Pardo – Auction House Users Unlikely to play the Market

During this morning’s investor conference DiabloWikiRob Pardo gave a presentation on the Real Money DiabloWikiAuction House highlighting some of the main features.  Along with explaining how the stash and buyout systems will work and pointing out the problems with Diablo 2 DiabloWikitrading. An interesting comment was made regarding looking for the best deals. Rob stated that it was unlikely players would move between auction houses to hunt down the best deals. Unlike World of Warcraft which had many,many auction house instances, Diablo 3 will only have around ten auction houses so he doesn’t think players will be bothered to hop around to look for deals and really play the market.

Rob also explained the RMAH fee system again as some players have been concerned about the multiple fees. The reason Blizzard are adding a flat fee for placing the item is so player won’t simply add all their inventory at the end of their play session which will keep valuable items only in the RMAH.

The flat sale fee is so when Blizzard make balance changes it will allow the devs to make the changes to the game that may be needed, whether it be on items or game balancing. Rob says that this flat fee system and not a percentage are so they are not accused of manipulating the market when they have to make changes to item stats for balancing reasons.

The only time a percentage comes into play is to the third party payment company which we already know.

I have no doubt whatsoever that there will be quite a few Diablo 3 players who will play the Diablo 3 market as best they can and really scour the AH for the best deals and keep a very close eye on the value of specific commodities and also gold.

Read on for a paraphrased transcript on this courtesy of Sentarius… debuted with Diablo, and showing the original interface.  ”Wild Wild West” wrt cheating; no client-server models, etc.  PKing.  ”Unwashed masses”!

Diablo II: “Wild Wild West but only slightly less wild.”  Had to  declare hostile; client-server model.  Item economy due to random items, but trades in chat rather than in game and SoJ based economy.  Failure on the part of Blizzard to make gold viable.  Lot of areas for improvement.  Single player was a local character and couldn’t interact online.  Non-persistent characters were “horrible” for the longevity of the game.  No friends list or matchmaking, etc.

So for DIII they want to keep you connected to friends; friends list and cross-game chat. SCII / RealID model.

Online only, fans are resisting but they still like it.  You can still play by yourself as long as you want, but then one day when you find a great item that you want to sell, you can.

Matchmaking for PvP.  Emphasis on co-op play, letting people hop in, dynamic difficulty shifts, etc. (old hat).

Now talking about banner system, which shows your playstyle as well as achievements,  somewhat customizable.

Moving on to the AH.

Loot is incredible important, all items are randomized.  Key diff between WoW and DIII.  You need to trade to get the best gear.  People would arrange trades in chat then go in game.  Eventually sites arose where items were sold for money; these were not Blizz. authorized and promoted fraud.

AH will be like WoW, but RMAH is the big new thing.  All in-client, but hopefully a web client eventually as well.  They want to let players stay in game though.   Gold and items can be sold and they hope to add the ability to sell characters, post-release.  Idea is a separate AH for each real world currency.  Rob doesn’t think there will be deal-hunting between AHs because in WoW we saw every faction every server with a AH and all well stocked.  And that’s a lot more AHs than there will be in DIII, WHICH THEY EXPECT WILL HAVE A SIMILARLY SIZED PLAYER BASE. (!)

AH will have smart-search and all that.  Due to random items its harder to know what you’re looking for, so smart search will be very helpful.

Shared stash.   Interesting, one reason is they think that if you’re in game looking for a particular item you might not remember that a different character already has it…

The AH will have secure item transfer, which is a feature no 3rd party can offer.

In other MMOs in Asia developers are creating items and selling them to players, which breeds player resentment.  Blizzard is going to let players determine the economy themselves and as a result are the good guys in the industry.

Players will be anonymous during trading.  (!)

Gold AH, of course.

Hardcore limited to gold AH, they don’t want to see people spend money on a character and then lose it.

AH from a transaction point of view:  Listing fee and transaction fee.  Nominal fee just to list, another nominal one to complete transaction.  Both will be a fixed flat fee per transaction, not a percentage.  Reason for listing fee is to limit auction house spam.  Lots and lots of items won’t be valuable enough to spend real world money on, and they don’t belong on the RMAH.

They want to make the AH easy for players so there will be a certain number of free listings each week.  Money in virtual account can be returned to the AH or used for “other Blizzard services.”  (!)  This will also suck people into the RMAH system, of course.

