The Virtual Real Estate Market

Many people might be surprised to find out there is a virtual real estate market and have had a hard time understanding how someone could pay money for something that you can't physically touch like virtual land. Before visiting virtual worlds myself, I would not have believed people would pay money for something like that. It was only after spending time in places like Second Life that I began to see the value people found in having a virtual space and virtual objects. Over the years I've watched as this value increased to create a billion dollar virtual goods industry – reported by TechCrunch to have reached $2.3 billion by the end of 2011. 

Drafting Table in Second Life

But while the virtual goods market has increased, the virtual land market, at least in places like Second Life, has seemed to follow a trend similar to that of the physical real estate market in the U.S. In both places, land values have dropped and the amount of vacant and abandoned land has increased resulting in a surplus of properties. Because of the similarities I've seen in the offline and online markets and their affects on communities, I thought it would be interesting to look at a comparison of the physical and virtual markets and explore movements towards recovery.

To get an idea of the amount of land available for sale in Second Life, I took a screenshot showing the large number of parcels for sale in an area of Second Life. Each dollar sign indicates a parcel on the market. (The green dots represent people who are visiting a space.)

SLmapJan2013

In most offline communities the number of vacant and abandoned parcels would not appear to be as large as what is seen in the virtual land market in Second Life. But there is one place where it does seem close – Detroit. Below is a screen shot of a website called Why Don't We Own This by Loveland Technologies showing the number of foreclosed or tax-distressed parcels in an area of Detroit.

Why Don't We Own This - Detroit

To better understand the performance of the virtual land market, we need to know how land is handled in a place like Second Life and what drives people to buy it. The world of Second Life is made up of many islands of virtual land also referred to as sims or regions. Each sim measures 256 m by 256 m. People enter the world in an avatar form which is a digital representation of themselves that they can use to explore the world. The basic land, sky, and ocean are provided by the company hosting the world of Second Life. Everything else that someone would see there was created by users. This can include plants, buildings, and other objects placed to enhance the user experience. People can also build upon or change the ground, water, and sky features with objects they create.

Typical customization of land, ocean, and sky in Second Life

However, all of these objects take up space in the world and use up computer resources. So Linden Lab, the company hosting Second Life, assesses a fee to users who want to leave their objects permanently displayed on a parcel of land. And because it would be chaos for people to just randomly leave things everywhere, they control where people can place their items by requiring people to own the land where their objects are displayed. At a basic level, you can think of it as renting storage space on a server where you are allowed to store your files. The only difference here is that in Second Life your files can be displayed as 3D objects and you and others can visit them in avatar form. I suppose it could also be compared to renting a storage unit where you can keep your physical possessions. Although one difference is that you are only allowed to take out objects or files in their entirety if you created them – you are not allowed to take something out of Second Life's system just because you purchased it.

Anyway, here's how the costs are assessed in the virtual world. Because the fees are dependent on the resources used, Linden Lab first sets a limit on the number of objects, which are called prims (a prim is a basic building unit), allowed on a full sim to 15,000. To get an idea of how prims are incorporated into objects you can look at the photo below taken inside of a building in Second Life. The highlighting outlines each prim used to make this building.

Prims highlighted in Second Life

Then Linden Lab offers users a choice between two different types of land for display of their items: Mainland and Private Islands. Mainland is a large group of islands or sims available to anyone to purchase and then subdivide and resell. Below is a detailed map showing parcels for sale in an area of mainland in Second Life. For reference, the large, yellow square is a full sim measuring 256 m by 256 m. Before the fall of the land market, mainland islands sold by Linden Lab through auction could cost about $1,000.

Second Life map showing land for sale

Back then, the lowest resale cost was a few dollars per square meter. Today the cheapest resale cost is $0.17 per square meter. This difference is simply a reflection of what happens when supply exceeds demand. It almost sounds exactly like what happened to many developers in the physical real estate market who had invested in subdividing land and were left with vacant lots and no buyers after the market fell. Many of those developers went bankrupt and lost the land to the bank. In Second Life, when owners abandon their parcels, they return to the ownership of Linden Lab. Below are a few statistics of the status of mainland in Second Life (these numbers come from Tyche Shepherd). Because of the amount of vacant and abandoned land, the amount of mainland has remained close to the same for some time at just over 7,000 regions with no new regions being added – there's just no demand to justify the creation of new land.

