Greedy Goblin

Friday, October 14, 2011

Misunderstandings regarding kittens

People celebrate or curse the "kitten", the new $10 pet. It is new because it can be traded on the AH. Blogposts are all over the place. They are all wrong. You don't even have to read them to know they are wrong. Writing about the kitten is itself wrong.

I did not want to write about the irrelevant kitten. I have to write about the people who believe the World (of Warcraft) will be turned upside down by the kitten. It won't. Some wannabe Warren Buffets will be poorer by $10 and richer with some experience. Here I can give you the experience for free.

You can't buy anything for kitten. Nothing. There isn't any NPC that accepts kitten. No player needs kitten. Kitten has near zero liquidity. To get gold for the kitten you must sell it to another player. Who will buy the kitten? A player who
  • has gold
  • want a completely useless vanity item
  • rather spend gold than $10
This is an extremely small group already. To make it worse, the kitten will deflate in price without doubt as the production is infinite, but the demand is declining as those who got it won't get another. So every buyer with some clue will either wait or buy one in the Blizzard store. Those who have no clue has no gold at hand so they have to wait until they farm enough.

On the seller side there will be the swarms of Warren Buffet wannabes, undercutting each other on the kitten by 1c and yelling on each other for undercutting on them.

Blizzard is obviously good at marketing. It's not goldselling, it's a cute pet with the promise of goldselling. Lot of players will say "hey I'll make a fortune and if not, I'll have a cute pet, let's go for it!".

My prediction: 99% of the Warren Buffet wannabes will finally use the pet and keep telling themselves that "it's so cute, totally worth the $10", as it sounds much better than "I'm a moron in economics and spent $10 on a piece of crap hoping to get lot of gold".

PS: the goldseller creates X gold for $10. He sells this gold for $10*profit_rate. So if kittens sell for more than X on the AH, the gold sellers are better off buying kittens in the Blizzard store, sell it on the AH, then sell the gold. Gold sellers sell gold for around $1 for 1000G. They have harsh competition so they can't have stellar profits, I'd guess their production cost is $0.8/1000G. So gold sellers will sell kittens for 10/0.8*1000 = 12500G. This is a hard cap on kitten price even if there are legions of players who have lot of gold and can't live without a kitten. (of course if they produce gold for $0.5/1000G they will sell for 20K, but you get the point).

20 comments:

Clockw0rk said...

Not sure what blogs you've been reading but this conclusion is what I have already seen elsewhere:

There might be a big week 1 burst and a few people might make some gold off it, but it'll fall off fast.

Jana said...

You have to remember that this one is just the test item of it's kind.

No doubt that more similar and more attractive BoE shop items are going to get released. Think something like 4 passenger Goblin Buggy Mount.

Or eventually even game time.

They just need to introduce these things gradually so the vocal minority (who probably buy gold themselves) does not kill their servers with too much spam.

Rebecca Herman said...

I am annoyed about this pet but for a different reason. I liked that the other pets were BOA. I did actually pay for the other pets but paying the same price to have it only on one character is a much worse deal.

Anti said...

if i had mega stockpiles of gold, were mega anti social, and was bored as hell, i would artificially drive the price of the kitten down on the first day just to make the wannabe buffets on my server cry.

buy one on the AH. "sell" in trade chat or on AH for 10% of the going rate. repeat until the going rate is in the pennies.

shame that i was bored enough to unsubscribe a few months back. not worth resubscribing to blow a few 100k on a couple of servers just for hijinks.

Anonymous said...

"produced" is not quite the word for the gold sellers. I found it interesting that as part of these announcements Blizzard did say what everyone guessed: the majority of sold gold was stolen/hacked not farmed.

Which has some interesting attributes: it does not take any longer to steal/phish an account with 20,000 gold versus 250,000. And a new more effective malware could make huge improvements in the gold acquisition: e.g. a Flash zero-day-exploit. D3 Beta probably provides extra phishing opportunities which increases the supply of gold.

The D3 AH and this pet are good first steps for Blizzard

Harri said...

Do you think this will lead to more tradeable items being sold by Blizz?

I'm pretty sure they're just testing the waters with this and we'll see more tradeable pets/mounts soon, then perhaps heirloom gear, then who knows what. Maybe eventually they can turn WoW into a full-fledged P2W game (like D3) and charge a subscription at the same time. :3

Lars Norberg said...

In a Norwegian newspaper (www.vg.no) they made a big deal of this. Claimed that Blizzard was legalizing gold trading through this. The newspaper is Norway's biggest, and completely unreliable. But it represents very well the misguided views a lot of people have. Views that are based partly on bad information, and partly on sheer stupidity.

I agree with you that this will have zero to none impact at the game and economy. People are ranting for no reason at all.

