Chen Nian to IGE: Eat me, Western barbarians!

And so the culture wars in item trading begin. I simply had to post this, from Pacific Epoch:

Virtual Item Trading Site Founder Chen Nian: IGE Will Fail In China

Chen Nian, former Joyo vice president and current chairman of online virtual item trading website Uoyoo.com told Sina on Tuesday that no multi-national Internet company will achieve success in China's virtual item trading market, including leading US online game virtual currency and item trading platform Internet Gaming Entertainment (IGE). Chen said that IGE's biggest weakness is its lack of understanding of China's online gaming and virtual item trading market. Chen confirmed that Uoyoo.com has expanded its business to some game servers in Taiwan. Chen said Uoyoo.com will directly compete with IGE in the international market. According to Chen, Uoyoo.com is targeting 100 million Yuan in revenue in 2006. Chen said Uoyoo.com was jointly invested by himself and Kingsoft CEO Lei Jun.

Comments

[Jessica Mulligan]

1.

Should have included the link for the site:

http://www.pacificepoch.com/

[Matt Mihaly]

2.

That doesn't look like a culture war to me. It looks like an ambitious startup attacking the established player and using any ammunition at hand. If IGE were a Chinese company, they'd be issuing the same press release with different reasons inserted as to why IGE will fail and Ouyoo.com will succeed.

--matt

[virtex]

3.

uoyoo is selling USD/WOWEU at around 11 (Gold per USD)
IGE sells around 17g per USD
They're just dreaming

[Colin Fisk]

4.

Matt-

Per the IGE website:

IGE maintains administrative offices in Los Angeles, California and Miami, Florida. The Company's market making and currency exchange services are operated by Internet Gaming Entertainment, Ltd., the Company's wholly-owned subsidiary in Hong Kong. The Company's auction exchange services and content network sites are administered by wholly-owned subsidiaries in the United States.

So they already are a chinese company.

Actually, the way I read it is this:

"The parent company is in Hong Kong so we can hire gold farmers and CS people for dirt cheap, and our main executives work out of offices in the US where we also maintain our servers."

Colin

[Marat]

5.

This is nothing but good PR. If they would be real competitor to Ige then they wouldnt have underhandled website. They doesnt have ever "about" section. many other things look weird. Any company with similar ambitions must have good website. If they are typical chnese game gold service then their prices are REALLY high. They dont have proper publicity and ads on adwords, overture etc. I dont mention ever that their marketing aims isnt reachable. 100M yans equal to USD20M. They are just kidding or really live in virtual world.
Colin is right, IGE is chinese company as well. So they have some additional expenses on administrative offices in USA but this ammount isnt much important.

[hikaru]

6.

this reeks of nationalistic posturing -- it's the latest fad in china of late.

IGE not know the way to sell virtual properties in china? they created the market..

IGE 4 teh pwn.

[Sweetzer]

7.

I've had some discussions with a few key people at MMORPG publishers, and here is what I've been told:

IGE doesn't actually farm. At least they have convinced a few of the big MMORPG publishers of this fact. Apparently, they are able to say this b/c although they may buy the majority of their inventory from farmers, they don't actually "employ" farmers. It's semantics, but technically . . .

Also, revenues of $20M U.S. wouldn't be that big of a stretch for Uoyoo.com. There are several companies in the "virtual trading" business that made more than this in '05. A few in N.A., a few in China, and a few in Korea. I have it on pretty good info that IGE made more than $35M last year.

[randolfe_]

8.

IGE's gross revenues were much higher than USD$20M. Their profits are unkown, unless you have inside info.

IGE does farm. They both directly employ farmers and have exclusive contracts with farming "operators". Their buy/sell market function operates between a band of 200%-350% markups with IGE acting as a pure broker. The volume of such transactions is not known, but believed to be small but growing.

IGE also is widely believed to be engaged in, either directly or indirectly, "alternative" methods of procuring virtual currency supply. Bluntly, exploits, bots, macros, etc. I don't think anyone's proven IGE's counterfeiting activities, but at least a few of us have very strong circumstantial statistical evidence to that effect. Also, more than a couple publishers have agreed with such conclusions of our data.

[Marat]

9.