  • 46.5% of mainland is owned by Linden Lab
  • 10.6% to 11.6% of mainland is abandoned (assuming not yet returned to Linden Lab)
  • 7,121 Mainland sims in total (that's about 467 million square meters of land)

Total mainland regions in Second Life 2007 to 2013

The alternative land choice available to users is a private region or island. These are available in full sim size only and can be sold or subdivided, but ownership cannot be transferred at the parcel level. Private islands vary in cost based on how many objects you can place on the land because Linden Lab does offer full private regions with different resource allotments. A full island allowing 15,000 prims costs $1,000 to purchase, a "Homestead" island allowing 3750 prims costs $375, and an Openspace island allowing 750 prims costs $250. You also have to own a full island to be able to purchase a Homestead or Openspace sim. In 2008, there were almost 27,000 private regions. Today there are about 20,700, and the number seems to be decreasing at a steady rate.

Total private regions in Second Life 2007 to 2013

One question that some of you might be wondering, if you are not familiar with Second Life, is why would people abandon the land they bought? Why spend $1,000 for a private region then just let it go? The answer is in the fees Linden Lab charges for the use of the land you buy. These monthly costs, often referred to by users as "tier," can also be thought of as a type of rental charge for the resources used to store and display virtual objects. Tier varies depending on the size of the parcel. A full sim (65,536 sq meters) on mainland costs $195 a month while 512 sq meters costs $5 (512 sq meters of land is limited to 117 prims). A full private sim or region costs $295 a month. So just like in the offline world where you might have no mortgage yet still lose your property because you cannot afford the taxes so too in the virtual world. You might have been able to buy the land at one time, but usually it's the ongoing costs that cause you to give up your property. In the physical world it might be the real estate taxes, and in the virtual world it is the land use fees or tier.

For Sale sign on mainland in Second Life

People who have owned land in Second Life, including myself, have complained for many years that tier is too high. Many of us have said that people increasingly cannot afford land if tier is not reduced. And this seems to parallel exactly what happens in the offline world. People who cannot afford the taxes in a community complain and try to get them lowered. But while there is somewhat of a relationship in the physical world between the amount of taxes and the size of the parcel, other factors influence the rate. Real estate tax is set by government based on the school costs and cost to the government for providing services. It can only be reduced so much without cutting back on education or services or investment in assets. In the virtual world, the fees or tier are also needed to pay for services such as the hardware supporting the world, upgrading of software and features, and customer support. But a significant difference is that because the virtual world is owned and managed by a private company, fees also support profit – in the physical world, profit is never part of the equation for assessing taxes.

salesign_002

So for those of us facing high real estate taxes in our physical spaces, we can complain to our elected officials and demand taxes be reduced or frozen. But if they decide to cut or freeze our taxes, it will be by reducing services which we might not want to accept or which might cost us more in the long run. Of course we can move to a different community, but there are several down sides to this solution. Education and government services have a similar cost across the United States. Sure there might be some areas that save money because they don't have to deal with costs for handling winter weather or they have cheaper labor costs, but most people don't analyze city and school budgets and compare them to each other to figure out if the difference in tax rate is due to these factors which are actual cost savings or if they are due to a reduction in services. Uprooting your family and moving them across the country to find the most cost effective community in which to live is also a major challenge. This would require a significant investment of time and money along with the need to find a new job and perhaps if children are involved a search for a new school or daycare. Most of us just don't have that kind of mobility in our physical world so we are limited in our ability to move.

Wastelands in Second Life

Government has tried to explore other methods of reducing the cost to live in a community. There are assistance programs for those who qualify and freezing of taxes for senior citizens. Based on a comment from one of my Facebook friends, it appears the U.K. might be trying to encourage people to downsize to a home that might be more affordable for them by assessing a fee on unused bedrooms in a home. Affordability of housing is and probably will be an ongoing challenge for communities.

Living Space from 2012 SL Home Expo

In the virtual space, people have pointed out that some of the operation costs for hosting a virtual world have been reduced because of lower costs for the infrastructure so tier should be lowered to reflect this. But others have argued that fees cannot be lowered or profits will be lost. In the end, Linden Lab has not indicated in any way that tier will ever be reduced. So people who are upset with paying the level of "taxes" or tier have to make a decision between accepting the costs or moving to another virtual world. After all, Second Life is no longer the only virtual community out there.