Gold trading is defined by the act of introducing or removing gold from the economy (mostly introducing), and thus inflating server prices by devaluating the gold value due to more gold being available.

This is obviously not the case with this, as no new gold at all is being introduced into the economy. This is no different from BoE items from collector cards. Whether you keep the item - which is a pure vanity item - for yourself, or sell it at the AH, it doesn't affect the economy of the server. Because no new gold is being introduced. It only changes hand from one player to another. Same happens when you sell your drops and loot at the AH. Gold changes hands. But the gold is gold that has been farmed from mobs and received through quest rewards. This is where all gold begin.

People tend to think of gold trading as "I can pay to get gold". But that's a completely subjective and wrong view. It's true that gold trading includes a person paying RL money to get in-game gold, but that's only half of it.

Gold trading as it is today represents mostly gold stolen from hacked/phished accounts. And the problem here is that Blizzard restores the stolen gold to the players, and thus extra gold is being inserted into the economy, causing inflated prices and devaluated gold. Old farm bots are no better, because they too represent gold inserted into the economy by "something other than a participating player".

Legalized gold trading crashes the market. Like Hitler's Germany, when he just kept producing money so "all could have enough". A retarded concept, because money like game gold is a virtual value, representing a set amount of actual "riches". More gold/money only means that the value of the riches have to be spread out over a larger amount of currency. We're not using the gold standard in RL anymore (at least not where I'm from), but the concept is still the same. Artificially creating more currency devaluates the currency. But an item of any sort won't. If I create 200000 oak tables and sell them, I'll get a lot of money. Money that other people already owned, and that I'll spend and eventually return to the economy. It's status quo from an outside perspective.

I'm beginning to talk in circles here, but my point is that the BoE $10 pet is totally unrelated to gold trading. Gold trading would be if you paid ten bucks, and let's say 2000 gold magically appeared in your inbox from nowhere. Gold that hadn't been farmed or earned by other players, but simply created.

Michael said...

I am utterly torn on the kittens. Now of course, I want one, and will get one somehow. But which way is best?

I have a good job with lots of savings so the dollar price is pretty much trivial. I did glyphs for a while, so I've got a few hundred thousand gold lying around, too.

Until a market is established and we can see the gold/kitten vs the cash/kitten, I don't know what would be more optimal, to pay with gold or with cash.

Gevlon, could you please do an analysis of what a fair price would be for this new item? Should I buy with gold or cash?

masterlooter said...

Two things:
First, players are paying 50k(ish) gold for Vial of Sands still.

Why on earth, would you think they would spend any less for an extremely similar item?

Secondly, Blizzard sold tens of thousands of sparklin ponies for $25. Which population do you think is higher? The amount of players that would spend $25 (RL) on a mount, or the amount of players that would spend gold on a mount?

Players will likely not become rich on this, but they will sell on a regular basis.

Nielas said...

300 gold would be a 'fair' price for the pet since that is what I would pay for one. :) Beyond that you need to consider whether the market price for it is above or below the baseline price.

The baseline price is simply the amount of gold you could buy from a third party gold seller for $10. You might also throw in a surcharge for this transaction being safer than buying from a gold seller who might be trying to hack your account.

The cat market will crash since there cannot be enough buyers willing to pay the large sums the initial sellers will be asking. What I am curious is as to at what price will the market stabilize when the sellers decide that it is no longer worth their time to undercut each other.

If you really want to get the pet, I suggest waiting a month and then seeing how low the price fell. It is no different than when new glyphs would hit the market after an expansion.

Wilson said...

@Lars
Please take some time to educate yourself. It was the Weimar Republic in the 1920s, not "Hitler's Germany" in the 1930s, that had hyperinflation issues. These stemmed not from some idiotic "everyone can have enough" fantasy, but rather the harsh reality of the French army occupying the valuable Ruhr valley in 1923 and demanding reparations payments the Germans couldn't afford. It was a drastic move but ultimately successful - the French left after 8 months and American banks stepped in and stabilized the German economy. Until the Great Depression hit and blew it all to hell, but that's a separate issue.

If you create and sell 200,000 tables, the staus quo is not maintained - you have done the work to convert raw wood into a finished product, and therefore you have increased the size of the economy. If the money supply is not also increased proportionately, then you get deflation, which can lead to different but no less problematic issues than inflation. Keeping the two balanced is a bitch and a half, but it works a lot better than putting the growth of your money supply in the hands of mining corporations or your ability to steal your neighbor's gold.

Anonymous said...

Gevlon, could you please do an analysis of what a fair price would be for this new item? Should I buy with gold or cash?

Don't buy this pet at all, if you want to look at one ask a guy who has it to show.

Spitt said...

