All Business
I need some help from the collective and distributed mind that is you.
I've become interested in the emergence of financial intermediaries and markets in MMOGs/VWs. So I'd like your suggestions of examples you've seen of this. I'm not so interested in the markets/financial actors which the game devs have created, or in the RMT stuff which we all know about; instead I'm interested in player-created market-makers and financiers.
So, the obvious example is guilds. I was trying to do a fedex quest the other morning that required me to tool through some inns, and lay down around some silver to pick up the bits (and then there was the cost of the griffin flights). I didn't have the readies to do this, so I had to head off and do some other quests before coming back to this one, which was a genuine drag and meant that I got even less work done than I expected (yeah, I know, boo hoo). If I were guilded up on this server I would just get a loan from my guild buddies who are rolling in it: guilds are a good example of player-instituted, financial actors. Apart from their role in raids, they are also a credit union. (Forgive me if this is obvious, but I'm trying to think this through) The thought struck me that I should create (if someone hasn't already) a guild called "Ask me for credit", which would lend to all comers--and of course, advertises just by having its members walk around with guild affiliation lit up above their heads. Is there such a beast? Presumably there are problems that one would need to overcome, in terms of security and the like. Whatever the answer to that little idea, having spoken with the other TN authors who hang out or run guilds it's pretty clear that guilds are really important as financial intermediaries and/or storage facilities. Nate tells me that in Eve the guild is elevated to first order status as a corporation, and has a suitably important role in the running of the world.
The other category I'm interested in is player market-makers, by which I mean players who vend or otherwise create a market in virtual assets. Again, I mean only those within the world. You see a bit of this in places like IronForge on WoW, with a kind of open outcry model that has been abandoned pretty much everywhere in the real world except Chicago Board of Trade and some other commodity markets. I think that these are, at best, secondary and inefficient markets, since they are trading in the same products that one can trade in using either NPC vendors or the auction houses. Has anyone ever seen examples of markets in-world for products that aren't created by the game devs speficially for trading? I'm thinking of derivative financial products, or forms of insurance, or the "free enchants, tips welcome" model.
All thoughts and assistance would be welcome.
Posted by Dan Hunter on September 19, 2005 | Permalink
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Comments
You said: "free enchants, tips welcome" model.
I say: This... blah. You could write a thesis on this alone, the expectation of what a "good tip" is, along with what people REALLY mean, and the impact on the markets or what everyone thinks they mean.
That is, (in WoW) I wanted to skill up enchanting. I had the materials on hand. There was no way I was going to spend time trying to make money when all I wanted was to just skill up. I was willing to put a 50AC enchant on my cloak 15 times, if that's what it took to get the skill ups I wanted (I had a Uldaman run to train set up).
I advertised that I was enchanting for free, 50AC to cloak and I listed off a bunch. I started getting whispers "how much" and people who were suprised that unlike the "tips welcome" liars people, I REALLY didn't want cash.
2 people paid me anyway, and I had to burn 5 enchants on my cloak because I couldn't give away enchants.
On the main topic though... I knew market makers in EQ back before the bazaar. They were on 24/7 (or so it seemed) and bought stuff cheap and sold it less cheap. And for their friends, you'd tell them, "I want XXX" and they'd get you the best price on it (or find one for rare items).
Posted Sep 19, 2005 2:19:54 PM | link
Generally, whatever commodities markets spring up within the game will leverage in-game tools, if only to foster trust among the traders. (Smart games leverage this to provide as many in-game tools as possible.)
In almost MMO you'll see the following:
1) Low level traders/crafters/players levelling up will use the in-game market system to swap low level equipment/magic/etc. This will be a tier above what's available on NPC vendors, but still low enough that the only value is between each other. You generally won't see high level players seeding the system, unless they're feeling especially benevolent, as it's below their radar.
2) Mid-range traders will use personal vendors if available, and advertise to build up their own business. Generally these folks will have so much of a clientele that they quickly are overwhelmed and can't take any business beyond their "regulars". This also where you usually see guild mules/crafters/etc. These players will usually offer items for sale on automated market systems if they can handle new business, but usually as advertisement more than revenue generation: "Come see me at my house in Zone XZY."
