Tobold's Blog
Tuesday, October 11, 2011
World of Warcraft introduces real money auction house

As Gazimoff so correctly remarks, the introduction of the Guardian Cub pet, which costs $10 in the Blizzard store and can be sold for gold in the World of Warcraft auction house, effectively turns the auction house into a real money affair. You can always buy kittens, sell them for gold, and use that gold to buy BoE epics or whatever else you want. The pet puts an "official" dollar to gold exchange rate into World of Warcraft. Except for the fact that you can't exchange the pet back for anything useful, that is very much like the PLEX economy of EVE. One difference is that WoW, unlike EVE, has a lot of items that can't be traded for gold, and are thus not touched by this.

What does this change? Not much, surprisingly. Because gold has been available for dollars since World of Warcraft was released. Only you had to get it on the black market. And that market was huge. Blizzard repeatedly banned hundreds of thousands of gold SELLERS. Now obviously a gold seller needs several customers to survive, so millions of people have bought WoW gold over the years. It is just that nobody ever wanted to admit it.

So the major effect of this "kitten economy" might be something that Blizzard has been unable to achieve for 7 years: Killing the third-party gold trade. Why would you want to buy gold from some website where you risk getting scammed and have no means to get your money back if the gold isn't delivered, if you can buy the gold via completely legit and official channels?

Gold sellers will still be viable because the cost of the pet ingame will decrease rapidly when about everyone tries to sell it.
Well, there is a floor to that, isn't it? If you can get enough gold to buy the pet from a gold farmer for $5 or less, you'd be tempted to buy the pet that way. Thus the gold price of the kitten is never going to drop too much, but will stabilize at some sort of semi-official gold to dollar exchange rate.
The floor is tied to the influx of new players, because everyone else will eventually have one. By contrast, the floor price for PLEX is much higher because it depends on the existing players' demand for game time.
Maybe, maybe not. You also have to see that the equilibrium is not at the price that gold farmers will give you, because the pet gives you the non-trivial advantage that you don't risk getting banned.

I wrote my opinion on my blog, but in a nutshell: I think the market might saturate relatively fast. Unless people will except a "cub economy", in which they trade stuff off the AH for cubs instead of gold, you won't see much change from now.

The pet is no PLEX. There is no inherent motivation for every player to try and get their hands on them.
As ShadowWalker point out, this won't work since in Eve people want plexes (free subs!) lots and lots of plexes but who wants (or can use?) lots and lots of kittens?

What will happen is that people will start selling kittens and the price will go down once everyone who wants a kitten has a kitten and will eventually stabilize at a gold value that is (presumably) much much less than you can get from buying $10 worth of farmed gold.

There is simply no mechanism to maintain the price of the kitten. If they lower the price then that just speeds up the process of everyone who wants a kitten having one.

This won't work.
Shadowwalker is right. The pet doesn't bring gold to the economy. It brings pet.

You can buy pets for $10 and try to sell for gold, but to to get gold you need someone who HAS gold, and wants to spend it on a pet. Which isn't a big group.

The pet market is limited on buyer side.
It's a limited version. There are only so many kitten customers and once people have bought one they're presumably unlikely to buy another.

It's also likely to be dramatically deflationary. The first kitten would be bid on by lots of interested buyers but the 500th kitten? Lucky to get 10g for it.
Until everyone who wants the kitten has one, anyway. They'll need a constant influx of new items to keep it running.
i think gold sellers will always have the value.

compared what i paid for in vanilla WOW to now i think they are too late for this to be a real value to the consumer. (all this is based on what i learned watching tv)

cant wait to see though.

Not really, no. Once everyone who wants the pet has the pet, there won't be any demand for it. In that case, there will be so few on the auction house anyway, that it really won't say anything about the real world value of gold. Blizzard would have to sell some kind of consumable that was useful enough that almost everyone wanted it and that couldn't be replicated in game in order to really get an exchange going.
Sadly the EVE experience proves that officially sanctioned RMT does not remove gold sellers from the game. It merely sets a ceiling to the price they can charge. It appears a lot of folks are willing to take the risk of dealing on the black market as long as they get a healthy discount over the official exchange rate.
Also I wonder if there is an (ingame) market for those pets. Perhaps pet collectors might buy one.
It isn't as highly collectable as for example the rare parrot pet and as such isn't much of a status symbol either.
So the customer base would consist out of people wanting the pet but don't want to spend $10 on it. I have no idea how big that market actually is.
Once everyone who wants the pet has the pet, there won't be any demand for it.

Replace the word "pet" in that phrase by some other word, like "iPad", and tell me if that sounds like solid economic theory.