Reason for transaction fee [being flat] is to help make it clear that Blizzard makes balance changes to improve the game, not to make the RMAH more profitable.  With flat fees Blizz profits strictly from volume, so their incentive is to make the RMAH something that as many use as possible.

There is a cash-out fee as well, which will be handled through a 3rd party that remains unannounced but they are very close to announcing.  Each time a transaction is complete you must choose between cashing out into your virtual account or to the third party, and Blizzard hopes that most money will go to the virtual account.  That keeps money in the system and, again, it can be spent on Blizzard services.  Rob emphasizes again that the more money stays in the AH system the more transactions and the more fees for Blizzard.

Rob says that thinking players first this is something players really want.  Ten years ago they would have resisted more, but now they want it, and if Blizzard doesn’t provide it someone else will.  It will be a great system for buyers and sellers because some have more money than time and some have more time than money and all benefit.  He specifically mentions that someone with a lot of time could use it to fund their WoW subscription.

Rob thinks this would not work in WoW because of “fundamental game design and how it works.”  He thinks microtransactions aren’t successful when they’re tacked on and not integrated, but here it will be good for players, Blizzard, and the game.  Will add longevity to the game.  AH itself as a major, fun game system.

Rob says thanks and hands it off to the CFO.


Source: Activision/Blizzard


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    45 thoughts on “Pardo – Auction House Users Unlikely to play the Market

    1. To clarify, that’s a running (and very close) paraphrase, but not an exact transcript.

      For my part, I think Pardo was thinking about it the wrong way.  His point was that it’s no problem to saturate the number of auction houses they will have.  But in WoW you couldn’t shop between multiple AHs.  In DIII being able to at all raises the prospect of arbitrage – of buying low on one AH and selling high on another.

      That isn’t necessarily bad, of course.  I have no problem with people making money off of making the economy more efficient, and the possibility should help keep less populated markets stocked.  But I think people absolutely will play the markets if it is possible  to do so.

    2. Hey Blizz… um… You know what makes more money than talking about the game?
      Finishing it and selling it.
      Weird huh?

      • This is Blizzard, not EA. Blizzard takes their time to polish. Investors calls are required, which means lots and lots of talking and explaining to the investors that the game is going to go somewhere when it does release.

        • Yeah bro I think we all know how Blizz works. As I also think it’s pretty obvious that a lot of the people that have been on this site since 2003 are getting tired of waiting, I fall into that category. I want my damn game already. 🙄

    3. Interesting insight.
      Just as well, me thinks the website is overflowing with curious eyes from Diablo III fanatics… Load times are ludicrously slow right now.

    4. There is a cash-out fee as well, which will be handled through a 3rd party that remains unannounced but they are very close to announcing.  Each time a transaction is complete you must choose between cashing out into your virtual account or to the third party, and Blizzard hopes that most money will go to the virtual account.

      If you choose to ‘cash out’ into your virtual account, do you think you will you have the option to cash out your VA to third party later?  Or once its in your VA is it really Blizz’s money one way or another?

        • This is true, they have said this previously. The reason behind this was something about how it could be seen as them being a bank, holding on to real money and therefore they would have a whole bunch of other legal issues to deal with.

          • Oh wow. That makes sense. But that actually turns it into a bit of a problem then. Having to make a decision like that on the spot isnt going to be easy.

      • Yep it becomes bobby bucks and you can’t use it for anything but over priced items that have no real world value.    

        I can see it circumvented by putting an item up for a very specific price on a second account and then buying in one account and cashing out of the other account.    Although I personally think it is just another way to make more money via the RMAH since if it is my money why can’t I have it.

    5. My takeaway was this:
      – Pardo really wants investors to believe that Bliz is becoming facebook.  Playtime staytime?
      – He is genuinely naive about how the RMAH will be arbitraged and hacked up the wazoo
      – He really has little or interest in actual game design, except the game by which bliz rakes cash

      • No comment on one, agree on two, disagree on three.  Pardo is one of the good guys, imo.

        Can you elaborate on “hacked up the wazoo?”  I don’t think there’s anything necessarily wrong with arbitrage.

      • Arbitrage can’t hurt the economy; it will only close the distance between what people are actually selling items for and what people will actually pay for those items. In other words, its a marginal-profit opportunity for a third-party.
        As for hacked, I can’t imagine you mean hacked in the same way D2 was hacked, but rather in meaning “ruining the economy.” Actual code-based hacking will probably be quashed very rapidly, as it would constitute fraud. Seeing as your personal details are required to use the RMAH, this wouldn’t be difficult to prosecute, either. If you mean hacking by someone not using the game, for what motive? There’s no money to be had if you don’t have an account, and if you do, you’ll get caught.