@Hikaru
well, ige "probably" made USD35M with all their affiliated stores in last year but i think that it is incorrect to conclude that if ige made 35M last year with 10, 20 or more stores they own then one yoyo pert fighting cock will easy reach similar annual turnover. ige has reputation, established affiliate network, all first positions in google, yahoo, msn, good management etc. This is very simplified approach to estimate chances of small chinese company with live support email kind a "[email protected]" with established business. I beliave none cannot beat ige in short-time perspective.

[randolfe_]

10.

good management etc

IGE has terrible management. CEO is a former child actor; President used to run 911 Entertainment which was so dubious that their auditors fired them as a client. COO has no operating company background other than running a power guild in EQ. CFO was a junior investment banker for a short while, but lacks the requisite CPA/Public Accounting background to run a real fincance organization.

Only their Chief Counsel is the real deal. In all fairness, running a fringe business such as IGE probably only requires a good lawyer and a couple good marketing types. It's not as if they're going to do any serious channel development.

[Matt Mihaly]

11.

Randolfe_ wrote:

IGE does farm. They both directly employ farmers and have exclusive contracts with farming "operators". Their buy/sell market function operates between a band of 200%-350% markups with IGE acting as a pure broker. The volume of such transactions is not known, but believed to be small but growing.

Do you have any proof that they directly employ farmers? They've privately assured me they don't, and although I've slammed them in public multiple times for other things, I'm rather tempted to believe them. They sounded quite sincere and, as per their explanation, they have no reason to actually employ farmers and thus break EULAs.

--matt

[randolfe_]

12.

Do you have any proof that they directly employ farmers?

Yes I do have proof of both directly employed farmers and exclusively contracted farmers. I should also categorically state that I find no particular problem with this. IGE violates the EULAs and TOS agreements; but so does every RMT participant. I know IGE was sent bigfoot letters by Sony, probably other publishers too. But they rightfully ignored Sony's threats. The fact is that the EULAs and TOSs are flimsy houses of cards which no major publisher has an interest seeing tested in court. (Less they risk the establishment of property rights interest precedent in virtual assets, like is happening in Korea presently).

Some of our evidence, both direct and statistical will become public within the next 6 months, after we finalize our agreements with some game publishers and launch.

[Matt Mihaly]

13.

Randolfe wrote:

Yes I do have proof of both directly employed farmers and exclusively contracted farmers.

Ok, though with all due respect, I, at least, am not changing my mind based on an anonymous poster's undocumented claims.

--matt

[Richard Bartle]

14.

Randolfe_>IGE has terrible management. CEO is a former child actor

This does not, in itself, qualify an individual as being a terrible manager. Shirley Temple was the arechtypal child star, yet she was US Ambassador to Czechoslovakia at the time of the "Velvet Revolution" and before that had been US Ambassador to Ghana. She's been on the boards of Disney, Del Monte and UNESCO.

As with most child actors, I doubt that Brock Pierce had much influence over the choice of his first career. If you want to dismiss his management as "terrible", you'll have to find better justification than his having been a child actor.

Richard

[Matt Mihaly]

15.

Richard Bartle wrote:

Shirley Temple was the arechtypal child star, yet she was US Ambassador to Czechoslovakia at the time of the "Velvet Revolution" and before that had been US Ambassador to Ghana. She's been on the boards of Disney, Del Monte and UNESCO.

I completely agree with your point, but I think your examples are poor. Being appointed as an ambassador or being appointed to a board doesn't imply any particular competence at all, especially in the case of am ambassadorship to somewhere like Ghana. They are largely crony-type positions, which is why they authorize such absurdly large payments to executives: They know it'll come back to them personally somewhere else. That's not to imply all corporate board members are corrupt or cronies, by any means, but being on a board just means that you were appointed there, not that you are qualified or competent at what you do.

I've not met Brock myself, but one of my close business partners has spent a fair amount of time with him, and says he's quite a savvy guy. Whether that translates into good management, I don't know. He did pioneer (if not invent) an entire industry though.

--matt

[randolfe_]

16.

As with most child actors, I doubt that Brock Pierce had much influence over the choice of his first career. If you want to dismiss his management as "terrible", you'll have to find better justification than his having been a child actor.

