GOM Question re: LL Competition - Important Issue!

From LINDEN FORUMS -> HOTLINE to Linden - Ricky Zamboni posts:

LL competing with resident-created businesses?


"LL competing with resident-created businesses?
At various points over the past year or so, we have brought up the idea of an open, community-standard banking API, going so far as to discuss design and implementation with senior management at LL. You have now informed us over at GOM that you are in the process of attempting to re-create what we have built in order to set up a competing currency exchange with an unacceptably inadequate API, rather than implementing the far superior, secure open banking API we have described in detail to you. Since that is the case, can we please have a reply to this Hotline post from a week ago that has gone unanswered?

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which was in reply to
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From the unanswered post:
"A unified web-shopping site is something that would provide huge benefits to the overall community, and, given your access to the data, is something you can build very easily. Why should the creators of the successful web-shopping sites believe you when you talk about building an API just for them? You told us the same thing and now threaten our business. Why should they not take this move to replace Gaming Open Market as an indication of a threat to theirs?"

Since you have decided to spend developer resources in an attempt to directly re-create a service already provided in exemplary fashion by two of your users, why should anyone believe that you won't leverage your position as the "owners of the world" to duplicate what *they* have built? Isn't this a *huge* disincentive for others to create things of value in Second Life?

Please don't sweep this issue under the rug again. I'm honestly concerned about the long-term growth and survivability of Second Life if you demonstrate to the community such a willingness to push innovative resident-created businesses out of SL by creating carbon copies."

LL - this certain deserves a response!


_/_/

Yeah, it's a tough problem. Unfortunately, I think people who built these products probably should have understood they were invading someone elses territory.

I have thought hard on this problem ever since I joined SL. There have been a half a dozen opportunities (Web Catalogs was definitely one of them) I had considered investing in over a year ago.

In the end, I realised that any venture which was global and close to the core mission was a dead end, because for various reasons LL would probably have to compete. I was pretty sure that this would happen to GOM, and then SLExchange / SLBoutique.

Unfortunately, I sense that LL is going about this in a very piss poor manner. Why not hire Ricky and Jamie to write the code? Why not buy their business?

The GOM is complex code. No developer is going to be able to come on and rewrite that quickly in a secure way. And security is important.

But, we don't know the details. Maybe Ricky and Jamie are trying to play chicken with Philip. Maybe an offer has been made, and Ricky and Jamie didn't realise the tenous position they were in.

Or, maybe the finances are getting shaky, so Philip is starting to make some desperate moves.

I agree -- Linden Labs, rather than just creating new service that replace ones that have been built by its loyal residents, should instead buy out these residents or hire them to run these new services. At the very least buy them out, and don't shaft them.

This raises the question of IP:

Since LL has direct access to GOM's scripts in world, doesn't that make a direct conflict of interest to trade secrets and IP?

I doubt they'll use LSL for this.

Another possibility is that SL is being packed up for sale, and this is the beginning of that packaging process. Look at the resume of the General Counsel .. he's all about mergers and aquisitions.

It would be almost worth it to see a name change.

Bingo!

LL has said repeatedly that they have no interest in selling currency themselves and were only looking at ways to make it easier for new residents to buy currency by doing something like processing credit card transactions on behalf of 3rd party exchanges. Has this changed? Without the actual information that Ricky implies GOM is privy to there's not enough there to form an opinion about. Did I miss something?

Yeah, we're divining based on evidence gathered from second hand sources.

Kind of like detecting black holes when they bend light.

Yes, but the functionality can be derived from the GOM code and thus concepts from the GOM code could be used in considering the planned project.

I doubt LL has done this, but simply the fact that they have access may be, in and of itself, a conflict of interest.

If LL starts offering an API that enables better RL $ <-> L$ exchanges, what is stopping GOM from continuing to use the system they already have ? Also I see this more like a case of LL slipping in the position of someone who'd offer an open source clone of GOM to other residents, so cries of "unfair competition" I dismiss immediately as the same kind of nonsense that some_big_software_company hurls at its F/OSS competition.

