eBay bans auctions of virtual goods

news analysis By proactively delisting auctions for property from virtual worlds and online games, eBay may be effectively forcing players who participate in such trades into the hands of giant third-party operations that buy and sell virtual goods.

Given that a significant slice of the multi-hundred-million-dollar business took place on eBay until now, the move portends a significant shift in who controls the market for virtual goods.

eBay on Monday confirmed its decision to ban auctions for the characters, currency, weapons, attire and accounts of online games such as World of Warcraft, City of Heroes and others. The move was first reported on Slashdot.

The ban does not affect the virtual world Second Life.

In most cases, publishers of online games include in their terms of service a prohibition on so-called real-money trades (RMTs), in which people buy and sell online games' virtual assets for real money. Players who violate such rules can be banned.

But because eBay has dominated the auction market for RMTs, there's little question that the short-term winner in this latest circumstance will be sites like the Internet Gaming Entertainment of the world, which control the third-party market.

While there is no universally agreed-upon value for the RMT market, it is assumed to be worth somewhere between $250 million and $880 million a year, according to experts.

eBay's move is "a boon for sites like IGE," said Julian Dibbell, author of Play Money: Or How I Quit My Day Job and Struck it Rich in Virtual Loot Farming. "They're going to have the field pretty much to themselves." But, Dibbell said, such a circumstance is "sad" because it restricts individuals from being direct participants in the markets themselves.

IGE did not respond to requests for comment.

For its part, eBay said its decision--which is essentially a move to begin enforcing rules against virtual-item trades already under way--stems from a desire to protect users.

"Any policy decision we make...has to do with...basically a good buyer experience and good seller experience on the site," said eBay spokesman Hani Durzy. "We want people to continue to come back, and we want people to have good user experiences on the site."

To Greg Short, director of Web development for EverQuest II publisher Sony Online Entertainment, eBay's move is likely a result of its wanting to avoid the time-consuming annoyance of dealing with customers who are defrauded over virtual-item sales.

"The only thing I can think of from eBay's standpoint is...that there's a huge risk of fraud to the consumer, even more so than with physical goods, because at least with physical goods you can track your shipments."

"We want people to continue to come back, and we want people to have good user experiences on the site."

--Hani Durzy, eBay spokesman

With virtual goods, Short said, there's no physical item to track and there are more opportunities for shady buyers or sellers to defraud their auction counterpart.

But Edward Castronova, a professor of telecommunications at Indiana University and the author of Synthetic Worlds: The Business and Culture of Online Games, says the motivation behind eBay's move is not that simple.

Castronova thinks that by banning items from virtual-worlds and online-game auctions, eBay is signaling its desire to stay out of the way of what it might see as an ugly future fight with game publishers and government regulators.

"eBay is a big, well-funded company," Castronova said. "If they turn their back on this market, they sense it's not worth fighting (the people who run the games) to keep this going. The other potential fight would be with the government. The Korean government is passing laws that regulate RMT. It seems like maybe eBay is just saying that this is just not an extremely lucrative line of business."

Castronova said another sign the RMT market has been deemed too risky is that IGE, which does millions and millions of dollars in annual business brokering virtual goods sales, has not been purchased.

"In the long run, blue-chip companies are always going to see this as a rogue market with no future," he said.

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