In a now-famous June 17 New York Times article entitled “The Life of the Chinese Gold Farmer,” technology writer Julian Dibbell detailed the surreal existence of workers in China who spend twelve hours a night scrambling for treasure inside the massively multiplayer online (MMO) gaming environment World of Warcraft. The laborers collect virtual coins from the corpses of virtual creatures on behalf of other players, who don’t have time to rob graves for booty but are willing to pay real money on the “gray market” to buy the coins, which they need inside the game world to buy the virtual weapons and virtual armor required for killing monsters and winning more treasure. Some 100,000 people in China are employed in this way, Dibbell wrote, contributing to a global trade in virtual items estimated at between $1.5 billion and $2 billion per year.
In a sense, the existence of gold farming is a testament to the amazing success of MMOs, which have become a deadly serious hobby for millions of consumers, and of globalization itself, which, if nothing else, is a magnificent mechanism for transferring low-paying jobs to the people willing to do them. But it’s also a testament to a huge failure of imagination on the part of game publishers such as Blizzard Entertainment (the creator of the World of Warcraft series), who never realized that the various forms of scarcity built into the mechanics of their games would give rise to gold farming and other forms of unsanctioned, underground trading, and who have therefore been missing out on a potential slice of billions of dollars in transactions.
But wherever there is a massive, unregulated, disordered market for some good or service, there are entrepreneurs who smell an opportunity to make things more “efficient,” and a few of those entrepreneurs emerged from stealth mode this week in New York City. Live Gamer has been working with game publishers for nearly a year to build what co-founder and president Andrew Schneider calls a “an environment where end users can trade virtual goods in a safe, secure, transparent way, and publishers can participate as well.”
On December 17 the company announced that it has formed partnerships with several major MMO publishers and operators—including 10tacle Studios, Acclaim, Funcom, GoPets, Ping0, and Sony Online Entertainment—to include its virtual trading system in their games. The company also said that it has raised $24 million in venture funding from Charles River Ventures and Kodiak Venture Partners (both in Waltham, MA) and New York’s Pequot Ventures of New York.
“There is clearly consumer demand” for virtual items, Schneider told me today. “Publishers want to be proactive and bring a lot of the people who are being lost to the black market back onto the grid.” Live Gamer proposes to do that by creating marketplaces where players can buy and sell virtual items without leaving their game worlds. The marketplaces will be undergirded by e-commerce software that allows both highest-bidder auctions and buy-it-now sales, and that assures that buyers receive their goods and that sellers receive their payment.
For publishers, one obvious plus to providing legitimate marketplaces for virtual trading is that it will give them more control over in-game economies, which are distorted by gold farming and other activities outside the games’ terms of service. But such marketplaces could also give players an easier, safer way to pursue their in-game goals, which increasingly necessitate spending real money.
“The trading experience right now is bad,” says Schneider. “It’s out-of-game; you need to go to any number of different websites operating on the gray market; you need to put in your credit card and conduct payment to people you don’t know; there is a high risk for fraud—that the item or currency or virtual asset you purchase will not be delivered. We can get rid of all of those inefficiencies and provide a seamless, integrated, instantaneous trading experience.”
