Linden Lab worth $1.1B?

I'm not a stock market expert.

I did however have a few economics courses a long time ago.

The commercial value of an asset- in this case, a whole company- is based upon the future income stream it can be forecast to produce.

Taking an out-of-context revenue number, and then applying an arbitrary multiple that has nothing to do with the company, doesn't seem to be a surefire way to value a company.

I notice that:

a) In Mitch Kapor's speeches, though he tries to give the issue positive spin, still admits that it's hard to get investment capital for Second Life, and that Second Life has always operated on shoestring investment capital. If Second Life is a billion dollar company with such great prospects, why aren't more investors hopping on-board?

b) Linden Lab certainly doesn't invest money in customer support staff, doesn't invest in protecting the IP rights which are one of the promised cornerstones of their product, and doesn't invest in the technical infrastructure to break the concurrency limit and just keep the grid stable. Linden Lab doesn't invest in its product like a billion-dollar company.

c) This company value estimate is based upon a projection that Linden Lab will double its revenue from last year (a 100% increase). However, last year Second Life experienced its greatest growth spurt, and only came up with a 33% increase in revenue from 2006 to 2007. Linden Lab's own numbers show that its concurrency stopped growing in Jan. of 2008, and has levelled off. Where is the doubling of revenue coming from?

d) From what I read in these forums, the land economy has been struggling all year in Second Life. Historically, land sales account for 70% - 75% of Linden Lab revenue. So from where is Linden Lab's revenue coming?

e) At least for part of 2007, Linden Lab was still reaping the benefit of gambling in Second Life. Linden Lab itself reported the revenue hit it took after the gambling ban. Though the growth spurt in 2007 may have eventually overtaken the hit from the gambling ban, the fact is, in 2007 Linden Lab's revenue is propped up somewhat by gambling, in 2008 it isn't. Maybe that's why we see Linden Lab indicating it want to try to bring back as much gambling as legally possible.

f) Second Life does have a decent brand name. That's very helpful in the early stages of growth, in which more press has been about the future promise of Second Life, rather than the actual problems with Second Life. But as more and more people come in because of that good press, then discover that Second Life isnt' all it's supposed to be, the media tide turns.

g) It seems to me that, compared to 2007, that there is more aggressive competition in the social virtual world arena. Whether or not you're a fan of the competitors, they have been making the buzz, and that has a lot of meaning when it comes to future prospects.

h) Linden Lab isn't worth a billion dollars if it's only asset, Second Life, can be reproduced in a few months by a competitor that can drop a fraction of a billion dollars to develop it.

I don't the huge, bright, billion-dollar future for Second Life.

I'll say this, if I thought Linden Lab had that kind of future, I'd be cobbling up some money to invest in it.

If this Alley Insider is a credible financial reporting source, then it did Linden Lab a huge favor with the inflated numbers. But if the Alley Insider doesn't withstand my amateur, casual scrutiny, I doubt it's doing anything for serious investors.

You know I'd give you mine Marianne, if it were Trans