From: Introvert Petunia
I think this easily wins "most incisive post of 2005".
Thanks, Introvert! It seems I barely managed to get that award, since the year is almost over

From: Introvert Petunia
A back-of-the-envelope (without envelope) calculation put personnel and hosting costs for SL conservatively at roughly $8M/annum (+/- 50%). I have little basis for estimating revenue but guesses at land and premium accounts gets me only about $3M/year. Even if I am short by 100%, that still makes for a rather red ledger.
The last time I thought a bit about it, based on some data, I posted the calculations
here (at the end of the page).
I came up to half the running costs (ie. about $4M/year). However, I've often accused of being too much of an optimist on the salary side, and that I shouldn't consider the salary costs based on the Liaison's salary (the only value I have to work with in terms of US$/hour) and the assumption that every LL employee forfeits a big part of their salary in order to get shares of Linden Lab, so perhaps the $8M/year value you quote is more near to reality. Let's use it as a reference.
On the income side, the above link shows some calculations done in September. Here are the revised ones:
Monthly income (December 2005):
16,000 Premium Accounts at an average of US $8, that's around US $128,000
8,000 Premium Accounts paying for additional land, that's around US $50,000
18,000 new subscribers, that's unfortunately zero these days
100 new private islands, that's around US$ 125,000
400 private islands, at around US $80,000
100 land auctions - around, say, US$ 100,000
Fees from LindeX: around US$ 10,000 or so
That's about US$ 500,000/mo. It's hard to project the total annual income, as SL will grow towards 350,000 users by the end of 2006, so you have to take an average of January 2006 and December 2006, but if they reach that goal, here is the expected data for December 2006:
40,000 Premium Accounts at an average of US $8, that's around US $320,000
20,000 Premium Accounts paying for additional land, that's around US $125,000
100 new private islands, that's around US$ 125,000
1600 private islands, at around US $320,000
100 land auctions - around, say, US$ 100,000
Fees from LindeX: around US$ 35,000 or so
Total: about US$ 1M/month. I'm assuming that SL is not growing exponentially, just geometrically (ie. every month the same number of users, around 15-20,000, join SL; thus, the same number of islands are bought every month, etc)
Thus, the average will be US $750K/mo, or a total of $9 M/year, well above your predictions. Notice that the costs will be higher, of course — more Liaisons to hire (although there is no more need to hire any other people), more machines to support (since for the past months they have relied upon migrating the one-sim-per-server islands towards four-sim-per-sever structures, thus keeping the same amount of servers; but there is no way they'll keep up this strategy, they'll need more servers — around 500 new ones by the end of 2006 to support the extra 2000 sims).
The ratio of premium accounts and people paying tier above their included 512 m2 comes from very old posts by Robin Linden. The number of islands/new mainland sims is just based on
this recent post by Robin.
Still, as you see, the difference between income and costs are slight — no one is going to get very rich by investing in Linden Lab — but at least they're not "losing millions per year". They're simply uninteresting and unattractive for outside investors expecting to earn
billions with a "game" with 350,000 users (compare it to any other MMORPG where you'll get at least a flat fee of US$ 10-25/mo. per user, and only need a fraction of the servers to run — WoW with 4 million paying users only has 100 servers!). But for Philip and his kind, more eager to drive their ideas forward than to become stupefyingly rich in a short time (do the math for 2007, you'll see things starting to get interesting by then, as we approach the half-million mark...). Around 2008 or so — almost a decade since Philip started LL! — they'll be able to pay back all their investment. I'm not 100% that's according to plan, and it is certainly a very long time for investors to get their ROI, but it only means that the model works, somewhat, although nobody is going to earn billions, like they do on WoW, CoH, EQ, SWG, or even social MMOGs like There, IMVU, or TSO.
From: Introvert Petunia
I think you are spot on at "stubborn enough" which I read as sort of complimentary to LL.
Yes, stubborness was meant as a compliment

Perhaps a better word would be "driven".
And now back to the thread. Obviously, to keep it going, and to make sure people tier up, LL has to make everybody
happy. Numbers on a spreadsheet are great fun, but if everybody is angry at LL for not complying with their wishes, people will leave, or at the very least, stop paying tier and sell their land.
Personally, I almost think that the refusal on LL's part to clear the signs ASAP (or at least, as soon as the residents wish!) comes from another reason: they wish to push people towards owning larger bits of land. The problem with "lost" 32 m2 or 64 m2 plots does not happen when you buy a sim wholesale (either on the mainland or on private islands). The message seems clear: if you don't want it to happen, get 3 or 4 friends together, split the cost among yourselves, and for just US$40 or $50 (well, almost what you would pay for playing some MMORPGs!), you can get your
own sim together. This seems to be working. I'm utterly surprised to see how relatively new residents come to SL, gang up together or find a partner, and instead of buying that lovely plot of 2048 m2 together, to live in front of a wonderful view over a calm bay, they go straight towards buying a private sim. Because they know fully well that their 2048 m2 today will be in the middle of rotating prims, Bush signs, ugly towers, plywood cubes dropped from the heights, and irritating neighbours in just a few weeks, spoiling all your fun. So, the alternative is to jump straight into a private island and forget all about it.
Might LL be wanting to push people into private sims (or wholly-owned ones)? Consider LL's demographics now. 100,000 users, but only 8% pay anything for tier. On average, people pay US$14-16/mo to own their land. So, if 10 people leave in disgust, but the remaining 5 join to buy an island together, LL's going to earn about the same, but with one third of the population to support. In the medium/long term, the strategy works out fine: increasing the paying customer base and getting rid of the unpaying ones is the way to go when one has a "mixed" model (ie. free and paying users mixed together on the same infrastructure). These are perhaps LL's medium-term plans.
In the mean time, the only alternative for the ones that refuse to leave their tiny plots on the mainland, LL
could completely change the way the group tools work, and give us the ability to "selectively view" other people's buildings (ie. when "muting" a resident, or banning it from your property, all their buildings become invisible to you). This is a completely different issue, a very serious one that will have implications in the way we perceive SL, but worth discussing — since we
know they're tinkering with the group tools.