But a downside to making that virtual move is that people can experience an "uprooting" similar to what they would feel from a move in the physical world because they are leaving their friends and community, but that is where the similarity ends. The time and investment needed to make a virtual move is significantly less than what it takes to move in the physical world. And there are usually no jobs or schools or other factors to have to worry about. People still risk the reduction in services by moving to a world with a lower cost, but it's much easier to research and explore what those reductions will be if any.

Fantasy Faire 2012

So let's finally look at what happens to a community when costs of land do not decrease, services decline, and the population becomes alienated from its caretakers. Again we will look at Detroit – in the last decade, this city has lost 25% of its population (see Wall Street Journal article). Some of the reasons cited for this loss are affordability (taxes and jobs) and a reduction in services. It almost becomes a viscious cycle because as people move out values fall, properties are abandoned, and taxes must be raised to offset losses. So many properties in Detroit were abandoned that some sections were even closed off. But as shocking as Detroit's current situation appears to be, it seems it has been steadily declining for decades. There's an interesting discussion about the causes here: The Reasons Behind Detroit’s Decline by Pete Saunders.

Population of Detroit, Michigan

Those who follow the virtual land market in Second Life might see some similarities in that declining graph. And while the elements within the virtual and physical communities might be different and the downward trend not as long, people believe Second Life's land decline is caused by management issues that sound a lot like Detroit's: a refusal to discuss or address the decline and the cost of maintaining land, a focus on meeting the needs of one or two primary groups, and a lack of investment in the community to the point where people sense a feeling of neglect. And when I say this, I don't mean the company managing Second Life is actually neglecting the world. As a person working in government I am well aware of the essential work and effort that goes into operating a community – work that no one knows about or wants to know about. And I believe Linden Lab is taking care of all those operational duties much like a public works department works in the background to make sure a city keeps functioning. The neglect comes about because in addition to keeping the gears turning, a community needs nurturing to be successful.

Old Packard Plant Detroit - from AcrylicArtist on morgueFile

Even if you think you are meeting the needs of the people, if the population thinks you are not, then you are not. For those of you who used to play Sim City it is kind of like the newsflash you would get telling you what the people in your city thought about the job you were doing. When they were unhappy, you would try to figure out what you could do next to change their opinion to one that was more positive. Well, unless you were the type who liked to inflict disasters and mayhem on your city just to see how bad it could get.

After 60 years, Detroit is now working hard to stop their decline. They are engaging the public and offering incentives to encourage people and business to move to their community knowing it can ultimately lead to lower costs for everyone as revenue increases. And they are no longer listening to only one industry – now everyone in the community has the potential to voice their ideas and opinions through online sites and public meetings and workshops like the one shown in the image below. The people who love and care about Detroit do not want it to slip into oblivion.

Detroit Can Do Camp

Those of us who love Second Life also do not want it to slip away, but we do not seem to have reached the point yet where the owners of the world have expressed any concern about the loss of land and investment. And we face a challenge somewhat different from people in places like Detroit. Those running our community do so to make a profit and they alone have ownership. In places like Detroit, the people own the community – in the end, they have the power to keep the lights on or turn them off and walk away. In Second Life, this decision is ultimately up to the company owning that world.

Waymount in Second Life

Perhaps the owners of Second Life are content to make as much money off the world as possible while allowing the decline to occur until expenditures exceed revenue. Then at that point, they just shut it all down and go on to their next thing. Or they might expect the decline to eventually stabilize and as long as they are still making an acceptable profit, they will be content to leave the world at that size. After all, not every community wants to become a metropolis. And some communities only want a demographic that can afford to "live" there.

