by Robin Wauters on July 2, 2009

Analyst firm Next Up Research has published an extensive report on Linden Lab, the San Francisco company behind virtual world Second Life. The research is based on aggregate data and is available on SharesPost, a site set up to trade shares of privately held companies (if you register, you can download the report for free from that page, or you can find other valuation reports on companies like Facebook and LinkedIn). The report goes rather deep into the valuation of the Linden Lab, which it pegs at somewhere between $658 million and 700 million.

More on that later.

Now that Linden Lab has been around for nearly 10 years, and with its product Second Life celebrating its sixth birthday since launching publicly in June 2003, we thought it would be a good idea to take a close look at the report and see how the company’s doing according to the analysts.

First of all, you may be wondering if anyone is still using Second Life at all. The answer is yes, and users are very active on there. During the past 30 days, one million users logged in, according to Second Life’s own statistics. In average time spent per user per week, Second Life in fact trounces all other MMORPGs, including World of Warcraft and Civilization IV. In another testament to the service’s apparent stickiness, the number of hours users spend on Second Life has been increasing steadily and is currently at historic highs, totaling approximately 124 million hours in the first quarter of this year.

More importantly, Next Up says in-world transactions have recovered after a significant drop in September 2007 – when gambling was banned in the virtual world – and has been steadily increasing ever since December 2007.

Which brings us to the valuation, or at least the estimated value Next Up claims Linden Lab is worth after running a couple of calculations. Using publicly-traded online gaming companies as a proxy, Next Up pegs the median enterprise value (EV)/ Revenue multiple for that group at 7.2x off of 2009 revenues. Subsequently applying this self-proclaimed “conservative” multiple of 7x to the estimated revenue of Linden Lab ($100 million for this year), the current target valuation amounts up to $700 million.

That seems like a stretch. In November 2007, the last time we asked ourselves how much Second Life is worth, we came out somewhere between $500 million and $1 billion. The current estimated enterprise value calculated by Next Up falls pretty much right into the middle of that range.

Next Up defends the 7x multiple variable by referring to a two-year-old M&A deal. When Disney acquired Club Penguin for $350 million in cash back in August 2007, it paid out at least a comparable multiple based on Vlub PEnguin’s projected revenue for the year (between $50 and $65 million), despite the fact that it reaches a narrower demographic profile. But things have changed since then: stocks have tanked, valuations have dropped, the IPO market has pretty much dried up and VC-backed liquidity is at a record low. So that implies a major discount, with a valuation between $300 million to $500 million, which is decent but not spectacular, assuming Next Up’s revenue projection is accurate.

Here’s what else Next Up says could have a negative impact on Second Life’s valuation:

- the aging population of its main target markets (U.S. and Europe) and less of a presence in developing nations where its main target audience (people from 13 to 45) is quickly gaining in size.
- limited amount of premium subscriptions (about 1% or 170,000 users)
- possible taxation on virtual monetary transactions in a variety of countries
- cost and complexity of running the technical infrastructure behind the virtual world

If you’re interested in the virtual worlds or Linden Lab in particular, there’s a ton of information and speculation about the market to be found in the report, even if we focus mostly on the financial side of things. To conclude, here are two charts from the report, one on the estimated valuations based off of different calendar years and one on the post-money valuations after the various funding rounds raised by the company.

Website:	lindenlab.com
Location:	San Francisco, California, United States
Founded:	1999
Funding:	$19M

Linden Lab is the company that created The Second Life Grid platform and hosts the Second Life virtual world.

The Second Life Grid is the technology platform used to power the Second Life virtual world. In 2007, Linden Lab opened the Second Life… Learn More

Second Life’s virtual world is providing real-world recruiting help to Ontario Public Service.

10/8/2008 5:00:00 AM By: Brian Jackson

A firefighter turns his hose towards the sparse collection of tall pine trees surrounding the building and aims its stream of water into the flames that are exploding outwards from the branches and foliage.

Protected by a heavy, flame-retardant vest and a helmet with a transparent face shield, he is doing his best to deter a total disaster.

But the conflagration is spreading – inexorably moving from one tree to the next and soon the entire landscape is ignited in an orange glow. The crackling sound is menacing and the fire’s determination to consume the building, unstoppable.

This would be one heck of an expensive and dangerous training exercise if it were happening in real life.

But it isn’t. It’s an experiment in Second Life, the virtual world designed and hosted by San Francisco-based Linden Lab Inc.  And the point of this flaming simulation isn’t to train a firefighter, but to give an average person an idea of what it might be like.

