Linden Lab worth $1.1B?

"We estimate that Linden generated about $40 million of revenue in 2007, up from $10 million in 2006. We estimate that the company will generate 2008 revenue of about $80 million, along with positive cash flow. This is a high-margin business--the cost of sales amounts to servers and technology--so the company should eventually be able to have a 30%-40% operating margin."
--
"In any event, we think Linden's $80 million of revenue this year should command a 10X-15X revenue multiple, which translates to a valuation of about $1.1 billion."

http://www.alleyinsider.com/companies/linden_lab

I dunno about this. What do you business savvy forum readers think?

Is that in US$, L$, Simeolans, Megabucks, or Monopoly currency?

Either way, it's a whole lot of cash.

If someone does manage to wrangle SL out of the lindens hands they just should be able to pull a profit(after the price tag, and upkeep costs) by the time a real competitor comes around.

The only reason the lindens will stand a chance against competitors is because they're man decades ahead of anyone entering the market, and achievement entrapment from the users. But I really don't think SL could stand against a persistent competitor, especially one that makes a system that does scale(while the original lindens just prayed hardware tech would scale for them).

Well we can use the purchase of YouTube as an example. They were bought out for 1.6
billion by Google in '06 and they only had 15 million in revenue for that same year.
Which gave them a purchase prize of 100 times revenue.

http://dealbook.blogs.nytimes.com/2007/03/08/was-youtube-worth-it/

Acknowledging that it is a different business, with all the potential that SL has in terms of
all the many things that can be done in a virtual world such as this I think that a 10 to 15x
multiple estimate is conservatively responsible. Especially as SL is sooo much harder to duplicate technologically than a YouTube type formula. As we have seen scores of similar sites have been up for awhile now.

For comparison SL has soo much more to offer than YouTube. Part of the trouble is that the
investment in terms of time for a worthwhile experience in SL is much larger than the use of a YouTube or even a MySpace or Facebook. I suspect that as LL keeps plugging away on
its technological scalability they will solve most of those issues. As their backers include some of the most accomplished techno pioneers of our time.
A different scalability perspective is that of the ease of use and investment of time alternatives that could become available. There are just so many more potential options
for SL in terms of business transactions in micropayments, 3d dynamic data visualization
with immediate feedback options from the general public so to speak. In addition to social networking and global "face to face" communication that its depth is astounding.

To give an example of a lower time investment scaling would be the ability to conduct a number of operations now conducted inworld without logging in at all. Sometimes a person
may just want to quickly withdraw some money from sales or send an IM to people online
or even build offline and be able to bring those builds inworld at a later time. That would be a great option as I am often offline using a variety of graphics programs that dont like sharing comp resources while I am also logged into SL.
What if you could use the SL search function while not even being logged in? What if I could search for people or products while talking to people inworld. Buy that product and have it delivered to me on my next inworld login.

In other words a set of methods for people to interact with the SL world and its people
without logging in would attract those people that feel that SL is too complicated or time consuming. Heck SL could even co-opt the functions of YouTube and Myspace with external
versions of their own that are intrinsically tied in to inworld activities.
That would be a great place to put corporate adspace rather than or in addition to inworld
options. As long as I am voicing my projectile preconceptualizations here a vast improvement in the quality and realism of the avatar would be a huge draw. Think Daz
Victoria 4 quality.
Victoria 4 Daz Page

I also think that alternatives to the real estate and physical travel paradigm would be awesome.
If I could jump in my spaceship and and fly not only above current limits but to other planets both private and public to scout real estate I think would be supercool.

Ok enough rambling from me, to sum up yes SL is easily worth that much even if your only considering the communication and transaction potentials on a global access level.

very very interesting...
so they can afford to get some extra help then with avvy mesh, stopping the crashes and oh what else?

How much money they are worth is very different from how much money they have. Unfortunately, my bank account is proof of the concept. I believe they actually have been hiring extra help. The majority of crashes have been stopped, and lots of what else is in place or on the way.

That really is some impressive looking revenue growth. Hopefully it'll keep scaling for a while.

Thanks for the great analysis, Infiniview.

