M&A inside Second Life

Linden Labs, the company behind Second Life yesterday announced the acquisition of two inworld businesses – reported here in the LA Times.

These businesses broker the sales of virtual goods – kind of like Amazon market place, but restricted to virtual goods for use inside Second Life.  It seems Linden has a strategy to become a sprawling corporation, as used to be the fashion for real world companies in the 1960s.  For a long time they have made money by selling land and letting everyone else innovate around that.  Now they want to grow revenues and profits by controlling more of the commerce themselves.

One of the products you can buy from these companies is an Obama avatar:

To my mind this makes sense in a short term view, but is likely to stifle innovation over the longer term.  Kind of like if Twitter acquired one of the leading Twitter clients.

Moreover Linden Labs strategy up to now has endorsed this point of view.

So I wonder if this move signals a recognition by them that the economy inside Second Life is not going to be so huge that they can afford to cede large areas of it to other companies and still have enough left for themselves.

That said the economy inside Second Life is still growing well, although not staggeringly fast.  Goods traded (equivalent to GDP) in Q4 2008 totalled $101m, up 54% on the year ago period.