Going, Going, GOM: L$ Site to Close Doors

by Alphaville Herald on 28/09/05 at 9:04 am

In news that is sure to shake up virtual commerce in Second Life for some time,GamingOpenMarket.com, probably the single most popular site for trading L$ and the benchmark by which most smaller traders do their business, this morning announced it would shut down its L$ trading service, effective 7pm game-time on Sunday, October 2. The move comes just a month after Linden Lab began taking steps to get into the L$ trading business — something many predicted would indeed have the effect of shutting GOM down.

As we reported back in August, Linden Lab had contacted GOM about more fully integrating its service into Second Life sometime last winter. But after Jamie Hale and Tom Merrall, GOM’s principals, visited LL to talk about a deal, negotiations broke down and LL decided it would be better off implementing the service itself.

According to posts by Hale in the GOM forums, he and Merrall felt LL’s offer was unfairly low. He also felt the company had underhandedly mined the two developers’ brains for information on how their service worked.

In the end, LL decided to implement its own service, one that would be “a direct duplication of GOM’s functionality with the addition of credit card billing,” according to Hale. “This is taken from communications with LL — it is not speculation on our part.”

GOM president Jamie Hale resigned his post a few days after news of GOM’s meeting with LL became widely public, making his announcment in an open letter to SL residents in which Hale pointed out that soon after GOM had launched in 2003, Philip Linden had actually contacted the company asking it to list the L$.

LL’s entering the L$ business makes it less likely that services like GOM would be able to survive. LL’s position is that it will be able to provide better service to more SL residents than a third-party site would be capable of, and that they will implement an interface that will allow other residents to get into the same business.

But this may or may not be true. It remains to be seen what the cost of entry to the L$ trading business will be under LL’s model. And more than one of LL’s major projects are already showing the strain of over-reaching and poor implementation. And the real question here has more to do with whose world and whose imagination Second Life will represent.

The SL economy will survive. But as one SL forum poster put it: “Moral of the story? Long, complex projects are impossible to do in Second Life.” Several other SL residents have come forth with similar sentiments, and some have said they will abandon plans to start ambitious undertakings. Their concerns appear to be well founded. GOM was an example of a popular resident-created service that worked well. As the administrators of Second Life, LL enters the L$ trading arena at a huge advantage; their move could only have spelled doom for GOM, and they must have known this.

The question is, what’s the limit of innovation that LL will accept in their world? Will any truly useful project be co-opted by the company, on their terms and their terms only?As the undisputed rulers of their world, LL operates in an atmosphere in which they need not take into account the market value of resident-created goods and services. Their move into L$ trading at the expense of GOM raises concerns for future projects on a similar scale.

The Herald has contacted both Philip and Robin Linden for comment on the issue, but as it’s only 7:00am game-time at the moment, we’re having to run this story before we’ve heard back from them. We’ll be sure to keep you posted as developments develop. [UPDATE: Read our exclusive interview with Philip Linden.]

10 Responses to “Going, Going, GOM: L$ Site to Close Doors”

  1. Urizenus

    Sep 28th, 2005

    It’s a sad day for the metaverse.

  2. Prokofy Neva

    Sep 28th, 2005

    Indeed, Uri, a sad day indeed we will mark with sorrow, and not only because we’re not able to be cashing out to pay our tier and RL bills. The sorrow is the loss of an independent entity — and that’s part of the struggle for the soul of the metaverse, whether it will be run by unaccountable elites, or by independent people at least with good intentions and good faith. I’m appalled at the amount of kicking of the victim going on while he is down. GOM did this as a labour of love, the sort of “your world/your imagination” stuff we are all beckoned to do. What a Pied Piper is Philip Linden!

    Especially nauseating to read on the SL forums are all these armchair snipes from people without a stake in SL at all, even of time or love, who hecture and lecture GOM on “sucking it up” and being able to adjust to business risks blah blah. As if they didn’t suffer and roll with a hundred punches already with frauds and SL itself being down and cranky customers already. Bleh.