        • Star, by “hacked” I mean organized attempts at exploiting the gaps in the system, goldfarming equivalents are one defintion (though that is hardly hacking when it gets the blizz imprimatur), but I more mean attempts to exploit the gaps between bliz and whatever 3-d party they use, especially if there are multiple services and/or multiple markets.  Every time anything seems ‘innovative’ and involves big money and technology, there are hackers, like flies to crap.  Count on it.
          As for the broader discussion of arbitrage – sure, it evens prices out in econ textbooks.  Too bad it becomes just another frictional cost in the real world, and ends up doing strange things like making gasoline more expensive in the real world due to commodity ETF speculation, etc.  But that’s probably irrelevant to the play experience.  Probably.  Pardo’s poo-pooing of it is interesting.
          As for the “good guys”.  He sure seems animated when talking about the RMAH in a way that I’ve never seen when talking about actual game design.  He wasn’t even hired by Bliz until after the original Diablo shipped.  Nice work if you can get it.

          • OK, if Diablo II and Starcraft don’t count as the golden years I guess I’m just not as much of an old-timer as you (though I did play Warcraft, Warcraft II, and Diablo).

            • Right – and War II and Diablo have nothing to do with him, nor was he in a senior position when SC was developed (nor could he have been, he was a kid fresh out of school).  All of the masterminds of that era – Adham, Phinney, O’Brien, Wyatt, Brevik, Strain – and many of the artists, writers and designers of that time are long gone.

          • I see what you mean by hacked, and that does make sense.
            RE: Arbitrage, there is a disincentive if the price gap is near or less than the flat listing fee, because then profits are near or at zero. How often items fall enough outside this price gap remains to be seen.

            And yes, hopefully the friction will be minimal =)

        • Well, there’s the spectre of account theft. WoW gold farmers found that it was cheaper and easier to phish for accounts w/ keyloggers rather than botting or sweat shop grinding. How that affects the RMAH remains to be seen. I know they say transactions are anonymous to the players, but I’m damn sure Blizz is tracking who is selling what to to whom.

    6. What I want to know is, if they are splitting up the various AHs based on currency, wouldn’t they simply lock accounts/characters to a specific currency? I guess that wouldn’t solve everything; I doubt they’d ban Brits from playing w/ other Europeans (pounds and euros), so they could still do manual trades. The more I think about it, this could be the plot of some goofy worldwide caper movie, where the crooks are using D3 AHs to launder their money, and it’s up to the somewhat nerdy, shy and awkward (yet somehow blazingly attractive) female FBI agent to work w/ the handsome, jockish slightly meat-head Interpol macho agent to break up the laundering ring in Sanctuary. They fight crime, they squabble, learn about each other, and get it on. Fall 2013, starring Anne Hathaway and Jude Law.

      • Nice.

        I have a strong suspicion that by the time the game ships, accounts will be tied to specific RMAHs.  Which is why I said  people will do it IF possible.

    7. Really? Pardo is wrong. If I get into the RMAH you better well believe I’m shopping for the best deal. Not doing this would be a waste of money, i.e stupid.

      • He isn’t saying that people will not be looking for the best deal. He is saying that people will not be buying items on one AH and selling it on a different currency’s AH to try and make a profit.
        Idk whether people will do this or not, Im sure they will try but depending on the equality of the prices on the auction houses it may or may not work very well.

    8. Let me try to understand (my english is not the best)…. Hes saying that inside a game with less AHs and where players can actually MAKE MONEY selling items they won’t bother trying to make the best deals?
      And hes also saying that in a game with no item selling for real money and lots of AHs players DO look for the best deal?
      I’m sorry, but what are Blizzard’s employers smoking?? (assuming i got it right)…

      • First part right, second part wrong.  He was just pointing out that on the multitude of WoW servers, there are plenty of good items in all the auction houses.

    9. Blizzard needs to go into more detail about this “virtual account” if that is the wording they used.

      A “virtual account” implies “virtual money”, as in you use real dollars to buy equivalent virtual dollars, and then you use the virtual dollars to buy items. Blizzard takes a flat fee off these virtual dollars when you turn them over to the seller. That cycle continues until someone cashes out of the virtual account, exchanging their virtual dollars for real dollars. The sum total of the difference between this virtual buy-ins and virtual sell-outs is where Blizzard makes their revenue, and they achieve this difference by whittling away the virtual dollars with transaction fees. 

