Virtual real estate specialist Anshe Chung Studios announced today that it is preparing to launch a cross-world “virtual financial market” that will allow direct investment across virtual world boundaries. The company, the business brand of Anshe Chung (the Second Life avatar of virtual entrepreneur Ailin Graef) said the venture is the first step toward an open, cross platform “Metaverse economy” unbound by the borders of virtual worlds.

While not involving and real money trading (RMT), this venture bears close watching, as it is likely to be the best test yet of cross-world investment. It appears that it won’t function as a virtual currency exchange per se, but will allow players from one world to purchase assets in another. But it’s structured with the virtual entrepreneur in mind, and the press release promised “several high profile virtual company IPOs to lead the way to a new culture of cross platform virtual investment.”

“Some virtual worlds like Second Life, Entropia Universe and IMVU have demonstrated the enormous economic potential that exists when key sectors of a virtual world economy such as content creation, trade, banking and services are privatized,” said Graef. “This has lead to a boom in each of these worlds that has yet to be matched by any other economy, real or virtual. Now the time is right to go further and link these exciting spaces together, to begin with the creation of the global Metaverse.”

The new financial market will allow Second Life residents to invest their Linden dollars directly in ventures such as banks, malls or biospheres in Entropia Universe while those who earned their fortunes in Entropia dollars will be able to easily diversify their investments into assets such as Second Life virtual land funds, virtual game development businesses or the IMVU fashion design industry.

Mark Wallace at 3PointD offers some thoughts on Anshe’s announcement:

The market Anshe envisions, of course, is more than just a forex market, and it’s entirely possible we’ll start to see a lot of cross-border investment. One of the best things Anshe could do here would be to quantify that trade for us, or at least make the figures available for people who might like to construct financial reports on the state of affairs. Let’s hope the “business girl” is at least that open with the information flowing through her markets. It should be of slight concern that there is no regulatory body, but in fact these kind of flows will eventually be regulated by the same people who regulate real-world financial markets; it remains only for virtual markets to grow large enough to merit oversight. For now, there’s a new wild west frontier opening up for any virtual investment cowboys out there. Saddle up.

Indeed. One of the interesting issues about cross-world currency exchange and investment is the opportunity for arbitrage - making money by exploiting price differentials between two or more markets. It’s not immediately clear what sort of arbitrage opportunities may arise from Anshe’s virtual financial market, and whether the trading system can be automated (and eventually gamed) to favor players in one world, or simply the more attentive investors.

The VC-backed start-up Sparter isn’t the only new entry in the real money trading (RMT) industry offering “peer-to-peer” trading. Iron Prairie, which launched in November 2006, also lets gamers trade virtual currency directly with one another and uses an escrow system to protect buyers and sellers. As with Sparter, much of the current inventory is being supplied by existing exchanges like IGE, EZGaming and TeamVIP.

The two companies have different backstories, however. While Sparter is managed by veteran game industry executives and funded by venture capitalists, Iron Prairie is the handiwork of two Indiana college students who spent a year developing the exchange and web site. “Our philosophy is that an open, transparent pricing mechanism is better than the current way to purchase virtual assets,” said co-founder Mike Shepard, who says Iron Prairie currently offers the ability to trade in WoW gold and will soon support Vanguard and Second Life.

Iron Prairie’s fee structure includes a $3.00 per transaction “trading fee” as well as an “exchange fee” that can run from 8 to 12 percent of the total transaction - meaning fees on a $50 sale would total at least $7. There’s a twist: the fees are borne by the buyer, rather than the seller (as is the case with many online marketplaces). As we noted in our posts about Sparter, gold suppliers are key to the success of these peer-to-peer platforms, and shifting the fees to the seller is one way of making the system more attractive to sellers.

Iron Prairie also offers graphs tracking pricing trends in major game currencies to help buyers and sellers trade with the latest information on market conditions. We’re seeing more sites offering pricing data on virtual currencies.

