Linden Lab Official:Managing Freebies on Xstreet SL Roadmap FAQ

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Did you take feedback from Residents on this subject?

Yes. We initially approached this topic because of Resident feedback we received on the Commerce Forums. Once we reviewed that feedback and examined the data, we held 3 office hours sessions to discuss the topic. You can read the summary of those sessions here. You can also read the blog post regarding the roadmap here.

What action will you take to deal with the problem?

We will enact the following new controls for the Xstreet SL Marketplace within 90 days in order to improve the shopping experience:

Monthly listing fee for freebies of L$99

• Freebies will now be treated as a marketing/promotional tool and thus will have a price.
• L$99 is the price of our least expensive listing enhancement and so we will start there.
• Depending upon desire for this marketing opportunity and perceived value given such demand, we will adjust the price as necessary to maximize this value and keep the freebie listings from becoming bloated again.
• Some have proposed that merchants will convert freebies to cheapies to avoid this fee. However, the average number of sales of a freebie is much higher than that of even a L$1 listing. So, while not paying for the cost of the marketing opportunity with a priced listing, a merchant would also not be receiving the marketing value and benefit of a freebie, so we believe that this pricing system will work.
• Expected Delivery: 30 - 60 days

Minimum commission of L$3 on all items priced L$1 or greater:

• We will enact a minimum commission of L$3 on all sales of non-freebie listings.
• Since Freebie listings are now considered marketing and are charged as such, they will not incur this fee.
• A L$3 commission will raise the commission on all listings under L$50. This was a range suggested by Residents. As well, it is the price range where there is a very high transaction volume and low commission income to cover the costs of those transactions.
• We may adjust this minimum commission as we see its effects on the marketplace. L$3 does not cover the full cost of a transaction, however, this seemed like the best price point for now.
• Expected Delivery: 30 - 60 days

Monthly listing fee of L$10 for all items L$1 or greater:

• All non-freebie listings will now be charged L$10 per month to remain listed in the Xstreet SL Marketplace
• Currently, less than 20% of Xstreet SL listings make at least one sale per month. This displays just how much clutter of unsold items exists on Xstreet SL.
• Our goal is to provide an expensive enough fee that it will be an incentive for merchants to remove listings which are not selling, while keeping this fee low enough to have a minimal effect on listings which are selling and are desired by shoppers.
• By reducing the overall number of listings on Xstreet SL, the shopping experience will drastically improve which will please our shoppers and be a boon to the business of all of our merchants.
• Expected Delivery: 60 - 90 days

Separate freebies into their own category:

• There Is already a freebie section on Xstreet SL. This section will become the place to browse for new freebies.
• We will remove free listings from the browsable categories and keyword search results on Xstreet SL.
• Expected Delivery: 60 - 90 days

Who came up with these ideas for actions?

The Residents. The minimum commission and monthly listing fee were initially presented by the Residents during office hours and garnered a lot of support. Treating freebies like marketing tools was presented by Linden Lab along with a number of other potential ideas and received a lot of support as well.

What is the timeline for enactment of the new controls to deal with free, cheap, and old listings on Xstreet SL?

We expect to enact these controls within the time window 30 - 90 days following this roadmap announcement on November 18th, 2009.

• Expected Delivery: 30 - 60 days
  • Monthly Listing Fee for Freebies of L$99
  • Minimum Commission of L$3 on all items priced L$1 or greater
• Expected Delivery: 60 - 90 days
  • Monthly Listing Fee of L$10 for all items L$1 or greater
  • Separate freebies into their own category

We will provide at least 2 weeks notice before releasing any of these changes.

Why are free listings on Xstreet SL a problem?

1. The items are a large percentage of transactions which have associated costs but no value, which means that cost must be shared by all users.
2. They decrease the price that other merchants can charge within a category
3. They hinder the shopping experience because a "sort by price" puts all freebies first
4. They garner so much attention that Residents are driven toward the freebies instead of quality, fairly priced items.

Why are cheap (L$10 and under) listings on Xstreet SL a problem?

All of the issues associated with free listings also apply to cheap listings. Additionally, if we put price controls on free listings, many of those will be converted to cheap listings. Any solution for the volume of free listings must consider the volume of cheap listings as well.

Why are old/stale listings on Xstreet SL a problem?

Stale listings are listings that are taking up space in the marketplace but don't ever sell. These add clutter, hindering any shoppers attempt to find quality goods. They also reduce the likelihood that a shopper will find the non-stale goods that the shopper is looking for. They add cost for Linden Lab, decrease sales of quality goods & add no value, and those costs are borne not only by Linden Lab, but also by those merchants with more active inventory.

Who decides what listings are stale?

The Shoppers, as indicated by the number of times an item is purchased. If shoppers are purchasing a listing with some frequency, then it is not stale. If shoppers are never or rarely purchasing a listing, then it is stale.

Why should a merchant pay for a freebie?

1. All of the feedback that we have received explains that merchants use freebies to market their brand.
2. It is reasonable to expect a merchant to pay for a brand marketing opportunity
3. According to our merchants, because of the overwhelming number of freebies, the value that one receives from a freebie has drastically diminished. Making merchants pay for freebies should reduce the number and increase the value a merchant receives for placing a freebie. The fee is a vital component to any advertisement and without it, it does not work.
4. There is a cost associated with a freebie transaction. If a merchant was willing to place a free listing when others were footing the bill, and is not when that merchant is asked to cover the cost himself, then that merchant was leaching off of others. If that merchant is willing to cover the cost, then it shoes that the free listing is returning more value than the merchant is paying which is the definition of a good marketing opportunity.

If you charge for a free listing, why won't a merchant just turn it into a cheap listing to avoid the fee?

There is a large drop off in sales from a free listing to even a L$1 listing. A merchant can choose to avoid the cost of a free listing, but in doing so, that merchant will also lose the marketing value of a free listing.

What about demo listings?

Some free listings are demos for expensive listings. However, the feedback from our office hours sessions was that many merchants already charge for these demos and that these new controls would not be a major hindrance to merchants with demo listings. We suggest that merchants provide free demos if they think that the marketing opportunity of a freebie will boost their sales. Otherwise, we suggest making them a cheap listing instead of a free listing.

Eventually, we'd like to add better "demo listing" functionality. In the meantime, effective immediately, we will explicitly allow our merchants to cross link from the listing for the full version of an item to the listing for the demo version of an item and vice versa. This will not be considered a violation of our listing guidelines and we will update those guidelines immediately.

Does this mean Second Life isn't committed to a free and open marketplace?

No. The Xstreet SL Marketplace is not meant to provide a replacement or even identical experience to that of shopping in-world. Instead, it serves as a specialized shopping experience which makes shopping & selling easier and different in many ways. All of our research and your feedback demonstrates that. To maintain and improve that shopping experience, we institute controls, such as our listing guidelines and features, such as changing the search algorithm. Since it is clear that the increasing quantities of free, cheap and old goods are hindering that experience for shoppers and merchants alike, we wanted to manage it. Because we believe in a free (as in freedom from central planning) and open marketplace we are deliberately not using price controls to manage the situation.

Where can I go for additional information or if my question is not answered in this FAQ?

For additional information, please read:

• The blog post announcing the roadmap for managing freebies on Xstreet SL
• The summary of the commerce office hours on free & cheap listings
• The transcripts for the 3 office hour sessions on free & cheap listings

If you have questions regarding this roadmap, please first read this FAQ. If they are not answered in the FAQ, then please post them here.