Tuesday, June 8, 2010

Why is Linden Labs Laying off Staff? Get Ready for the Roller Coaster Ahead

Metaverse Journal is reporting today that large numbers of Linden Labs staff have been laid off.

Since the Linden Labs economy is not declining, but stable at the current time (I need to check these numbers, but according to some initial reports I have read  the economic picture of Second Life is stable) this is due to one of several reasons:

1. Preparation for an expected decline in revenue, which does not make sense, since the worst of the "great recession" appears to have been weathered.

2. Preparation for an upcoming sale to a company like Microsoft or Google or Sony which I still think stands a 40% probability of happening withing the next 18 months.

3. A wholesale shutdown of X-Rated content in Second Life, and much tighter security, which may be necessary for it to taken seriously by businesses. If this shock were to happen, Linden Labs could expect a 30% decline in revenue within 3 months, but would hope to offset this in business interest.

There is one more option: 

Key investors such as Mitch Kapor, the inventor of Lotus Notes, needs some cash and is forcing a higher pay-out.  Since Linden Labs is privately held we will have no idea if this is the reason unless someone spills the beans.  The biggest investors are assumed to have seats on the board below and can whatever they so please if they have can get 51% of the share votes.

Board of Directors

Philip Rosedale | Founder and Chairman of the Board
Mitch Kapor | Kapor Enterprises, Inc.
Jed Smith | Managing Partner, Catamount Ventures
Bill Gurley | Partner, Benchmark Capital
James Currier | CEO, Ooga
Dana L. Evan | Strategic Finance and Operations Executive

Whatever the point, if these reports are true, get ready for a roller coaster ride ahead.


  1. The answer is that there is an unmentionable in-world recession going on. There is a glitch in the SL real estate market that is obvious. Some Sims have 60% abandoned rate. Nobody can sell a 512 Meter property now that Linden Homes is sucking the market dry. Small rentals are impossible to market. Prices fo r even adult themed properties have dropped to half of 2009 levels. Entire Sims are beign abandoned because would-be entrepeneurs cannot get buyers for goods in-world. The only sales of avatar products are high-end premium and freebies. Linden simply has to be feelignthe cash flow shortage.

  2. The information I've seen - which I admit has come mostly from the blogs/reports, so it is iffy at best - has shown the SL economy to be in a decline. I must agree with Nordic about the high number of vacant land parcels. Land fees/tier fees are the largest source of income for the Lab and if there's a decline in those fees, it's gonna hurt them.

    Earlier this year (March or April, I think?), The Lab laid off about 5% of it's staff and currently they're laying off more. There's also the closure of their Singapore office and serious cutbacks in their Germany branch. Germany being their second largest source of revenue/clients, etc.

    During the second half of 2008 and throughout 2009 we were flooded with reports telling us how strong the SL economy was and how it was growing in leaps and bounds despite the state of affairs in the RL economy. How accurate those claims were is something I'm not privy to, but I choose to believe those claims were less factual than they appeared to be because believing the alternative is pretty frightening in my opinion...

    But.... One way or another, SL, the Lab, the Marketplace, resident to resident transactions, et cetera are no longer immuned to the economical issues at hand in the world. This was/is inevitable.

    My own situation is I have 3 shops in SL, down from 4, and there's been a noticable decline in my sales. I also do some side work at an SL club, a job I really enjoy, and my income there has also noticably dropped.

    Since I'm just a 'little guy' and not an SL 'mover and shaker' the damages I am feeling are limited and it's pretty much impossible that I'll experience any drastic setbacks - although it hasn't really been feasible to 'withdraw' funds from SL and I deffinately miss that - there's something very satisfying about withdrawing funds that you've made in SL and then being able to go to the ATM machine down the street and make a withdraw ande hold cold hard cash in your hand that you made in SL hehehe...hopefully that will start to happen again soon. But I'll survive either way and my withdraws were never for very much anyway.

    My SL life is still paying for itself with no help from my credit card, and that's what I set out to accomplished when I went into business - So I can't and won't complain.

    But for the time being we all just have to hang on tight and hope for the best. We're bound to lose a substantial number of SL businesses and content creators in addition to sims, but things WILL balance out and this situation will turn around...it's the nature of the beast.


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