OnRez to Get GOM'd Too -- LL Shopping Site Acquisitions

Uh-oh -- now we have two of them bending over.

*Wince*.

I've just confirmed that OnRez is selling out to Linden Lab, too. The announcement is supposed to be coming out tomorrow. Zee Linden in fact *was* referring to this big takeover in his claim on the forums that he had some good news for merchants coming soon. Unless the deal is scuttled for some reason (and maybe that's why it's being leaked to me?) -- we are about to see another end of an SL era.

I wonder how good this news is, frankly -- I find it creepy-scary for a number of reasons.

First, yes, both XStreet and OnRez are being take over by Linden Lab. This is described as a good thing, as an "acquisition" for the Lab as part of their global expansion, along with improving stability and new user experience.

What did OnRez and XStreet get  out of this? I have to wonder. I'm told that OnRez, which I understand has been languishing, is being folded into XStreet -- they are the ones migrating over to XStreet, not visa versa. And apparently XStreet was facing the issue of having to close, due to poor content sales inworld in recent months, and the sell-out to the Lab was the only option. Of course, we'll have to wait and hear how Apotheus spins it -- but apparently at least he gets a job out of this, and turns into a Linden, like Pastrami Linden turned into a Linden when he and his friends sold Windlight.

Why is Linden Lab doing this? It hurts, doesn't it?

Because they realize, as I just told you earlier today, that the revenue streams of the future are not going to be in land -- or at least not soley in land, especially as people bring their own server farms to hook up to grids and won't need a land store. The future of virtual world sales is supposed to be in content sales and currency sales -- I actually think land services will still be important, but the Lindens may not see it that way.

Why does this hurt? Well, it always hurts for me when an independent business, very much trusted by the community, is taken over by Linden Lab, which is not trusted by the community. That about sums it up. The issues of freedom of commerce and freedom of speech articulated in the XStreet forums are also very much at issue. It's not good when we become MORE of a company town, when the State gobbles up free enterprise in our fledgling civil society.

But I'll tell you what hurts more. I only sell crappy little stuff on XStreet because I am not a content maker, but imagine if you are a big one. Now Linden will clip you three times:

o Once on the tier, which you need inworld for your store -- stores inworld are still very necessary even if people buy on their lunchours online on the web for their avatar -- this we've established in the last 3 years

o Twice on the currency exchange, as you cashout your Lindens to real dollars and pay the fee on the LindEx to sell your Lindens and cash them out to PayPal, under their fixed-rate undervalued currency system

o And now Thrice on the fee for selling your item on this website.

It was one thing giving a few pennies from each transaction to Apotheus and friends for their independent service that helped the community. No one minded that he made a buck, as he was an independent developer apart from the Lab. But now, that few pennies goes to an entity already shaking each content provider down for tier and currency exchange. Maybe they won't mind that, but I find it queasy-making. If I were the Merchants Guild, I would open up negotiations immediately to the Lab demanding a better cashout rate or cut rates in tier. That's crappy for the rest of us that the FIC is even more forked, but otherwise, it seems like making content is something that makes you pay MORE for SL, not less, and that isn't fair, either.

The idea is that the service will now become "better" because it is poured into the maw of the Linden code cave.

Am I right to be a little worried about that?

By taking over these shopping sites, the Lindens will presumably be able to  put their advertising clout behind inworld content makers looking for outlets inworld, where it is very hard to advertise. That same advertising clout that they use to such effect bringing in new recruits through TV, magazine, and online community adver-- wait. Let me start rewriting this paragraph. Advertising clout. OK where were we. Let me pull up my Google news reader today with the key words "Second Life".

Oh, dear, a second life taken in that car accident.

OK. Well. This is all about the future.

Another thing that makes me queasy is the idea that the Lindens are in some kind of hurry to find revenue streams -- or in a hurry to take over failing resident shopping site businesses (if that's the case) -- either way because...because...maybe they aren't as profitable as we think? They tell us they are, but you know, they aren't a publicly traded company. This claim hasn't been independently reviewded by industry standards -- and the land model is a rocky one when they just wiped out so many customers with a price rise -- it's not clear how that's going to go.

