Virtual Worlds, Real Profits

There’s been a lot of interesting discussion about yesterday’s post about Sparter, the recently launched peer-to-peer exchange for trading game gold. The new exchange was the focus of a thread on Slashdot and also prompted discussion on blogs covering virtual worlds and real-money trading. Among the commenters was Raph Koster, who most readers will know from his work with Ultima Online and Star Wars Galaxies. Here’s Raph’s take:

How long will it be until there’s an aggregator of Sparter networks? Who knows. What we do know is that the genie is out of the bottle, cat’s out of the bag, horse out of the barn, and cow over the moon at this point. RMT is here to stay.

I agree completely, as I believe the changing audience demographics of virtual worlds/MMORPGs make this inevitable.

Mark Wallace of 3PointD (and a new Terra Novan as well) believes the launch of Sparter “could spell the beginning of the end of the wild-west atmosphere that currently holds around virtual item sales — though conditions will probably get more messy before they get neater.” An excerpt:

Why is Sparter important? First off, it’s gamer-to-gamer. … The second reason this is interesting is that it’s backed by some heavyweigt venture capitalists, the people at Bessemer Venture Partners, who have backed a number of winners not just in tech but in a range of industries. That doesn’t necessarily spell success for Sparter, but it indicates that a more serious breed of investor is looking at the space these days.

Mark predicts legislation and lawsuits ahead for game publishers and corporate RMT exchanges. It’s interesting that the grey areas around ownership of virtual goods and violations of game publishers terms-of-service, which were cited as a rationale for eBay’s exit, didn’t scare off the venture capitalists. That suggests the opportunity is promising enough that the VCs believe these issues will be worked out in a fashion that allows a white-market RMT business to go forward.

The Ding! Grats!? blog raises some interesting questions about Sparter’s business model:

Honestly, I don’t see how Sparter plans to turn a profit with their high- profile executives. If they really are only getting 10% of each transaction, and haven’t signed other exclusive deals with some of the larger currency providers, they will have to do a huge volume to meet their costs. Being an affiliate for one of the RMT companies typically pays 10% and usually more for better performing sites, and these affiliates don’t have to deal with any headaches that arise from problems during the transaction.

I have no direct information from the principals at Sparter, but it seems to me that their business model is all about the sellers. The sellers are the constituency that seems best positioned to benefit from the Sparter model. If it turns out that game gold suppliers can really make more money through Sparter than selling to IGE and other exchanges, the inventory at Sparter will quickly build critical mass. I suspect the model will involve other products and services before long, some of which will involve heftier margins than the 10% commission on game gold. The hosting and domain industries are examples of using the commodity product to acquire tons of customers and then upselling like mad.