3) The highest-range traders NEVER offer anything for sale on the open market; if anything they will offer it for sale at a literally unobtainable price simply to advertise that they possess it. These folks work on an appointment basis only and usually only with other high-end traders that they know personally. Kind of similar to diamond consignment merchants in the real world.
Not sure if that's what you were asking, hope it is helpful to you.
Posted Sep 19, 2005 8:18:42 PM | link
Around the beginning of the year I read about an individual who made a lot of gold by leasing bag space. Essentially he opened a few accounts, made 8 characters per account, and maxed out the bag and bank slots. For a monthly fee, he would hold onto items you couldn't store yourself and have them available for you at a moment's notice. If you couldn't pay the fee, he'd sell your items. A WoW public storage service if you will. Rather brilliant if you (or a team) can be online around the clock.
Posted Sep 19, 2005 10:56:30 PM | link
Regarding Market Makers:
EVE Online's marktet is almost entirely player driven. Which opens possibilities for large scale market manipulations. At least for corporations with huge amounts of money (there are a lot of). Such manipulations actually have happened several times:
http://myeve.eve-online.com/ingameboard.asp?a=topic&threadID=186517&page=1
The good thing is that one can make a fortune while piggybacking these actions :-)
Generally the EVE market is a very interesting one because of it being player based: what hasn't been built by a player cannot be purchased in the market (with some excaption). And it works quite well, because there are enough players online both producing and purchasing things.
Where a player based market doesn't work is in Ryzom: not enough players to drive the market.
Posted Sep 20, 2005 1:19:07 AM | link
Second Life has land ownership and currency. Users can sell services to acquire money which allows them to buy goods and/or land. The valuation of the game currency fluctuates and can be converted into USD. The creators claim that over US$18 million is traded in goods and services annually.
Posted Sep 20, 2005 1:21:31 AM | link
Thanks to all who've provided such useful commentary. Especially at a time when everyone wants to be commenting on the plague over at Dmitri's post. I want to follow up on a number of the thoughts here, and will do so one comment at a time. First up...
Patrick> Around the beginning of the year I read about an individual who made a lot of gold by leasing bag space.
This is a great example of a market-maker, since there is no formal market in bagspace. It also addresses one of the most obvious "resource misallocations" within the game, ie limited bag space. One would theorize that someone would come up with a market to address this, and your example proves the theory right. (Though like many of these markets, like the RMT market, the market response may well be at the expense of gameplay. Blizzard limits bagspace for an obvious reason.)
Have you seen any documenting of this? And how do people become aware of this service? I don't hang round Ironforge much (the lag drives me nuts and usually means I run into the trench) so I haven't spent much time looking at advertising here. Are there flags/ads for this sort of behavior?
Oh, just thought of another business: quest storage.
Posted Sep 20, 2005 9:25:38 AM | link
Here's an old-time example, which is largely irrelevant in more recent games, but is interesting as an example:
In Sierra's "The Realm" when I played (in 1997-1998), there was no secure player-to-player trading. Global chat channels were used extensively, so frequently there were calls for a "MM" ("middleman") to come somewhere and facilitate a trade between players who didn't know each other. I'm not sure if there was a traditional cut for the middleman.
Posted Sep 20, 2005 1:19:43 PM | link
Dan> I'll inquire with some friends who play/used to play on Frostwolf. I read about it in a thread in the WoW realm forum so I have no firsthand experience with the service.
The OP started the thread to complain that the service was a scam since everyone could make their own twinks replete with free bank and bag slots. Over the next few pages, 9 out of every 10 replies jumped on the bandwagon to condemn the service. The 10th would be someone who had used the service and/or understood the multiple business advantages provided by the service. The service offered 3 customer benefits I could see: 1) amortizes the high cost of additional bank slots over multiple payments, 2) overcomes bag/bank space limits, and most importantly 3) overcomes the 1-hr delay imposed on mailing items. If you think about #3, you realize that the monthly storage fee also gives you a paid proxy for transferring items between twinks at any time.