There's constant chatter of course, including on Corey Linden's blog, that LL is getting ready to IPO or sell out. I think that they may be prudently making sure they are ready to sell if they need to, that would just be the smart thing to do in today's terribly crashing market, but I don't know that they really have a buyer.

Lots of signals point to something being up, however:

o huge price increase in a popular product, the homesteads
o no further announcement on real plans to opensource the server code (good!)
o Philip's hints that they would merge the teen grid into the main grid
o the rush to hold the educational faire without much notice
o the buying of the two main shopping sites
o the increase in the valuation of the Linden against the dollar

It all feels like a pizza dough simultaneously getting thinned out and bunched up and laid to cook in the oven so it can be eaten.

What's next, a Linden-sponsored real-estate site that takes over inworld land baron business? (Zee used to run just such a site for RL real estate).

So why am I continuing to use the word GOM? Because these are independent businesses with resident ideas that are being taken over, perhaps with their own avid acquiesence if they are failing, perhaps reluctantly at the thought they'd be closed by LL coding their own sites anyway. They may or may have gotten some handsome cash payout -- but I doubt that, somehow, if the end result is that at least Apotheus goes to work as a Linden. It's more like he gets a sign-on bonus, and has to fire all his loyal staff because the Lindens will fill in the rest of the staffing now.

Comments

[Ann Otoole]

Will Linden Lab also buy the Brazil lion version of slx with all the stolen content for sale?

[Dusan Writer]

I'm not sure I'm entirely on-side with having an issue with the co-opting of successful SL businesses. But posted longer thoughts on my blog. But in particular, I'm taken with the idea that this sets the Lab up to be in the services business. As I posted:

"It strikes me that it will be ironic that some of the main drivers of value in virtual worlds - the ability to create content, sell it, a currency to support those transactions, and trusted sources to facilitate those things - are the very things that the developers of openSim choose to “leave until later”.

Over time, as Hypergrid and scatter-shot approaches to currency and markets erode the overall trust by users in “those openSim worlds”, it will be brands like the Linden currency and XStreet vending systems that may benefit - bringing “trusted brands” to grids that have deferred trust decisions until later.

The Lab will be able to cover its bets. Now that it has a suite of products, it can reopen the discussions of interoperability within the context of a suite of services and products that “trusted partners” can buy into. The model will be in services and content, not in hosting. The Lab recognizes this long-term strategy."

[Cocoanut Koala]

This isn't good news in any way, shape, or form.

coco

[SecondLie Scribe]

This is their way of reaching into office-hours browsing.

Catalog shopping at work is huge, and Second Life has gone beyond the application and in-world experience.

We'll see if they partner with or acquire more companies to get a better foothold in social media.

[Prokofy Neva]

Dusan, that is so much tekkie bullshit blather, and you know better, you aren't supposed to be a tekkie.

The Lindens always told us they were a platform not interested in content and that we'd get to do the content, our world, our imagination. Ok, so they lied, understood.

But your notion that this builds trust is hugely skewed. It doesn't. It means that the energy of the world is vitiated. It means that the goal of starting a company is only to see it eaten by the Borg. It's like the recipe for Silicon Valley, where every start-up can only dream of being bought out by Google or Microsoft. Everyone thinks that's nifty.

But that's not a recipe for a world. It's not a recipe for civil society and a free economy. It's a recipe for a software company that ate up its own customers which is like the revolution eating its children. It means that Disnification, homogenization.

And watch those forums. Watch what they do to those forums, closely.

[Prokofy Neva]

http://lindenlab.com/pressroom/releases/01_20_09

News it out earlier, also posted at X street with the eye-hand logo now joining the X.

[Dusan Writer]

Hmmm...I think I'm agreeing with you, Prok, but it might be I'm coming at it from the wrong way. My take is to look at something like openSim, at looking at virtual worlds as "just code". The Lab is, in some ways, playing the same game: by buying these out it may not be code, now it's PLATFORM. But here's the deal - if you ignore issues of trust, say in openSim, then someone's going to come along and solve the trust issue for you, by having currency systems that work, by having vendor marketplaces that they own and that have aggregated commerce. So in the end, the "trust" part is being solved by someone who maybe shouldn't be solving it: all the tools of trust are ending up in the hands of the folks that the openSim folks were trying to reverse engineer.