The retail price of gold is about $1.50-$1.70/k USD, the wholesale price is about $1.15-$1.35/k USD, depending on the wholesaler. Actual cost to produce, depends on how they farm the gold. Do they bot/hack it, steal it, or buy it from others?

One thing I would like to mention that you might start seeing, is people selling codes, and then those codes might turn out not to work. If the price for the codes, seems too low (using the above info), then it's probably a scam.

You can of course contact a GM and announce you have been scammed, which in turn will get you your gold back, and cause the scammer to get banned. Of course the offender, might be a stolen account, but that's how it goes I guess.

On special note, I have tried to trade legit time codes and have been warned that this is not allowed, so blizzard may enforce a no selling kitty codes, in chat as well.

Jim said...

@ Spitt: Not the same thing. 60 Days Game Card Time Codes are real life items. You can't sell those for gods, the kitten is a ingame good; you can sell it for gold. You just get it out of real money. But it has a presence and can be traded safely, you put it in the trade box and the guy inputs X amount of gold.

You can't do that with codes, and that is why it's frowned upon: Too many chances to be scammed.

Whether or not it would be allowed to sell it for real money is irrelevant.

Anonymous said...

@Spitt One of the largest scams I see now is people selling game time or RaF mounts for gold. They buy the item with a CC for that person then charge it back after getting the gold. Blizz will generally NOT return the gold to the player who lost out on this.

Anonymous said...

"One thing I would like to mention that you might start seeing, is people selling codes, and then those codes might turn out not to work. If the price for the codes, seems too low (using the above info), then it's probably a scam."

There is no code. It is a BoE pet. You buy it for say 10 EUR from Blizzard online store, and then you put it on the AH for gold or try to sell it via trade.

Rich people who collect pets -and in contrast to Gevlon's viewpoint yes, these exist- have the option to buy them in-game for gold instead of having to buy it for real EUR.

Anonymous said...

I basically see two possible reasons why Blizzard is changing from their policy to only sell BOE/BOA items (= non-tradable).

1. The amount of players paying for purely cosmetic BOE items is limited and Blizzard wants to extend the customer base for those pets by including users interested in real money -> ingame gold transactions, hence increasing pets sold (and therefor the profit).

2. Blizzard uses this as another mini-step forward to RMT. Both to test the user reaction and to slowly get the customers used to RMT. The plan would obviously be to introduce real RMT in the future. (real RMT = you can buy ingame items with real impact on the game, not just cosmetic items).

The first reason can be split further into:

1.a. Blizzard is aware that the pet will be a very inefficient real money -> ingame gold transfer. They simply accept unsatisfied customers (those who will realize too late they will get much less gold for the 10$ spent than they were hoping for) for the little extra profit from raised pet sales.

1.b. Blizzard actually thinks the pet will be a semi-efficient real money -> ingame gold transfer. In that case Blizzard is introducing what they have always promised to not do: sell items with real game impact (gold) for real life money.

And you wonder why the blog-sphere is up in arms against this pet?

Selkhet said...

Haha that's exactly what I thought when I saw the kitten uproar. God, this pet is ugly as sin anyway, who the fuck would want one? And you even get the stigma of buying stuff for RL money/feeding someone who buys stuff for RL money.

I foresee hordes of kittens stuck in the AH. And I look foward to seeing the cries on trade chat.

Lars Norberg said...

@Wilson

Yeah, I probably missed out quite a bit on the historic parts. History was never my strongest subject. It's been quite a few years, and some re-education is probably needed on my part there. And I can agree with my table analogy not being perfect. I only weakened my argument by using those two examples.

But bad examples or not, I maintain my stance on the issue itself, that the purchasable BoE pet is not gold trading, and that it won't affect the economy at any large scale at all.

We're talking about a BoE pet, that cost the low sum of $10 in the Blizzard store. A beer at any local pub in Norway costs more. (Yes, Norway is expensive.)

Unlike actual gold buying, you won't even get a set amount of gold for this pet. And the more players that choose to sell this at the AH, the lower the prices of this item will be. Meaning that it's a concept that will kill itself.

While when people buy gold online, prices on things usually go up as a result of more gold being in the hands of the players.

See what I'm trying hard to explain with my bad examples here? The BoE pet as means of "legal gold trading" won't work, as it falls on the fact that it's a single item, and everybody using this system would be competing with each other.

Kimmo said...

@Anonymous

It might also help to even out the wealth distribution a bit. Most completionists (includes pet collecting) are at least as wealthy as goblins (even if they didn't play AH themselves) simply because they play so much. I think the fact that some players have hundreds of thousands of gold and some live from hand to mouth causes some problems. Poor players most definitely are not going to spend their very limited gold on vanity items and a player with 200kg in bank probably isn't going to waste real money.

Not a very effective solution, but I think it does have at least some effect.