GOMs new best Pal

Gaming Open Market and PayPal seem to have kissed and made up.

In what could be characterised as an intense focus on customer sentiment or a sudden 180 degree hand-break turn of a policy change GOM have just announced that, despite previous statements, they will be using PayPal after all.

A couple of weeks ago I reported that GOM had suspended trading (See: GOM Off-line) due to an alleged fraud. The incident sparked off a massive discussion here on TN about the legality, ethics, impact and mechanics of virtual item trading. On 26th of June GOM announced:

As of midnight eastern time on July 9 2004, Gaming Open Market will no longer take deposits from or send withdrawals to PayPal accounts.

Now brace yourselves. Yesterday GOM updated their stance:

Hello again!

Never let it be said that we don't listen to your suggestions, complaints and requests. :)

PayPal
======

Gaming Open Market will *continue* to use PayPal as our payment system. We will *not* be closing our PayPal account after July 9th as previously planned. We have been discussing options with Linden Lab for limiting our liability in the case of fraud, and they are more than happy to work with us. Together, we'll try to make PayPal understand why what we do is so important.

If I can ever get these voice-activated ATMs done, I'll add the YowCow and e-gold pages. We will of course continue to support payments to and from these systems and you are welcome to choose whichever of them is easiest for you.

Your Non-L$ Deposits
====================

Those of you who still have game money on deposit with us in all worlds other than Second Life will need to withdraw it. Please sign into the site and click "Withdraw Game Money To Game", fill in the details and then contact either Tom or myself to arrange for delivery.

Happy trading!

Jamie Hale
President - Gaming Open Market Corp.
[email protected]
http://www.gamingopenmarket.com

At the time of writing I have not see anything that explains just how Linden Labs are limiting GOMs liability. But the statement: ’ Those of you who still have game money on deposit with us in all worlds other than Second Life will need to withdraw it.’ does seem to suggest that maybe GOM and Linden are going establishing an exclusive relationship.

Hay, maybe Linden will take the advice I so generously gave them in the previous thread and really limit GOMs liability by just buying them :)

Comments

[Andres Ferraro (ex: DivineShadow)]

1.

"In what could be characterised as an intense focus on customer sentiment or a sudden 180 degree hand-break turn of a policy change"

I'm getting whiplash...

"We have been discussing options with Linden Lab for limiting our liability in the case of fraud"

To make sense out of this you need to remember that while *trading* Linden Dollars creates a financial risk to GOM (when they give them out in *exchange* for dollars which may vanish due to a reversal), it does no such thing to Linden Labs. Linden Labs could potentially restitute GOM -in Linden Dollars- for the amount of Linden Dollars that disappeared due to a verified fraud, furthermore Linden Labs may do this with no financial impact to their operation. The end-state of a fraud would be that GOM doesn't get the money, but didn't lose the Linden Dollars either - the only expense here would be time spent in investigations.

[Richard Bartle]

2.

"Those of you who still have game money on deposit with us in all worlds other than Second Life will need to withdraw it."

Am I missing something here? If you can only trade in L$ and USD on GOM, what's the point of it?

Richard

[Tessa Lowe]

3.

Richard Bartle wrote:
>Am I missing something here? If you can only
>trade in L$ and USD on GOM, what's the point of
>it?

Players buy the local currency from the game developer. They then use this currency to buy virtual goods and services from other players. The vendors of those goods and services make use of GOM et al to turn their profits back into real-world $$$ by undercutting the rate at which players can buy the game currency from the game operator.

It's not all about cross-currency trading, it's about turning earned virtual currency into $ and £.

[Lee Delarm]

4.

So...is Paypal going to refund them the money and come into the fold/flock? Or are they just saying they realize that 90% of the virtual world users still use paypal regardless of the fact that fraud occurs constantly because of Paypal refusal to work with some of their (best?) customers?

Anyone? Buy a vowel for me?

[Lineage2 guy]

5.

Well, I think if any online game company would be smart they would just sell the money themselves. It would be much easier for them to sell it through a web site of their own and they would be making a profit off of what? A few pixels. If Linden labs does buy it they would be smart. But you would have to hire about maybe 50-100 people giving the money out. And this would also prevent bots (only if the game company sold it at cheap prices)

And i doubt paypal did or will pay them the money they lost. I think they just realized they screwed up by leaving it.

[Jamie Hale]

6.

I wouldn't say we've "kissed and made up". :)

I admit I acted in haste - being a software type and not a business type - but PayPal's policy on intangible goods remains. We've just found another way to limit our liability.

Please forward me your therepy bills for the neck injuries...

