Friday, January 26, 2007

Market Opportunity: Ebay Stops Trading of Virtual Items

Ebay has decided to stop the sales of virtual items and currency on its site. Why? I assume that it’s a reputational risk issue. From what I’ve gathered following the virtual item trading world, sellers are not a particularly reputable bunch, leaving buyers without the goods they purchased.

Clearly, the traffic to other virtual trading platforms, most owned by one company, IGE, is going to increase dramatically. People want to trade items. Let them.

Why don’t MMOs encourage in-world trading? Raph Koster has an interesting post about the game dynamics of MMOs that push developers to dampen item trade. His point is basically that limiting trade of virtual items extends the life of the standard MMO.

I have no idea how many millions that Ebay is sacrificing by stopping virtual item trading, but for a company its size, it’s probably insignificant. Yet, it’s short-term thinking. The virtual item economy is huge and continues to grow. Ebay’s core business is no longer experiencing high-growth levels, you’d think that they would want to grab the opportunity to dominate one of the few auction categories experiencing double-digit growth.

But again, it’s an opportunity for a savvy entepreneur to push out a specialized auction site, figure out the pain points specific to virtual item trading (delivery, trust, questionable legality) and address them.

Article about IGE:

UPDATE: You can still buy and sell Second Life related items. Probably because the founder of Ebay is an investor in Linden Labs, the company behind Second Life.

(via slashdot)