One of the most heavily discussed features of Blizzard’s eagerly awaited Diablo 3 was its introduction of an auction house to facilitate trading between characters. The random nature of Diablo’s item generation system quite often left players with an item that would be useful to someone else, but not to them directly. The auction house promised to replace the confusion and inefficiency of players trying to arrange direct player to player trades through chat channels dominated by ads and spam.
Much of the focus of pre-release discussion regarding the auction house was the “Real Money Auction House”. This version of the auction house allowed players to spend a few dollars (or whatever their local currency might be) to purchase items that could then be transferred to their character in-game. Players discussed at length their plans to make a living selling items to those who were less fortunate (or less skilled). Controversy swirled around players concerned that Blizzard was only worried about cashing in on their cut from real money sales, or that the game would be trivialized by people buying their way into the ranks of the elite.
In these early days after the game’s release though, it isn’t the currency auction house that is stirring up trouble. Blizzard hasn’t even enabled it yet. Instead, it is its cousin, the auction house based on in-game currency, which is making waves in the Diablo economy. In the frenzy of play since the game’s release, the auction house has quickly turned into a massive clearance sale, threatening to trivialize the game by making powerful items of all sorts available at almost no cost to players.
Like a real-world market, prices on the Diablo auction house are driven by supply and demand. But the virtual nature of the game’s “production” mechanisms have reduced or eliminated most of the controls that exist on supply in the real world. Players generate new items constantly during play, and a few hours of play time may generate several “rare” items that may generate enough demand to sell on the auction house. Selling these items to computer controlled vendors yields very little reward, thus encouraging players to try their hand at selling to other players. There is no cost to sell an item in the auction house besides the 15% cut that is taken from successful auctions, so there is really no reason not to attempt to auction items, and in just a few days there are now millions of items covering the entire spectrum of power ranges.
Adding to the over-abundant supply is the fact that items can be used and then sold again after only a minimal repair fee. This allows a player to spend 1,000 gold pieces to purchase a powerful new sword and use it to quickly increase the power of their character. Then once they have gained enough power to use something even stronger, they can place the sword back up for auction, receive 1,000 gold from the next player that needs to use it, and thus recover nearly their entire cost.
With all those great items sitting around on the auction house, you might expect that players would be clamoring to buy. Determining the level of demand isn’t nearly as easy as assessing supply, since there are not publicly available records of auctions to analyze. But the rush to the bottom of prices suggests that demand is lagging far behind, and there are some good reasons why that might be the case.
First, the auction house is new to the Diablo series. The auction house is also not accessible from in-game (like its counterpart in Blizzard’s World of Warcraft), but is instead accessed from a menu somewhat hidden on the character selection screen. New and even veteran players might not think to go looking for items that are available while they are playing.
Second, to prevent players from becoming too powerful just by spending money, all powerful items have a minimum level at which they can be used. In the early game, where characters are rapidly growing in strength, this means that the most powerful item that can be used by a character at one time will become underpowered after just a few hours of playing. Many players thus see buying items at the auction house as a waste of money.
Third, players often focus on the “auction” concept, and think that in order to get an item, they will have to place a bid and then wait several days to receive the item (by which time they will almost certainly have outgrown its power level). If players are not familiar with the instant purchase “buyout” option (similar to what exists on EBay), they may dismiss the auction house as too slow to help them when it really matters: now!
Finally, Blizzard has built several “gold sinks” into the game, designed to combat inflation by regularly removing money from the economy. The most popular of these right now involves upgrading “artisans”, a merchant that can create new items for you if provided with supplies and a crafting fee. Since these upgrades are sequential and required for the merchant to create powerful items, players see this as a better long-term investment than buying a single item at the auction house, and so that is where they are focusing their hard-earned money.
It could be argued that similar conditions existed in Diablo 2′s barter based economy without causing any serious impact. The key difference in Diablo 3 is efficiency. Rather than wading through hundreds of chat messages hoping to encounter someone selling an item you want, the auction house allows you to sort and filter items quite effectively. A few button clicks will give you specific types of items, with the specific attributes that are most important to your character, and at just the right power level for them to use. You can then sort by price to immediately find the cheapest buyout, and a few more clicks has the item into the hands of your character and ready to use.
This market efficiency forces sellers to compete heavily, and so each item posted generally tried to undercut the one before it. Just a few days of this has already pushed profit margins compared to selling to in-game merchants to exceedingly low levels.
As an example, a level 20 character thinks that he hasn’t found a good shield for a while, and decides to see what is available at the auction house. Sorting for rare items at his level and that give bonuses to his most important attribute yields a page of 20 auctions. Any one of these items would’ve represented a find that would be cause for celebration in game, a gift from the gods of randomly generated treasure. But here they all sell for 1,000 gold or less, an amount that represents about 10 minutes of monster killing “work” (and that’s before considering the resale value).
So What’s the Problem?
So is the auction house destroying the game? Certainly not. It’s still wonderfully polished, cleverly designed, and incredibly fun. But at its heart, Diablo is a game about collecting items. In its current state, the auction house has significantly reduced the excitement that normally results from seeing an item appear that might be just what your character needs. Even if it does manage to be more powerful than your current clearance sale purchase, you know that in another day and a few more levels, the auction house will once again provide you with something even better, at very little cost but also with far less satisfaction.
Do I think this will last? Probably not. Blizzard put a lot of thought into this system, and it is unlikely that they misjudged it to a great degree. This is probably just the growing pains of a new economy. If I can pull myself away from playing the game long enough to write a second part to this article, I will explore the potential future of the auction house, and how things will change as the game matures and players move beyond the initial rapid power gain into the much slower grind to the top. In the mean time, take advantage of the bargain basement prices while you can!