Linden Lab has spent $1.3 billion. to build Second Life and paid $1.1 billion. of the creators

Linden Lab has spent $1.3 billion to build the Second life virtual world that 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, executive chairman of Linden Lab, spoke with me about the scale of the investment that went into the Second Life platform and the revenue paid out to creators. In fact, Linden Lab has paid out $1.1 billion to creators.

These 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 science fiction fans would like to see connected one day as the next generation of the Internet.

In modern discussions of the Internet, Second Life—which was inspired by Neal Stevenson’s 1997 novel Snow disasterwhere the term “metaverse” first appeared—is often dismissed. In fact, people usually think of Roblox, Fortnite, and Minecraft as today’s leaders in the metaverse.

But Second Life is still around with a relatively small number of users compared to the leaders (Roblox has 89 million daily active users). These 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 about $650 million a year built on the buying and selling of virtual goods created in Second Life.

And since Linden Lab shares 90% of transactions with creators and only takes a 10% cut, most of the money generated through trading goes to the creators themselves. It’s a testament to the strength of the creative-based economy and our 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 passed some pretty big milestones,” Oberwager said. “Even though Roblox is 500 times our size, they only paid out 10 times more than us in terms of creator payouts last year.” (Based on last 12 months).

Roblox recently said it generated $1.2 billion GDP as of 2017. by 2023, creating a total of 17,840 jobs. Yet that money is distributed among far more daily active 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 with its creators; 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 started Linden Lab in 1999). He had more time to invest while Roblox had a more impressive growth rate. But the comparisons are instructive.

As a result, Linden Lab’s calculations for its economy are quite impressive compared to Roblox. About 30% of Second Life creators earn over $1,000 a year, compared to 0.2% for Roblox. And 7.4% of Second Life creators earn over $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 in Roblox. And they are 27 times more likely to become a millionaire. Oberwager thinks it’s a big statement about equity and opportunity. Second Life’s payout system creates an egalitarian environment where middle and high end incomes are much more accessible.

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

“We’ve spent over a billion dollars investing in Second Life since 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 that money to support creators.”

He said the point of this is not to bash 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 economy is nearly 10 times that number. Overall, Second Life’s GDP is pretty stable, Rosedale said.

“This means that the likelihood of a long-tail content creator being successful in the Roblox community is probably lower because the numbers are the population,” Rosedale said. “If you’re super into 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’s spending happens, that’s a harder question to answer. Linden Lab needs to spend to keep existing players happy and also spend money to attract new players.

“We’re competing with all the other things that people think of as 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 started, High Fidelity, and Rosedale rejoined Linden Lab as a strategic advisor. The largest company ever under Rosedale was about 350 employees. During its various cycles, Linden Lab spent money on various types of projects, some of which failed.

Over a decade ago, under CEO Rod Humble, Linden Lab began diversifying and creating its own games for players to play outside of Second Life. And also appointed Ebbe Altberg as CEO in 2014. Altberg created a project called Sansar as something of a sequel to Second Life, with VR experiences that exist through web connections rather than in a virtual world. But Sansar ultimately failed and was spun off until Altberg died of an illness in June 2021. Oberwager later acquired Linden Lab.

“We feel now that we have more people working on the core components of Second Life than before,” Rosedale said.

Oberwager said the company continues to invest in its world. He said that artificial intelligence will affect every industry, and he predicts that it will affect virtual worlds in the form of influencing the behavior of non-player characters and the process of creating things in the world. Rosedale said artificial intelligence will be helpful in processing problem alerts and categorizing what needs to be fixed, but humans must ultimately fix things.

A comparison of incomes in different worlds

Income per user is interesting for Second Life. Based on 2023 numbers. about 21,152 have generated income in Second Life. About 6,446 have made over $1,000 in the past year. About 1,580 made over $10,000. A total of 139 made over $100,000 and 14 made over $1 million. Those numbers aren’t that far off from Roblox’s.

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 mixed mix of creator and consumer, something that’s more like a farmer’s market or Etsy or something as a business,” Rosedale said.

In contrast, the Roblox business today consists of a few winners and more losers, sort of like the triple-A game business today, where the chances of any given person being successful are pretty low.

The cost per daily active user on Roblox is around $12. In Second Life, it’s about $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 throw around as much. They are dedicated players and both generate revenue and spend money. This is a pretty good user. Rosedale said much of the spending is now dedicated to making the world more accessible to more people.