And Richard, your question is quite valid. GOM is now a multi-game exchange that services exactly *one* VW. It might seem a bit silly, I know. Our plan as it stands is this:

1) Build a viable and safe trading system working with Linden Lab. Determine what is needed from both parties to make things as smooth as possible.
2) Approach PayPal with this new working relationship with the game developer and offer new solutions to curbing intangibles fraud.
3) Present other game developers with this model in the hopes that they will see the value and offer us a similar relationship.

So who wants to start? EULAs? Trade wrecks the game? Game devs working with us would imply some sort of value and hence admit liability and they're never going to do it?

Are there any others?

[weasel]

7.

Jamie>So who wants to start? EULAs? Trade wrecks the game? Game devs working with us would imply some sort of value and hence admit liability and they're never going to do it?

So long as you're providing a service to the virtual worlds that specifically sign on and support the effort -- I think it's a fine idea, and wish you luck.

Trade can't 'wreck' a game if its allowed, and seeing as how several virtual worlds directly do sell characters and items, and you already have your first partner, I think 'never do it' isn't even an argument.

[Richard Bartle]

8.

Tessa Lowe>Players buy the local currency from the game developer. They then use this currency to buy virtual goods and services from other players. The vendors of those goods and services make use of GOM et al to turn their profits back into real-world $$$ by undercutting the rate at which players can buy the game currency from the game operator.

So who buys the local currency from GOM? As you describe it, GOM ends up with a ton of L$ that it paid more for than it can sell them to SL for.

Richard

[Cory Ondrejka]

9.

Richard> So who buys the local currency from GOM?

Remember, that Second Life doesn't exchange L$ for US$, so GOM is simply allowing players to auction currency back and forth between each other. That's what GOM has always done.

There is currently a lot of discussions going on between the various players in the digital items space to work on ways to make it safer for everyone. Hopefully there'll be more to report on that in the near future.

[ren]

10.

Cory > Hopefully there'll be more to report on that in the near future.

Paint me teased.

[Richard Bartle]

11.

Cory Ondrejka>Second Life doesn't exchange L$ for US$

Yes, I know Linden Labs doesn't buy back L$ for real dollars. Why doesn't it, though?

A scenario might be as follows. Y buys L$100 from Linden Labs, and spends it on a sailboat sold by X. X sells the L$100 to GOM for US$, at a price below what it cost Y to buy those $100 from Linden Labs (because otherwise GOM could get the L$ cheaper from source). Later, Z wants to buy a sailboat from X at the same price, L$100, but instead of going to Linden Labs they go to GOM. This is because GOM sells L$ at less than Linden Labs does (but at more than they gave X for the L$100). So X sells the sailboat to Z for L$100, then sells the L$100 back to GOM, and the wheel turns. Result: GOM profits by the difference between the price it bought the L$100 for and the amount it sold it for.

So in time, most people will buy their L$ from GOM rather than from Linden Labs. The only reason they'd buy from Linden Labs is if GOM runs out of L$ (which of course it will do, as some L$ purchases are direct from SL, not from other users of GOM, so the money goes out of the system).

GOM gains because ultimately it gets a fraction of most L$ trades except those between player and SL itself. Linden Labs gains because ... why?

Richard

[Carnildo Greenacre]

12.

RB > A scenario might be as follows. Y buys L$100 from Linden Labs, and spends it on a sailboat sold by X. X sells the L$100 to GOM for US$, at a price below what it cost Y to buy those $100 from Linden Labs (because otherwise GOM could get the L$ cheaper from source). Later, Z wants to buy a sailboat from X at the same price, L$100, but instead of going to Linden Labs they go to GOM. This is because GOM sells L$ at less than Linden Labs does (but at more than they gave X for the L$100). So X sells the sailboat to Z for L$100, then sells the L$100 back to GOM, and the wheel turns. Result: GOM profits by the difference between the price it bought the L$100 for and the amount it sold it for.

You're misunderstanding the relationship between GOM, the players, and Linden Lab.

LL does not sell currency; they give it to the players in the form of a weekly stipend, prizes to hand out at events, and compensation for holding events.

GOM does not buy or sell L$; they simply provide a safe way of trading between players -- if someone's listing currency on the GOM, you know that GOM has that currency in-hand. Likewise, if they're offering money for game currency, you know GOM has the cash already.

GOM's profit comes from a 3% fee on trades.

In this context, your scenario would go as follows: Player Y spends L$100 of his stipend on Player X's sailboat. Player X lists that L$100 on GOM, where player Z buys it for US$0.40. GOM takes $0.01 as a transaction fee. Player Z uses the L$100 to buy a sailboat from X, who lists and sells the L$ for US$0.40 again.

