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Sep 05, 2006



The real tragedy here is that IGE might not be able to send folks to places like the Austin Game Conference, and then we'd all miss out on the floor show of debates between them and Ted...

But more seriously, I've a couple questions:

1) I've talked with a number of venture capitalists who are backing companies that are making an IGE play. Does this prove your point that the RMT biz will no longer be dominated by a single player, or does it prove that VCs are getting into a business that's not as robust as they've been told?

2) Could your data that no new WoW money is flowing into the IGE system be a leading indicator of a softening WoW market? That is, are subscription numbers dropping? Or is this perhaps a softening of the overall MMO market?



1. When you say a big player went for a small price what all was included? Was there inventory transfered, machines, a web site?? Is the seller under contract to not compete in that market again?

3. Maybe 50,000 just isn't big enough to draw player attention anymore.

2. This is the most interesting tidbit. It wouldn't have to be due to a decline in sales though. Maybe they just have a more efficent / cheaper dedicated supplier. That kind of news might indicate a good time to review games for dupes or other exploits.


#2 is not that big of news. It's just an indicator that, yes, we have hit oversupply.

Note that there is little barrier of entry to get into the gold farming business. A good number of people playing WoW in China or elsewhere is probably making some pocket money while enjoying the game (it's at least self-financing in certain locales). You see, people in the West might grind for in-game loot; people in the East on the other hand might grind for RL loot. I'm talking in general terms with no hard data, but in essence supplying RMT is easy.

#1 is not that big of news also if you believe oversupply is true. Whereas IGE tries to gain a monopoly and the benefits thereof, Korean RMT is more competitive and works a bit more like eBay. The $5m valuation maybe cheap at say 5 times last years earnings of $1m, but may be fair value at say 10 times next year's earning of $500k. Strategically, I expect to see IGE accelerate their acquisition program. It's a Barry Diller's IAG-type of play.

As for #3, 50k of 6m is not that much. No uproar from players cuz no players were affected :) It's at least good to hear that Blizzard is on the prowl. The subtle PR is a great move.

My analysis,



Very interesting, Ted. A couple questions (which may just be boneheaded layman chatter, so feel free to tell me to RTFEcon101Textbook where merited):

1. The GameStudy article suggests Itemmania may have sold cheap not so much because of bad financials as because its prospects are clouded by the uncertain legal status of RMT itself. If that's true, wouldn't it mean that the valuation of RMT businesses tells us very little about the health of the RMT market? I mean, the fact that Crack R Us, Inc., can't seem to raise legitimate venture backing doesn't mean illegal drug sales are flagging, right?

2. Itemmania looks to be an eBay type mediator (making a few points profit on every dollar of sales through its site), whereas IGE is an Amazon type retailer (earning probably 10 times the percentage on every dollar). I'm wondering if you (and for that matter GameStudy) are accounting for that difference when you call $5m a cheap price relative to Itemmania's "share" of total RMT? Valuation generally reflects profits, not total sales, right?

3. The end of "single-company dominance"? How so, if it's a single company, IGE, that's snapping up every RMT player that can't make a legitimate go of it?


I have heard player feedback from the bannings. Namely guild mates complaining about the price of gold (it's not a taboo thing in my guild, we're a raiding guild filled with mostly professionals that have time to farm for consumables). Over the last three months the price of gold across nearly all servers has at least doubled and sometimes tripled and quadrupled. You used to be able to buy 1000 gold for as little as $25 and now it's rare to see it go for under $80 and usually above $100.


Yeah, what Brandon said. Gold prices have skyrocketed in WoW. I don't buy gold but for fun I've occasionally checked gold prices on the servers I play WoW on. Right after Blizzard announced the 50k banned accounts, prices of gold went way up (from $40 for 1000 gold to something like $40 for 100 gold). I checked lots of other servers and it wasn't just mine.

What's interesting is how prices on the auction house in WoW seem much lower now -- I guess without people buying tons of gold and bidding prices up things just can't cost quite so much.


I've been collecting price data for quite some time and am working on a way getting it available in real-time with long-term historic graphs. I've got a couple graphs for WOW Gold that show the huge jump at http://www.gamepricewatcher.com/


WoW! (No pun intended). Julian Dibbell has once again bucked the trend-- the reporter gets it right while the academics are off in la-la land. Seems to me that Ted's analysis has been clouded by wishful thinking :) By the way, IGE has not had an office in Manhattan in almost two years. Geez.......

Randy Maslow

DISCLAIMER: While I am no longer formally associated with IGE, I am not a disinterested observer :)


"2. IGE has closed it's gold-buying market. I checked yesterday; IGE was not buying gold on a single WoW server. To understand the significance of this, realize that IGE makes money on throughput. If they are closing the incoming doors, it can only be because they are not selling enough. Inventories are too big."

Maybe they were just tired of getting caught up in sting operations.


I'm not sure how many people here have ever tried to actually sell virtual coin to IGE before, but that function of their site has long been primarily a window dressing type part of their business. They only accept very small transactions and more often than not they are only accepting gold on a very few select servers. Even as a casual player, it was more trouble than it was worth to use these channels to try to sell gold as the amounts they would buy were just so small. I imagine that it is more of a last ditch supply channel in case their main Asian suppliers aren't able to meet demand (and that is rare these days as those suppliers are becoming ever more effecient).

Just because IGE is no longer buying gold publicly through their site most certainly does not mean they are not buying gold at all - it simply means they are getting all they need through "wholesale" channels.