Despite the obvious benefits, the service requires customers to place absolute faith in a single or few individuals. At any time, the storage provider could quit the game or auction off all the inventory with no reprisal from Blizzard (though s/he would probably get blacklisted on the server).
A large, enterprising guild could really make this work by minimizing risks. A large guild inherently has around-the-clock "staff," an established bank inventory tracking system, assured longevity, and a reputation to uphold. With all that inventory, the next step is to do something with it - buying and selling on margin. Logistics aside the possibilities are endless.
The problem with a quest storage business is the level requirements. To receive a quest, you must meet the minimum level requirements and it must be a quest you haven't completed. To maximize the variety of quests you can receive and return, you'd need a lvl 60 character that has never completed a single quest - no small feat in time and effort.
Posted Sep 20, 2005 1:36:42 PM | link
Earlier this year on my WoW server (Magtheridon), when getting a mount at level 40 seemed like a daunting expense, I set up a guild (Wall Street) wherein players would pay in on a weekly basis at a graduated scale.
The pay-in amounts increased as the players leveled and were times that they would be handed back the full cost of the their mount as soon as they hit 40.
I had a very difficult time getting peeps to buy in. The plan WAS rather complex, admittedly. Eventually I dropped it.
Posted Sep 20, 2005 1:39:33 PM | link
Several guilds in SWG have created "lightsaber experimentation suits."
Wearing such a set of clothing allows Jedi crafters to maximize the quality of the lightsabers they make. So guilds who have put together such suits have realized that they can rent them out for millions of credits for a hour's use.
The problem they indicate having is that there's no formal in-game system for guaranteeing that they'll get their suit back. So they've resorted to asking for millions in collateral. One player reports wanting 25 million credits, of which 23-24 million are given back when the hour's up.
I'd expect service offerings like this one to be more common in MMOGs that feature a system supporting general and enforceable player contracts. The more general the contract system, and the more trust players have that the terms of contracts will be fairly enforced, the more likely it becomes that a service sector will emerge within the player economy.
Without such a system, the player economy is stifled because fewer players can afford to put up the massive amounts of collateral required to generate mutual trust... which may be why so few stories of player-generated services have been posted here.
--Bart
Posted Sep 20, 2005 1:44:39 PM | link
A few interesting ones:
Look up Black Company in Ultima Online. They fit your player-created market-makers and financiers example.
They also have something called "Free Spawn Fridays" which allows guilds not normally apart of the Felucca community to pay the Black Company for spawn protection from other attacking guilds. Apparently not paying is not even a discussed option for the guilds that pay, as they end up dead 100% of the time otherwise.
They have been doing it for years, and as best I understand it, because of their enormous size and organization they have been very successful with it, to the point it I understand it was recently discussed privately between Stratics and EA in a topic regarding in-game monopoly's in UO.
http://forums.the-blackcompany.org
Good Luck.
Posted Sep 20, 2005 2:38:34 PM | link
The inherent problem with many VW player services is lender/investor risk and how to balance/offset it. You see it alluded to in GamePolitics' and Bart's examples, just as you see it in the real world. An unacceptable amount of risk (GamePolitics' Mount Fund) and a costly mechanism for balancing risk (collateral for Bart's premium item rental) justify why these services are often seldom seen and used.
The developer can implement additional mechanisms to facilitate trade but at what cost to the player experience and developer logistics? I think a searchable public player history in WoW would go a long way to eliminating scammers and forum trolls but doing so strips away some of that anonymity that makes MMORPGs enjoyable.
Posted Sep 20, 2005 2:50:47 PM | link
I have seen some good examples of creating markets and playing market maker here. I myself have had the notion to pursue interesting market making activities (mainly on very sketchy business models, like naked shorts), but the problem I always come back to in the VW, which Bart also alludes to, is the issue of monitoring and enforcement. How is it you deal with people who reneg on agreements? If you decide to start a loan business, what recourse do you have for non-payment? In the case of leased bag space, what recourse is there for said service provider just selling your goods? Word of mouth can be a deterent I assume, but that doesn't rememdy the grief brought to the players who were scammed. In the real world, there are things like insurance and policing agencies to deal with these sorts of situations. In the VW no course of actions is clearly laid out when one is the victim of such griefing. I'm not saying there should be something like a small claims court set up.... but it could be an interesting idea.
