WoW Gold & Competition
Posted on February 14th, 2009 by Lawbringer under Auction House, General Tips, Gold Building, Trade Skills, World of Warcraft, WotLKThe Truth About Competition On The Auction House
We know you all want to make more gold. And we’ve given you dozens of tips here at Dominate Your Server to help you do just that. We’ve even got the very best guide available on how to make gold by using the auction house efficiently and effectively (but most importantly faster).
But from time to time we get a lot of complaints from some people who seem to think that our methodologies fall somewhere in the robber baron classification. Others think that we are messing things up by releasing our gold making secrets to – everybody. Still others argue that if you are out to make more gold that automatically steps on the throats of all the “little people;” whoever that is.
Well we want to set the record straight concerning how using the things we have told you not only help those who read Dominate Your Server – but everyone else in the WoW marketplace as well. Ironically, we would never have discovered just how powerful it was going to be until a unique set of circumstances proved a thesis we had held all along, but just didn’t have the empirical evidence to support our viewpoints.
Now, as we tell everyone in our auction house guide, we are not economists; nor are we experts on economic theory. But certain properties of competition in marketplaces always hold true according to the laws of supply and demand economics. So we’re going to tell you what we’ve discovered and how. And why you should be cheering every single toon you see at the AH with several hundred auctions competing right alongside you every week.
Last October, Dominate Your Server began the Dominate guild on the Fenris realm. Our goal was to form a team that could not only clear content to give everyone a better overall perspective of the game, but also to have a lot of fun doing it. We also have made no bones about the fact that we are there to help everyone improve their experience. And that means cutting out the drama from the prima-donna’s, and coaching those with less raiding, leveling, and yes, gold making experience to new heights of Domination.
So there we were with Mr. Moneybaggins. Happily scraping up about 3,000 gold a week working the auction house in truly Dominating fashion. Then, six weeks later, we released Gavin Garrett’s Auction House Mastery Guide. Wouldn’t you know it, about 10 members of our very own guild began using the very same techniques on the very same auction house on the very same realm – at the same time.
Well, you might think that Money saw his profits drop and made a lot less gold now that there were 10 people doing all the same stuff. But that is not what happened. Now, Moneybaggins is making over 5,000 gold each week, and we even have a guild banking toon pulling in another 3,000 each week. Our guild members report making anywhere from 2,000 to 4,000 every week as well. Our best estimate is that members of the Dominate guild are pulling in more than 25,000 gold a week from auction house reselling alone.
So how in the world can such a drastic increase in direct competition still leave room for everyone to make that kind of gold? The answer lies in the very nature of supply, demand, and competition.
You see, by their very nature, monopolies (where one firm or business has actual or relative control of a market) will always have lower profits than in situations where three or more competitors are vying for the same opportunities. While businesses operating in situations with a high degree of competitive pressure have to operate more efficiently in order to survive. The weird thing is that this pressure tends to drive profits UP, and hardly ever down.
The WoW economy is weird, there’s no getting around that. Supply is severely limited, while demand is virtually infinite for certain items. Because it is a completely (well almost) closed system there is always a great deal of fluctuation in the relative value of all of the commodities in the market. The price of entry and exit as far as being a competitor is so low that it’s silly, and the number of “firms” operating at any given time equals everyone basically. In a way that means competition is also as close to infinite as you can get without actually getting there.
So all this nonsense about limiting competition is just foolishness. Every single person who ever places a single item on the auction house is in competition with you. In most cases that’s probably 99% of the people on your realm.
Now, when you are talking about power players in the marketplace, you might also think that you would want to stay in a situation where you remained the ONLY power user on your realm. Do so to your own detriment folks. What you really want (even though you might not know it yet) is a minimum of 20 power users to start, and the more the merrier.
Fenris, Horde side has always been a horrid market. It usually has less than 10,000 items for sale at any given time. Because of the 2 to 1 ratio of Alliance to Horde on the server it’s easy to see why the Ally AH is typically more than twice as large with 27,000 auctions running on most days.
Well, larger markets are more stable, and we’ve always made more gold on the ally side. Part of that is just the sheer niftiness of economies of scale (selling more things more often). Part of that is that prices tend to be a lot more stable over time. So we’re not always chasing trends or getting stuck with stuff that was selling like hotcakes one month and tanking the next.