It is also quite possible that IGE has been "stung" by Blizzard in this way - I've long wondered why game companies simply did not use this as a way to easily get the account information. I dealt with IGE in SWG at one point and put the character I traded with on my friends list. He was still logging in multiple times a night until I quit 6 months later - afaik IGE could still be using that same account now. How that kind of activity, done in a very public manner could escape SOE is beyond me (other than the fact that SOE really didn't care as long as their customers were not getting scammed and quitting the game because of it).


Now that Riley mentions, it, I think it is quite common for IGE not to buy gold on their website. I've never sold them gold, but I have gone through the process a few times to see what they were paying for it. I had to try quite a few servers before I found one that they were buying gold on.

I'd guess that nearly all of their gold comes from dependable, internal sources and they only buy from the public when their inventory falls below some threshold, if at all.


Brent Michael Krupp, so you're saying that the prices have fallen to match the price jump for Gold?

Because..I'd doubt it. What it sounds like is pure profiteering on the back of an annoucement by Blizzard (and another two of me online friends who have never bought anything were banned, apparently because the guy who recruited them into their guild did...) by RMT traders.

There's only one known way to crush Ebay prices without causing inflation.... (Allow gametime codes to be sold for in-game cash. See Eve-Online)


Interesting topic.

It's true that the price of WoW Gold has generally risen over the past few months. Have the bannings had an effect on this? Almost certainly to some degree.

If you look at it over a longer period though you'll see that while WoW US prices have shot through the roof over the past few months, WoW EU prices have dived through the floor.


Just wanted to pipe in with some comments on Mr. Castranova's post:

1. As pointed out elsewhere on this thread, the $5M number on Itemania really reflects more on the low-margin nature of auction exchanges. Seems to me another brilliant move by IGE-- they gain a key distribution outlet in the critical Korean market to sell their own inventory at high margins, just as they previously did years ago when they purchased PlayerAuctions after the Yantis acquisition. Itemania's purchase price reflected its inherent value as an auction exchange, while its value to IGE is 100 times that.

2. Your conclusion that they are "not selling enough" does not follow at all from your premise. I don't think you understand much about how the supply chain in RMT actually operates.

3. Blizzard's war on farming accounts only hurts the little guys who do not have enough scale to take countermeasures. If anything, Blizzard's actions are consolidating the market and making IGE stronger.

4. You mentioned Sony's Station Exchange. Station Exchange does indeed "continue to function", but so does Ariel Sharon. OK, sorry, that was in bad taste. Station Exchange has been an abysmal failure--SOE's total volume to date is what IGE does in a week in one game.

5. You are right that none of the big internet companies has bought IGE. But my information is that something like $100M was invested in IGE earlier this year by a leading U.S. investment bank and a consortium of private equity funds. I also heard that some of the IGE partners were partially bought out as part of that investment.

I just can't figure out where you got the idea that single-company dominance of the market is coming to an end. :)-



Interesting. Did not know the amount, but the rumor was that Goldman Sachs and a bunch of hedge funds put a lot of money into IGE and that Jonathan Yantis and Randy Maslow were partly bought out for more than $40 million! "Virtual" currency you say?


The fact is that IGE aims to be an yahoo/ebay/amazon of RMT, is currently a clear leader, and RMT is becoming more acceptable with people and governments, strong financial support will put them on a track to an successful IPO and billion dollars valuation.

Note that Partygaming, an online gambling company listed in the UK, had the same expected outcome.

Like online gambling, there will be fewer hurdles over time. For example, with the evolution of business models, there will be less EULA restrictions on RMT. It's becoming more acceptable.



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The recent Blizzard and NCSoft crackdowns haven't hurt IGE, they only hurt the little people of RMT.

The one thing constantly missed when discussing RMT and IGE in virtually any game is that IGE operates like a guild or clan with a business plan, not as a loose group of individuals trying to make a buck.

This blog needs more powergamers.


This roughly google translated version of ige.com.cn ( http://translate.google.com/translate?u=http%3A%2F%2Fwww.ige.com.cn%2F&langpair=zh%7Cen&hl=de&ie=UTF-8&oe=UTF-8&prev=%2Flanguage_tools ) might tell you a little something about the players selling to IGE.

Imho IGE is not at all any sort of marketplace but rather a China-to-Europe-or-US-export-company. Marketplace is part of the vocabulary IGE uses to frame press and public opinion. People shall think that IGE is a virtual goods ebay with George from Wisconsin selling to Pierre from Paris - but it is not, at least not from what I have heard and read.


This roughly google translated version of ige.com.cn ( http://translate.google.com/translate?u=http%3A%2F%2Fwww.ige.com.cn%2F&langpair=zh%7Cen&hl=de&ie=UTF-8&oe=UTF-8&prev=%2Flanguage_tools ) might tell you a little something about the players selling to IGE.

Imho IGE is not at all any sort of marketplace but rather a China-to-Europe-or-US-export-company. Marketplace is part of the vocabulary IGE uses to frame press and public opinion. People shall think that IGE is a virtual goods ebay with George from Wisconsin selling to Pierre from Paris - but it is not, at least not from what I have heard and read.


There are always stories hidden - :)


i always wunder if IGE has anything to do with o'blizzard. You see, it is pretty easy for them to locate a player selling/buying gold from each other. So,basically it is pretty easy for o'bliz to know which is IGE's characters. Hey,their Travelling Backpacks must have like at least 10K gold for each characters. How come o'Bliz never ban them where it is so obvious. Maybe there are something hidden ... HEY!

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