      If the system works like they want, then their should be noticeable difference for players. But what happens on the day an expansion is announced and people start selling items and cashing out like crazy because they know better stuff is on the way? There is no FDIC to insure our virtual accounts.

      • I guess it depends on what Blizzard does with the money players have in their “Virtual” account. Say I sell an epic wand of duplicity for $10 and decide to keep the money in my “virtual” account instead of cashing out. Blizz takes their 50 cents (or whatever it is), and I have $9.50 left in my virtual account. Blizz can do whatever they want with the 50 cents, but what do they do with the $9.50? Assuming they just put it into a big savings account, there should never a “run” on the Blizzard Bank, because the sum total of everyone’s virtual accounts will never exceed the amount of money that was put into the system.

      • Blizzard will never hold onto your money to be released later. If you sell something on the RMAH you have two choices:
        1. Cash out right now with third party vendor, if you choose this both blizzard and the third party vendor take a cut
        2. The money goes into your account where it can be used to buy sc2, d3 expansion packs, wow monthly play time etc. etc.
        If you do not instantly cash out your sale on the RMAH you will not have the opportunity too in the future, in this way blizzard is not acting as bank.
        Blizzard has said this multiple times in previous interviews.

        • I am not confused about any of this and I have read the interviews.

          The issue is what this money is in the “virtual account”: is it virtual dollars or is it real dollars? In other words, are you buying virtual money instead of depositing real money into the account and then this virtual money can be used for any Blizzard purchases? Or, are you simply transferring real money to Blizzard to hold onto and you will make Blizzard purchases with that? I am clear that the only way to cash the money out of the Blizzard account will be to purchase a thing, then sell that thing after changing your settings in order to transfer the money to a third party.

          However, the importance is that if it is virtual money, there is nothing saying that Blizzard has to keep a real store of money to back it. Actually, I suppose they could do this with real money, but then they would be running into banking laws, which require certain insurances be taken out to back the accounts. With virtual money, though, the laws would not be an issue because the terms of services could simply state that you are purchasing a fictional money to make Blizzard purchases and, upon selling an item, you may choose to receive that value in real money in a real account or more virtual money in a virtual account. But there are no real laws governing the backing of virtual money and thus there are no protections for the consumer if Blizzard fails to back the virtual money and there is a run on the Blizzard (i.e., people all of the sudden decide to spend all their virtual money in order to sell everything for real money).

        • I didn’t even consider this. If you sell something on the RMAH, and elect to not cash out, can you use your profit$ to buy other stuff on the RMAH? If not…well, you can only buy so many copies of SC2. My guess is most everyone will take the cash out option, almost every time.

    10. Cant direclty cash out from the blizz wallet.  But you can buy items with it. and try sell those items and then cash out.

      • You can cash out at the time of the transaction still, you cannot cash out your blizzard dollars later if you do not cash out initially.

      • I think a decent strategy might be to accumulate a small virtual account for buying purposes, and when you hit a predetermined level, you do cash outs on the rest.

    11. I was able to buy low and sell high on one AH in WoW. I made a decent amount to purchase good items every now and then. I love how people think that this is only for people to buy power. Blizzard has the coomunity in mind with this game. The average Diablo player is now into their 20s and 30s when we need to focus on the dumb grown up stuff. I’m glad that I will be able to play this game and still have access to the best items offered through drops or AH. If one is smart enough or if there are sites that graph averages of suggested sales prices for items it shouldn’t be a problem to play the market. If anyone is going to try and make a living on this game, good luck! You’ll make WAY more money in the workforce on average then selling D3 items. Unless your SO has a very good friggin job and doesn’t mind you sitting around all day playing video games!

    12. Im curious. What’s to stop a HC player from jumping onto another toon, buying something from the RMAH and then whacking it on the HC character?

      • Presumably the shared stashes are separate from HC and SC characters. I have not heard this for a fact but it is the only thing that makes sense to me.

    13. Pardo is one of the best game developer out there and he is my favourite in Blizzard. He was the man behind Starcraft,Starcraft:BW(he is lead disigner),WoW:original&BC. I am glad he is still at Blizzard.

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