Which brings us to our point if you are still with me. Those silly folks on the horde side only knew one method of selling anything – mark it down. They seem to think that the only way anyone will buy their cloth is if they undercut everyone else. And not just undercutting by a few coppers – we’re talking markdowns of 2 gold on a 10 gold item! You can actually watch prices drop by the day. It’s maddening. Then when everything bottoms out, prices will insta-hop back up to above where they were before. It’s freaky and frustrating. But most of that is a thing of the past now.
Here’s how it works and we’ll give you a real life example. Moneybaggins bought a whole bunch of Saronite arrows that some doofus had listed for 5g a stack. It was a lot of stacks, something like 100. Must have been leveling engineering and had no clue what the market value was for those things. Until that day they had been selling quite nicely for around 10-12 gold as stack.
So now this guy is KILLING my pricing data. I bought him out and they went right back up on the house for 11 gold. But foolish pricing far below demand prices had already killed the market. He flooded the AH with way too much stuff, then mashed the price to the floor because he was impatient. I wasn’t worried. I knew I could re-list those things for weeks and the demand would eventually sell every single one.
Now, for those of you who think we price gouge everyone, our AADV module marks those arrows down every time we re-post them by 5%. So the price gradually dropped to about 7 gold and then BAM – every single stack sold in a single day – to another member of Dominate!
His system was also telling him that the price for those things was too low. So he bought Moneybaggins out and re-posted them back at the proper market price of 11g. He sold about half of them to regular folks, and then BAM, another Dominator bought the rest out for 9 gold and re-listed for 12. By that time the market price was once again firmly established and in a few days, they were almost all gone. And every single one of us made money off of them.
So instead of a single knucklehead ruining the market for an item so badly that I would have been lucky to get 6g per stack on most of them I made 400 gold instead, then next guy made another 300 gold, and the last one made about 300 gold. It’s easy to say that I could have made 1,000 gold if I had just stuck with a price and they had eventually all of them sold, but it’s not as simple as that.
You see, posting fees chew at your profits, so I would have spent another 100-200 gold in listing fees and only made about 800. Some other nut would have undercut in the meantime and slowed my sales again. Taking into account the time value of money I would MUCH rather have 300 gold in a single week than 800 spread out over 2 months. As it turns out the three of us sold out much quicker than we normally would have and were able to re-invest that money back into the market (another market stabilizer) for another return on investment in a much shorter period of time.
So in a nutshell, the power users provide a great deal of price support in a limited market. That’s a GOOD thing folks. Besides that, they also virtually guarantee profits to each other. And last, because they are constantly re-investing their capital back into the marketplace they also provide a much stronger base for everyone else’s prices over a much broader range of items.
In other words, the guys who DO choose to farm can be absolutely certain to get a better price than ever for their goods and are also assured that they will sell almost anything they post since there are so many more toons with so much more money to invest in the market than ever before. Would you rather sell ALL you stuff to the Government (who has a LOT of gold) in one lump at a small discount, or to 500 guys named “Willkillyounub” who will wait until you drop the price to the point where you know it’s not worth it and then STILL whine in trade chat about how you are ripping the shoes off their whelplings feet?
Well, we could go on for pages and pages about this and still never really scratch the surface. But we did want to make a thorough and clear answer to all those guys who throw junk out there from a monopolistic or downright communistic point of view. We’ve always said that our system will help you Dominate. Now you know it’s better for everyone ELSE on your server as well. It’s a great thing to know that Dominating ALSO serves the greater good.
Off topic but… first comment for the win
Wow, great article. Second comment. I have also noticed that mechanical squirrels also sell, even with 30 of them on the AH.
Nice post
O btw, weren’t you guys supposed to try and get an aliance guild going? I remember listening to one of your pod casts that it might be a “xmas gift” Xmas is long gone now, and i havn’t heard any word of an aliance guild. Is this ever going to come about? I really hope so
Running a guild is a huge time sink. As a matter of fact, it takes so much time that Moneybaggins has been getting the short end of the time stick the last two months. That doesn’t mean we won’t ever do an Ally guild, but horde side still needs a few really good raiders before Gavinn will consider cutting me loose from the dark side.
Good post. The people who claim that dominating the AH is bad for the WoW economy are the same people who think immigrants take their jobs rather than creating new ones.
Ha, nice post
so true!
Sounds like Dominate truly is dominating Fenris then. How are you guys doing with content?
Also, are you playing the Alliance side AH too, and then sending the money from that over to the horde side through the neutral AH, or just relying on the horde AH?
As I stated above, guild runs take up so much time that I haven’t been focusing as much on the AH as I would like since WotLK. However to answer your question. . .
