Linden Lab spent $1.3 billion on building the Second Life virtual world, which ended back in 2003 in the first century of the metaverse.
And Second Life is still around today. Philip Rosedale, founder and former CEO of Linden Lab, and Brad Oberwager, executive chairman of Linden Lab, spoke to me about the amount of investment that went into the Second Life platform and the revenue generated pay out to creators. In fact, Linden Lab has paid $1.1 billion to creators.
These numbers represent a huge digital industry which is good to remember as we all continue to talk about the metaverse, a universe of virtual worlds that sci-fi people would love to see linked together one day as the next generation of the internet.
In today's discussions of the Internet, Second Life – which was inspired by Neal Stephenson's 1997 novel Snow disasterwhere the word “metaverse” first appeared – often dismissed. In fact, people usually think of Roblox, Fortnite and Minecraft as the modern pioneers of the metaverse.
But Second Life is still around with a relatively small number of users compared to its predecessors (Roblox has 89 million daily active users). Those users are dedicated and have been on the platform for about 14 years on average, Oberwager said. Second Life also has an economy of about $650 million a year, built on the buying and selling of virtual goods created within Second Life.
And since Linden Lab shares 90% of transactions with creators and only takes a 10% cut, most of the money that comes from trading is paid to the creators themselves. This is a testament to the strength of the economy based on creators and our residents who support them, said Oberwager. That 10% cut allows Linden Lab to hire about 160 people.
“I started looking into our numbers and it turns out we've hit some pretty big milestones,” Oberwager said. “Even though Roblox is 500 times our size , they only paid 10 times more than us in terms of creator payments last year.” (On the basis of 12 months ago).
Roblox recently announced that it has been created $1.2 billion in GDP from 2017 to 2023, creating a total of 17,840 jobs. But that money is spread over far more daily active users, or about 145 times more users than Second Life (which has somewhere around 600,000 players). And Roblox shares much less than Second Life does with its creators; the Roblox amount can be considered 27%.
After Roblox shared that data, Oberwager began looking into Linden Lab's numbers. Linden Lab has been around longer (Roblox was founded in 2004, and Rosedale started Linden Lab in 1999). He has had more time to invest, and Roblox has had a more impressive growth rate. But the comparisons are clear.
As a result, Linden Lab's calculations about its economy are quite impressive compared to Roblox. About 30% of Second Life creators earn more than $1,000 per year, compared to 0.2% for Roblox. And 7.4% of Second Life creators earn more than $10,000 per year (compared to Roblox's 0.07.%).
This means that creators in Second Life are 100 times more likely to earn over $10,000 than on Roblox. And they are 27 times more likely to be millionaires. Oberwager believes this is a big statement about fairness and opportunity. Second Life's payment system creates a fair environment, where mid-level and high-level employment is much more accessible.
Neither company has completed their year yet so the figures for now are a rough comparison. But Rosedale said it's worth noting that Second Life became profitable within six years, during which time the company had only raised $25 million and turned a profit. still in 2005.
“We've spent over a billion dollars investing in Second Life 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've spent all this money spend to support the creators.”
He said that's not the point of bashing Roblox. Instead, it shows the different paths companies can take on the road to the metaverse and how they can embrace user-generated content. In the past year, Second Life paid about $ 78 million to creators, and the total economy is almost 10 times that number. In general, Second Life's GDP has been fairly stable, Rosedale said.
“This means that the probability in the long tail of a content creator being successful in the Roblox community is probably lower because of the numbers in the population,” Rosedale said. “If you're really passionate about creating 3D content and making money doing it in a virtual world, you're probably better off coming to Second Life.”
As far as where Linden Lab's spending happens, that's a more difficult question to answer. Linden Lab needs to spend to make existing players happy and also spend money to attract new players.
“We're competing with everything else that people think is social,” Oberwager said.
Where Linden Lab spent its $1.3 billion
Rosedale stepped down as CEO in 2008. In 2022, Oberwager acquired the company Rosedale had started, High Fidelity, and Rosedale joined Linden Lab as a strategic advisor. It was the largest number ever at the company under Rosedale, about 350 employees. During its various tours, Linden Lab spent money on different types of projects, some of which did not stop.
Over 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 he also appointed Ebbe Altberg as CEO in 2014. Altberg created a project called Sansar as a kind of sequel to Second Life, with VR experiences that existed through web connections rather than inside a virtual world. But Sansar eventually failed and was spun off, while Altberg died of an illness in June 2021. Later, Oberwager acquired Linden Lab.
“It feels like we have more people working on the core parts of Second Life now than we did before,” Rosedale said.
Oberwager said the company continues to invest in its world. He said that AI is going to affect all industries and he expects it to affect the virtual world in the form of influencing the behavior of non-player characters and the process of creating things in the the world Rosedale said AI will be helpful in handling trouble tickets and classifying what needs to be fixed, but ultimately people will have to fix things.
Compare incomes in different worlds
The revenue per user is interesting for Second Life. Based on the numbers of 2023, approximately 21,152 have generated income 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 over $100,000, and 14 have made over $1 million. These numbers are not that far off from Roblox's.
This is not to say that Linden Lab has a much better business than Roblox. Instead, it tells us about different paths to the metaverse.
“If you want to imagine a sustainable metaverse world that people are going to live in, you want to see a higher level of consumption per individual, a more mixed 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 industry today consists of several winners and more losers, like the triple-A game industry today, where the odds of a particular person's success are very low.
The cost per daily active user in Roblox is around $12. In Second Life, it is around $190. The challenge is that the cost of getting a new user in Roblox can be very high.
The good thing about Second Life players is that they don't churn that much. They are niche players and they both generate revenue and spend money. That is a very high user. Rosedale said much of the spending is now dedicated to making the world more accessible to more people.
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