When it comes to Warcraft gold, not all servers are created equal. In a detailed study of pricing trends on World of Warcraft servers, GamerPrice.com found a huge differential between the price of gold on game servers in the United States and those in Europe. The study, which was compiled by GamerPrice staff and students from the University of Sheffield, showed the gold on servers in Europe costs just 12% of an equivalent amount on American servers. In its analysis, gamer price suggested that the results “indicate a phenomenal bias on behalf of blizzard towards their American clients.”

The average price for 1,000 gold on US realms was $255, while the same 1,000 gold pieces could be had for about $32 in European realms. GamerPrice examines several possible reasons for this huge discrepancy, including the likelihood that US servers experience greater demand for gold and U.S. gamers have more disposable income. While these factors could certainly explain some of the price differential, GamerPrice believes that they don’t address the huge difference found in the study:

The cost involved in producing (farming) gold on Europe must simply be lower than the cost involved in producing the same gold on World of Warcraft USA. What this means is that Blizzard is policing its American realms far, far more rigorously than it is policing its European realms. The figures are so very different, that they suggest an extreme imbalance, even extreme negligence on behalf of Blizzard Europe. This suggests that in America, it’s actually harder for a farmer to produce gold than it naturally would be, because of an active and ongoing purge of these accounts, and indicating rigid standards, and good policing.

GamerPrice conducted its survey in “early 2007,” and provides server-by-server comparisons of the US and European realms. It’s one of a growing number of providers tracking trends in the game gold market. See the MMO RMT directory for a listing of services providing WoW gold pricing information.

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.

Sparter is a new entry in the real money trading industry that uses an eBay-like “peer-to-peer” approach for the buying and selling of game gold for World of Warcraft and other MMORPG online games. The company has received venture capital funding from Bessemer Venture Partners and its management includes executives with experience at THQ, Walt Disney, Expedia, Ariba and IGN. Sparter describes itself as “the world’s first company devoted to enabling global Gamer2Gamer trading of virtual currencies.”

Sparter has a reputation system for buyers and sellers (similar to feedback on eBay) and uses an escrow system to protect buyers and sellers and manage the transfer of goods. There is no charge to list virtual currency, but the company charges a 10 percent commission fee to sellers for every transaction. Now in beta, the Sparter marketpalce offers only currency for sale, and not game accounts or power-leveling services.

The company’s debut comes just two weeks after eBay discontinued sales of game gold, game accounts and other virtual assets. Sparter appears to represent a direct challenge to IGE and other existing market makers, offering gamers the ability to eliminate the exchanges who have dominated the marketplace for goods from World of Warcraft, Everquest, Ultima Online and other games..

“The current market for virtual currency is dominated by large companies that aggregate gold and charge significant mark-ups to gamers,” the company says on its web site. “Sparter allows gamers to trade with each other directly. Essentially, we connect gamers who need gold to gamers who have gold. We started Sparter because we thought gamers and the industry would benefit from a new approach, one founded on the principles of open, efficient, transparent and safe trade. While many companies exist to sell you currency, only Sparter gives you the option of buying direct from gamers and, if you want, making some money by selling to gamers.”

Sparter is also working with IGE, Brogame, MOGS.com and other exchanges, listing their inventory in the Sparter system (and presumably functioning as an affiliate so it gets a referral fee). Sparter believes its approach will result in cheaper prices than those found on major exchanges. “Sparter has built a marketplace where many sellers compete for your business” the FAQ notes. “By creating an open and transparent marketplace individual gamers are on equal footing to professional sellers thereby increasing price competition. Additionally, by connecting buyers directly to sellers, we are eliminating the middleman, making it possible to purchase currency at a cheaper price.”

Because Sparter uses an escrow system, holding the buyer’s funds until the seller makes delivery, pricing may be influenced by how quickly you need the money. Buyers can choose their delivery window, which will in turn influence the price. “Shorter delivery windows usually will be more expensive than longer delivery windows,” according to Sparter.