It's divided between Z's and Ginko Bonds

My pleasure Argos

LOL

Let's put it up on ebay and see how much we can get.

Number of bids:

0

Ah. High finance.

I miss Ginko threads, they were entertaining.

All the good stuff to talk about has been banned.

The cost isn't servers and technology - that's a joke, and instant insight into the fact that whomever wrote that has no clue.

The cost is paying for brains and creativity, asking people to develop cutting-edge, high-tech, better-than-anything-else-and-staying-on-top technology all day, every day. Forever.

Ah, and with a near-flawless biz plan required, because any 'me too' company can take a look at what you have done and go the 'only servers and technology' route copying what was done, never paying the price for development.

Sure, there may be speculators willing to evaluate at high dollar value, trying to sell to other speculators. But come on, really now.

* * * * *

1.1 gigadollarz for the Company? What does that make Caledon worth, then? I've never considered selling, but let me state for the record I'd consider an offer of a mere meeellion dollars! laughs

Not bloody likely.

They really were, weren't they?

We did get these pretty sweet recycled Benshees Bracelets.

Im gonna admit i only scanned this title at first ...

I thought it said

Linden Lab worth $1.18

Prolly more correct.

Well, the quote did specify "cost of sales" by which one might assume they're referring to the accounting term of art, "Cost Of Goods Sold" (COGS), which excludes "indirect expense" such as (most) R&D. But the point is nonetheless valid: evaluating a company like LL based on a "30%-40% operating margin" projection excluding R&D is just silly.

If Phil went on to Dragons Den 6 years ago and asked for US$100,000 to start a virtual world 'game', and said he believed his company would be worth US$1.1 Billion in 6 years, they would have flushed him down the toilet.

The (enormous?) cost of care, feeding and scaling "servers and technology" probably cuts well into that margin. Then there's payroll, which for most companies is the single biggest expense. In Linden Lab's case, it wouldn't surprise me if service infrastructure expenses exceed payroll, or at least run a very close second.

Well, maybe *you* got one...

(I saw my brother's last night. I like 'em, even if I'd hardly use em)

The amount of people logged-in in the last 60 days has dropped by almost 200,000 in the last year. Currently on-line numbers have not risen much in the last 6 months. Premium members are dropping. Yet somehow SL is going to double it's "estimated" revenue? Somehow the land size has doubled yet there is not many more people logging in... Something somewhere is a miss here.

$1.1Billion seems way to much. How can a company with no solid profit be worth that much? The only worth SL would have to another company would be using SL in addition to whatever they currently have to boost that product. Like MySpace buying SL to add a 3D world to their current product. Would it be worth $1.1 billion for them to do so? I highly doubt it being LL released open-source code and projects like OpenLifeGrid and realextend would suit just as good with a situation like that and they are open-source and free... It would be a hell of a lot cheaper for any company to use realextends version and just hire some programmers to implement the code into their product than buying SL in it's current state.

SL lost a lot of potential value when they decided to open-source their code...

http://www.realxtend.org/

http://www.openlifegrid.com/

You could buy some pretty solid profitable companies for $1.1 billion. Only way a company would pay that much is if they already have to much money to care... Like Google but even they are taking a different approach.

Anyway I hope LL never sells SL as any other company would most likely change it for the worst.

don`t forget that all land purchases and tier also add to that figure

add all the mainland on a pile and do the old average sales price
then pile the islands at 1675
then pile all the tiers up -1% of abandoned/linden owned land


that`s a shitload of money from sales and tiers alone...

IMO that is a high multiple for revenue alone and doesn't take into consideration a lot of risk issues. I'll bet that unless they get an anxious buyer and a solid growth pattern, they will not get close to that. I can see a pure business play in the 7 - 7.5 multiple area, which would account for barriers to competition actually falling and no recent growth to point to. The other side of that is 'revenue'. Anyone that has argued budget with a marketer knows that 'revenue' can mean more than one thing and in accounting, you also have potential issues with a place like LL. Tell me what they are calling 'revenue' and how they are netting the other side of the revenue stream and we might get close to a price.