Earlier in the day, Linden Lab announced some upcoming changes to the way XStreet manages freebies (click here to read the blog post). While checking Twitter, I quickly found myself in a tweet-storm of complaints, arguments, and cries of foul play before needing to rush off to the RL shops with BlakOpal. While out and about, I realized that the 140 character limitation of Twitter posts was going to make it more difficult, if not completely impossible, to express my thoughts on the move.

I’m all for it.

Prior to the policy change announcement, and even going back to before Linden Lab acquired XStreet back in mid-January, there has been a loud and growing complaint from both customers and merchants that freebies and cheapies were causing problems.

For customers (who are clearly more important here), years of no-holds-barred listings of freebies and cheapies has meant that XStreet has been swamped with junk listings. Cheap generic goods that fill up countless pages of listings, so that when you try to either browse a category or search for a general type of item (instead of a specific thing from a specific seller), the site becomes an exercise in futility. As someone who shops on XStreet - I agree wholeheartedly. If there’s a specific item or seller I’m looking for, then XStreet is a great tool for surfing and out-of-world shopping. I’m all for anything that can make XStreet a better experience for our customers.

On the merchant side, the complaint is that the freebie/cheapie listings are flooding the marketplace, and undercutting peoples’ businesses. In RL when an item becomes successful and people start making cheap knockoffs, there are still physical costs to contend with. In SL, cost is not an issue. As a result, no matter the item there seems to be dozens of under L$50 variations, often in several colors and styles. One item can then beget literally thousands of knockoff item listings. When you then factor in the amount of keyword spamming that gets done by some folks, it’s easy to see why it’s so tough to shop on XStreet.

That hurts XStreet in a couple ways. First, the freebie and cheapie market consumes a lot of server resources. All those listings/images, and serving up all those items (estimated conservatively to be well over a million transactions a day). Second, when the quality/premium content creators get lost in a sea of cheapies, XStreet loses too - since their primary source of revenue is commissions.

If you were to do an accounting breakdown of XStreet as a separate business unit of Linden Lab (which it basically is), and you were to separate the business into under L$100 and over L$100 business, you likely find that XStreet is losing its shirt on the sub L$100 market. There are a lot of back-end costs associated with hosting the site and serving up goods: handling transactions, credit card processing, hosting content (including images) - it all eats up server space and bandwidth, but none of it is free. As a frame of reference, I’ll point to Apple’s App Store for iPhone, which is currently heralded as the great success story in the world of e-commerce. In addition to the signup fee, Apple gets a 30% cut in exchange for hosting the store and shopping experience, delivering the content, and of course taking peoples’ money. XStreet, by comparison, charges only 5%. They could have announced plans to triple the rate and it would still be a great deal. No, I do not think they should triple the rates - I’m just saying that XStreet’s fees are extremely reasonable.

Changes to the listing fees/fee structure as it applies to freebies and cheapies, and then splitting out the freebies into their own category will effectively weed out a lot of listings. And after running unchecked for several years, the XStreet garden is in desperate need of weeding. Cleaning all that up will help designers and content creators, and I’m all for anything that can help designers and content creators be more successful.

If you’ve got slow-movers or non-movers, I encourage you to take a hard look at those items. Perhaps you could enhance or improve the item, to make it either a value at a higher price point, or more compelling purchase at the current price (so you’d sell enough to cover listing fees and then some). Alternatively, you could decide to pull the XStreet listing and only make it available at your shop in-world.

Will these changes cost BlakOpal and I money? Yes, it will. We offer a few free items on XStreet, as well as list some inexpensive items. In the next 30-60 days, we’ll need to decide which items we want to pay additional fees on, and which items might make more sense not to offer on XStreet (they would still be available in the main store). While I think of us as extremely fortunate and successful SL designers, we’re far from a top XStreet seller - so we’ll see and feel that pinch when it comes.

Thanks for indulging me on this long ramble of a post. But since the blog was posted I’ve seen quite a few knee-jerk responses and complaints, and felt it was worth taking the time to give it some thought and explain why I feel differently about it. If you want to talk further on it, please feel free to IM me up in-world.

Tags: SL, XStreet, Freebie, Cheapie