Richard

The burden of credentials is on the other foot, I'm afraid. I was simply listing the only credential Mr. Pierce can boast. (Other than apparently having played way too much EQ.) There are, of course, many examples such as Ms. Temple. Mr. Pierce is no Ms. Temple. Would you like to demonstrate otherwise?

You also conviently evaded the reamining "management" at IGE, assuming that Mr. Pierce is merely a PR figurehead.

[Matt Mihaly]

17.

Randolfe_ wrote:

You also conviently evaded the reamining "management" at IGE, assuming that Mr. Pierce is merely a PR figurehead.

It's easy to take pot-shots at people from a position of anonymity isn't it?

He's not a PR figurehead, and he's definitely in charge of the company, incidentally.

--matt

[randolfe_]

18.

It's easy to take pot-shots at people from a position of anonymity isn't it?

Now you've made a fatal assumption. My position is far from anonymous; my data is far from obscure; my relation to the secondary market and publishers is far from trivial. Just because you don't know me doesn't mean I don't exist. I know that he is in charge of the operation. I await any proof that he has succeeded at anything aside from managing the operation of a fringe business in an industry defined by transactional integrity problems.

Will they survive the next 1-1.5 years as these transactional frictions subside? More than a couple of funds investing in up and coming competitors certainly don't seem to think so.

As an industry matures, economic profits in excess of commodity accounting profits attract entrants. In a competitive environment, better management wins. This is why you see seasoned, solid management as the rule, not the exception.

I remind you I was responding to the assertion that IGE has "good" management.

[Samantha LeCraft]

19.

So what is the breakdown in who is "in charge of the company", between Pierce (CEO) and Steve Salyer (President)? I've never met Mr. Pierce, but I saw Mr. Salyer at AGC this year, on the panel with Ted and Daniel James, and I have to say, he did not make a good impression on me.

[randolfe_]

20.

I don't know what power Salyer has at IGE, to be honest. I did know Salyer when he was running around San Francisco with 911 in the late 90s. He was generally considered a lightweight and pretty much left a bad taste in everyone's mouth. Incidentally, he made the top-enemies list of a lot of otherwise decent [music] artists who he left holding the losing end of recording contracts.

[Also Not Anonymous]

21.

My position is far from anonymous; my data is far from obscure

Your position is completely anonymous here. Your data is competely obscure. Much easier to make sweeping statements that way.

But I know who you are.

[randolfe_]

22.

Your position is completely anonymous here. Your data is competely obscure. Much easier to make sweeping statements that way.

Ask me any directed question and I'll provide the specific data and methods which are not covered by a currently active NDA. I've used a real email, so feel free to contact me. In fact, much of our research data will be available publically on the web in coming weeks/months. If you're interested, feel free to email me. By the way, I do hyper-intensive research, analysis, and due diligence for VCs and entrepreneurs who invest in a number of areas, including computer entertainment. This is how I know Salyer, and what kind of a track record he has.

[sweetzer]

23.

Randolfe:

I know for a fact that IGE does not farm (i.e. IGE does not employ anyone that plays MMORPGs simply to amass virtual objects). That said, since you have “evidence” to the contrary, I’d love to make a little wager.

Incidentally, when you refer to their “Chief Counsel,” to whom is it that you are referring?

[Michael Hartman]

24.

Randolph, you said you had proof that IGE does employ farmers. I find that very interesting since they have always denied that.

Could you share some of that proof?

Thanks,

[DannyBoy]

25.

Randolfe:

I saw that you say that you are "finalizing agreements with publishers" and then "launching". So I guess you intend to compete with IGE in some new company and maybe thats why you say these things about their management and about farming.

I completed a significant transaction with IGE back in 2004 and I've been in the RMT business for years both before my deal got done and after. Being unsure about my obligations under the confidentiality clause of my contract, I'll remain anonymous here, but I just have to disagree with your comments.

