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Prime News delivers timely, accurate news and insights on global events, politics, business, and technology
Linden Lab has spent $1.3 billion building the Second life virtual world, which debuted in 2003 in the first era of the metaverse.
And Second Life still exists today. Philip Rosedale, founder and former CEO of Linden Lab, and Brad Oberwager, CEO of Linden Lab, spoke with me about the magnitude of the investment that has gone into the Second Life platform and the revenue paid to creators. In fact, Linden Lab has paid $1.1 billion to creators.
Those numbers represent a huge digital business that’s good to remember as we all continue to discuss the metaverse, the universe of virtual worlds that sci-fi folks would love to see connected to each other one day as the next generation of the Internet.
In modern debates about the Internet, Second Life, which was inspired by Neal Stephenson’s 1997 novel, snow crashwhere the term “metaverse” first appeared, it is often dismissed. In fact, people typically think of Roblox, Fortnite, and Minecraft as the current pioneers of the metaverse.
But Second Life still exists with a relatively small number of users compared to the pioneers (Roblox has 89 million daily active users). Those users are dedicated and have been on the platform for an average of about 14 years, Oberwager said. Second Life also has an economy of around $650 million a year, based on the buying and selling of virtual goods created within Second Life.
And since Linden Lab shares 90% of transactions with creators and only keeps 10%, the vast majority of money generated through commerce is paid to the creators themselves. “This is a testament to the strength of the creator-based economy and our residents who support them,” Oberwager said. This 10% cut allows Linden Lab to employ about 160 people.
“I started looking at our numbers and it turns out we’ve eclipsed some pretty important milestones,” Oberwager said. “While Roblox is 500 times our size, last year they only paid 10 times more than us in terms of payments to creators.” (On a trailing 12 month basis).
Roblox recently said it has generated 1.2 billion dollars in GDP from 2017 to 2023, creating a total of 17,840 jobs. However, that money is spread across many more daily active users, or about 145 times more users than in Second Life (which has around 600,000 players). And Roblox shares much less than Second Life with its creators; Roblox’s amount could 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 founded Linden Lab in 1999). It has had more time to invest, while Roblox has had a more impressive growth rate. But the comparisons are illuminating.
As a result, Linden Lab’s calculations on its economics are quite impressive compared to Roblox. About 30% of Second Life creators earn more than $1,000 a year, compared to 0.2% on Roblox. And 7.4% of Second Life creators make more than $10,000 a year (compared to 0.07% for Roblox).%).
This means that Second Life creators are 100 times more likely to earn more than $10,000 than on Roblox. And they are 27 times more likely to become millionaires. Oberwager believes this is a great statement about justice and opportunity. Second Life’s payment system creates an egalitarian environment, where mid-level and higher-level earnings are much more accessible.
Neither company has completed its year yet, so the numbers for now are rough comparisons. But Rosedale said it’s worth noting that Second Life became profitable within six years, and during that time the company had only raised $25 million and still reached profitability in 2005.
“As of this year we have invested more than a billion dollars in Second Life. “What we have spent is not what Roblox has spent, but it is not far off,” Oberwager said. “The reason our payments are close is because we’ve spent all this money to support creators.”
He said the point of this is not to criticize Roblox. Rather, it shows the different paths companies can take on the path to the metaverse and how they can embrace user-generated content. Last year, Second Life paid out about $78 million to creators, and the overall bottom line is about 10 times that figure. Overall, Second Life’s GDP has been fairly stable, Rosedale said.
“This means that the long-tail probability of a content creator being successful in the Roblox community is probably lower because the numbers are the population,” Rosedale said. “If you’re passionate about creating 3D content and making money doing it in a virtual world, you’re probably better off coming to Second Life.”
As for where Linden Lab is spent, that’s a harder question to answer. Linden Lab has to spend to make existing players happy and also spend money to attract new players.
“We’re competing with all the other things that people consider social,” Oberwager said.
Rosedale resigned as CEO in 2008. In 2022, Oberwager acquired the company Rosedale had started, High Fidelity, and Rosedale rejoined Linden Lab as a strategic advisor. The largest company Rosedale ever had was about 350 employees. During its different cycles, Linden Lab spent money on different types of projects, some of which did not pan out.
More than a decade ago, under CEO Rod Humble, Linden Lab began branching out and creating its own games for players to play outside of Second Life. And he also named Ebbe 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 through web links rather than within a virtual world. But Sansar ultimately failed and was spun off, while Altberg died of illness in June 2021. Oberwager later acquired Linden Lab.
“We now seem to have more people working on the core components of Second Life than ever before,” Rosedale said.
Oberwager said the company continues to invest in its world. He said that AI will affect all industries and predicts that it will affect virtual worlds by affecting the behavior of non-player characters and the process of creating things in the world. Rosedale said AI will be helpful in handling problems and categorizing what needs to be fixed, but humans have to fix things eventually.
Revenue per user is interesting for Second Life. According to figures from 2023, around 21,152 have generated income within Second Life. About 6,446 earned more than $1,000 last year. About 1,580 have won more than $10,000. A total of 139 have won more than $100,000 and 14 have won more than $1 million. Those numbers aren’t that far off from Roblox.
This is not to say that Linden Lab has a much better business than Roblox. Rather, it tells us about different paths to the metaverse.
“If you want to think about a sustainable metaverse world that people are going to live in, you want to see a higher level of spending per individual, a more balanced mix between creator and consumer, something that is more like a farmers market or Etsy. or something like a business,” Rosedale said.
In contrast, the Roblox business today is made up of a few winners and more losers, somewhat like today’s triple-A gaming business, where the odds of success for any given person are quite low.
Spending per daily active user on Roblox is around $12. In Second Life, it costs around $190. The challenge is that the cost of acquiring a new user on Roblox can be quite high.
The good thing about Second Life players is that they don’t produce as much. They are dedicated players and both generate income and spend money. He is a pretty high quality user. Rosedale said much of the current spending is dedicated to making the world more accessible to more people.