Or why Blizzard wanted to make games and not make markets

On September 18th 2013, the news broke that Blizzard will be taking down all the Auction Houses in the virtual world of Diablo 3 on March 18th 2014 (or 6 months later). (Official release: http://us.battle.net/d3/en/blog/10974978/) Everyone who had played Diablo 3 were taken by surprise, that Blizzard would be culling their cash cow (all the more so since blizzard has gone on record for saying that the Auction House were here to stay) This news even made its way to BBC: http://www.bbc.co.uk/news/technology-24152225

“Blizzard were leading the way with the real-money auction house, designed to take what was being done in a grey economy and making it legitimate, and indeed profitable,” John Walker, editor of PC gaming site Rock, Paper, Shotgun told the BBC.

“They just did it in the wrong game. The very purpose of Diablo is to run around killing stuff and having them then drop new weapons and new equipment which allows you to kill more creatures, letting you gather better items – creating a cycle which drives you to carry on.

(and also Forbes and TIME)

Some of the early responses involved disbelieving people posting that this was a strategic ploy by Blizzard to improve the first day sales of the Diablo 3 expansion Reaper of Souls, calling it a long con or cashing into expansion sales, with blizz blues replying that the Auction House absence is here to say and then closing and locking the threads.

The date indication probably points to loot 2.0 dropping during that period, or some form of replacement. It remains to be seen whether loot 2.0 will remain as the sole replacement or if the new guild, lobby and chat features will make their form in something reminiscent of the old diablo 2 trading. It is currently generally expected that third party sites such as d2jsp will resume in their old roles (as well as the official blizzard forums) to carry out diablo trading.

Posts include expectation of a “return to a bartering economy, similar to Diablo II. Unless, of course, we find some other kind of currency, similar to what happened later on in the lifespan of Diablo II (via Gems, 3/20/20’s, SOJ’s, and eventually HR’s” or perhaps some trade hub city or trade search mechanisms (path of exile? dota 2?) and concerns about crafting materials.

InvisUK makes an important point: The real top end items do not go in the auction houses, those that go for a few thousand euros on the forums, the auction house caters to the medium end market.

(such as the USD$14,000 echoing fury that Hieven bought)

Despite its imminent closure, the diablo Auction House has been remarkably successful at achieving what it had set out to achieve:

On the one hand, we invested a lot of time and resources into the development of the auction house system, and (for all intents and purposes) the auction houses achieved the goals we originally set for them when they were implemented. …many players appreciated if not outright enjoyed using the feature, be it because they worked long days and didn’t always have time to farm, because they liked having a convenient way to sell off unneeded goods, or because they had fun “playing” the AH economy… (Keep in mind that we actually evaluated different options that would allow us to preserve the auction houses and just diminish their temptation… initially one of the big goals of Loot 2.0.) [Blizzard blue: Lylirra]


It provided a safe and secure way for people to trade, even with real money that also reduced account compromises as well as frauds and scams. It was also convenient and easy to trade, that could well have made it to easy to trade…

Perhaps it was too successful for itself, its success in the grand experiment killing it. Blizzard’s stated explanation for taking it down was that the Auction House short-circuited the monster-loot gameplay.

Nerfnow.com had nailed it a year back:


Now that the experiment has ended however…

As a site puts it:

Soon Diablo 3 will be about your monster killing skills, not your financial planning skills

Why did Blizzard decide to pull the plug?

Commonly canvassed reasons include that of costs, that perhaps the legal, administrative and paypal linked costs of maintaining the auction house surpassed the rather generous 15% cut Blizzard was taking.

Perhaps, it is not just the players who wanted to be challenged on their hack and slash abilities instead of their Auction House Tycoon 3 proficiency, the people working at Blizzard too were there because they wanted to be game developers, to be challenged by making and perfecting games, not to become virtual central bankers and economists and manage economies. (though their staff would probably include their own counterpart to Valve’s economist in residence: Yanis Varoufakis, http://blogs.valvesoftware.com/economics/)

If we look at the costs of compliance exceeding the revenue from the auction house, it is not inconceivable since the active players had dwindled to 1 million a day and 3 million a month before Jay Wilson left. There would still be a massive staff needed to look at the authenticity and legitimacy of transactions, as well as clearing it with credit cards or paypal. There may even be legal issues cropping up such as during the gold dupe where blizzard mass froze accounts and tried to crackdown on the laundered gold money. There were mass bans, but laundered gold money escaped their grasp. Why didn’t they do a rollback? Perhaps they were concerned about a class action lawsuit since real money was involved and unlike a sovereign or central bank they are unable to write their own laws. Blizzard staff were there because they loved making games, and not because they loved being economists or liked ensuring the laws of currency onto diablo 3 gold and prevent forgery or money printing or gold dupes. They didn’t want to be measuring supply and demand changes every patch, or volatile market movements with a small code change here and there. They didn’t want to be crunching numbers to do with the market maintenance, instead of doing what they loved that was perfecting their game. Could this be why they took so long implementing much needed changes? Because each stat that was toggled, had to be run through with the lawyers as well as the Auction House compliance arm. The safest approach they may have thought, was not to do much.