I work both sides independently with seperate bankers and mules. Actually the bankers are on different accounts since you can no longer buy out your own auctions even on the neutral house – so it takes two accounts.
Because AADV doesn’t show cross faction data in the tooltips, you have to rely on the arbitration search to make sure you are flipping the right stuff back and forth. At this point I am mostly flipping from horde to ally side since the horde side tends to undervalue compared to Ally.
So I don’t move gold back and forth between factions – each banker stands on his own and the Ally toon gets the benefit of picking up items (especially blues, deviate delight, and throat piercers) from the horde side at zero cost. Those greedy little neutral AH gremlins take 10% of the sell price as their fee, so I don’t want them getting 100g out of every 1,000 just to transfer. It messes up my 25% minimum margin.
AMEN! ! ! Tired of the nah Sayers. I have a great AH on Shadow Council. I turned 2000g into 4700g over nite just DEing good buys. Hello epic flying.
Peace,
Pient
I have just set up my first horde character with one by the booty bay AH for getting gold to him. He has arrived at Mulgore now and listed some light leather. It sold just fine. I noticed the same auction house interface loaded up as it does on my alliance toon but what will happen to the data if I do a scan of the auctions on my Horde toon? I am guessing it will throw off the alliance data because of the difference in prices. Is there any way round this? Or should I just use the old fashioned way of seeing what is worth buying out to resell?
Cheers
Lars Warming- Scanning the Horde AH data will not affect the allience data you have collected. The Horde AH and Allience AH data are seprate to avoid problems like this.
That’s good news, I will try it out. One of the reasons I asked was that it came up with the buyout figures etc and suggested pricing of what I can only assume was the alliance data.
Time to sell sell sell
To answer your question on how we are doing on content in Dominate… you should come check it out
Schwartz is right – we could still use some more power players. If you’re in T7 and ready to rock Malygos you’re welcome to come to our guild site and apply for admission.
http://www.dominate.guildomatic.com
Most importantly, we are having a ton of fun and it sure makes the game better than it ever has been in the past.
Hey guys – great post and very interesting findings! I have a question regarding the free updates to the Inscription and Auction House Guides. I have purchased both to great satisfaction but am finding myself struggling currently with prices and strategy on our server and would love some additional guidance. Will you guys release these updates via email to those who purchased the guides or are we to request them, etc?
Thanks for everything – your info has truly changed my enjoyment of the game.
BLAM-O
Hello guys- I haven’t bought the money making guide for the reason that the Inscription updates that were promised as part of our purchase price were never forthcoming. The comments by Blam-o here also went unanswered. I would not mind purchasing your guide but rmain slightly skeptical of your customer service. Can we get an answer to this question?
Coredriller (Llane)
OK let’s deal with this updates thing. There IS an update to the inscription guide and it is as complete, thorough and up to date as it needs to be. There is no need to do a major update until the information ceases to be accurate. Since the information is still accurate there is no need for further updates.
So the first accusation is not accurate. The update was made in December. Everyone who purchased the guide was sent links to the new version via email. If you missed the update we would be happy to get you your copy.
The Auction House Guide will be updated as Auctioneer changes in big enough ways to make such updates necessary. This might be once a year or longer. The guide explains everything you need to know to truly master the AH. We are working on some video tutorials to further show people the things that don’t necessarily translate well into print. Picture is worth a thousand words kind of thing.
So as far as having poor customer service, this particular situation doesn’t fit that term. Service after the sale only goes so far. The product is by far the best on the market. It’s also one of the least expensive to boot. There is not enough time or need to update everything we ever do twice a week or something. If it’s good it stands the test of time, and these are good. Inscription was an oddball and needed a major revision after WotLK, but that has been done and the guide may never need an update again. At least not until the next xpac when the level cap goes to 90 and trade skills rise to 525 –
And Blam-o, I’m afraid that even if we expanded the Ah guide to 1,000 pages we could never cover every single situation that people will ever come accross. The key is to get back to basics. Read the section on searchUI again and then keep an eye out for the videos. I don’t struggle with changing markets because I watch them like a hawk, I just do the same old crud over and over and over again every single week. Nothing fancy. Spam clicking in SearchUI. If your settings are right, and you are following the system you don’t even think about it, just click and post. The numbers protect your investment. Don’t think about strategy, just set and click. Start with vendor and DE, then move up to Resale. After that add Prospecting, Converting, and milling. And last you can do Arbitrage once you have a big pile of gold on both faction houses.
Don’t make this hard folks, it’s really a brain dead activity once you figure out what order to click the buttons in. Build your ignore list, then just click 500 times. The guide actually is too long, so expanding it seems like it would add MORE confusion instead of clearing things up.