I agree that the market for PLEX is deeper, because PLEX are consumable. But that doesn't mean the market for the kitten pet can't go on for a very long time. And I'd be extremely surprised if Blizzard wouldn't release the NEXT tradeable pet in a some months.
The usability of the pet as a companion is the equivalent of the gold standard for real world money. That is to say, the gold standard gave paper dollars an intrinsic value, because you could exvchange them for gold. Similarly, the kitten has an intrinsic value, because you can activate it and at least have a pet for your character.

But real money did away with the gold standard long ago, and people still want it. The same could happen for kittens if they become an accepted medium of exchange. [Remember the demons playing poker for kittens in Buffy? Hardly any of them used to eat kittens!]
Actually that is possible for a long time through TCG Mounts/Pets.

But now you buy your trading goods directly at blizzard instead of ebay
I think this is an experiment. They announced a real money AH in Diablo 3, but they can't just introduce it in WoW without causing an uproar. So this is just an small experiment to see how the community reacts and how well is the item incorporated into the existing economy system.

Exactly, it's not about the pet itself being a PLEX-like item with inherent usability, it's about it being a store of value and medium of exchange, an odd sort of currency.

It will definitely be interesting to see what it does.
Yeah, intrinsic value in itself doesn't prevent the kittens from being used as money. I'm more worried about inflation, because there is no built-in sink to offset the influx of new kittens from the RMT. However, this is a temporary issue.

Like Tobold noted, the people that "print" new money are the players, and because "printing" isn't free, a minimum price will establish itself eventually. Unless Blizzard stirs the pot with a new pet and restarts the whole thing.

Oh well. At least we'll be reviewing exchange rate graphs in addition to subscriber count graphs in the future, looking for the same boom-decay patterns. ;-)
It might not work completely against illegal gold selling, but it certainly won't hurt. If nothing else, it will slow down inflation. We're talking about single digit percentages here, but it will.

In any case, it won't "kill the economy in-game" like many seem to ignorantly scream.
Making the kitten a form of currency due to it's fixed $ value will be one of the vectors affecting the gold price of the kitten. The other vector would be the laws of free market.

It all very much depends on the willingness of players to make these sorts of transactions. At first some kittens will get sold for lots of gold, but then the market will get competetive and the price will fall down. If it goes to low, we can suppose there wil be a group of players waiting to make more gold, buy the chap kittens and sell them for more gold, thus creating a bottom line for the price. It highly depends on how many playerson WoW want to risk their dollars on the prmary market and how many would risk their gold to invest on the secondary market. Should both groups be small, the introduction of the kitten will change nothing. If more and more people uses the kitten in exchange of goods, it will be considered a strong currency and thus the situation will be close to what we can see in EVE.

My guess is that there's a very slim chance to end up in the middle and it's very much probable that we'll end up even closer to the 'no effect' end of the line, with only a very small fraction of the players uses the Kitten as means of gain.
Easy fix to third-party gold sellers would be selling game card codes for gold. I've seen claims from both sides of the "bannable offense?" argument related to selling game time in Trade channel (which is exactly what we're talking about with PLEX, right?), so I'm not sure what the official line is today (I suspect it is bannable).
The first real money pet was for charity. The charity bit got dropped pretty quick.

This is an experiment with a built in self-destruct, because people are right; it's value will plummet pretty quickly. It also sets a precedent so later when you can buy a cat that you can vendor for 10000 gold it won't arouse as much anger.
Your maths of 100,000(s) of gold sellers to 1,000,000(s) of gold buyers seems a bit suspect.

If someone spams trade to sell gold gets reported and banned. It does not mean that account ever sold gold nor does it mean that the buyer only brought gold once.
If'n I wants ta buy gold, I puts up me credit card info, lets the buggers charge $100 or whatevers, and an hour or two (or whatevers) laters the gold be in me mailbox.


I buy ten pets from Blizz fer $100, put'em on the auction house. Next day, none of'em sold 'cause some other bugger undercut me. Mebbe next day I sell one. Few more over time, but within a couple weeks, neatrly everyone what wanted one done already bought they's, most of'em from Blizz. So I keeps cuttin' me prices ta stay up with all the other pet-sellers. Takes days? Weeks? Months? Who knows.

I's sure Blizz wouldn't mind some petrapeneurs takin' a little biz away from the gold-sellers, but I doubts what they expects it ta be a lotta biz.
This is just a test for Blizzard. If it works (i.e. people buy pets for $10 and then find buyers willing to purchase the pet for gold), they are going to introduce more desirable items at higher price points.

Remember how Stone of Jordan functioned as a monetary unit in Diablo 2? Now this time, it will be pets (or mounts)
On Allods Online players can buy cash items and sell them in the auction house. The problem is that the game masters themselves create fake accounts to sell cash items for absurd prices. :(

Someone may say "Ah, but at least you can buy cash with in game gold safety, better than nothing!"

Well, you'll need to hunt gold 10h per day just to buy an essencial cash item. Once you bought it you'll lose your whole gold and will not have gold to buy new equips. Let's go for more 10h of hunting...
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