Land company in Second Life

Finally the other option is what Detroit has chosen – address the decline and determine a path to turn it around. And just as Detroit is investing significant effort now to accomplish growth, this option would also be the most work for Linden Lab. There are some who have suggested Linden Lab is pursuing this option by launching other potential revenue streams. And some have suggested imposing new fees unrelated to land. If these steps were taken, the company could choose to use new revenues to help meet costs of operating Second Life and still ensure profit while allowing for a reduction in tier. This is somewhat similar to a city adding new taxes or service fees or a city that works to attract a heavy sales tax or industrial base and uses the additional revenues to offset a reduction in taxes for residents. But if the company chooses to build a new revenue base, the key will be to diversify, because history shows relying on one group or industry or revenue stream eventually leads to a collapse. The video below is a trailer for a documentary about communities and the aftermath of this type of collapse.

As the young man points out in this video the "The soul of the city . . .are the people." So if Linden Lab chooses to follow Detroit's path, they need to also follow their example of engaging and informing the community and embracing the people because the people really are Second Life. Without them, there is only water, ground, and sky. And people cannot be expected to invest time and money in a community without knowing its plan for the future or feeling like they have a say in that future. As decades of emigration and our example of Detroit have shown, when people have no clear path to the future and lose faith in leadership on top of facing high costs, they will eventually seek out a new world and opportunities.

Statue of Liberty

 

 

 

 

 

 

 

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Virtual Worlds Help Demonstrate Root of Public Apathy

Bytegang Sim in Second Life

Fleep recently summarized the promise she saw in the Second Life community, the change that transpired there over the last few years, and her decision to focus her involvement in a different virtual community or platform. (You can read her article here: Why Anyone Who Cares. . ..) And based on the comments she received and what I have read online, her experience seems to be one shared by many who followed a similar path in that virtual world. But at the root of her article, I saw something else that was intriguing and provides great insight into public apathy.

In local government we are constantly bemoaning the lack of public involvement in the community. We can't understand why no one seems to care, becomes involved, or attends meetings. If you have ever wondered this I suggest you read Fleep's post and imagine she is talking about any city in the the physical world. Because she could be describing exactly what happens to those who try to get involved and make a difference in their own cities and towns.

It all starts out much in the same way it started out for Fleep in Second Life. A person becomes excited about the promise and the opportunity to help create something different – something that could be so much better. In the physical world this could come about because there is a change in leadership such as newly elected officials or a change in a prominent and influential community within the city. Or it could occur because of a major change that brings about a significant shift in management or development of that city. Whatever it is, it's enough to motivate someone to invest time, perhaps money, and for some, their heart and soul for the cause. This person does this because these new leaders seem to share their dream or vision and by doing so they inspire the person's dedication and commitment. They also provide opportunities for involvement and contribution to the cause. The foundation of this effort is to make the world a better place. For some of us, this is almost an impossible opportunity to pass up.

If someone chooses to go down this road, they begin to share thoughts and feelings similar to those expressed by Fleep:

"Everywhere you looked was innovation.
Everyone you met was experimenting, trying new things, pushing new boundaries.
Anything seemed possible.  Maybe even probable."

As Fleep said, it is "an exciting, heady time." Perhaps you know of someone who has made this type of commitment for your city or town or perhaps you have done so yourself. If so, you might be able to guess what happens next.

Eventually things begin to shift. Perhaps there is a change in leadership. Or someone who has a lot of control in the community and had only up to this point been watching becomes involved, possibly because all this new innovation and change is starting to negatively impact the good thing they had going on for themselves. Unfortunately for all the obvious challenges to innovation, change, and progress, there are many more forces behind the scenes that will make sure change does not happen if it starts to actually make a significant difference.

So eventually  the person who had invested everything in this cause starts to realize something has changed. They begin to hit roadblocks or look around and realize no one left shares that dream or vision. Or perhaps the new leadership makes sure they are no longer able to contribute or help out. For many of the reasons Fleep has given, the person will most likely give up and move on. And most do. Those of us who have been this person or those of us who have known people who have gone down this road will most likely not allow ourselves to be sucked in again by promises and dreams. We have come to the conclusion that it's not worth it. Primarily because no one else seems to care and all our work and effort is undone by others. And apathy takes root.

But there is another profound point to all this in a great post by Botgirl that was written in response to Fleep's: My take on the future. . .. In the end, the person who has given it all only to see it carelessly cast aside might be tempted to blame those who grabbed the helm and changed course. But as Botgirl points out, "if there has been a failure, it is ours."  The true failure is because the majority will not make an effort to do anything to prevent it. And they will not even recognize or acknowledge they have the power or ability to do so. Or if they do, they do not know how. We have allowed this apathy to become ingrained in our culture by beating down those who try to make a difference until they give up and others witness the futility of their efforts. 

