The Alphaville Herald

Virtual Market Matters: Cyberland Steady; Is Ginko in Trouble?

by Alphaville Herald on 30/10/05 at 8:06 pm

By Dow Jonas

Since the demise of the well-liked independent Linden currency exchange Gaming Open Market, Second Life’s land and content markets as well as its fledgling financial institutions have taken a beating. With the month-long ramp-up time of the LindEx, Linden Lab’s own currency exchange, which still has a hefty fee and slow manual pay-out via PayPal, a number of SL businesses offering savings, investments, and shares have had to tighten their belts for a very rocky ride.

Many land dealers were faced with the predicament this past August and September of having too many Linden dollars from booming land sales, but were reluctant to cash at the lousy rapidly-tanking GOM rates as GOM managers headed for the exits after Philip Rosedale, CEO of Linden Lab, announced that talks of a takeover and stock option had failed, and LL would be creating its own currency exchange. SL investors then began to hunt for places to park their Lindens – some commissioned builds, some put their pixelated pennies into more cheap land to flip later, and some entrusted their ephemeral finance to a new stock market and a well-established bank.

After a tangle with Linden Lab, which told the entrepreneurs to remove what they felt was the misleading name SL Stock Market), Cyberland Securities, the sole company listed on what is now called the Metaverse Stock Exchange, appears to be holding its own, paying out dividends on schedule on October 11 to an unknown number of investors holding a total of 469,750 shares. Today, shares are trading at $11.25 per share for 5000 on the buy side and $10 per share for 100 on the sell side, down from the summer high in the 20s . Shareholders are scheduled to meet Sunday at 6:00 PM SL-time to hear plans for spending what is currently a L$3,746,830 cash reserve, evidently garnered from selling the company’s mainland holdings, which now total just 107,760 m2, indicating the successful sale of a number of sims won on auction bids by Cyberland CEO Shaun Altman.

Trading of shares on the Metaverse have not been terribly brisk, as many are no doubt waiting to see how the LindEx does and land market in general turns. LL continues to sell on its auction a dozen or more sims a week at bids opening at $1000 and closing for normally not more than $1200, and more often $1050; with the population explosion, these have been parceled up to small amounts all over the north and are rapidly filling with newbies and oldbies who now find is cheaper and flatter to build in SL.

Ginko Financial is an interesting experiment that has apparently been around for a year or so, which offers a whopping 0.19 percent daily compounded interest to depositors. At terminals scattered around SL, any resident can right-click and pay GF Ambassador, an avatar in the land group and wait for his SL nest-egg to grow. In May, Ginko reported it had reached the $L2 million deposit mark. This week, Ginko announced that the software update 1.7 required them to redo some scripts, but this is par for the course in SL, where each new patch paralyzes hundreds of businesses as they scramble to rewrite code on everything from vendors to rentomatics to ATMs.

Before the update, however, SL’s small investor community was rocked with rumors that Ginko was about to crash, like GOM. While Ginko had kept paying out regularly throughout the GOM crisis, suddenly it seemed as if its model was breaking. Investor insiders began to speculate that GOM itself may really be like the sort of pyramid scheme SL forum critics endlessly wail about in the anonymous-avatar filled virtual world because the financial company itself may rely on an Internet pyramid schemes like the cash-for-web-surfing site at http://www.12dailypro.com/ This site’s mention of e-gold with 12 percent daily commission and 12 percent referral commission, say some knowledgeable about the scheme, would dovetail with statements made by Ginko CEO Nicholas Portocarro that his investments are in gold, and that he has plenty of return to be able to plough back into SL.

Ginko makes no promises to depositors that they may withdraw instantly – disclaimers come with an automatic notecard at every terminal. Its track record has been pretty stable, but in recent weeks, at least one very large deposit said to amount to L$1.8 million was rumored to have been withdrawn from Ginko, and others are speculated to have followed – with the issue not clear of whether they are able to obtain complete and timely withdrawals.

Rumours were further fueled by the disappearance off the SL map of Paris and South Paris, two casino, shopping, and museum private island sims owned by Ginko that never seemed to taken off, despite breathtakingly realistic French builds by architect Kavai Onizuka. Onizuka himself has been targeted by claims from Anshe Chung and other SL developers for failure to perform on building contracts though his builds on Paris seemed above reproach. This week, the word on the street is that Kavai, who is often said to bluster about access to deep pockets but whose connection from his alleged RL location in Macau has often been spotty, might be a candidate for the Teen Grid. His for-sale ads on the forums have grown more frequent. Onizuka was rumored to have been paid by Ginko for the failed sims not in direct cash, but in a favorably-rated deposit in Ginko itself, creating speculation about grounds for some claims and counterclaims, although to date Kavai remains an officer of GinkoTec Financial group.

Calling into question the LL mantra about “value-add”, despite their beautiful architecture and planning, the Paris islands never seemed to get the traffic they needed to succeed, though for a time they were managed by successful entrepreneur Timmy Night, whose Night Mountain has regularly been in the top high-traffic and Developer Awards lists. Rumour has it that Ginko was forced to sell off the Paris sims to make ends meet on the withdrawals at the terminals. Meanwhile, Ginko is in fact showing a new island “coming soon” on the map and doesn’t show any actual signs of closing its ATMs. Tracking the Ginko doings in SL are made difficult by the confusion between GinkoTec and Ginko Technologies, which executives say are completely separate – yet have some of the same people in or around them.

The secretive Ginko has never wanted to explain where its investments are made outside of SL, and that has created a credibility problem for its users. Still, most depositors seem so happy to get the .19 per day help grow their SL dream that they haven’t looked too closely at the arrangement. As with all pixel profits that have no certainty of turning into RL cash, caveat emptor.