The result is that X has made a profit of US$0.78, GOM has profited by US$0.02, players Y and Z now have shiny new sailboats, and Linden Labs is happy that everyone played fair.

[Jamie Hale]

13.

RB> Linden Labs gains because ... why?

Before GOM traded L$, Linden Lab's content providers (read: users) would rake in the L$ selling their wares and end up with nothing to show for it except a large number in the top right corner of the screen. Once you reach a certain point, there isn't a whole lot to spend your hard-earned cash on. In a sense, this could discourage them from producing quality content, if they saw that there was little to be gained.

Since we started in Second Life, I've had many people explain to me that now that they know their work is *worth* something, there's much more incentive to build bigger and better things.

Linden Lab gains because their previously discouraged "content providers" now have a good reason *not* to migrate to another VW.

Of course it can be argued that SL is *not* EQ or SWG, and that perhaps the values that we bring to the SL market can't be mapped to other worlds...

As long as external markets exist, however, I believe they can.

[ren]

14.

Richard > Linden Labs gains because ... why?

Remember, Cory is a Linden. I think that the thrust of the paper that he recently TNd (see:
A Piece of Place) is that a secondary market stimulates creation. Second Life is driven (largely) by the creative input of the players – thus by facilitating the market I think that Linden (or at least the Cory shaped bit of it) believe that this will be good for their community hence will sustain and drive subscriptions and the rest of their direct revenue model. More than this I guess that they believe that this is a general good as it increases the amount of cool stuff in the world, allows people greater expression etc.

Of course I’m a European, hence come from a culture that is a bit dubious about how free a free market should be, some restrain and regulation can be good – I really don’t know yet what the optimal situation for virtual worlds is. However the other issues that potentially come with commoditization do make me err on the side of caution.

[Cory Ondrejka]

15.

Ren> I think that the thrust of the paper that he recently TNd (see: A Piece of Place) is that a secondary market stimulates creation

Actually, all the SL papers talk about property ownership and economic incentives as drivers of innovation. In the long run, the innovation of Second Life's users will be a primary driver of both their -- and Second Life's -- success.

Ren> However the other issues that potentially come with commoditization do make me err on the side of caution.

Fair enough, but I think that you build the market first and then the regulations follow :-)

[Richard Bartle]

16.

Jamie Hale>Linden Lab gains because their previously discouraged "content providers" now have a good reason *not* to migrate to another VW.

Why does Linden Labs gain from having GOM do their trading, if GOM is trading nothing but L$? Linden Labs could do all this on their own - they don't need GOM. Why don't they? What's the point of GOM in all this?

>As long as external markets exist, however, I believe they can.

What's external about it? While GOM traded other virtual currencies it could be argued that it was external. Linden Labs can't do anything with currency from EQ, DAOC, AC etc., and neither have SOE, Mythic, FunCom etc., so it makes sense for an independent company to do the trades for all of these.

Now, though, GOM trades L$ (and US$) exclusively. They do nothing that Linden Labs can't do on their own. All the advantages that you say accrue would still accrue if Linden Labs would buy back L$ themselves. So why GOM? Is it a case of "Ah, that's what it's like now, but soon we'll be trading other virtual currencies again"? Or is it "this way we won't be skinned if someone finds a dupe bug - GOM will be instead"? Or is it something else?

Richard

[Bruce Boston]

17.

Richard> so it makes sense for an independent company to do the trades for all of these.

Looks like ige.com is steping in quickly to fill some of the void.

-bruce

[hunter]

18.

Richard > So why GOM?

1. Leave value on the table
Let me suggest that when growing a new business there's some value in creating an ecosystem where others are also benefiting from your success. It means that others are also working hard to innovate and evolve to meet consumer needs.

2. Core competency
Also, Linden Lab is a small company with very ambitious goals, why take on another set of responsibilities? Let GOM specialize in what they do, and let Linden focus on building the platform. Linden can get more return on investing their capital in software.

3. Remain impartial
SL already deals with the occasional charge of favoritism, shady back office deals or conspiracy to enhance one player over another. Why expose themselves to this risk by also directly controlling the purse? With services like GOM, Linden can just step back and no open themselves up to accusations.

(disclosure, I used to work for Linden Lab, but the whole GOM stuff started after I left, so this is just opinion)

[Bruce Boston]

19.

I have to agree with "Core Competency", GOM has some pretty slick software, which works very well, btw.

When I was working with Toyota in Japan, I sold a fair amount of Japanese Pokemon and Japanese Beanie Babies in what spare time I had, most of it through a site called MetaExchange.com, which has similar software. Both work very well with commoditized products like Pokemon, Beanie Babies, and Virtual Currency.

-bruce

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