I’ve read a lot of words from people very unhappy about the Diablo 3 real money auction house. These guys were never going to get into the spirit of ‘paying to play’. I get their complaints – I understand where they’re coming from. I just don’t agree with the phrase “Diablo III is pay to play”.
I’ve been thinking, more and more, about the accusation. Whether it is pay to play and (if it is) that’s a bad thing. From here I arrived at a point where I was debating to myself whether all instances of buying items in a game is considered ‘pay to play’ and should therefore be frowned upon.
I’ve been formulating a response to those who think ‘only fools pay for items’ and I believe it’s in fact a question much older than Diablo III’s currency based auction house. It’s a new coat of paint on that old chestnut – a question that an auctioneer will often ask him/herself: “Why should I buy items at all?”
There are several circumstances in which you should definitely buy (always with your eye focused on net profit). The way to sure profit is to buy low and sell higher (not ‘high’ per se – this is a common mistake of the beginning auctioneer trying to sell an uncovered bargain for it’s very maximum price – we’ll deal with that some other time) than your purchase price.
If something is priced at a low price point (we’ll deal with how you decide if something is low in another article) then you buy. It gets more complicated (and in my eyes beautiful) than this simple rule though.
“Time is money”; an old adage but very true. This phrase does not originate with Warcraft’s Goblins, though they say it often enough, but in a much older system: Economics. Let’s highlight this principle with an example:
Two players spot an opportunity one morning as they scan the gold and currency based auction house – there is a shortage of Fallen Teeth. The cheapest is sitting at $20. Our players know – from checking the auction house regularly – that the teeth are valued at $5 usually. They also know that no change has recently been announced (or implemented) that would result in an increase in value for these teeth. In short they know that, for a short period of time, demand has outstripped supply for fallen teeth. They know too that this is something a market will quickly ‘right’ by itself.
To truly limit our example to two choices we’ll say that neither have any stockpiled. Quickly listing their stockpile would have been the fastest way to profit. That’s one reason why it’s better to stockpile rather than sell at a loss. So there are only two logical approaches to this (though there are intricacies involved in each approach): First approach = gather fallen teeth; Second approach = buy fallen teeth.
Both players reason that all they need to do is find magic items (blue items) and break them down with the Nehpalem Cube – you will (as the beta works now) gain a fallen tooth or two. They need a ‘shuffle’ (conversion of one type of item into another). Where to find the magic items though?
Well one player opts to gather, and one to buy.
Let’s say it takes player 1 60 minutes to gather 6 items which generate 1 broken tooth – at no cost to him. In 1 hour more fallen teeth appear on the RMAH. He lists the item for $15 and sells it quickly. He made $15 (minus fees) for that hour plus the left over materials from the 6 items salvaged (let’s say 6 scraps and 6 essences gain him $12 minus fees). In 60 minutes player 1 made $27 (minus fees).
Player 2 on the other hand, spends 4 minutes quickly hunting for and buying up 6 non desirable magic items (the same kind you might gather) at a dollar each. From here on he does exactly as player 1 did. He breaks the 6 blue items down and has the same luck and gains one tooth. He prices his tooth at $18 (in 5 minutes, few teeth appear on the RMAH) and sells it. He made a total of $18 minus fees plus the left over materials from the 6 items salvaged (same as player 1, $12). Player 2 made $30 minus fees and minus his investment in 6 minutes (we’re adding 2 minutes for salvaging and listing).
These are both hypothetical and the exact numbers will vary but the key is that player 1 started with 0 and made 28 (net profit 28). Player 2 started with -6 and made 30 (net profit 24). So far it looks like player 1 made the wise choice but we’re not quite done. Player 2 turned over $24 in 1/10 of the time.
In practise, for as long as the teeth remain at a price point that makes it profitable you would repeat this shuffling process. Let’s say the market stabilises (teeth supply bounces back to match demand and therefore prices drop) in 2 hours. To keep things simple we will imagine the prices stay exactly the same for each cycle of shuffling each player carries out in the 2 hour time period.
In reality there would be more teeth appearing on the market and prices would return at a staggered rate. At some point in the 2 hours it may become too much effort for too little gain (player time would be better spent elsewhere). In actual fact this extra realism works to the detriment of the gathering method more than the buying method because player 1 only has two shuffling cycles in 2 hours with his slower method – meaning he has no chance to review prices in between cycles and decide to move – player 2 has this flexibility.
To keep our example simple however, we’ll keep the price for each quick cycle the same: $15 and $18.
Player 1 can, without investing, make up to $56 net profit (we’ll ignore fees for now). Player 2 can, with $120 investment, make up to $480 net profit (again ignoring fees).
Again, these numbers are for example purposes only. The real mechanics are a bit more complex: Player 1 might be more lucky (getting 6 items in shorter time); player 1 might be at a point in game where he kills much faster and gains items faster. There are also additional methods for gaining blue items such as gathering gold to buy blue items from an NPC versus buying gold to buy blue items from an NPC (I’ll cover this in more detail in another article).
In nearly all cases though, buying will trump gathering in terms of speed. Your only real question in the example above is whether you can get more profit from buying gold then items/gathering gold then items (ie – is gold cheaper than buying blue items direct).
This example aims to highlight an important principle – profit is inseparable from time. Our goal isn’t to make the single greatest coup in Diablo 3 Auction House history but to have a sustained means of making the most money over time.
There will come times when you spot a gap in the market from a particular shuffle or pipeline and you cannot fill it fast enough, even with your best approach. In those times you want to be sure your approach is the very fastest because the time it takes for you to get your product to auction is time that you are not making profit.
PS Slower article rate as I’m on holidays with family for Christmas – but I still can’t tear myself away from Diablo 3 thinking!