Six years after the launch of Second Life and two years after reporting profitability from it, how much is Linden Lab worth? How does somewhere between $658-700 million sound to you? That's the opinion of NeXtUp Research, an analyst firm which recently published an extensive report on behalf of SharesPost, a new startup that handles the buying and selling of shares to a number of privately-held, pre-IPO companies. One of those companies is Linden Lab (here's their Linden page), and right now, SharesPost is listing 22 potential Linden share sellers -- and 35 potential buyers. (This after recent news that another firm had purchased Linden shares from an original investor.)
You can download the full NeXt Up report on Linden Lab from the SharesPost site after creating a free account. For a company analysis, it actually makes for interesting reading. (Even the Tea Crate Rebellion and the War of the Jessie Wall rate a mention in the company history section.) More salient to Internet business watchers, however, is the analyst's estimate of Linden's revenue and profit, with the former forecast to hit $150 million in 2011, and profit (i.e. "Net Income") to reach $35 million that same year. (See chart above.) NeXtUp uses these numbers and related virtual world business sales (such as Disney's purchase of Club Penguin for $350 million) to arrive at that half billion-plus valuation figure.
But is all this accurate?
I gave the report a pretty close read, and it's remarkably well-informed. There are some niggling errors here and there: for example, NextUp estimates Second Life has 170K Premium subscribers, but during my last interview with CEO M. Linden, last April, he mentioned the number was more like 75K. Then there's the frequent mention of "Linden Labs" plural, a common mistake. But it's not far off from my own analysis of Linden's revenue.
$700 million, it goes without saying, is an extremely high valuation. Then again, it's several orders of magnitude less than the $5 billion a Techcrunch report pegged it at in 2007. NeXtUp also did an analysis of Facebook for Sharespost (page here), and gave the social network a valuation of $3.15-$4.34 billion. Then again, that figure is for a system of 200 million monthly active users, versus Second Life's much more modest 800K. The outstanding question, of course: What if anything will the tech industry make of the valuation?