Besides all of this Coredriller, there is a completely rock-solid money back guarantee, so you have nothing to lose.
First things first I really enjoyed this post and wish there was a way to attach it to the trade channel on Nazgrel as there are many individuals there that need to know this stuff.
Secondly. I never recieved the inscription update and would like to know how to go about getting it. Your help is greatly appreciated.
Nice post. Only nitpick is the part about selling to the government. I’d still stick with Willkillyounub. Reason being a government (any government) produces nothing, no value whatever. It must take from a population to redistribute actual wealth to those in the population who produce less, or do not produce at all. The analogy weakens your overall point, which is valid, true, and enlightening.
Rainbowbaby
Kevin your dislike of government does not mean that you are correct and that it was a poor example. Now, i will agree it’s probably not the best analogy, but it still doesn’t weaken the connection we were trying to create by selling to a large entity with a lot of capital.
Governments do produce things – just not tangible goods. Governments are in the professional services industry. Do not confuse lack of shelf space with a lack of a needed good. They also do not sell their service directly. this is also not the role of government. the last thing we want is privatized lawmaking (yikes.)
Not sure where you live, but not even Comunist governments redistribute wealth very well. I had more in mind the guy who sells iron or steel (much like we do in WoW) to the military so they can make planes and ships and bullets or whatever. And don’t start anything with me about the evils of the military – it’s just an example of a “farmer” grabbing a good that is valuable to a large organization (in our example the government) instead of selling his metal to hundreds of smaller businesses (such as metal building companies) he sells the whole pile to the Navy or something.
There is so much socialism in your assumptions I’m just curious where you live?
I bought the guide, used the techniques on the Alliance side of The Scryers realm…my only regret is I don’t use it often enough but it generates the money i need it too. First week I started a bank toon with 25 gold, by the end of that week he had all bank slots paid for with 20 slot bags and began supply for my other toons. I have since bought a new account just for banking so that i can play 10 toons on my main account. I think it was an uber Idea for the Dominate guild and an uber idea to share everything…I know my decked out toons thank you. it was AWESOME to go ahead and spend the money when WoLK released and take my rogue’s swordsmith skill to max in 1 day…after that I didn’t have to worry about level to open boxes and made all that money back just opening boxes in IF just because I had keys a few days later. So to the Nay-Sayers I say got get ur 29 twink pwnd, To DYS I say thanks
Good article. Most people don’t realize this side of supply and demand inside the Warcraft economy.
I had suspected this for a long time. My server has 100% noob population, gr8 for destroying people in the Bgs but when it comes to the market its worse than a rollercoaster. Like you said prices rise adn fall constantly. We have a large farming groupfor the stuff that everyone ahs gort but the higher cost things are double price becvause noone has them. Money cannot be guaranteed and I think i will look at forming a Gold Guild specifically for controlling the market on our server. Thanks for the info, I will soon be driving those prices with sum friends to take the money from the unenlightened.
Question: Moneybaggins makes 2-4000 g/week. Assuming that profit is made for buying all sorts of goodies for him and your other toons, is there a good time to spend? I mean do you keep your bank the highest it can be and skim off the top for stuff or just buy at will. I’m thinking of waiting until my bank is a bit higher before giving in so that I can maintain a few hundred auctions after the shopping spree. Your thoughts?
I really hate spending my way below 10k gold. But there have been times when leveling several professions has left me with as little as 5k to work the AH with.
I wouldn’t spend a nickle on anything other than resale until I had well over 2,500g. Frankly, at this point I’m trying to hit 100,000 so all my 80’s can get a motorcycle and tundra mammoth just for kicks, but that’s going to take a little while.
A question if I may about the bid for vendor items, I have bid and won some only to find the vendor didn’t give me what I paid for it. Have I missed something along the way? I am sure the settings are as per your guide. Is it other bankers messing with the prices? There were a stack of vendor bid items today but all listed by a “mybanker” type toon, he would only do this if the vendor price I would get was indeed less then his bid price….
Lars something is wrong with . . .something.
I have never seen the data get so corrupted that vendor prices are not working properly. I hate to say it but you might need to just blow up all your AADV stuff on all your accounts and start over, because you are right, that could potentially be a really bad problem.
Hey guys,
Just curious if there are any classes you could use. My current alliance guild is rolling along quite nicely but have always wondered about Hordeland so was thinking of rolling an alt over there but not 100% committed to a reroll yet. But I can always be convinced. Anyways any classes you guys are looking for specifically?