In the Lab buying the main commerce sites, they're expanding their "platform"...they recognize that monetization is partly in owning all the platforms where transactions are performed, the currencies, the marketplaces, taking slices of all those things, and in the aggregate establishing a brand which becomes trusted, perhaps if only because it's the only game in town.

I find it interesting in the press release to read about their four areas of focus, because it feels like a slightly new spin:

"“Linden Lab is expanding its footprint in the virtual world industry through four major initiatives – localizing the Second Life experience in key markets around the world, simplifying the ‘first hour experience’ to broaden consumer adoption, enhancing the platform for enterprise users and building our virtual goods marketplace,”"

What I find interesting about this is that I find it hard to extrapolate the VALUE to residents. I guess the values are MORE residents, in more countries, but they'll need to better articulate how specifically these things translate to improved experiences for current users - the schools, residents, content creators, whoever. I guess it's a network effect thing, but they're not explicit about it. That, more than anything, concerns me, and right now I trust Apotheus to make XStreet trusted and valuable than I do the Lab, which means that they still have work to do to earn it.

[Wayfinder Wishbringer]

Prok, I have to agree with the vast majority of your gut-feeling misgivings. We've both been on SL long enough for our gut-feelings to be pretty accurate, and I can tell you mine is ringing like a five alarm fire.

The majority of the points you made above seem pretty valid... and pretty right on the button. As for WHY Onrez got out of the deal, I'd think that would be obvious: $$$$$$$. I'm sure Linden Lab didn't buy either them or Xstreet for a song.

But there's something far more sinister that is possibly going on here. The usually-reliable-grapevine states that the OpenGrid project (or at least a major player therein, OpenLife) was already working with Xstreet to form a financial/sales system. I haven't been able to confirm the accuracy of that rumor yet (working on it)... but if that proves to be true, then an additional rumor makes sense as well: that the first thing LL did was remove all third-party support from Xstreet (in other words, they trash-canned the OpenLife deal).

IF that rumor proves to be true (and those sources have never proved wrong to date), then this whole thing smacks of Linden Lab monopolistically trying to close the gates... which would make all your feelings and reservations spot on.

[Wayfinder Wishbringer]

Oh, scuse a follow up note... wanted to verify (imo) another of your insights Prok-- that Linden Lab isn't doing all that well financially.

As stated in the Elf Clan blog (http://elfclan.ning.com)... World of Warcraft has some 11.5 million users, paying $15 a month each to use the system. That comes to approxiamtely $172 million a month. Comparatively, Second Life is a spit in the bucket.

No, after years of price gouging, knee jerk decisions, playing with toys instead of stabilizing the foundation, corporate propaganda and outright lies... Linden Lab has failed to perform as it could have if it had simply conducted business properly. In short, it's come to what you and I and a host of others have been telling them for years: their way of doing business would eventually bite them in the butt.

So now I hear serious rumors of the company going public, and the first thing that pops to mind: a truly profitable company doesn't HAVE to go public; they finance themselves.

Many of us are of the opinion that Linden Lab's days are numbered. They've played games with other people's money for too long, they've failed to run the company as ethically and professionally as they should have... and there are consequences for actions. So, now we have alternate platforms quickly rising to "good to go" state, and we have Linden Lab acquiring third party companies, and strong indications they're seeking more investment capital... and it all points to one thing: Linden Lab is as unstable and unfulfilled as Second Life itself.

A lot of this of course is supposition based on limited data... but those of use who are of these opinions have been consistently right for four years now. Time will expose the truth.

So yeah, I think you're right; Linden Lab isn't all that financially stable at this time. Not all that surprising, either.

[Ace Albion]

So, Linden Lab now have a soup to nuts "solution" for anyone developing a remotely similar virtual world. They have the background asset systems, a trusted virtual currency, and now a complete, proven web based transaction system (any interesting patents?) for any VW that wants to come and talk to them?