Power-leveling is attracting increased interest these days, according to an informative story by Daniel Terdiman of C/Net that mentions many of the sites featured in the directory of power-leveling services at Virtual Economies. The growing demand for power leveling services is driven by the expansion of World of Warcraft, which makes it even more daunting for new players to advance to the highest levels of the game.

According to Power-levels.com, it takes a new player 768 hours to reach the highest level you can hit in World of Warcraft: The Burning Crusade. For someone who had already topped out at level 60 in the original WoW, it would take 384 hours to get to the new top level of 70 in Burning Crusade. Several provders of paid power-leveling told C/Net that their business has been on the rise:

Outfits like Guy4Game, Power-levels.com, Power-level.net and GmLvl.com say they’re pulling in serious business. For example, GmLvl.com says on its Web site that it employs more than 2,000 people solely for the purpose of helping clients get where they want to be. By comparison, Guy4Game’s has a staff of 150 full-time workers.

Daniel notes that power-leveling services may be getting new customers due to eBay’s decision to halt the of auction of game accounts. The availability of high-level accounts on eBay made it simple for players to reach level 60 in the time it takes to process a Paypal transaction. Power-leveling is an alternate route to the upper levels, in which a service charges a fee to quickly advance a character to the desired level:

“They give us their character name, their password and they tell us which level they want us to reach for them,” said Flora Chen, manager of Guy4Game, a power-leveling company based in Canada that also has operations in China, Korea, Japan and Mexico. “Some just want to reach levels as fast as possible, so they say to (play for them) 24 hours a day.”

The process typically involves two players from the power-leveling service working together, with one player using an existing high-level character while the other one uses the client account. As the C/Net story notes, power-leveling is controversial because it violates the terms of service of many games (which prohibit the sharing of account logins) and is frowned upon by many gamers:

In the eyes of regular players, however, those who utilize power-leveling services aren’t sticking to the spirit of the games. “Using a service to level a character is pretty universally regarded as a ‘lamer’ move,” said Eric Haller, a San Francisco investor and long-time WoW player. “You will definitely not earn anyone’s respect if they know you have paid for your levels.”

But the growth of the power-leveling industry underscores a key point about the demographics of MMORPG gaming. As the player base has expanded beyond hard-core young adults, many new players are older and have careers and families - leaving less time available for grinding through levels. Sony’s recent white paper on the Station Exchange economy noted that the largest sellers were 22-year-olds (who have plenty of time but not a lot of money) and the largest buyers were age 34. These older players have more money than time, and that fact drives the demand side of the virtual economy, creating a sustainable and thriving market for both power-leveling and game accounts.

MMORPG hosting specialist Online Game Services Inc. (OGSI) has been acquired by long-term Global Netoptex Inc. (GNi) in a deal valued at more than $3 million, positioning GNi to provide “pay-as-you-grow” game hosting solutions to the fast-growing industry for massively multiplayer games.

“Acquiring OGSi is a natural progression,” said Derek Wise, GNi’s president and CEO. “By combining their expertise in the games space with ours in managed services, we achieve increased economies of scale and efficiency to better serve our customers.”

“Combining our two companies clearly strengthens our ability to serve the game industry with innovative hosting solutions,” said James Hursthouse, CEO of OGSi. “We’ll also be taking our ‘pay-as-you-grow’ model into new areas such as interactive TV, video and music services, and social community websites.”

OGSi currently has more than 1,000 blade servers packed into 12 cabinets in 365 Main’s San Francisco data center. OGSi has been developing its game service provider business model since 2004, hosting sites for Ping0 LLC and GoPets Ltd. with the new Hellgate London online game. With its acquisition by GNi, OGSi expects to have over 4,000 additional servers operational for games clients in 10 datacenters worldwide by the end of 2007.

“We’ll be building out these gaming dedicated hosting infrastructure in other data centers operated by 365 Main,” said Hursthouse. “Our goal is to provide the industry with every excuse not to build data center infrastructure in-house. It’s a drastic reduction in risk and cost. Right now there aren’t many publishers that aren’t looking at MMOs.”