Kagekaze puts it in better words than I do, suggesting that Blizzard was concerned about the outcry and potential legal exposure (my interpretation/words) every time they would have to undertake a game balancing move, where real life money would become “wasted” in a patch change, with the examples of the 50% IAS nerf, the absence of the One With Everything nerf. Closing the Auction House essentially pushes the risks back onto the third party sides, and Blizzard is now free to make the gameplay balances they need.

Or note the legacy natalya’s set 5p, that would have been imba for PvP had there been proper pvp. Blizzard was unable to “patch” legacy nats like they “patched” 18ias stats into 9ias, instead the roundabout way was for patch 1.04 with stat stick “new” nats that would persuade PvE people to switch. Perhaps that was also the real reason why they couldn’t bring PvP out, because so long as the auction house was there, balancing would be impossible. Items will go from $9999 to $0.99 in a single hour from patch drop, or vice versa. Or why wrath of the berserker and archon has remained, or anything with whirlwinds and tornados being OP and the “fix/patch” being a reduction in proc rates.

Driving the nail into the coffin was probably the success of console as a game (as opposed to a money making entity). When Diablo 3 was first launched for the PC, the game developers had thought inferno would be incredibly hard. None of them had cleared it. And it would have been, if not for the Auction House. An entire world using the AHs is markedly different from a group of developers thinking of an AH as an abstract concept. An AH in practice can get the int dps gear in the hands of the wizard, and the dex dps in the hands of the demon hunters, far out-scaling whatever the game developers would have been able to replicate in their controlled environment. Even without the glitching (hell mode to inferno to skip ahead in acts, ultra kiting and Act IV Tyrael Terror kills), the AH was incredible in funneling loot from people who didn’t want it (a barb picking up a high ias wand) to those who did (a wizard with force armor lightning freeze build) or pure deeps equip to a shoot first loot later demonhunter who would fire blindly into the area ahead to kill everything since they would get one shotted. Such builds, including the predecessors of the critical mass wicked winds wizard or dualnado barbs would have been incredibly difficult without an auction house. Likely, game devs would never have conceived of such builds, nor did they have the opportunity with the limited beta testing. Inferno was cleared in a blink, even hardcore inferno was cleared, MP10 made barely a dent. This shortcircuit also worked for skills like One With Everything, that was likely meant to be a niche passive to be used if you suddenly had a lot of X resist gear, but it became the MUST HAVE skill with the X resist search function with the auction house. And with hundreds or thousands of dollars spent, it became a lot harder to balance it down.

With the console however, it was a different deal, they had the advantage of 20/20 hindsight and the new balances. Plus, without the auction house, and knowing that items will be hacked within the first 24 hours, they were free to make items to their hearts fancy without the oppressive chains of auction house “balance”. And it worked, the responses were overwhelmingly good compared to the early PC days. And some of these people were those that had played the PC too. The game was balanced, the loot felt non garbage, and there was no error 37.

Without the shackles of the AH, they were free to make games.

Reaper of Souls

What then might they do for their revenue stream? One possible way may be as Path of Exile has done it with their customizable spells. There is quite a lot of room for that in Diablo 3, which even naysayers would concede has a rich (and relatively polished) array of spells and possibilities. Perhaps a Gold Midas Hydra 5s that turns monsters to gold, Barbarian Worldwind that spews out spinning Globes and scorpions, witchdoctors with a Firebat (starcraft) pet (or gargantuan) if they skill cloud of bats, customizable skins for Demon hunter and Monk companions, or changing the colors of their spells, Crusader can have Death Knight or Scarlet Crusader skins. This adds color to player choice, without affecting game balance.

Alternatively there could also be weapon imbues (perhaps in combo with the planned transmog), or cosmetic additions like the wings. Things like pets and companions, guild housing if there is a trade/chat world interface.

If microshop/microtransactions is their way to fund their profits going forward however, that might be why diablo iii for pc may remain always online, or people would just hack in the POE style micro shop skill/pet/skin/cosmetic customizations.

We might also see their intentions in their blizzcon swag/virtual items.