    The most important thing about all this, Uri, is that if you or I were banned from the game (that’s always a distinct possibility for me), we’d have nowhere to have kept our stash away from the state. You were able to roll out of TSO with that one, as could anybody in any game if they kept a savings on the GOM website in that game currency. GOM could then be expected to honour your new avatar name or even transfer to a fellow player’s account — they’re independent of the game companies — that’s golden, and that more than anything else, reputation or service or currency value, is what makes the gold gold!

    I specifically ask Philip last night whether he’d be just taking the cash from the Linden exchanges to top off accounts to pay down tier bills, and whether people could cash out — and whether there’d be a float (GOM would say 24 hours, but they were often done in a few hours, you sensed that if they kept your cash for a bit, it wasn’t to gouge profits off the float, but just because they hadn’t manually gotten to it yet). With the Lindens, I’d love to know what they’re going to do with their float. Seriously. Philip replied that it would be “up to me,” i.e. I could cash out or pay my bill as I chose. He didn’t answer about the time period for the float. What I didn’t want to push with him though was the concept of having SOMEPLACE ELSE BESIDES HIS GAME to put LL in.

    In fact if all Jamie does is keep some form of GOM open as a vault to park LL in even if he doesn’t exchange it anymore, he’ll be golden for me, and I’d pay him for that service as I’m sure those with far bigger investments than me would do.

  3. Cocoanut

    Sep 28th, 2005

    Note that ONLY GOM was approached for involvement in this. IGE and Anshe (and any others) were not.

    Now what is going to happen with the shopping sites? Will ONLY Flipper/SLBoutique be approached?

    Will he have the entre to whatever LL is doing to take over this business? Or what? What about SLExchange? What about Second Server/Gigas?

    Will – when LL decides to get into (read: take over) whatever business – they always approach just one first, try to make a deal with them, and not any of the others?

    The situation as I see it is this: If you go to the trouble of making a huge, important business, you better also be nicer to LL than the others in your market, or try to be. So that when it comes time for them to take over that market, you will be the Chosen One.

    And you had better be ready to play ball on their terms. Whatever those terms may be. Which will probably be stock options and your ability to boast that you were the Chosen One, and the enhancement of your businesses and reputation as a result.

    Our World, Your Labor.


  4. Prokofy Neva

    Sep 28th, 2005

    oh wait it probably wasn’t GOM, or was it? That kept your simoleons? Did they deal in simoleons? Or was that IGE?

  5. RB

    Sep 29th, 2005

    IGE contracts out to sweatshop labour in Hong Kong and China for alot of thier currency generation. They’ve also been caught in shady activities such as [elided by Uri], PP & ebay accounts so on. I happen to know these facts from insiders.

    Seems sheer greed got the better of the IGE juggernaught.

    oh yeah, no it wasn’t IGE that had Uris simoleans way back then Prok, it was GOM.

    - RB.

  6. Janus Sartre

    Sep 29th, 2005

    I agree that this thinning of the trade-stock is not a good thing… But Being one to try and find the positives in the peach pits:

    Now that LL has broader control over the L$, maybe they will pay more attention to it’s value. They, not GOM, now stand to make the most profit off a bustling trade of L$ for US$ or any other currency. When you take over being the national bank and trust, you have to look after the health of the money.

    Then again, they could just flush things down the drain and shake loose all the developers that were making things worth buying, causing the death-spiral to continue…


  7. Antje

    Sep 30th, 2005

    GOM made some serious mistakes.

    1) They put all their eggs in one basket by getting out of other game markets to focus soley on SL. De-diversification is bad economics, unless you absolutely have to, to save a business.

    2) They mistook the incredibly zealous loyalty of their SL customer base for over all importance in the marketplace. Was GOM important? Sure, but not nearly as important as they, or all those who are having embolisms over recent turns of events like to think.

    3) They didn’t prepare themselves for this change, when they had more than ample warning. LL has been throwing the idea of a client integrated method of exchange for a LONG time now, and it was no secret.

    4) They didn’t have to close. LL is not running them out of business anymore than they are the other currency traders. All the hooting and hollering to the contrary is just loyalist hand-wringing.