The numbers involves in MMORPG hosting are mind-boggling. World of Warcraft, the largest “virtual world,” has more than 7 million subscribers. DFC Intelligence, which specializes in game industry research, estimates that subscription revenue from online games was $2 billion in 2005 and will increase to $6.8 billion by 2011.

The market leader in MMO hosting is AT&T, which hosts both World of Warcraft and Sony Online’s MMOs, and has a specialized business unit for this sector. IBM also has a foothold in this market, operating a grid for the sci-fi MMO EVE Online that has supported more than 30,000 concurrent users on a single shard (instance). Valve Software’s Steam system, which hosts Half Life 2, Counter Strike and other popular games, delivered 10 million gigabytes of data during 2005, representing 50 billion “player minutes.”

Guild Launch (www.guildlaunch.com) has launched a new guild hosting service incorporating social networking features. The service, which launched in mid-January, offers free ad-supported hosting with 10 megs of space and a subdomain, with additional features available for $5.99 a month. Guild Launch is hosted at FastServers, a fast-growing dedicated hosting provider with facilities in Chicago and Iowa.

Guild Launch has created a full featured guild hosting application for the MMORPG gaming industry for games such as World of Warcraft, Guild Wars, City of Heros, EverQuest, and for games that are in still development such as Age of Conan, Lord of the Rings Online , and the highly anticipated WarHammer Online. Guild Launch says it is is taking the best of the social networking features and building them into its guild hosting application. “Guild hosting should offer more, it should be feature rich and grow with the needs of it’s users and the needs of individual game niches,” said Guild Launch founder Stephen Johnston. “Being stagnant is a disservice to your community and leaves you out of touch with the needs of gamers.”
In addition to basic guild features like guild forums, guild roster, calendar, file library, and news they have created a selection of widgets to add usefulness to the guild site. Widgets are small informational snap shots into the larger features. They have also created larger features lie a custom built dkp system called “Rapid Raid.” Guild Launch motes that whiule there are many DKP systems on the market, Rapid Raid anticipates information needed by users and pre-fills forms and shares data through out the site.

Just posted by Zonk at Slashdot, confirming our earlier post on eBay’s decision to halt auctions in game gold, gamer accounts and other assets from MMORPG online games:

Mr. Hani Durzy, speaking for eBay, explained that the decision to pull these items was due to the ‘legal complexities’ surrounding virtual property. “For the overall health of the marketplace” the company felt that the proper course of action, after considerable contemplation, was to ban the sale of these items outright. While he couldn’t give me a specific date when the delistings began, he estimated that they’ve been coming down for about a month or so. Mr. Durzy pointed out that in reality, the company is just now following through with a pre-existing policy, as opposed to creating a new one. The policy on digitally delivered goods states: “The seller must be the owner of the underlying intellectual property, or authorized to distribute it by the intellectual property owner.” Given the nebulous nature of ownership in online games, eBay has decided the prudent decision is to remove the possibility for players to sell what might be the IP of other parties via their service. Mr. Durzy made it a point to say that initial listings of virtual property would not have punitive actions. Their assumption, he said, is that most users break with policies because they’re unaware of them, rather than maliciously. Initial infractions will result in a delisting of items, and an attempt to educate the user on the policy. Persistent disregard for the policies, of course, will result in a removal of the seller’s account.

The market for virtual add-ons to online video games is slated for substantial growth, according to a study of console and handheld online gaming by ABI Research.

The study predicts that a growing percentage of gamers’ budgets will go towards the purchase of in-game virtual assets such as “maps, game related add-ons, casual game titles, and, eventually, full core console titles.” Micropayments for consoles alone will account for over $833 million by 2011, as console vendors and their publisher partners look to monetize both in-game and game-related assets beyond initial game purchases.

This is obviously a trend with implications for MMO gaming, particularly as we see more console-based MMOs. Having said that, micropayments have been overhyped before, and some of these companiesa re still failing (BitPass, which got $13 million in VC money, closed its doors this week). Read more at PaidContent.