Apathy has been our legacy in our physical space. Will we allow it to become our legacy in our virtual communities too? Or will we create the opportunity to overcome apathy in both spaces by following Fleep's vision to "learn from our experiences in virtual worlds to make the real world a better place, too."

 

 

 

 

 

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Modeling a City

Pegasus Global Holdings is planning to build a full-scale city somewhere in New Mexico "to test and evaluate technologies in conditions that most closely simulate real-world applications." According to the project's website, CITE-CITY, the company proposed building the model to overcome challenges related to access, long waits, and costs that they faced in carrying out testing of technologies in actual cities. Last August, Pegasus Global signed a  Memorandum of Understanding with the New Mexico Economic Development Department in which they indicated the model will be built with private funds and create 350 new jobs. The company and State of New Mexico hope to draw vendors, investors, partners, and users from six specific areas of interest: Energy, transmission systems, transport, economic development, resource development, and security.

The company planned to break ground by this summer, but based on a recent article in myDesert.com, the project has been placed on hold due to land acquisition issues. However, it appears development plans for the model community will continue while the company searches for a new location. 

The Frontier Project in Second Life

The use of full-scale models for training and simulation is not a new idea. Many police and fire departments use existing structures for training. And the Texas Engineering Extension Service (TEEX) provides emergency response training at Disaster City – a 52-acre full scale "mock community." But not everyone chooses to model cities in the physical world. Increased computing capabilities offer a more efficient and low cost method to run simulations and training. A couple years ago, IBM launched CityOne – an online game people can play to explore how technology can impact cities. And over the last several years, Crista Lopes has been involved in some amazing work involving simulations in a virtual setting. One of her blog posts, Simulating a City, describes a traffic simulation/visualization project she has been working on. There are also many other examples of virtual simulations throughout Second Life and other 3D immersive worlds. The image in this post is a photo of a simulation of a stormwater collection and groundwater recharge facility that was built in Second Life.

Because of the tremendous cost of building physical models (in the case of the Pegasus Global project costs have been reported anywhere from $200 million to $1 billion) it would be interesting to see a study comparing the benefits, costs, and effectiveness of both physical and virtual simulations. And based on that type of study, a guideline could be developed to assist people in choosing the best, most economical, and efficient model for their purpose.

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SL9B and Community Planning

SL9B

This month, the community in Second Life celebrates its 9th birthday, otherwise known as SL9B. This seems to be the first year that the celebration is not sponsored or hosted by Linden Lab, the creators of Second Life. Instead, this year, Linden Lab announced the theme of the birthday would be community and that the community should host their own individual celebrations. The reaction from many people at first seemed to be disappointment, but it quickly changed over to a determined effort to put together a central location similar to what was done in the past. This was thanks to the efforts of a group of organizers and sponsors who donated space and time and talent to get the land set up for the event and a website to support the activities. They quickly put out a call for exhibitors and volunteers that has been answered by hundreds of people. This is one of the many aspects of Second Life that fascinates and captures me – the ability of the people there to get something done in an organized and collaborative and efficient and quick manner. If only we had this capability in our offline communities.

Anyway, I had not participated in a Second Life birthday since I think SL5B. And I wasn't sure about participating this year until I saw how the community pulled together to organize this event and really thought about the community theme and where I might fit into all that. It seemed the perfect time to begin putting together a community plan!

If you've read my previous posts on this, you're probably aware I have thought for some time a community plan is exactly what we need at this point in our development. Normally in an offline community, this process would be started by city planners. But there's no virtual planners on staff at Linden Lab so there's no one to reach out and suggest we start the process. Over the last few months, I talked about the idea with some other members of Second Life who also thought it would be worthwhile. But I don't think any of us were sure it could be done without their involvement. 

