Krangel and Ondrejka Disagree on Linden Lab Acquisition Possibility

Earlier this month former Linden Lab Chief Technology Officer Cory Ondrejka made his predictions for 2009, two of which were related to the futures of Second Life and Linden Labs.

The first, and most rosy, is for a resurgance in Second Life in 2009, where he stated on his blog Collapsing Geography, "Second Life will return to steady growth and have a shockingly good 2009. By shockingly good, let's say 50% growth in concurrency and James' measure of active users. Why do I expect SL to rock 2009? A few reasons. First, world-wide recession makes SL more valuable as a source of income, cost effective collaboration tool, substitute for expensive travel, and educational resource. Second, the same recession -- combined with Lively's demise -- means competition will remain non-existent. Third, Linden has had time to adapt to the many organizational changes 2008 brought."

His fifth prediction, echoing a similar prediction this reporter made back in December, stated, "For the earliest employees, this is year 10 at Linden Lab. For most of the investors, this is year 8. With capital markets in the toilet, even with the great performance I expect out of Second Life this year, an IPO is impossible. Thus, the pressure of no liquidity -- from investors, from employees trapped by AMT, and from the increasing need to be able to diversify the Second Life product offering to being truly rebuilding the code base -- is going to mount, with an acquisition the logical way out. Per the MS discussion, an acquisition this year may be for fewer absolute dollars, but in the long run the deal would be more valuable as markets recover."

While some have speculated that Linden Labs, and in particular related to it's surprising reversal of Openspace policy, may be preparing for an IPO, Eric Krangel (formerly Eric Reuters) of the Silicon Alley Insider disagrees, stating, "Why we don't see a Second Life purchase -- by any one -- as likely. According to Linden Lab's own numbers, Second Life's revenue base is contracting. Linden Lab makes its money on a monthly charge for "virtual land," and that land base is shrinking. Linden's response that we should ignore the numbers because the company has been "misreporting for a while" is not reassuring at all. There's no more revenue to be squeezed out of Second Life. The community is already migrating in bits and drabs to rapdily evolving free open-source variant Opensim, and any attempt to harvest more fees will only accelerate the exodus. Second Life has something of an image problem and anyone who buys it inherits that. Nor is any change coming: CEO Mark Kingdon recently told Forbes he thinks mainstream appeal is a function of reforming Second Life's "first hour experience" for new users -- and not anyone's discomfort with flying penises or randy furries."

Krangel's own complicity with the image problem of Second Life not withstanding, one has to wonder at his objectivity on the matter considering his continually negative comments on the Virtual World that used to house a good portion of his professional duties. Krangel also called into question the objectivity of Ondrejka, theorizing that he still has a stake in Linden Labs, and stating, "Seems to us Cory still succumbs to the classic dot-com delusion: Saying "we're awesome and deserve to be rich!" rather than asking "who might be interested in buying our service and what might they pay?"