Healers mostly – no more DK’s. That’s pretty much it.
I never run into the problem of not having enough people putting auctions up on the echo isles server (alliance), there is an average of 30,000 auctions. But I still run into the problem when someone puts something up for auction for an outrages price, such as maybe 999 gold for one peice of copper ore, and it really messes up my auctioneer data, and I often dont know if my auctioneer is giving me the right price to put the item up for.
Welcome to dealing with Gold sellers part 1 –
Your outlier filters should catch that kind of crud, but it doesn’t seem to really work the way you would think. What’s happening is that the guy selling the vendor trash has bought gold from someone and is “laundering” the money through the AH by posting some stupid item for 1,000g to collect what he purchased. The gold seller logs in, buys out the item and everyone is happy – along with being virtually untraceable by GM’s.
Oddball prices will get washed out of your data after 30 days, so it’s not a huge problem overall, and outlier filter should catch it before that.
But really, our system is built to run on auto-pilot. I don’t really keep much of an eye out for things like that. If it’s causing you real problems then there may be other usage issues you need to address that have nothing to do with the little things, and everything to do with the way you are doing your auctions.
Thanks
excellent point about socialism. i live in the united states which is highly socialized. you are indeed correct that even in complete command economies wealth is redistributed poorly. it is not as beneficial to a market to sell a good such as iron bars (in wow) to one entity with greater capital than to many smaller entities with lesser individual capital. the point i believe you made earlier is just the opposite. innovation isn’t something that happens in wow, however smaller entities drive innovations, not larger ones. i can appreciate your assertion that governments produce goods, though intangible. i would dissent in so much as those goods are as poorly distributed as wealth by a government. private entities are simply more efficient. on the whole, consent drives both government and market. i thought the analogy was weak compared with the rest of the article, which again was excellent.
also, i didn’t intend to make a political debate, but i thought i’d answer your question regarding where i am from, and what the drive of my point was. i value your opinion, and support your right to express it.
Lush arguments there Kevin. Yes, smaller entities drive progress because they simply MUST innovate to survive against the big boys. However, the consolidation of capital for massive investment in any economy also comes from some “big boys.” Without (educated, smart, and serious) capital investors with loads of capital it’s hard to fund innovation on any level.
Perhaps it would be better to say I would rather sell to a largish middleman who then redistributes the raw materials to manufacturers. Like a textile maker might sell to a cloth warehouser that carries thousands of types from dozens of other manufacturers to supply hundreds of mom and pops or clothing makers. The reason I didn’t get any better in the analogy is that it would have taken another 4 paragraphs to develop the idea – brevity got in the way of clarity.
Another thing I was thinking about in regards to the more interesting aspects of the wow economy is where all the gold came from in the first place. Since Blizz does not directly interact by investing in the market, the wild thing is that every single copper on a realm HAS to come from a mob kill or quest reward. Very fascinating when you think about it. OK there is some cash coming in from players who transfer as well, but even that gold had to source from drops and quests on some server somewhere.
It’s really a little mind-boggling that all the millions of gold available for sale from farmers was originally collected from some murloc somewhere or a silly daily. It’s then our job to consolidate that wealth for investment in the marketplace since no other vehicle for such investment exists. Once again – Dominate to the rescue!
Sorry I didn’t mean to start a bit of a heated back-and-forth… I really have valued both guides and will take your advice to sticking to the basics. I guess it was just a situation of “hey there’s nothing new – keep doing it” kinda thing and that’s fine. I should move ahead with Resale it sounds like then. Anyways, I think all that happened is I missed being on the email list for the Inscription Guide because I had a glitch with purchasing it and had it sent special by Gavin. In that case, may I be put on that email group list and get the update for the Inscription guide? That’s really all I need. I still have my copy of my transaction ID and email from Gavin so whatever I need to verify my purchase I should be gtg. Thanks a ton, fellas.
BLAM-O
Hello Lawbringer and Gavin and DYS readers,
I wanted to post here to thank you again for the AH guide. Just last night I hit 101,000g. I absolutely cannot fathom how some readers aren’t having luck with the guide – my guess is that most aren’t utilizing every part of it.
I essentially own the entire Enchanting market as well as 30 other niches I’ve carved out for myself. Thank you so much.
I have been a fairly regular poster here on DYS starting with the Inscription guide last year. I made my initial seed money of 25K g when it was released, and since then have innovated my AH methods. I am now trying to hit the in-game gold cap, something I never thought possible.