Posted Sep 20, 2005 6:12:11 PM | link
Interesting thoughts about the nature of what is necessary for these types of experiments to emerge. Reminds me of the debate within political philosophy about the scope of government: right libertarians contend that the only role for government is to establish property rights, and to guarantee them and a functioning mechanism of exchange (ie guarantee contract rights, and a limited set of torts).
Seems like the various workarounds that have been suggested here (large collateral, for example, in lightsaber experimentation units) exist because the game devs don't follow this model. Hard to blame them really, since it's a headache to think this stuff through. Though I imagine devs like Linden (Second Life) will be more aware of the issue. And as the MMOG devs like CCP (Eve) wake up to the audience that the economic game creates...well, we may see them becoming more like governments.
Posted Sep 21, 2005 8:46:29 AM | link
Assuming that some of these barriers can be gotten around (and player anonymity seems llike it's always going to be a barrier to things like credit), does that mean doing so is a good idea? Any time you formalize something in the game, you're going to be taking away an opportunity for players to (a) be innovative, and (b) engage in certain practices (or at least be rewarded for those practices).
If there's a secure trading system, then there's no role for middlemen, and the middlemen may have enjoyed the role, enjoyed making some profit from their reputation, or merely from meeting with other players.
If much of a guild's economic role (say, credit for mid-levels) can be abstracted into game mechanisms so the borrower gets a loan from a credit exchange, after which their risk is ranked and their loan is traded as an instrument itself, then what does that do to guilds? Are the players better off?
Posted Sep 21, 2005 9:51:48 AM | link
Timothy,
I take your point. As a dedicated Explorer-type, I support creativity in MMOGs, too; I would hesitate to propose formalizing some informal player-devised system that's working well for a lot of people.
But IMO that's not the situation with MMOG economic systems; these high-collateral deals only work for a few well-off players. What about the poor players who want to make some cash by running errands for other players, but who can't put up big collateral? Formalizing contracts would help bring more of these players into the virtual world's economic system by lowering the risk of losing time/goods/money, which reduces the cost of participation, which opens the system to more players.
Again, the two keys to this working (in RL as in the virtual world) are trustability and generality. If players don't trust the system to fairly enforce all the terms of a contract into which they voluntarily enter, then they're stuck with high-collateral deals (or none at all if they can't afford it). And if the system isn't general enough to allow lots of kinds of contracts, then (again) only a few players will be able to participate and you won't see the emergence of a significant service sector.
(On the other hand, too general a system could either be too complex to use or too open to griefing -- or both -- which, again, would limit acceptance. Such a system would not be trivial to create in code.)
I went into more detail on this subject in the After currency thread here on TN, but to summarize: I see a general/trustable player contract system not as a replacement for player creativity, but as an enabler. What it would take away in ad-hoc dealmaking for the well off few, it would repay tenfold or more by opening up economic participation to the more numerous average players.
Pretty much as in RL.
On the other hand, not many developers seem eager to add this feature to their MMOGs, so it's entirely possible that they know something I don't. ;-)
--Bart
Posted Sep 21, 2005 3:11:31 PM | link
On my WoW server, I came across a guild doing something quite similar to what GamePolitics describes. The GL provided a banking service, and a sales service. For the banking service, you sent him your new level in silver each time you leveled, up to level 40. At that time, he would return your money with a hefty bonus. If you were a guild member, you got an *extra* hefty bonus. For the sales service, you sent him standard goods, like light leather, and he would credit your account with the value he would sell it for.
The flip side was that he used the money to trade on the AH. A common maneuver was for him to decide that prices on, say, medium leather, were too low, and buy all the medium leather on the AH, and resell it for a considerable profit. So he tended to get good prices for what was sent him.
Because I myself am an AH troll, I saw his name for months, but I don't know if I've seen it recently. Makes me wonder.
Posted Sep 21, 2005 3:52:46 PM | link
Bart--Did you post on that other thread under a different name?
