Linden Lab spent $1.3B to build Second Life and paid $1.1B to developers

Linden Lab it cost $1.3 billion to build Second Life the real world, which started back in 2003 in the first metaverse era.

And Second Life still exists today. Philip Rosedale, the founder and former CEO of Linden Lab, and Brad Oberwager, the executive chairman of Linden Lab, spoke with me about the growth of the money that has gone into the Second Life platform and the money it gives to creators. In fact, Linden Lab has given $1.1 billion to developers.

These numbers represent a huge digital enterprise that is good to remember as we all continue to talk about the metaverse, a universe of worlds that scientists would love to see connected together one day as the next generation of the Internet.

In today’s discussion of the Internet, Second Life – which was inspired by Neal Stephenson’s 1997 book. Snow damagewhere the term “metaverse” first appeared – is often dismissed. In fact, people often think of Roblox, Fortnite and Minecraft as today’s leaders in evolution.

But Second Life still has a small number of users compared to the leader (Roblox has 89 million daily users). These users are dedicated and have been on the platform for about 14 years, Oberwager said. Second Life also has an economy of $650 million a year, built on the buying and selling of products created within Second Life.

And since Linden Lab shares 90% of the activity with creators and only takes a 10% cut, most of the revenue generated through sales goes to the creators themselves. That’s a testament to the strength of the economy built by developers and the residents who support them, Oberwager said. The 10% cut will help Linden Lab hire about 160 people.

“I started looking at our numbers and it turns out we’ve gone through some major milestones,” Oberwager said. “Even though Roblox is 500 times our size, they only paid 10 times what we paid developers last year.” (In the next 12 months).

Roblox recently announced that it has developed $1.2 billion in GDP from 2017 to 2023, creating 17,840 jobs. However the money is spread over daily users, or about 145 times more users than in Second Life (which is somewhere around 600,000 players). And Roblox shares much less than Second Life does with its creators; Roblox’s rate can be considered as 27%.

After Roblox shared this information, Oberwager began looking at Linden Lab’s numbers. Linden Lab has been around for a long time (Roblox was founded in 2004, while Rosedale founded Linden Lab in 1999). It has had more time to invest, while Roblox has had more risk. But the comparison is illuminating.

As a result, Linden Lab’s calculations about its economy are very impressive compared to Roblox. About 30% of Second Life developers 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 a year (compared to Roblox’s 0.07%).

This means that creators in Second Life are more likely to earn $10,000 more than Roblox. And they are 27 times more likely to become a millionaire. Oberwager thinks this is a great statement about justice and opportunity. Second Life’s payment system creates a level playing field, where medium and high incomes are accessible.

Neither company has completed its year so current figures are not comparable. But Rosedale said it’s important to note that Second Life became profitable within six years, and during that time the company only raised $25 million and was still profitable in 2005.

“We’ve spent more than a billion dollars investing in Second Life since this year. What we’ve spent is not what Roblox spent, but it’s not far off,” said Oberwager. “The reason our payout is so close is because we’ve spent all this money helping producers.”

He said his intention was not to insult Roblox. Instead, it shows the different steps companies can take on the road to the metaverse and how to use user-generated content. In the last year, Second Life gave out 78 million dollars to developers, and the total economy is about 10 times that number. In general, Second Life’s GDP has been stable, Rosedale said.

“This means that the chances of a developer succeeding in the Roblox community are probably low because of the population,” Rosedale said. “If you’re passionate about creating 3D objects and making money doing them in the real world, you’d be better off coming to Second Life.”

When Linden Lab’s money is made, it’s a difficult question to answer. Linden Lab should use it to entertain existing players and spend money to attract new players.

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

Where Linden Lab spent $ 1.3 billion

Rosedale stepped down as co-CEO in 2008. In 2022, Oberwager acquired the company Rosedale founded, High Fidelity, and Rosedale also joined Linden Lab as a consultant. The largest company that ever existed under Rosedale was about 350 employees. In its various competitions, Linden Lab spent money on various projects, some of which never materialized.

More than ten years ago, under CEO Rod Humble, Linden Lab began diversifying and creating its own games for players to play outside of Second Life. And it also appointed Ebbe Altberg as CEO in 2014. Altberg created a project called Sansar as a follow-up to Second Life, with VR experiences available through web links instead of around the world. But Sansar eventually failed and was withdrawn, while Altberg died of an illness in June 2021. Later, Oberwager found Linden Lab.

“It sounds like we have a lot more people working on major parts of Second Life than we did before,” Rosedale said.

Oberwager said the company continues to invest globally. He also said that AI will affect every industry and he foresees that it will affect all countries as it affects the non-gaming and manufacturing processes of the world. Rosedale said that AI will be useful in handling trouble tickets and assigning what needs to be fixed, but people will need to fix things.

Comparing costs in different countries

The amount of money each user earns is interesting for Second Life. Based on the numbers of 2023, approximately 21,152 have earned money within Second Life. About 6,446 have made more than $1,000 in the past year. About 1,580 have made more than $10,000. A total of 139 have made more than $100,000, and 14 have made more than $1 million. Those numbers aren’t too far off from Roblox.

This is not to say that Linden Lab has a better business than Roblox. Instead, it tells us about different paths to the metaverse.

“If you want to think about a sustainable world that people live in, you want to see a per capita income, an integrated mix between producer and consumer, something that looks like a farmer’s market or Etsy. or something like a business,” Rosedale said.

In contrast, the Roblox business today has few winners and many losers, much like the triple-A gaming business today, where the chance of success for any individual is extremely low.

The amount that each person spends every day in Roblox is about $12. In Second Life, it’s about $190. The problem is that the cost of acquiring a new user in Roblox can be very high.

The good thing about Second Life players is that they are not very fast. They are dedicated players and they both make money and spend money. It is a very advanced user. Rosedale said that most of the money that is currently being spent is being spent on making the world easier for more people.