But after watching SL9B unfold, I thought, if we can have our own birthday celebration, why can't we create our own plan? Something else that inspired and convinced me to apply and volunteer was a set of videos created by Crap Mariner. Dressed as "Death" he put together a series of videos to promote SL9B and explain what was going on. Glossing over these, someone might at first dismiss them as goofy fun, but I would encourage people to really watch them and think about their message. What he has accomplished with these deserves a whole other blog post by someone who is more adept at analyzing motivation, marketing, and promotion. Here's one of the first videos (so far he has created 18 videos):

Anyway, I ended up applying to exhibit and fortunately was accepted! Basically the community plan exhibit, which is named Virtual Vision 2020, explains and promotes the idea and development of a community plan for Second Life. I'm hoping people will stop by to share their thoughts and ideas about the community, where they'd like to see it go, and how they think we can get there. There's also a website set up to support development of the plan and to offer a place where people can leave feedback: Virtual Vision 2020 

I am also hoping that a friend of mine, Vanish Firecaster, will add more information to the exhibit that will help people explore what it means to be a citizen of a virtual world. He recently posted, World of Democracycraft, highlighting an essay by Cory Doctorow: "Why Online Games are Dictatorships." If you are a member of Second Life or any other virtual community, I'd suggest checking it out.

SL9B will be open from June 18-27. Make sure you stop by to visit the Virtual Vision 2020 Exhibit, share your thoughts and ideas, pick up a mini Avatar Birthday Fountain, or just say hi! And be sure to thank the sponsors and organizers – they have put together an amazing event!

SL9B Exhibit

 

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The Time for a Comprehensive Plan for Second Life is Now!?

Today I read a great article about digital citizenship, Digital Citizenship and the Forward Edge Transference, written by Mike Langlois, LICSW. In his post, Langlois discusses many similarities between online and offline behavior. This was interesting to me because as a local government employee, I've also recognized many similarities between offline communities and online spaces. But my focus usually tends to be more on how the community functions as a whole. Langlois is in the psychotherapy and social work fields, so his perspective seems to be more targeted at the individual and interpersonal level. But both of our observations meet at the same very important point in all this – people are viewing, approaching, and behaving in these online spaces as though they are in an actual place. They rely on and feel loyalty and obligation to the digital space where they hang out, and this sense of responsibility extends to the people there with whom they interact.

The significance of these observations to offline and online governance should not be underestimated. It will eventually have major impacts as digital populations increase. One example is the current sign of unrest among the population of the virtual world of Second Life. If this were occurring in an offline community, the solution would be to develop a comprehensive plan. And if we acknowlege that people in a digital space are behaving as they would in an offline space, there is no reason to believe we should not apply this same solution to Second Life. If we do not, past experience in the offline world has proven we risk diminishing the success of our community.

While a comprehensive plan is not a cure-all, the practice of going through it and the final document can go a long way in helping move a community forward. These plans are viewed by professionals to be so important that grants are commonly offered to help fund their development. Unfortunately at this time, grant providers have not yet come to the same awareness as some of us that digitial spaces also need these plans. So moving forward on a plan for a virtual community would have to be self-funded or be developed through volunteer efforts. 

Another challenge in developing a comprehensive plan for a virtual space like Second Life is that there are no models to follow. But due to the similarities between online and offline spaces, I believe it would not be too difficult to modify a typical plan to meet the needs of a virtual one. Because I feel so strongly about this, I went ahead and developed a proposal for implementing the comprehensive planning process in Second Life. And I went so far as to have it peer reviewed by an experienced planner. Then feeling confident it offered a well-thought out approach and reasonable solution, I emailed it to Rod Humble. Of course, in the back of my mind, I didn't really expect a response and never received one. I just don't think a private company wants to believe they have anything in common with government. And many private managers or CEOs probably aren't very familiar with how local government actually works and why.

The problem with Linden Lab not choosing to at least consider this solution is that in an offline space, I don't think development of a comprehensive plan is usually undertaken without the "city" being involved. So I am not sure if it would be possible or worthwhile to attempt this without the involvement of Linden Lab. But I do believe this type of exercise and plan would help  address many of the current concerns in that particular virtual world. And I think some group needs to provide the lead that many online communities might eventually have to follow. So I decided to post the proposal here and ask if anyone in the Second Life community sees value in this or believes it would be worth the time and effort or even a discussion or if it is even possible to implement on our own. If not, I suppose it will eventually be another online company that in the future forges this path.

Second Life Comprehensive Plan Proposal 2012

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