I'm going to get all theory-y now. There's a really cool old paper by Ronald Coase, "The Nature of the Firm". Coase was a huge free-marketer, and in this paper he asked the question: If free markets are so great, then why do we tend to use command-and-control inside a firm? Why isn't everything done through an open market?
His answer was that transactions costs made some things more efficient to do via the incomplete contracts that characterize a firm: "As an employee I'll do anything reasonable that's asked of me in return for my paycheck." Coase imagines a firm as defined by economic activities, spreading out from some center. In the center are things which are clearly too difficult to do through the market. Eventually you reach things which are done as well or better via the market and the firm contracts those activities out, defining the borders of the firm.
So, if overall tansactions costs get lower, the firm is going to shrink. I would be fascinated to see if this happens to guilds when new game institutions are put in place. It may not matter, depending on how much of a guild's purpose is economic versus other, but if it's largely economic then Coase's approach would predict guild membership to go down.
And this *might* have a negative impact on even those players who don't want to engage in market-creation play, if some other aspects of why a guild is fun diminish when their economic role gets less important.
Another thing to consider is what other changes to the game might be needed to support these. If new institutions make the economy overall more efficient, then the economy might need to be slowed down otherwise (reducing drops) to keep the challenge level the same. Would the poor players feel better off in such a case?
Posted Sep 21, 2005 4:08:03 PM | link
In A Tale In the Desert, there are no developer-created markets. Andrew Tepper (aka Pharaoh) thinks that vending machines destroy community, so he hasn't implemented any. This means most trade is done by bartering, which is a hassle. There have been attempts at creating backed currency, but they haven't been very successful.
In the first telling, a player named Baf created an exchange to help make trade easier. It's called The Goods ( http://www.atitdhosting.com/thegoods/manifesto.php ).
The Goods is a simple commodity exchange. The price of an item is determined by the amount of it that is in stock. The first unit of a commodity is worth 10000 Goodscrip. The next 2 units are worth 10000 Goodscrip together, and the 4 units after that are also worth 10000 Goodscrip. Prices decline exponentially based on an equation using log sub 2.
So if the Goods has lots of an item in stock, the price is low, and if it has few units of an item, the price is high. If someone buys lots of an item, the price increases, encouraging people to sell it, and if someone sells lots of an item, the price decreases, encouraging people to buy it.
All the calculations are done by the website. Users have an account on the website. Orders are entered on the website and fulfilled ingame by the tellers. There are tellers in several different time zones so you can find one most of the time.
In telling 2, the Goods is the most successful trading organization. I helped run it and made my ingame living speculating on it until I left the game recently.
The Goods succeeds in that it always has 1 of most everything in stock. It may be expensive, but it's there. It's also easy to trade a commodity for any other commodity that is listed. Many items needed by new players are easier to trade for at the Goods than to make.
The Goods fails in that it is hard to make large trades on it. If you sell a lot, you drive the price down so much that you don't make much money on the last units you sell. If you buy most of the stock of an item, you drive the price up so that you're paying through the nose for the last units you buy. The exchange is also not very efficient. Prices fluctuate a lot based on when trades occur, and shortages and surpluses are not rectified very fast.
Posted Sep 21, 2005 11:10:00 PM | link
Timothy,
Yes, I posted in that thread (and, for some months, here) under the handle "Flatfingers". (I post under my name here as that's the standard.)
I've run into Coase's ideas before, but I hadn't thought about them -- thanks for the reminder!
I suspect you're right that one effect of implementing a formal player contract system would be to reduce the number of members of large guilds... but I also suspect another effect would be to increase the number of small guilds. A big guild creates economies of scale in production by consolidating resources, but when it's easier to do that (because it has become easier to make trustable deals) then smaller groups are more survivable.
It's conceivable that there'd actually wind up being more players in guilds once a player contract system went live. Just as a trustable legal system helps encourage market activity in RL that only the big boys can enjoy in a corrupt or excessively laissez-faire environment, a contract system that players could trust would -- I think -- open up a lot more economic activity to the player who otherwise would have done something else.
I think that sharply increased economic activity would make a virtual world more enduring, but I could be wrong.
--Bart
Posted Sep 22, 2005 7:16:17 PM | link
