Second Life Pros

Linden Lab earns about 50 millions USD per year… or 40?

by sbrunozzi on May 5th, 2008

Wagner thinks that, given some approximation, Linden Lab is earning a gross of about a hundred millions a year, and pays about half of it in expenses.
Let’s take his calculations (he honestly says that he’s not an expert of the matter), and modify them according to my little and humble IT experience:

Linden Income
a) There are 14,600 islands, of which about 7,000 were sold in the last 12 months. They bring a one time sales fee of 1500$ (average), it means 10.5 M$ per year (but this figure is growing, almost doubling every year, so we can assume that for the next 12 months, it will be 14,000 times 1,200 USD = about 17 M$). Wagner says 17 M$. (too much, some island were already sold before one year ago!).
b) Monthly fees: 14,600 times 295$, it means roughly 4.3 M$ monthly, or 51.6 M$ annually.
There is also some land feed on the mainland continents (about half of that earning), so let’s say 2.1 M$ monthly, or 25.2 M$ annually.
Add the premium accounts (92,000 accounts, paying 10$ minus the L$, makes about 400,000 $ per month, or 4.8 M$ per year), add commissions from currency transactions, roughly 1.5 M$ a year.
Total is 51.6 + 25.2 + 4.8 + 1.5 = 83.1 M$ / year.
Total earnings is 93.6 M$/year. Wagner says 96 M$/year.

Linden Expenses
250 employees = 250 times $110,000 = -27.5 M$
Offices (San Francisco, Mountain View, Seattle, Boston, and Dover in UK) cost about 1/3 of salaries (it’s an european average), so let’s say -9 M$/year. Total up till now is -36,5 M$/year, while Wagner is at -30 M$/year.
The grid is about 5,000 servers (Wagner forgot a thousand), you have to consider:
buying and deploying 1,800 of them this year = 1,000 USD times 1,800 = -1.8 M$.
powering, running, fixing 5,000 servers, and mantaining the grid: 2,500 $ times 5,000 = -12.5 M$.
bandwidth for 50,000 concurrent users on average, streaming 40 megs of data per hour = 50,000 * 40Mbyte/hour * 24 * 365 = 17.52 Tbyte/year. You need 50,000 * 40 Mbyte/hour / 3600 = 555 Mbyte/sec, or 4 Gbit/sec of bandwidth for that.
That bandwidth could cost another -2 M$/year.
Publicity, legal, insurance? It’s ok to set it at -5 M$, as Wagner’s extimate.

Total expenses is -36.5 -1.8 -12.5 -2 -5 = -53.3 M$/year. Wagner is at -50 M$.

Income, minus expenses: 93.6 M$ - 53.3 M$ = roughly 40 M$/year. Not bad.

Also, my extimate is very close to Wagner’s. We’re not expert, and if we say 40 M$ or 50 M$ it means we could be both right, or close to truth.

What do you say? Do you think they earn a lot more, or less? What we forgot?

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POSTED IN: linden lab, second life