Saying that IGE has no good management is pretty ridiculous when you think about it. There were four guys at IGE who mattered back when we completed our deal. Brock Pierce and Jonathan Yantis and Alan Debonneville literally created the RMT industry and they''ve dominated the business ever since they joined forces years ago. We also dealt with Randy Maslow who was the other partner and the former GC. He had a track record of working with successful internet companies and me and my attorney found him competent and and easy to work with, just like the others. IGE back then was both outcompeting everyone else in the fledgling business and at the same time aggressively acquiring competitors and content sites that they thought could be successful. Bottom line is that those guys built the world's most successful RMT trading and content business and its pretty lame to say that they have "horrible" management. What have you done?

I am not familiar with Steve Salyer or the new GC or the new CFO that joined recently, but given IGE's success its pretty improbable to me that the new guys are "lightweights" as you suggest.

Also, you are incorrect about IGE engaging in "farming". Besides being a strategic decision on their part a long time ago, its also not necessary or smart for guys with their business model to be involved in the production end of the supply line. Not only is your allegation wrong but it also shows how little you know about the RMT business. Good luck competing with IGE.

[randolfe_]

26.

@DannyBoy,

You are incorrect in your assumption that I am going to compete with anyone. I did research for investors who will be launching virtual asset plays which, in fact, probably won't compete with IGE. I also have been deeply involved in building channel relationships with the publishers themselves in this context. If you're a RMT veteran, then you can deduce the why and where of such initiatives. As a result, these guys wanted to know a lot about the economics, strategy and realities of the classic RMT space, which includes a major focus on IGE.

Salyer is only of interest because, as I've been doing this type of research and analysis in the computer entertainment space for about 11 years now, he is infamous for having bilked more than one Bay Area VC out of their investment. So your assumptions about him are wrong, and easily verifiable with a few google searches.

If I implied that I will be publishing data directly, then I apologize for being misleading. The data I've compiled will be released by the firms that engaged me when they launch, and probably by more than one game publisher. What is going to happen to IGE is not so much any form of competition, but a fundamental reshaping of the "virtual asset industry" itself.

[Matt Mihaly]

27.

Gosh, if you're willing to claim that someone has bilked someone else out of money, one would think you'd have the guts to identify yourself instead of remaining an anonymous mud slinger.

--matt

[Sweetzer]

28.

Randolfe:

Blizzard is fundamentally opposed to RMT in WoW. They refused doing a deal with IGE not because their heads told them it was a bad deal, but because their hearts told them it was not right for their title. You must know this with all the research that you have done and with the deep relationships that you have established with publishers. Seeing as how there will never be "sanctioned" RMT in WoW, how do you see "a fundamental reshaping of the 'virtual asset industry'" occurring and when?

Still curious to know who you think their "Chief Counsel" is . . .

[Matt Mihaly]

29.

Sweetzer wrote:

Seeing as how there will never be "sanctioned" RMT in WoW,

Thus ensuring that IGE and other virtual asset traders will continue to rake in money from WoW users eager to use their services.

Still curious to know who you think their "Chief Counsel" is .

I think he meant Peter Huie, their SVP and General Counsel.

--matt

[Michael Hartman]

30.

Whenever someone says "do a few google searches", I am immediately suspicious. I mean, "a few google searches" could turn up just about anything you can imagine.

I will ask again, since my question got ignored:

Randolfe, you said you had proof that IGE employs farmers. I find that very interesting since they have always denied that.

Could you share some of that proof?

[AhmedF]

31.

Ive likely burnt my IGE bridges, so I can post this with complete confidence.

Before accusations of my anonymity plague me, you are free to ask any of the above mentioned players (except for Peter - I only knew Randy) about me being anonymous or not :)

So anyway - I just wanted to pipe in to say that all this talk of the RMT industry - Brock and Alan had nothing to do with its creation. It was 100% Yantis who made it how big it was. You can do some rough work into the IGE/Yantis 'acquisition' and just see who was bigger than whom.

Furthermore, their SE rankings were not because of anything they did. I was their SEO guy and 99% of their rankings (IGE and MSS) were all done by me. A credit/discredit to management, I dunno, but something to clarify.

On top of that, try a WHOIS of GamerKing.com. Something is up? :)

And my final note ... this Chen Nian and his Uoyoo.com are just little dogs barking at the big dog ... hoping for some publicity. Which is exactly what you gave him.

PS. I love it when people throw random numbers around ;)