I trust the Lindens as far as trusting them to do what suits them, whatever the consequences, but even so, I suppose I hope that if they are in a strong position, that's good for us. The silicon valley model of build your business to be bought by the monopoly player is a good one. Does it apply to all those little opengrid type Baby SL startups too? After six years, we still don't see a real competitor to what SL is, do we?

[Gwyneth Llewelyn]

Nawww... I think it's exactly the opposite of all that :)

OnRez Shop was bought by the Sheep from FlipperPA Peregrine, when it was SL Boutique. They were at that time firmly engaging in producing content in SL, and working very closely with LL. We will never understand what happened (their CEO just says that "LL is impossible to work with") but we all know that they were phasing out all efforts in SL as their *primary* virtual world of choice.

The OnRez Client was due to be discontinued in February '09. I guess that this was not just the client, but the whole *brand*. They had tweaked and improved OnRez Shop for a bit, while the Sheep were still happily developing for SL, but they have pretty much left it as it is for months. The money made out of it very likely never even covered the costs. So it would be dropped next month anyway. That way, they just sold it to LL, and I'm sure it was not for a huge amount, and with the condition that the "OnRez" brand is not mentioned. LL was eager to "save" the merchants — they act often altruistically like that (GOM, for instance, was a similar case, but which was totally misrepresented by the SL media, and the lack of comments by LL did not help — in that case, however, the deal didn't went through).

XStreet SL is slightly different. Income from that is marginal, probably enough to pay for Apotheus and his staff and the running costs of the servers and some development. Anshe, however (who owned 70% of XStreetSL), is probably making way more money out of selling content in IMVU, where the webshop is provided by IMVU for free, and she has no expenses at all — it's just developing content and that's all.

So I can imagine that she told Apotheus that she wouldn't be supporting XStreetSL any more, and this scared Apotheus — who got in touch with the Lindens and cried: "HELP!" explaining that he'd have to shut down, too.

All of a sudden, thus, LL sees two much-beloved resident-run operations fail for the same reason: their main funders are not interested in continuing to run the service any longer. So, more altruistically than we usually credit them for, LL decided to save what they could.

I actually believe this to be the same scenario as GOM :) The media, of course, will just move against LL, just like they did in the GOM case. Altruism coming from LL is skeptically received, and not believed in any more. Still, a lot of merchants (specially the small ones, of course, where XStreetSL represented the only source of income — like myself!) will be happy that at least ONE of those will continue (we have already lost Gigas a few years ago).

But LL's altruism pays off. As noted, almost all other virtual worlds do webshopping *exclusively*, and IMVU has pretty much the same number of content creators as SL (100,000 or so), although the number of items for sale on IMVU is just twice of what XStreetSL has (and that, in turn, just represents 1/2000th or 1/2500th of *all* content in SL...).

By pushing XStreetSL into the SL viewer, LL will naturally expose the whole community of users to a new way of shopping that a vast majority of residents were never aware of. The lack of mass media in SL tends to make these things pretty much unnoticed. *We* who read Prok's blog are of course aware of the existence of these webshop sites, but most people won't. Perhaps half of the readers of the Official Linden Blog will be surprised that those things actually existed. However, the vast majority of users don't even read the Official Linden Blog.

They will, however, notice a new tab on Search or a new button saying "Shop". And for them this will be a "fait accompli" — "LL has introduced an easier way of shopping". Like the LindeX introduced "an easier way of buying L$", although these days you can buy them from RL ATM machines or at the post office — people just don't KNOW they have more options, because it's hard to advertise massively in SL. Whoever controls the SL client will rewrite history and create reality :)

My worries are long-term, as commented on other sites. For now, all's well: small content creators will enjoy more sales, and larger brands will have a new channel for increase sales. But at some point the large brands will ask why they use sims at all for their shops. Prok, your reasoning that "nobody uses webshops thus in-world shopping has proven to be a better experience" is just based on the statistics (under 1% of all people ever shop on webshops), but it doesn't take account the major factor for the lack of webshop sales: *ignorance*. The residents *don't know* it's possible at all.