“You can don the firefighter gear that our Ministry of Natural Resources has and take on a fire in a simulation,” says Glen Padassery, acting director of the youth and new professionals’ secretariat at Ontario’s Ministry of Government Services. “That idea is you are a career tourist – you have a day-in-the-life type of interaction.”

Ontario’s Public Service is hoping to find new young professionals to replace its ageing workforce. As the average age of a Second Life user is 32, the virtual world is an ideal environment to attempt recruitment.

The award-winning simulation set up by the government may be a virtual island, but it isn’t alone.

Many organizations are turning to virtual worlds as a useful recruitment vehicle and honing techniques for measuring the success of such projects.

Analysts say it’s one more step towards virtual worlds becoming more mainstream and less dominated by a population of computer nerds.

“As youth move more towards the online space, we wanted to make sure we had a presence that would be fulfilling and meaningful to them,” Padassery says.

The government worked with New York-based virtual world design firm The SL Agency to launch a pilot in April. The team selected five of the 18 careers that Ontario was looking to draw attention to: firefighter, medical technician, civil engineer, economist, and traffic analyst.

“They wanted an experiential marketing package that would really show what it’s like to work as a fireman, or in a health clinic,” says Leigh Rowan, vice-president with The SL Agency. “Second Life is perfect for that.”

Aside from the forest fire simulation, users can take water samples from a virtual pond and analyze its contents. A healthcare simulation allows your avatar to perform cardiopulmonary resuscitation (CPR) on a dummy, or watch a bank of television screens to monitor live traffic flow across the province – the real video feed supplied from real highway cameras.

“From Second Life, you can actually send HTTP requests,” Rowan explains. “So we bring in snapshots as thumbnails into Second Life. When you click on that, it launches into an actual video from that camera.”

2. Linden Lab’s Economic Statistics
This is a good place to get daily updates which can be used along with the numbers in State of the Virtual World above. They’re mostly geared towards the state of Second Life’s internal economy, but there are accurate numbers on logins today, this week, this month, and so on.

3. Tateru Nino’s Second Life Charts
Tateru’s graphs are useful and highly accurate, but their data doesn’t always go back over large periods of time. They were originally provided to demonstrate the discrepancy between number of accounts and number of users. Tateru’s charts were produced by scraping data from the front page ofSecondLife.com.

One interesting observation of Tateru’s charts is this: Second Life consistently hits a new record number of concurrent logins every Sunday at around 1:30 PM, Pacific Time. It’s usually an increase of over a thousand users. However, Monday –the day with the lowest concurrent logins– often boasts the greatest number of new accounts created. It would be interesting to be able to find out why.

4. “Second Life Second Life Residents Statistics, from the Second Life Research blog
This is very useful: it’s an accurate, “presentation-quality” graph, correlating the growth of overall population to the one metric we can rely on as a sign of growth: the increase in concurrent users. As you can see from the graph, the numbers match up. This demonstrates that while we shouldn’t rely on the account numbers themselves to demonstrate Second Life’s current userbase, (1 million six months ago, 4.6 million today) we can use those numbers to express Second Life’s growth.

5. Linden Lab’s “Economic Statistics: Graphs: ” page.
These graphs all represent the growth of the internal Second Life economy over time. However, they’re a bit dated now, only going up to December 2006.

21 July, 2007

According to PHYSORG.com, “[...] police in Canada are turning to an unusual candidate pool for crime fighters: the virtual world of Second Life.

“Policing has to reflect society, and as technology becomes more pervasive in society, we have to make sure that officers we hire are familiar with the technology,” said Inspector Kevin McQuiggin, head of the Vancouver Police Department’s technology crimes unit.

“Anyone we meet online, by virtue of being on Second Life, likely has an interest in cutting-edge technology or is comfortable with technology … and could make an excellent candidate,” he told AFP.

Second Life, created by Linden Lab in 2003, is one of the most popular digital virtual worlds on the World Wide Web, with more than eight million users worldwide.

Hoping to attract technology-savvy candidates to their unit, the Vancouver cops created online personas or avatars with the help of local university students, and held their first recruiting session on Second Life in June.

A second session is planned by year-end, said McQuiggin, whose team is responsible for computer forensics, investigating harassment by text messages, child porn cases, financial crime, decrypting cell-phone calls of organized crime rings and so on.

Last year, the unit was involved in 18 out of 19 homicides in Vancouver on Canada’s Pacific Coast, scanning computers, cell phones and handheld e-mail devices.

