Second Life Users Make About as Much Money as Linden Lab Itself Makes from Second Life

Interesting thought hit me recently:

• Linden Lab frequently reports that Second Life users cash out about $60 million yearly from sales of virtual content. 
• In 2011, Linden Lab reported making $75 million yearly from Second Life 
• As private sim ownership in Second Life declines, so has Linden Lab's revenue -- conservatively estimated, a loss of about $1 million in annual revenue since 2011. 

So flash forward to 2017 and make some quick-and-dirty math, that means Second Life users are earning $60 million from Second Life content, while Linden Lab is earning about $65-70 million from Second Life content. In other words: Second Life users are making nearly as much revenue from Second Life as Second Life's actual corporate owner.

Maybe it's just me, but that's amazing and rare near-equity for an Internet-based content creation platform. By contrast, for example, YouTube earned an estimated $9 billion in revenue in 2015, but only paid out $5 billion to content creators/rights-holders.

We could even go further and estimate that Second Life users are probably making more money than Linden Lab's actual staff:

After all, about 200 Linden Lab staff people are specifically working on Second Life, and they earn an average of $100,000 a year. (Executives earning low six figures, low level support staff making maybe $50-75K.) On that view, they take $20 million total from Second Life, while Second Life users take $40 million more. Including someone, as Linden Lab's CEO once said, "who makes hundreds of thousands of dollars making hands and feets for avatars and feeds her family by doing that." (Which would also mean the maker of avatar feet is making about as much as a Linden Lab executive.)

There's a lot of valid talk about how much Silicon Valley companies are exploiting their users, so it's notable that Linden Lab seems to be a unique exception to that criticism. Though of course it's likely Linden Lab wishes it was still making a lot more from Second Life than it currently is.

Comments

[Pussycat Catnap]

Linden Labs takes a 5% cut from marketplace sales.

This means people always need to keep buying more linden dollars. 5% of all those used on marketplace 'vanish' and somebody has to click the button to replace them.

- If we assume ALL money spent in SL was on marketplace (obviously untrue), then Linden Lab would make $3 million / year off of marketplace sales forcing people to click that buy $L button.

Now I guess... the question is how much of the commerce in SL hits the marketplace?

It might actually even be MORE than the cash-out value rather than less...

Consider:

I click the button to buy X $L.
I then buy a prim from you on MP... you then take the money and buy a prim from me on MP.
- I then cash out.

LLs has taken 5% of that money twice.

That's an oversimplification though.

More likely is that that piece of money changed hands many times - through both purchases in world and on MP and for land rentals and DJ tips and whatever else... before somebody cashed out however much of it was still remaining.

LLs is likely making good buck off of MP forcing people to buy more $L.

[cyberserenity]

I have no problem with Linden lab making money on Second life. They own it and if they do not make any money the world is gone. If you want open source there is Opensim.

[Fred]

I have cashed out for period of time, its slow and additional cost for withdrawing the converted L$ to USD. But I am quite pleased over all. Delivery problems never occur any longer and marketplace (with all its quirks and flaws) works better now than before. Content competition is tough but the cash is not bad at all if you succeed.

[Alex]

(Sorry about my english). I do not want to disturb the hornet, but this situation, while impressive, is not difficult to understand. Have you seen how there are developers who have a small monopoly on some products? For example, today the mesh bodies (I love the one I use) they has modified the market in SL, if you use one of those bodies you will know what I am talking about. I think the developers of those bodies only lend other clothing developers (extremely few or themselves) the templates to create clothing. Only a few developers have the ability to create clothing that fits 100% for some mesh bodies. That reducing the number of developers who create clothing for those mesh bodies, many layer designers are being annihilated to join the creation of mesh clothing, but they can not accessing those templates, they have declined to close their businesses of 6, 7, 8 Or more years in SL. What happens then? Simple, if a person, two or three, are staying with the lindens who previously received 30, 40 or 50 former creators who closed their businesses, possibly these few favored will have so many lindens that after buying what they need, they will prefer to convert them In real money, to withdraw them within the SL economy. This means that the circulating currency will be reduced, so... land is abandoned, those who are no longer developers do not buy furniture, cars, houses and all, absolutely all affect us. In short, if you distribute 1,000,000 lindens to 100 residents, those 100 will receive 10,000, they will buy clothes, furniture, cars ... is not much money to think about converting them In real money, but 1.000.000 of lindens gives it to 5 people, possibly consume in SL 10,000 lindens and 190,000 convert it into real money.

[IntLibber Brautigan]

Being one of the people who saw everything he built and owned in SL stolen by Linden Lab (value over a half million USD), and having been a party in at least one of the class action lawsuits by similarly victimized customers of LL, I can say that LL has never had any compunctions against exploiting its users when it thought it could get away with it. They continue to this day to violate the terms of my settlement agreement with them. Their infamous terms of service agreements that have incrementally stripped away their users rights to their own property and creativity, through morally and legally unconscionable unilaterally coerced edits that constitute adhesion contracts are the worst in the industry, and the only reason they've gotten their BBB ratings up in recent years is because they pay someone full time to bullshit the BBB about the customers who complain about getting ripped off. Prior to that their ratings were F for many years.

[KaschK]

The numeric parity does not say anything about the prosperity of the SL user base as a whole or even the prosperity of the content creators as a whole. Assuming that one of the products being included in the user figures is land, barons like Doeko Cassidy and Anshe Chung account for such a large percentage of those figures that it doesn't even support hazarding an educated guess about corporate/user profit parity. The large majority of SL content creators make pocket change - due in parts to asset theft, exchange rate of Lindens to real world currency, technological overhauls and obsolescence due to LL changes such as the move to mesh and the outlawing of things like sploders, avie defense systems, etc., and narrow marketing channels.

And that doesn't even count customer attrition due to platform performance problems. So while it is cool that users can create content and (in theory), make a mint or at least enough to supplement real life, it would be disingenuous to think most do or that the on paper prosperity of the user base equates to anything like out-earning the LL staff.