Once ALL residents know, however, this will quickly pick up. Residents will experience lag-free shopping, even if they're in-world. Slowly, in a year or so, almost *all* content will be bought via the Linden webshop, either in-world or off-world. And at that stage, people will start selling off their sims. What for? Listing on the webshop doesn't require an investment (buying an island, building it, buying all those nifty tools to drive traffic, buying a vendor system) nor running costs (tier and promotional events). It just requires talent to create content. A few things will probably still require a shop — animations, for instance, are way harder to sell on a web page — but most (e.g. clothes, skins, avatar attachments, most HUDs) will not.

So expect all the big brands starting to tier down until the end of the year... after all, why should they keep shops in-world, if nobody will ever wish to face the lag to see pasted pictures on vendors, when you can watch those very same pictures on a dialogue box (or an external webpage) instead and spare yourself the trouble?

Short-term, yay, this has been a great announcement. Long-term, ouch.

[Prokofy Neva]

Gwyn, you are impossible.

First of all, you are completely misrepresenting the GOM story! did you ever actually use GOM?! LL didn't save any merchants from GOM!!!! It stopped them from making $4.25/1000 Lindens!!! It's not at all the case that merchants had "no where to go" and GOM was failing and only Linden could save them -- they made the best money they've ever made in SL.

GOM closed because they didn't get a good enough offer, and because apparently, LL wanted to grab the newbie first-30-day stream away from them (that's my hunch) or do *something* that made it just not as compelling to work on so selflessly as those two GOM owners had worked.

I don't know where in hell you get the idea that LL behaved altruistically about GOM! What the fuck, Gwyn? where on earth did you come up with that bullshit? You know full well why "GOM" means "GOM". Sure, the Canadians could have kept GOM open, but with LL creaming off the top of the business and coopting it, they'd be left with very little.

Please do not make up shit about LL saving any merchants. We were all forced to go to the LindEx and use it for want of anything else except the very untrustworthy IGM, that lost your money at times and was very slow usually.

I've also heard that OnRez was driven into the ground and sold for a song, and that Apotheus also begged the Lindens to save him because he was failing. I didn't hear anything about Anshe dumping him, but that may be the case, since she herself is failing in SL. We have no evidence she makes any great amount of money from IMVU, that remains to be investigated.

Virtual worlds are not places to make money in. They are places to spend money in.

Your notion that people haven't heard of these shopping sites doesn't track. They have a lot of usage. It looks to me like a very healthy percentage of the concurrency is using them. This same rationale was used to GOM the GOM -- t hey said it would "help" the economy by putting cash into newbies hands faster to spend by "putting it in the viewer" (it isn't, really, because it lags your game out to tab to the web). Many newbies to this day are still puzzled and frightened by the LindEx and the Lindens would do better selling cheap premiums with cash in them to solve that problem.

GOM used to have a limit, possibly it was 30 days for an avatar age, and required ID, i.e. credit cards, to do transactions. LL supposedly was going to shorten that and make it easier for newbies. They really haven't done so, especially for non-Americans.

You're also so smugly and smarmily gleeful about those "controlling the viewer controlling history" as if now that control will be a good thing.

Why do you think I screamed and howled about the Sheep takeover of the viewer? Because they rewrote history burying the search/places, where the sales are made, put the search/all, which is a lot of kasha, and put SHOP, a button leading directly to their own people's stores.

Now do you honestly think that the same people who brought you the FIC, SL Views, SL Dev, Showcase, and all the other elitism of dubious value in SL will make sure that what is under that SHOP button is really of value?

Have you forgotten how the Lindens flogged Aimee exclusively for 4 years, to the point that it became ridiculous?

I never said "nobody uses web shops" anywhere in this piece, Gwyn, don't be retarded. Good lord you are spouting nonsense today. Read what I said. I said they use them to search, then go inworld to see the stuff. So they go to shops inworld.