In most ways, the Vancouver Police Department’s June online session mirrored a real-life recruiting session: explaining the force’s selection process, training and job opportunities, he said.

However, the veteran cops found themselves in a virtual world surrounded by 30 avatars with spiked hair, wings and mercenary accouterments.

McQuiggin said recruiters should try to ignore some of the outlandish costumes worn in Second Life. One man reportedly attended another virtual job fair as a female avatar named Dragon while another appeared as a teddy bear.

“The interactivity in Second Life is really neat,” McQuiggin said.

But the avatars can be tricky to maneuver. One job-seeker told the daily Globe and Mail he accidentally presented a recruiter with a beer online, instead of a resume.

And unintentionally sending your avatar hurtling into a wall could spoil that crucial first impression. Of course, with the virtual environment being new to employers too, most are understanding of such gaffes.

According to reports, a growing number of organizations are turning to virtual online communities to find employees for real-life positions, because of their global reach.

In May, TMP Worldwide Advertising & Communications held its first virtual job fair, attracting hundreds of applicants.

Hewlett-Packard, Verizon and Microsoft are also purportedly experimenting with online hiring.

After its first virtual session, the Vancouver Police Department received three applications from Second Life users, including one from Italy, McQuiggin said.

“He had planned to vacation in Canada and decided he’d like to meet with us next week,” he said.

Candidates must still be vetted and interviewed the old-fashioned way, he said.

“We weren’t looking to establish a police station or conduct investigations on Second Life,” McQuiggin said.”

Source: PHYSORG.com

September 2, 2008

New World Notes has been following the use of a Second Life-based simulation for training Canadian border guards designed by Loyalist College‘s Virtual World Design Centre. It’s saving money and having real-world impacts on the interview section of the students’ final test. “2007 – Without using Second Life, student interview skills average grade: 58%,” Ken Hudson of Loyalist told New World Notes. “2008 – after using Second Life simulation, student interview skills average grade: 86%.”

November 2007

Yesterday, Canada Post announced that it has boldly gone to perhaps the last place anyone would have expected it to go: Second Life.

The official launch of Maple Grove will be celebrated tomorrow, November 3, with a six-hour virtual live music festival. As well, throughout the holiday season, the virtual city will host concerts, film screenings and shopping events.

To augment the inaugural festivities, many retailers are offering incentives for Second Life visitors. SkyMall, which recently entered the Canadian market, has a “ship to anyone in Canada” option, allowing Canadian and US shoppers to send gifts to families and friends in Canada. The Shopping Channel will broadcast its special offers throughout the holiday season. Niche retailer Everything Olive will give eco-friendly gift totes with purchases. And Brookstone will take $15 off all purchases of $100 or more.

Why did Canada Post choose to set up shop in Second Life’s worldwide virtual community of more than 8 million registered users? “Today’s net-savvy consumers value convenience and relevance, and there are hundreds of thousands of Canadians in Second Life,” explains Laurene Cihosky, SVP for Canada Post’s direct marketing division. “Maple Grove is our way of meeting those expectations; a virtual place for friends to meet, shop and enjoy the culture that Canada has to offer.

“The post office is the centre of many communities across Canada,” notes Cihosky. “And just like your local post office, visitors to Maple Grove can visit Canada Post and send packages, buy stamps, cards, gift cards and send them to anyone, anywhere in Canada.”

No paid advertising is planned for the Maple Grove venture. Instead, Paulina Sazon, of Canada Post’s direct retail strategies division, tells MiC, “A buzz marketing campaign will take place within Second Life, across social media networks and directly through the mainstream media.”

The initiative will include a series of live entertainment events, discussion forums and a virtual scavenger hunt, all promoted through Second Life’s events calendar, group notices and blogs. Maple Grove will also be similarly promoted on other social media sites including MySpace. As well, says Sazon, “We expect extensive media coverage about the initiative from mainstream media, which are already expressing great interest” in the venture.

Promotional activities are being handled in-house at Canada Post. Development of the Maple Grove initiative was done in collaboration with the mail carrier’s US reps, French West Vaughan, of Raleigh, NC.

It didn’t take long for Second Life, a leader in 3D Virtual Worlds, to respond to There.com’s announcement of new features.The most compelling new feature There.com revealed was its innovative ThereIM which would allow its members to chat in 3D and 2D worlds at the same time. Not to be out-done by their competition, Second Life has announced their own instant messenger called SLim™ (Second Life Instant Messenger) that will work in the 2D and 3D worlds.

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