Phase 3: Profit !

MMO-Champion mentioned that changes are coming on the 4.1 PTR that will significant change the Obsidian Shuffle.  Alright, what exactly does this mean?  For those of us who have been taking advantage of high vendor prices for the uncommon gems from Obsidian, it means that the easy 9G per gem is going away.  Most place on the blogosphere seems to be taking the stance that the sky is falling.  However, I am not too sure just yet.  It will have a dramatic change on the Game of to the Auction House.  But there should still be profit, just maybe somewhere else.  Let’s take a quick look on the impacts.

Jewelcrafting – Yikes, this doesn’t look helpful

Mining – Yikes, the floor price is dropping

Engineering – Well, maybe we can find something

Blacksmithing – This has got to be good, right.

Jewelcrafters:  Form a Union Now…

This is something that was predicted a long time ago, but it was for a long time ago.  Just as Cataclysm launched many were saying that the uncommon gem prices strangely high.  I remember an episode of Call to Auction where they discussed it quite a bit.  At the time, I thought it would change in a hot fix like the Maelstrom Crystal changed that caught my Alchemy/Enchanter with worthless non-DE-able stones.  Yet, the change never came.  Now, I would like to see this a good news.  We have been looking forward to the introduction of Epic Gems.  This might be the right time for that.  Blizzard would need to nerf the uncommons gem prices if they were introducing Epic to avoid a mad rush to Jewelcrafting.  I think that Jewelcrafting will still be profitable, but the shuffle may end up more similar to the Wrath Saronite version.  It’s more work, but more goods for the Auction House as well.  I’ll reserve judgment until the change goes live, but we need to form a Union now.  I don’t want to picket the AH, but there has to be something we can do as a group.

This may induce a side effect on the Herb, Alchemy and Inscription market as Herbs are purchased to Transmute Uncommon Gems into Rare versions.  This will likely not to be too significant as the demand for Rare Gems will likely be fairly steady.

Mining:  Whiskey Tango Foxtrot…

I can’t think of a way to phrase this nicely.  Miners just got a big face full of coal dust.  Try not to get Black Lung and die.  The floor price for Ore is taking a huge hit.  Farming gold per hour will take a beating.  It is not likely to be the 92% hit that the Uncommon Gem price is taking, but it will be significant.  I guess this is one way of combatting bots.  At least, there may be some demand from Engineering and Blacksmithing.  It is likely to make Smelting a viable option as well.  It’s not all bad news, but it’s hard to say that there is a silver lining.

Engineering:  Woot!?!

This is a great thing for Engineering.  I don’t know about you, but I have been disappointed with my 525 Engineer.  I just haven’t been able to find any real profits in with the Cataclysm Engineering items.  I like the utility of my Killshades and cogwheels, but well…. it’s been tough.  Now, I need to plan and find any recipes that I don’t have yet.  I am hopeful that my Engineer Alt can finally make it into the gold making rotation.

Blacksmithing:  Woot!!!!!!!

You mean something besides buckles might generate a profit.  How can this not be good?  Mats will be down, but there is more.  The recipes require Elementium Bar which should be cheaper as well.  High level Blacksmithing will be cheaper than ever.  Combine this with the Call to Arm, Dungeon Finder change and we could see an increase in demand for plate tanking gear.  Argh, It looks like I will be spending my time getting another alt to 84.

Are you happy now?

Well, you should be.  The marketing is shifting.  This can lead to a tremendous opportunity for many of us.  I hope to be well into the black and I wish you amazing success as well.

Happy Selling!

This is a cross mmog post, will be posted on both blog of mine,
http://phase3profit.net (WoW) and http://warpto.me/i-trader (EvE Online)

(I have less topic on Wow to share recently, this is a ice-breaker post, since Gevlon had hit a topic I had deep thoughts about…)

Gevlon at http://greedygoblin.blogspot.com/2011/03/intra-player-microtransaction.html
and
Rohan at http://blessingofkings.blogspot.com/2011/03/trading-time-for-money.html
talked about Intra-playerbase microtransaction.

While both blogger are from Azeroth (Wolrd of Warcraft), like any new capsuleer (I assume some of them are reading this post as well) have little knowledge about what happened in the New Eden (EvE online)

here is a little background:

Background

EvE online’s developer CCP, decided to include Intra-playerbase microtransaction in EvE online.
PLEX – Pilot License Extension, an in game item, which can be bought from CCP
is effectively an item when “consumed” add to the account’s 1 month subscription.

CCP will make 15% markup for buying the the tradeable version of PLEX (Compare to directly subscript a month player’s own account)

This had been running for years (As far as I can tell, it’s back from 2009)
Since it’s fully supported by CCP, the transaction is totally secure, and not shady business running.
This proved to be a good example for the discussion, since we have  tons of data (Official from CCP)

But there may be some major differences in two games.

Difference

1. Eve is hard and harsh. Imagine when you die, all your gears are lost, and you better have another set of gears (Ship) ready, or the station trader will be happy to rip you off, unless you are willing to wait a day or two.

2. Isk (Gold) matters. In Wow, Extra gold do not give you much use. Other than Mekgineer’s Chopper and Grand Ice Mammoth.
In Eve, every thing is Isk, if you want a decent ship, you need Isk. If you want to achieve anything big, you need even more. It’s also matters that, it takes Isk to make Isk. Evem if you grinding like mining, you need at least some capital to start mining effectively. Most of the player would complain not enough Isk(Gold), since when you have more, you want to achieve more.

Failing manage your wallet also means fail the game at all.

