Linden Lab spent $1.3 billion building Second Life and paid $1.1 billion to creators

Linden Laboratory It spent $1.3 billion to build Second life The virtual world, which first appeared in 2003 in the first era of the Metaverse.

The second life still exists today. Philip Rosedale, founder and former CEO of Linden Lab, and Brad Oberwager, CEO of Linden Lab, spoke to me about the amount of investment that has gone into the Second Life platform and the revenue paid to creators. In fact, Linden Lab paid $1.1 billion to creators.

These numbers represent a huge digital feat and it’s good to remember them as we all continue to discuss the Metaverse, the world of virtual worlds that sci-fi folks would like to see connected one day as the next generation of the Internet.

In modern discussions of the Internet, Second Life – inspired by Neal Stevenson’s 1997 novel Snow crashwhere the term “metaverse” first appeared – is often dismissed. In fact, people typically think of Roblox, Fortnite, and Minecraft as today’s front runners in the Metaverse.

But Second Life still exists with a relatively small number of users compared to the front runners (Roblox has 89 million daily active users). These users are loyal and have been on the platform for about 14 years on average, Oberwager said. Second Life also has an economy of about $650 million annually, built on the buying and selling of virtual goods created within Second Life.

Since Linden Lab shares 90% of transactions with creators and only takes 10%, the vast majority of money generated from commerce is paid to the creators themselves. “This is a testament to the strength of the economy based on creatives and the residents who support them,” Oberwager said. This 10% reduction allows Linden Lab to hire about 160 people.

“I started looking at our numbers, and it turns out we’ve crossed some pretty big milestones,” Oberwager said. “Even though Roblox is 500 times our size, they only paid 10 times what we paid in terms of payments to creators last year.” (Based on 12 trailing months).

Roblox recently said it had been created $1.2 billion in GDP from 2017 to 2023, creating a total of 17,840 jobs. However, this money is distributed among a much larger number of daily active users, or about 145 times more than the number of users in Second Life (which is about 600,000 players). Roblox shares much less with its creators than Second Life does; The Roblox amount can be considered 27%.

After Roblox shared that data, Oberwager began digging into Linden Lab’s numbers. Linden Lab has been around longer (Roblox was founded in 2004, while Rosedale created Linden Lab in 1999). It has had more time to invest, while Roblox has achieved a more impressive growth rate. But comparisons are useful.

As a result, Linden Lab’s calculations about its economy are very impressive compared to Roblox. About 30% of Second Life creators earn more than $1,000 a year, compared to 0.2% for Roblox. And 7.4% of Second Life creators earn more than $10,000 per year (compared to 0.07 on Roblox%).

This means that Second Life creators are 100 times more likely to earn more than $10,000 compared to Roblox. They are 27 times more likely to become millionaires. Oberwager believes this is a big statement about justice and opportunity. Second Life’s payment system creates an egalitarian environment, where middle- and upper-class earnings are more accessible.

Neither company has completed its year yet, so the numbers at the moment are rough comparisons. But Rosedale said it’s worth noting that Second Life became profitable within six years, during which time the company raised only $25 million, and was still profitable in 2005.

“We’ve spent over $1 billion investing in Second Life as of this year. What we’ve spent is not what Roblox has spent, but it’s not far off,” Oberwager said. “The reason our payouts are close is because we spent all this money to support creators.”

He said the point was not to attack Roblox. Rather, it shows the different paths companies can take on their path to transformation and how they can embrace user-generated content. Last year, Second Life paid out about $78 million to creators, and the overall economics are close to 10 times that number. Overall, Second Life’s GDP has been very stable, Rosedale said.

“This means that a long tail creator is probably less likely to succeed in the Roblox community due to demographics,” Rosedale said. “If you’re really passionate about creating 3D content and making money by doing it in a virtual world, you’d better come to Second Life.”

As for where Linden Lab spends money, that question is more difficult to answer. Linden Lab has to spend money to keep existing players happy and also spend money to attract new players.

“We’re competing with all the other things that people think are social,” Oberwager said.

The Linden Laboratory spent $1.3 billion

Rosedale stepped down as CEO in 2008. In 2022, Oberwager acquired the company Rosedale founded, High Fidelity, and Rosedale rejoined Linden Lab as a strategic advisor. The largest company ever under Rosedale’s management was about 350 employees. During its various cycles, Linden Lab spent money on different types of projects, some of which were unsuccessful.

More than a decade ago, under the leadership of CEO Rod Humble, Linden Lab began diversifying and creating its own games for players to play outside of Second Life. Ebbe also appointed Altberg as CEO in 2014. Altberg created a project called Sansar as a sort of sequel to Second Life, with virtual reality experiences that existed via web links rather than within a virtual world. But Sansar ultimately failed and was dismissed, while Altberg died of illness in June 2021. Oberwager later acquired Linden Lab.

“It now seems like we have more people working on the core components of Second Life than we did before,” Rosedale said.

Oberwager said the company continues to invest in its world. He said that AI will impact every industry and is expected to impact virtual worlds in the form of influencing the behavior of non-player characters and the process of creating things in the world. AI will be useful in handling trouble tickets and sorting out what needs to be fixed, but humans will have to fix things eventually, Rosedale said.

Compare income in different worlds

Income per user is an interesting thing for Second Life. Based on 2023 numbers, approximately 21,152 people generated income within Second Life. About 6,446 earned more than $1,000 last year. About 1,580 received more than $10,000. A total of 139 made more than $100,000, and 14 made more than $1 million. These numbers are not too far off from Roblox’s numbers.

This does not mean that Linden Lab has a much better job than Roblox. Rather, it tells us about different paths to the metaverse.

“If you want to think about a sustainable, changing world that people are going to live in, you want to see a higher level of spending per capita, a more blended mix between creator and consumer, something that looks more like a farmers market or Etsy or something like that as a business,” Rosedale said. “.

By contrast, today’s Roblox business consists of fewer winners and more losers, just like today’s triple-A gaming business, where the odds of anyone succeeding are very low.

Spending per daily active user on Roblox is around $12. In Second Life, it’s around $190. The challenge is that the cost of getting a new user into Roblox can be very high.

The good thing about Second Life players is that they don’t offer much. They are dedicated players and both generate revenue and spend money. This is a high quality user. Much of the spending now is to make the world more accessible to more people, Rosedale said.