  8. Prokofy Neva

    Sep 30th, 2005

    No, quite the contrary:

    1) By ceasing their trading in other game currencies — some of them illegallly within that game like IGE does — they severed that tie with the MMORPG culture that many of us were happy to see severed and made the connection between SL and RL more emphatically “not a game” with real cash-out money by RL-type activity. Good for them. I don’t need to buy simoleons from GOM I can go on ebay or player sites.

    2) Their robust support (nothing “zealous” about it given the frequent criticism on the SL forums even from supporters) was directly a result of their incredible customer service and their incredible service to the community, enabling people to cash out of the game to real money. They sure were important because they represented an honest, decent company with people you could talk to (unlike IGE which had scores of drones and would disappear with your money for days or shut down for days to buying or use of credit cards). And now that their legitimate independent function in a free society has been abrogated and taken over by LL, we’ll see just how it is to live in a less-free society and how that will impact the free market.

    3) I hardly think that GOM was unprepared, duh. They were in these talks with LL for months, and were shafted by them, so they did take moves like completely redoing their interface with the partial fills and so on. I never did understand why LL couldn’t have worked out a deal for newbies, i.e. those under 30 days could use their credit cards within LL or something. LL itself could have bought the currency on GOM and sold it to newbies under 30 days or 60 days or whatever. This would eliminate this problem of interface they keep talking about.

    4) When there’s a run on the bank, as there was in the last few days, the bank has to close. They can’t sit around and wait for the currency to plummet to 0 as a public service, and P.S., bailing out LL’s ass because they didn’t get Lindex up and running.

    Once again, I’m quite confident that all the personal attacks against me are in fact rooted in quite different political and cultural views. Those attacking me tend either to be socialists or social Darwininsts advocating unrestrained capitalism — or in some cases, tekkie wikinistas who advocate both when and if it suits them.

  9. Cocoanut

    Sep 30th, 2005

    I’ll go to my grave never forgetting – or getting out of my mind – the phrase someone coined (I forget who):

    “GOM’s dead, baby, GOM’s dead.”

    Right after the Linden takeover was announced.

    It was obvious then to me, as so well summed up in the phrase above, and it was obvious to those who ran GOM.

    Next up: The shopping sites! Yayayayayay! (Not.)


  10. Antje

    Sep 30th, 2005

    Personal attacks?

    My, you are a lot like your sickeningly cutesy koala strawbeary knitting circle friend.

    My remarks were directed at no one in particular. It seems you’ve recognised yourself within them though… not very surprised here.

    De-diversification is stupid, which maks YOU stupid AND wrong. Acting as an exchange for game currency IS NOT illegal, it may be against the ToS of some games, but it’s certainly NOT illegal. And, these ToS’s apply to the players – you know – the people that “signed” an agreement. Sony just started their own exchange. These companies are realising that they must do this, because people are going to do it themselves. It’s akin to the music industry co-opting Napster.

    Nothing you can say, not replacing “zealous” with “robust”, nothing, will change my thoughts. I read the forums. I recognize loyalty before logic mindsets.

    They were unprepared, DUH. LL was tossing the idea around since the time that GOM first ventured into SL, DUH. And it wasn’t a secret DUH. And, if they weren’t such crybabies, they could work with LL like the other exchanges are going to. But no, they wanted it all. Now they will get nothing. Too bad, so sad.

    And no, they didnt have to close. They could have employed any of a variety of mechanisms to deal with a short term run. The fact that they didn’t just shows how weak their business really was. This closing announcement was just another use of the appeal to emotion fallacy that GOM has a vigourous history of employing.

    Finally, I would like to point out that if GOM can’t survive a short run on currency, then they really were not very strong or stable, and therefore, LL was probably right on target with their valuation of GOM’s worth. See? If they hadn’t been so busy playing to their cloying loayalists for sympathy, they could have taken one of LL’s offers and THEN CLOSED. Now they got nothing out of the deal. Nothing. Poor, prideful mendicants that they are.

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