excluded from your popups.
9. Should sales simply move to the $3L - $5L mark, XStreet will STILL be faced with a "clutter" problem.
   
10. $10L per item per month is too much and it unfairly impacts sellers of low end items such as textures which often sell for $10L - $20L and are an important part of the overall shopping experience on XStreet SL. XStreet SL is an awesome site for selling and finding textures!! My guess is that once the fees go into place, texture sellers will be gone from XStreet completely.

SOME ALTERNATIVE SOLUTIONS:

So what could LL be doing instead of blindly increasing fees? Here are some of the suggestions that have been floated:

• More categories and better categories.
• Separation of freebies and demos within search (exclude them or include them in results).
• Improved search (right now, it returns a LOT of irrelevant items). Add search by merchant, size/color, custom price ranges, title ONLY, perms, etc.
• Allow multiple items within single listings (for example, color or size choices). This by itself would cut the clutter in the hair and apparel categories dramatically.
• Better organization of the website itself. For most people, XStreet SL has become a more difficult place to shop since LL integrated it with the main website.
• Real merchant storefronts with sub-URLs that show a merchant's entire line.
• "Sticky" over-18 mature content selection.
• Better listing tools for merchants.
• Eliminate "stale" listings by expiring any item that hasn't sold for three months and deleting listings that can't be delivered for more than a month due to a missing magic box.
• Allow real seasonal listings (Christmas, Valentine's Day, etc.).
• Allow merchants to list products with actual keywords (limit of 10) instead of indexing to the description copy (which is easily gamed).
• Stronger enforcement of keyword spamming and alt abuse of ratings.
• Add a shopping cart and wishlist feature.
• Integrated logins and logouts across ALL SL web content.
• Fix broken delivery problems.

All of these solutions would "improve the shopping experience" without tampering with the existing economics of XStreet SL as Linden Lab is about to do. Yes, some may take a little work on the Lab's part and some will take a lot! However, in the end, if they make XStreet SL more successful, they'll reap the profits from increased sales. FURTHER, the Lab could THEN justify some level of increased fees since everyone will be benefitting.

What was telling from the office hours was that Linden Lab unveiled a plan to add a Wishlist feature by integrating XStreet SL with Facebook. Of all the priority problems XStreet has, this was surely one of the lowest on the list to be solved. Yet, the Lab chose to put resources behind it. WHY?

LISTING FEE ALTERNATIVE IDEAS:

Even IF the listing fees are still viewed by the Lab as a first solution, they could be better structured that what is currently proposed. For example:

• Tiered listing fees as a percentage of the item's listing price with a $5L minimum. I think 2% would be reasonable. List an item for $50L, it costs $5L. List one for $1000L and it costs $20L and so on. Any price change would trigger an new listing fee so you couldn't game it by listing low and repricing. I believe this approach would generate MORE $L for Linden Lab WITHOUT penalizing the low price merchants.
• The only distinction between a freebie and a regular listing is price. It should be subject to the same listing fees above as regular items. $99L because an item is free is just silly. There are many good reasons for freebies that outweigh their possible negative affect on search.
•  Listing fees should be charged bi-monthly instead of monthly.
• Any solution MUST have a flag as "demo" feature or any easy way to link a demo to the main product so you can remove DEMOs from search. Honestly, they are more annoying to me than the freebies.
  

FINALLY:

This is a huge risk for Linden Lab. As currently outlined, the fee increases are a MAJOR change and not an incremental one. They can't be tested. If the fee increases drive a lot of merchants out of XStreet SL, it will be very difficult to bring them back. 

I am convinced that, if the Lab were to approach this with smaller fees and a less drastic change to handling freebies, the outcry might be tempered, the risk of failure lowered and if it proves successful, they can insert another increase later. It will be about "what the market can bear".

Are the current economic times right for drastic, random and ill-considered fee increases? I don't think so.