No, I didn't have a coffee yet Can someone please tell me the situation discussed is unlike what I've understood so far ?

Sounds like SCO and Linux allegations of "derivative works"

Any old Joe can't set up in competition to GOM because of the trust factor. Jamie and Tom have worked very hard over the last two years or so to gain trust, soaking up some large frauds in the process. They have demonstrated that even though they're nothing to do with LL as a company, they can be trusted with our money when we want to buy or sell L$.

Anyone else setting up a competing site, even if using a direct copy of GOMs current software, would first have to gain that level of trust before they start gaining any ground into GOMs market.

However, there is already another company that you trust with your money.... one that has direct access to your SL account and credit card details. One that has spent the past two years encouraging 3rd party sites to provide all the extra functionality to SL while they themselves concentrate on simply making SL work. Yes I'm talking about Linden Lab.

Their public policy has always been to concentrate on creating the SecondLife software, claiming that it is down to the user to create all the content to go inside it. This includes both products AND services. However, they now percieve a need for noobs to be able to buy L$ even easier than going to GOM.

Now I personally wouldn't say that GOM is hard to use, but for the average noob that wants more L$ in the next 5 mins it can be frustrating because of the fraud checks done on avs less than 30 days old. (I hasten to add here that I totally agree with the fraud checking...). So LL decide there should be a way to buy L$ built into the SL client. Great so far.

The big question is, When LL sell L$ through the client interface, where are those L$ coming from?

1. created on demand
   
2. drawn from a central bank
   
3. drawn from 3rd party bank
   

option 1 would be almost suicidal in terms of inflation, which leaves options 2 or 3.

If LL created their own "pool" of L$ from which all these client sales are drawn then the economy would be controlled. In order for the system to work LL would also have to allow selling your L$ back to them through the client in order to replenish the L$ pool. Obviously you'd get less US$ selling than you paid when you bought your L$, thus LL makes profit. The price offered would initially have to be comparable to GOM.

Option 3 is basically the same as option 2, however the L$ pool is GOM. (or indeed another 3rd party service, subject to the trust requirement mentioned earlier). The price offered within the client would most likely be a cent or two up on GOM if you want to buy, and a cent or two down if you're selling. ie, you pay for the convenience factor.

So what is the problem?
Well, Linden Lab have consistently said that they will not sell L$, but Philip wants to make it easier for noobs to buy L$. The obvious path is option 3, however Jamie and Tom have had the code in place to allow this for months and have been talking to LL about it for months and have constantly come up against brick walls. So are LL going with option 2? What would happen to GOM if they did? How could GOM (or IGE or AnsheChung.com) compete with a service that is provided by LL directly in the client?

This is important not only to the future of GOM, but also for all the other 3rd party developers. SLExchange and the others set up as a direct result of a lack of functionality within the SL client. But there is no reason why any of these sevices could not be integrated. You just have to ask yourself, will it be your service that is linked, or will it be a LL replacement?

Ah, so you think LL is going to compete directly against GOM/IGE etc... because they disagree on how to implement the API ? Sorry I don't see things this way :/

BTW here's the kind of API I'd like: make a call to a specialized XML-RPC registering function , and have all credit card payments in SL land directly into a specialized event in my script. And a pony, of course

Sony is doing it:
http://news.zdnet.com/2100-1040_22-5842791.html


I wonder at what price LL is going to buy and sell L$s at. Knowing LL, they won't be running a service that operates on very close margins, making just a few cents per L$1000 unit, like GOM. LL will trade for a big markup, Like Anshe and IGE, making fifty cents or more per L$1000. LL will charge as much as the market will bare. In that case, there could still be an opportunity for the GOM, although GOM would be at a very severe disadvantage as LL will steer all the L$ buyers to themselves, or ban all competing exchanges.

I still see no reason why LL would start selling/buying L$. And I can see one reason they won't: tax issues.

Well, they might start buying/selling as a way to pump up their revenue numbers.