As I said on Nexeus' blog, I fail to see what magically happens the day after the Lindens take this over that transforms it into an instrument for killing "ugly malls," which is of course the Extropian dandellion's wish (and the wish of other elitists).

If anything, ugly malls may become more necessary if XSt's real estate in the top viewable areas so clogs up that nobody has a chance of being seen unless the grab somebody inworld.

But why would that much change, really? What magic thing could the Lindens do, even if they completely melded XSt into their viewer (which they can't do, because it's all just too laggy)?

People like to shop *with each other*. In couples. With groups of friends. They like to talk to shop keepers. I'm amazed at how much people have a yearning to see me as a rentals agent standing in my shop by my portal boards advertising houses and prefabs so that they can ask questions and understand the system. People like having their little avatar's hands held. Wasn't the whole point of this friggin' virtual world stuff to return personality and humanity to the cold, cold web that had become a very solipsistic experience?

[AlterEgoTrip Svenska]

I hate SLX, it such garbage, really, the layout is dreadful and chaotic,Its like the MYSPACE of vitual shopping- it is not for the strictly visually oriented in mind.. you know, those of us who can look at things and then gleen a bit of logic about its form and function..

SLX is a product I will not use as it is now, so you who yourself dragged the reptuation of Electric Sheep into the ground, you Prokofy who Hated ONREZ, pat yourself on the back for that one.

You want to complain about Second life of Today verse the Second life of long ago, here is a good place to start : YOU had more money coming in via LL via payments to members, this isn't true anymore, so basicly you are pining for the "Socialist" times, times with pay for traffic aand no "bots"..

This take over is PURE capitalistic style, buy your competitor, desolve the product so it doesn't cause threat to income any longer. PURE capitalistic style has allot in common with the choices you find in communisim, only the "populare" and "accepted" format is allowed, all others, well there are no others.

I had a long talk about Cuba with someone who has no political stance, and they say the major problem of Cuba, in spite of all the good things that were done there, and there were amany good things done there, the down fall was it was a system of no elections and only one leader and one party. In America you have false polarity, right and left but still if you look at the backside of any canditate on the two major parties you see the same thing in action, no real choice and the same people behind the scenes.

Its really disappointing to know that one soap product is just a product sold by the same company that bought it out years previous.. thus it goes on, into history. There are no competitors, just images in front of us to polarize, like you Prokofy, and your little FIC.

[Gwyneth Llewelyn]

The myth of GOM making a huge amount of money and of LL being the Evil Corp opting them out of SL will forever be repeated and repeated until it becomes merely history. I like to be a revisionist — however, I'm the poor sort of a revisionist, because people don't allow me access to the *documentation* to back my case ;) So, sure, believe the Official History™ of GOM if you wish. I won't insist much on that :) Also, revisionists are never to be trusted, of course... because it's so much more nicer to put all the blame on the Big Evil Corps®.

As for "nobody uses webshops thus in-world shopping has proven to be a better experience" you're right, you didn't exactly put it that way — *I* did though. My number of 1% of all residents never used a webshop is pretty much based on these recent numbers. I'm glad that at least some of these things start to pop up from reputable sources and I can only hope to see more of them published to back up my claims ;)

[Gwyneth Llewelyn]

TypePad doesn't like URLs:

http://nwn.blogs.com/nwn/2009/01/second-life-economy-snapshot-100000-heavy-users-20000-heavy-xstreetsl-shoppers.html

[Wayfinder Wishbringer]

Gwyneth: No offense... your posts are an interesting fairy tale... but that's all it seems to be. Lots of supposition without any data that I can see to back up the views.

First, LL buying Xstreet for "altruistic" purposes? (snickers). Seriously?

Second, while there are a lot of theories about GOM and LL, the word I got straight from the mouth of the owner was that GOM was doing fine... and he was put out of business by LL. Just that simple. He had a working business that was profitable... and LL completely undermined his operation by doing exactly the same thing he had been doing... using even the same business model he had proven successful.

I don't know where all the "blue skies and roses" scenarios are coming from... but I would have to wonder how much Linden Lab is paying you to publicly postulate these theories. ;D