My observation

1. Main source of PLEX is not from new/lowbie player, but rather old player who want to have the short cut or boost to his activities. Since “High-end” activities take much more Isk (2 PLEX for a freight for instance) to maintain, while one PLEX can feed a new player’s ship (42 x T1 Cruisers) for a month or two.

2. The transacted money is hardly for social value at all. While there are some gold sink as well (Faction ships), there are much more place that a player can spend in EvE. An showing off a really rare ship is more likely to attract suicide gank (attacks) rather then Envy sights.

3. Efficient or Hardworking Isk-maker live their game for “free” on the exchanging “service” for the game time. The market itself is self-balanced.

4. Bot and Black market Isk (Gold) Seller still exists, even if it did reduced a lot. Since some player just want RL cash, instead of game time alone.

Disclaimer: I never buy gold in Wow, but did buy two Plex in Eve for starting budget for my trader. In both case, it’s valid for the EULA on both game.

(Zekta: Yeah, I am still alive, just haven’t much time and topics to post. Thanks Sovrun for these wonderful posts. Until next time  o7 Zekta.)

WoW Econ 102: What can Hunters tell us about pricing?
By Sovrun

There comes a time in everyone’s life where they come to realize that what appear to be one thing is actually another. This is what happened to me a while back when examining the WoW economy. You can talk about a number of economic factors that could be involved, but in actuality none of them matter. The WoW Economy isn’t in fact an economy at all.

Whoa, not so far there partner, shouldn’t you qualify your statements a bit before jumping off the deep end. In last post, we talked about markets. Aren’t markets naturally associated with the economies that exchange products for a monetary value from the buyers and sellers? May be we didn’t spend enough time talking about “nuts”.

Well, if we don’t assume the typical, then what do we get. Hmmm, what is it? But of course… WoW is a game. The economy isn’t something that functions like a stock exchange or store. The WoW markets are each a game within the confines of the game world. They put sellers against each other in to be the selected item that gets purchased. In a store or stock exchange there is no order to the items that will be sold. However, within the game, only the lowest priced items that meet the request are purchased. This order changes your approach to pricing and figuring out which segments of the markets to participate in. Get it?

Auction House is a game

Once you accept that the Auction House is a game, you change you mindset. Let’s look into game theory to determine which of our actions will be most beneficial. I would like to examine a classic example of the Hunter’s Dilemma. This is an example where two hunters can independent select from two different meadows to hunt in. The Northern Meadow is filled with larger game, such as, deer and the Southern Meadow is filled with smaller game, such as, rabbits. The dilemma revolves around the choice that each hunter must make. The hunters will get capture either one deer or three rabbit from the respective meadow. However, if they hunt in the same meadow, they go home empty handed.

This example isn’t purely accurate, but explains how your choice of segment affects the price that you can get. The WoW Economy actually has many hunters working in each meadow, but WoW has a lot more game too. The Hunter’s dilemma points us to markets with less competition to achieve the best possible price for our goods. This doesn’t mean that hunting in the Western Meadow will be success simply because no one is hunting there. There might simply be no game or demand for those items. Simply put, find segments with demand, but limited competition. This is also why the profitable AH Gamer will need to have some diversity in production capabilities.

Game Theory

Wait, isn’t game theory used to price items in retail stores? Why aren’t we choosing a pricing example when we are talking about pricing? Well, the answer is easy. If you have a dominant strategy, use it. The a real world game of pricing, you can sell items without being the lowest priced item, but your price sets which portion of the market you will capture as individual choose items based on what is available to select within there given location. Lowering your price may capture an extra percent of market share, but it no likely to have the biggest impact. A good sales person can always point out the differentiators that allow for a high point whether they are actual benefits or perceived benefits. Customers may be willing to go to a competing store a few doors down, but it would be impractical to travel 300 miles/kilometers to save a little money. The time investment makes it not worth the effort. Customers also have some level of brand loyalty that just simply does not exist in the game. However, the Auction House is really big store with various prices for a single item. Therefore, the only item that sells is the lowest meeting the buying criteria. The dominant strategy is to be the lowest priced item on the market when the buyers are looking for the item.

I see… price everything really low and you will get all of the sales. Woot, I am going to be rich!

Not so fast, you need to look at another pricing example from a video I saw at Interop last year, where two completing sock merchants on the streets of London compete for sales. Barney is selling his socks for 40p until the Franklin moves into the area. Then the two go back and forth lowering there price until Franklin realized that Barney is now selling below Franklins wholesale price and buys all of Barney’s sock for 4p a pair. Franklin quickly raises the price to 45p and is happy that his stock of socks can be sold without competition.

Strategy

This is a strategy that I have used a number of times in the glyph market to reset margins. I will cover the glyph market in another segment, but the basic thought is to examine the market while posting. When just a couple of items are on the Auction House near your threshold, it is better to purchase them to reset the price to a higher point than to post at an ever slimming margin. As long as, your reset price is within reason, the market will progress, as it would have at the lower price, but with higher margins.

The basics of pricing in WoW for a given item are simple.

1. Undercut by the smallest margin possible (1c). Anything larger just spends up the Sock situation.
2. Don’t sell below a threshold unless you are trying to no longer sell that item. This threshold may be based on raw material cost or effort for farming typical or rare materials.
3. Look for opportunities to buy all the socks. This will allow you to reset the pricing levels for higher profitability. Be cautious here, you won’t want to end up protecting a price point. If you are purchasing more than three to five items, don’t reset the price.

Until next time….have fun and sell like a crazy hunter, possibly a goblin hunter.