For example, let's say they trade 10 million L$ throughout the year. The profit on that might be very little, but it *does* pump up the revenue number quite nicely.

Truly, the sad and unfortunate thing about this whole debacle is that LL should have entered into this market in the beginning. In fact, I proposed it to them. It was my first general posting. I should go bump it.

Philip has stated publicly that he wants it to be easier for 'noobs' to buy more L$. As it is already very easy to buy L$ from GOM or IGE we have to assume that he is reffering to selling L$ directly from the SL client interface, in the same manner that they're talking about integration of other 3rd party services into the LL server structure.

So here is the conumdrun causing all the threads. On the one hand LindenLab have stated quite clearly several times that they have no interest in selling L$ themselves. Infact several posts have been made in the past pointing out that it would be a case of 'printing their own money' to do so.
But on the other hand the guys over at GOM already have the infrastructure in place to allow a direct link to the SL interface, bypassing their own website and allowing trading GOM using your SL account direct. And yet they have come up against constant brick walls.


The only conclusion I see is that either LL are planning to impleplement their own trading system, going against everything they've told us, or they simply don't have a clue what they're doing and are just as suprised as we are at the statements that Philip keeps making...



They already sell accounts and land tier to people from all over the world, what difference would selling L$ make?

There would be IRS implications and legal implication and their credibility is at stake, since they have said repeatedly they would not do this, and would leave it to residents.

And the issues that Zep has asked them in the HOTLINE - to name but a few.


_/_/

Sony never formally allowed buying and selling of characters. They simply turned their heads the other way. Now that they have their own system, they will probably try and crack down on 3rd party sites and ebay / playerauction listings.

As someone developing a search engine that I hope to patent, I really hope the rumors of what LL may or may not be planning is not true.

Two interesting possibilities raise their heads. Individually or in combination.

LL is unhappy about the current steady decline in the 'value' (let's NOT get into definitions of 'value' here...) of the L$ against the US$ and may be considering entering the field with the intention of controlling the exchange rate and thus bolstering the 'value' of the L$.

and/or

LL is suffering from a touch of the 'punish the bearer of bad news' syndrome.
After all, when anyone talks about the 'value' (there it is again!) of the L$ they quote GOM's publicly available exchange rate and historical graph - how often do you see IGE's or Anshe's rates quoted, other than in a disadvantageous comparison?

Dare one say if GOM were not around, and LL were running their own exchange, which I'm pretty sure would be a fixed rate setup, the perception of the present unhappy state of the L$ might be removed?

Would LL controlling the money supply, and hence the exchange rate, directly work?

My suspicion is that short term it would stabilise the economy. Long term I'm not so sure...

Yes, I agree with this analysis.

However, I still believe they could have found away to merge in GOM in a more friendly way.

That's where I think we're disagreeing. I think "Easier" here really refers to the selling of L$ by residents, not the buying of L$ by newbies. In other words: LL is making modifications to SL so that Joe Builder, SL resident, won't need a complex infrastructure with external mail and web and RPC servers intercommunicating with scripted ATMs to sell L$ (and possibly land and more things) for USD, EUR, etc...

I already agreed with you in my post that it would hurt LL credibility if they started selling L$, Jesrad said they wouldn't do it for tax reasons...


I fail to see the link between selling L$ and tax problems.

Here is the specific quote


There are two things here... "make it easier for casual or first time users to buy currency more easily from other users." By 'other users' he can either mean every individual user has the ability to sell their L$, via the SL interface, to any other user. Thus killing the exchange market in one blow. OR he is referring to users who have existing exchange sites and he wants to integrate them into the SL interface to make it easier for 'noobs'.

Second, when he says "it seems to me that if currency exchange could happen with one click for new users" he is not implying, but stating, that the system will be built into the SL interface. That would be the only way to achieve a 'one click transaction'.


So back to the point of my orriginal post, why does GOM keep coming up against a brick wall when talking to LL about this when GOM already has the structure in place to implement it?