Tiptoe, through the Auction House….

After trying to triage the Warcraft Auction House for a while, I begin to understand how seductive it is to make assumptions with an economy that leads to the kind of thing we call the Great Recession.

First, a bit of explanation. People have wanted a quick way to get extra money for MMO’s ever since it was released. Naturally, despite the MMO companies wishing to maintain control of the game’s economy (so an early game dagger doesn’t cost 500 gold when you’re not even getting 1 gold as a mission reward), there would be a thriving black market as people would farm the gold available at high levels, and then turn around and sell it for real life money. Warcraft fought this for a while, getting into running battles with gold sellers. An account would be banned, and three more would come up in its place. Hercules and the Hydra comes to mind.

Then they hit on an idea. They introduced the WoW token. Folks could purchase it for $20 (just about one month’s subscription cost), and receive a variable amount of gold (based on supply and demand). And they then turn around and sell the token that folks purchased for gold on the Auction House. So for someone who’s willing to put in the effort, they can spend in-game currency for 30 days of game time. This allows folks whose money is tight to spend in-game money instead of real money to play, and gives people who are willing to spend real money in game money in return. So, in a way, by buying and selling tokens, you’re letting someone else pay for your monthly subscription, and giving them your gold in return (I’m sure Blizzard drains some money out of the economy by doing so, as they control the cost/benefit of a token).

So, for the last few months, since money has been tight at the Casa de Yellope, that’s how I’ve been paying for my WoW subscription. I would do a bunch of old content, and sell the materials I’ve crafted, and use the gold I earned to buy Warcraft tokens to continue to play. In other words, I spend a lot of time on the gold treadmill to make sure I keep playing instead of paying.

Right now, the value of a token, as I’m writing this is 34,849 gold. That is, if you spend 34,849 gold, you get a token worth 30 days game time. Figure it’s about the same benefit if you pay real money. It fluctuates as people buy and sell tokens (More people paying real money? The supply goes up, and the price goes down. More people BUYING tokens? You guessed it, it’s the opposite. Today it’s varied from 34,720 to 37,108 gold. Blizzard also bars you from trying to play both ends of the spectrum, as you cannot simultaneously have buy tokens and sell tokens.

So, I have to make money somehow (true in-game and out), and one method is by being smart at the Auction House. Anything you make as a profit there reduces the amount of grinding you have to do to make your goal. So, there’s programs, like TradeSkillMaster, that help you not only figure out what high profit items to make (that is, items where the materials to make it cost much less then the finished item goes for), but they alert you when someone posts an item on the Auction House that is widely undervalued, so you can swoop in, take it off the hands of the chump who obviously doesn’t know the true value, and resell it for its true price. Yes, that makes us the item speculators that drive up the prices of the good stuff on the Auction House. I can feel your hate coming through the screen already.

But here’s the rub. Not only you have to be right about the CURRENT demand, but future demand. I’m going to provide a real-life example here. One of the most bizarre market bubbles ever was about tulips. Yes, that’s right, the brightly colored plants. You see, certain varieties were so in demand in the Netherlands in the 1630’s as a status symbol, that the price went forever upward to the point that a single bulb of one particularly rare type of tulip went for between 3,000 and 4,200 guilders. A skilled craftsman would earn about 300 guilders in a year. However, one sharp market correction (a single tulip auction was cancelled due to a breakout of the bubonic plague) meant that within three months the price of tulips dropped 99%.

So it can be in Warcraft (you wondered where I was going with this, didn’t you?). It’s easy to assume that prices will remain steady, if not going upward as more money enters the economy. So, selling a single Temporal Crystal (a high level enchanting requires these things) could cost you 50 gold one day. If you see someone listing a whole bunch for 20 gold, you’re going to dive in and buy it, and resell it, right? It’s found money. I did that myself last week, and made several thousand gold profit with a whole bunch more left to sell (you never dump all the materials you have on the market, because it will depress the price, and clue in other people that you’re trying to set the market).

But the danger is you get complacent. You KNOW you can get more if you just push out those other auctions. Someone will ALWAYS buy that crystal, because what are they going to do, farm it themselves? Hardly. No one has the time for that. So you get greedy. You start buying the ones at 50 gold and relisting for 70 gold. Here’s the thing. There’s always going to be more Crystals. Or when the next expansion comes out, those crystals will be the equivalent of the toy whistle you used to get in a box of Cracker Jack. So if you’re not careful, suddenly you have 700 Temporal Crystals in your backpack, and you’re praying that you’ll just make your money back.

So far, I’ve avoided the urge to try to dominate the market (especially when it comes to things like materials for crafting, there will always be a steady stream of new items making its way to the auction house), but I forgot to catch myself when I saw 250 Crystals for 50-60 gold, and said “Hey.. I could buy that all up, set the minimum price to 65 gold, and rake in the money.”

Considering there’s 300 sold on average for my server daily, that’s a fool’s game. So I’m a little bit poorer, and a lot wiser.

And hey, if someone needs Temporal Crystals on Kirin Tor alliance side, let me know. I can hook ya up.