Cosmetic payables will then be incommensurables

This would be a good time to borrow the comparisons from extra credit on incommensurables on gameplay balance, and although they used it for skills between World of Warcraft and League of Legends, we can lift up that discussion and apply it to the balancing of market economies in the nature of sellable items in Diablo 3 and Dota 2.

Extra credits

h/t edmw

In Diablo 3, item and power progression follows largely the formulaic process of WoW. Items get bigger numbers and procs are more cosmetic than anything. Nothing from the lower levels really maintains their edge at the high end unlike Diablo 2. You may have the lvl 23 leoric’s signet or the over 20mf nagelring for your follower, but it pretty much tapers off. (Cain’s set for plvling was rendered much less useful for lvl 60 by mp10 buffs, Boj Anglers were useful for a while) Other good value low lvl items tended towards leveling process such as Schaefer’s hammer, Scrimshaw. Initial crappy legends followed by buffed one ilvl up 1.04 legends and loot 2.0 in the future and then expansion follows the tier series of WoW. Exceptions of previous generation included legacy natalya’s for a PvP that never truly arrived, and legacy zunimassa’s trail with both ias and poison damage that could be best in slot even after nerf.

Dota 2 went for the opposite route, since perhaps their more direct comparison was that of the phenomenal success of Riot’s LoL (which is now tencent’s riot) even as a free to play game with freemiums. Instead of going for leveling for glpyhs, runes and skills, Dota 2 took the F2P model and married it to their own incredibly successful free to play game Team Fortress which made a living selling hats. Like LoL, the power creep was “balanced” via the incommensurability method. Purchasing items with real money did nothing to make your character bigger, faster, stronger, they merely made them look cooler. And there are other perks like glados announcer, iceiceice’s clever trolling with novelty items of coal and snowballs.

By having items that cannot be compared to each other on power levels and power creep, they were compared in terms of aesthetic value or hero popularity. Sets of Omniknight and Witchdoctor are frequently looked down upon in trading such as when on dota2lounge, whereas antimage sets are highly valued. In comparison, Diablo 3 becomes a numbers game. For a weapon, does it have  a socket? is there crit damage? lifesteal? attack speed? And a number is generated. To balance the Auction House, blizzard instituted tap stopgates to prevent overflooding, which made for a terrible experience for people playing the game. For dota 2 however, even if mythicals were restricted, it wouldn’t affect gameplay, and would make their eventual drop more “cool”.

Steam’s solution to resolving gameplay balance alongside trading was to simply segregate them. Trading would not affect the actual gameplay itself. (Which may be Diablo’s 3 new approach via a POE style customizable skills, another problem of D3 balancing is probably that the game is ultimately about the loot as opposed to say pvp) Why do I say that steam is taking their auction house up a notch even when the steam wallet and community market has been out for a while?

This is because of the most recent patch first blood


On top of removing fountain hook, for the market watchers we can see that gear that previously were not marketable have now become marketable. Inscrutable sets for rubick or Yoskreth for antimage or Crystal maiden sets can now be listed on the Community Market for sale into the steam wallet! Previously, only a selected group of items could do so, such as the genuine items from purchasing real life Valve merchandises.

This will lead to an interesting interaction with dota2lounge, a d3 trading and betting site due to to betting use of common uncommon and rare versus the “real life” market prices of the different individual sets that leads to different values. An uncommon can be worth several times a lower end rare (determined by its aesthetics and subjective popularity as opposed to its power value)



That is not to say there is no volatility, that can be exemplified with the example of an item that was previously from the Furion plushie but has been restocked and expanded to CK (the furion plushie was previously thought to have been limited to the seattle event)


We can see it peaking at $300 USD (plushie was 39.99 USD iirc) and dropping to $131 in the span of about a day

(Or could this be a cooling measure by Valve? At many times the treants may well have been the highest priced genuine dota)

There will always be a game, there will always be a trade, and there will always be an auction house…

We will see if this next stage of the grand experiment works!


(Although, note that on top of the numerous vocal approval of the closure of the AH, there are also voices of disapproval: some are addressed at the removal not having to do with the core issues, others with the nature and usage of the auction house)

An example may be in DOOM’s post: I’m already seeing the public opinion shift towards keeping the GAH open now that the playerbase has had time to really think it through. Right now it’s still a majority against, that being said, once the reality sets in and players realize loot 2.0 is not going to offer them a chance to try out the new build options then they will ask for it to be reactivated. I am all for a self found mode, I just don’t feel those of us who liked the GAH and RMAH should have to be forced into it as well.

…I personally can’t stand it as a concept, but I STILL support those players right to continue playing how they want. All we want is a choice here, I challenge anyone to offer a compelling reason why they can’t allow Rmah/Gah for those who want it and have a separate community with it’s own drop rates for those who don’t.