Rodvik: Virtual Goods and LL’s Profitability

Rod Humble discusses virtual goods and virtual worlds in a brief Bloomberg interview. What are most interesting to note are the comments towards the end of the piece, regarding Linden Lab’s current profitability:

Emily Chang: The Tech IPO bandwagon is filling up. Is that something that you guys would consider or [are] considering?

Rod Humble:  We’re not looking for any further investment right now. We’re profitable, we’ve got [a] very good cash balance… So from our perspective, if we were to be able to deliver a large and measurable long-term return on new investment, then we’d certainly look at it. We’ve got a long runway of features that I want to put in place with our current very healthy cash and profitable business first, though.

Should this story be picked up, it is these words that are probably going to be the focus of attention – particularly among those who seem anxious to sink the Second Life boat, who will probably interpret Humble’s words as, “We’re not really attractive enough for IPO, and we’ve got to blow money to get there, ‘cos we have to make ourselves attractive somehow.”

Personally, I see his statement in a more positive light: LL are reasonably cash stable and are profitable, something I’ve commented on previously. Furthermore, there is a continuing upswing in sign-ups (still running at around 16K per day), which appears to be translating into a rise in user concurrency, which would indicate that new users are actually sticking around for longer and potentially getting more involved. Both of which are healthy signs.

What is key about Humble’s words, however, is the sheer pragmatism they carry, even in such a relatively lightweight interview. He recognises that while Second Life indeed “has legs”, and can, on current form, continue pretty much as is as a private company generating sufficient profits to demonstrate (presumably) a return reasonable enough to keep the original investors happy, it also has the potential to go much further in time. Thus, while IPO is definitely not on the cards right now, this may not be the case in the future, should things develop in that direction.

This is pragmatic on two counts. Firstly, it is allowing the company a degree of freedom in tackling the issues it currently faces – technical and otherwise – and solidifying its position without any ulterior needs or requirements overshadowing things. Given the company has undergone significant pain when ulterior motives have been the driving force behind matters in the past (e.g. the drive to convert SL into some form of “real world” business and applications platform), this is a wise move. Secondly, as Emily Chang states – the technology IPO bandwagon is fast filling up, but if we’re all absolutely honest, we’ve no idea where it is going. As such, not leaping onto it with everyone else is also something of a potentially wise move; especially if the wheels do come off the wagon, as LL get to avoid the resultant crash. However, if the bandwagon proves it can roll and roll, then LL could ideally be well-placed to pick-up on all those investors who might otherwise be kicking themselves from not being “in” on things from the start.

Taking this perspective and being willing to acknowledge both sides of the coin, so to speak, again demonstrates to me that Rod Humble is very much the right man in the right place at Linden Lab – and he’s hopefully carrying the board with him on this.

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9 thoughts on “Rodvik: Virtual Goods and LL’s Profitability

  1. Ossian

    That *was* an interesting comment of his, as well as another remark that “last quarter was our most successful quarter ever” — which took me quite by surprise.

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    1. Inara Pey Post author

      TBH, the “last quarter” comment was less surprising to me, as Rod his been dropping it into a number of conversations for the last couple of weeks :).

      That said, it is good news, as are the continuing upward trends elsewhere within SL. Even in my own modest in-world “business”, I’ve started to see an upturn in store visits over the last 6 or so weeks, whereas SLM sales dominated my revenue during the first 4-5 months of the year.

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    1. Inara Pey Post author

      I think the message is good and very upbeat – and kudos yet again to Rod for spelling things out in sufficient detail and clarity.

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  2. Miso Susanowa

    You know I am an admirer of Mr Humble; this is one reason why. I can go along with technical challengesif there’s clear communication. I agree, based on performance so far, that he is the right man in the right place, for once. I appreciate his candor and communication; he gets it, this medium, and that gives me more confidence than any rhetoric from M or P ever did. And I’m all for SL moving into the future.

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    1. Inara Pey Post author

      Miso,

      Nail meet hammer :). You’ve hit the precise reason I have so much confidence where Rodvik is concerned. He really does understand the platform: It’s a shared creativity tool. This is something I’m not honestly sure Philip Rosedale truly understood. It is certainly not something Mark Kingdon understood – but in fairness, that was never his brief. His brief was to drag SL, kicking and screaming, into the business arena and social marketplace; something it is ill equipped to deal with in the latter case (at least when compared to the likes of Twitter, MySpace, Facebook et al) and completed inappropriate in the former case (at least in the way LL appeared determined to try and leverage it).

      Of course, there are going to be some who continue to moan and groan over things – especially what they appear to be a “lack of progress” in areas that particularly dent their fenders, but overall, I think we all have good reason to feel reasonably confident for the future in <i<at least the medium term, than we ever did say, six or seven months ago.

      Let’s hope it continues.

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  3. Caliburn Susanto

    Some say that the tipping point has long passed and SL is now sliding down the hill to its demise. Maybe so, but my personal belief is that the tipping point has not yet been reached.

    I should clarify by specifying that what I mean is the *public acceptance* tipping point. People in general are either against (sometimes vehemently) or simply have no interest whatsoever in the whole Avatarian business. That’s what they don’t “get.” Those of us who have invested the time, had the aptitude, or for whatever other reason became totally comfortable in our digital personas tend to forget how utterly foreign it is to most people.

    However, I think that mindset is changing rapidly. Avatars are becoming increasingly prevalent and more and more people are accepting the whole idea of projecting their minds and personalities online via a digital self. It’s only going to take some combination of changes — could include better affordability, better interface, scalability, a business or even person who embraces the concept and brings along the masses, an entertainment factor, whatever — to tip the balance and instigate a flood of interest in the platform.

    I’m not smart or experienced enough to know, or even speculate on, what that combination will be, but I have no doubt Mr. Humble, if anyone, is the one to find it.

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    1. Inara Pey Post author

      Good points all – and I like “Avatarian”; wonderfully descriptive. Mind if I borrow it?

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      1. Caliburn Susanto

        I’ve been calling myself an Avatarian since 2007 and I’m surprised it hasn’t come into more common use (although I do see it used on blogs every now and then). Anyway, I have no possessiveness about the word — spread it around as you wish. Cheers. 🙂

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