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Gold Farming ?

Many game sites now are writing about Gold Farming. This is cool because this is exactly on what I'm working on currently.
I can give you the complete document I'm making because it's my Job/mission and my company won't be happy if they find, for free, the same work on my blog that they have in their hands by paying me decent salary.... but because I'm a kind guy and sharing is for me really important, here a brief version with enough hints for you to understand the business. And if you wanna go further, take a look at the sources and references I give you at the end of this article.

Before, let's define some keywords I'm using in this article :

*Gold farming is a general term for an MMORPG activity in which a player attempts to acquire ("farm") items of value which are sold to create stocks of in-game currency ("gold"), usually by exploiting repetitive elements of the game's mechanics.

Nowadays, Gold Farming is a general term for every activities which is oriented to “product” virtual items which are sold for real money.

Here, Gold farming is not exclusive to gold.

*RMT : Real Money Trading or Real Money Traders. This is the action of trading something virtual for Real Money.

A brief History :

*RMT isn't new.
The first REAL MONEY TRADE started in 1987 : the first cash payments between players for items or for improving characters within text- and basic graphics-based multi-user dungeons. RMT trundled on during the 1980s and 1990s but seems to have remained a phenomenon of the global North.
*Golden Age.
But it clearly started to take great proportion during 2k4-2k6 with the expansion of eBay and the arrival of many MMORPGs. And of course, WOW.
Gold Farming also expanded in Asia with the incredible success of the Korean Lineage. This game spread all around the country and also came to China where Gold Farming became what it is now.
*Time of Regulation
RMT became forbidden on eBay, followed by governments : in Korea, Gold Forming is banned since 2006, in the USA and Australia, RMT activities has been stated as taxable incomes and recently, the Chinese government also officially banned such activities.

Who are the actors ?

A trivial Value Chain can be drawn :
*ICT provide Internet Connection and sell games to the farmers
*Individual Gold Farmers have little power. They need the Gold Farming Firms.
*Gold Farming Firms have not enough connection to the end-users. They sell the Gold to the Brokers.
*The Brokers have to be connected (by sponsoring or buying) to the top community forums/fansites in order to be known. They are the exchange platform of RMT.
*Fansites promote the Brokers to other players and some of them want to buy directly to the source. Some others start to hate the RMT and start killing the farmers in game or report them to the Game Company
*The Game company have the "Nuclear Option" which consists it banning someone or closing the server.
*Governments can order to ban the Game globally of locally

The Business.

RMT can be divided in 3 industries.

First industry (the goods) :
*Selling game currency : sell Gold from the game against real money. This is still the core of the global RMT industry. (the price depends on the quantity the buyer want and the rarity of the ressource)
*Selling items : sell games items (the price depends on quantity and the rarity of the item).

Second industry (the "irl" services) :
*Selling account : selling an already played avatar which is strong/famous (the price depends on the avatar's characteristics and, sometime, its "nick")
*Power leveling : the buyer request a level (how strong he wants his avatar to be) and tell in how many hours he wants to get it (the price depends on level and time)

Third industry (the "rp" services)
*Hunter : these players kill non-player characters/"monsters". They will then take any currency dropped from the kill, and sell valuable dropped items in-game for more currency (price depends on time or monster kills)
*Fighter : helps the hunter to kill NPCs but does not take the drop. (price depends on time)
*Banker : undertakes a non-fighting role in the game to gather resources that can be sold for in-game currency, such as mining or wood-cutting (price depends on the service fee)
*Dealer : delivers the currency or item to the purchaser in the game. (price depends on how fast the delivery is but in almost every RMT service, the delivery is free)
*Marketer :"barkers" who generally advertise gold farming services to other players; "peddlers" who contact individual players with advertising messages. (price depends on the "barkers"' reputation)
*Location : Real Estate agents who buy/sell locations or virtual castle/houses. (price depends more on location than on the virtual "object")

Of course, these 3 industries are all connected each other.

Let's focus on the 4 keys players now : farmers (producers), brokers (retailers), gamers (buyers) and the game companies (GOD :D).

Producers.
The Gold Farming is glocalized : rich countries hire poor countries Farmers to do the job. But, localization is also important so that's way, firms prefer to hire in countries which are near them. Mexican work for the US, Chinese work for Korea.
Some hints anyway :
*The first producers were American. But it was only a small and individual activity.
*Korean Farmers came during the Lineage Golden Age and became the first serious intensive workers.
*Now 80-85% of the global Farmers are Chinese but since it turns to be officially banned, things could be changing in the next few years. Can we see some Vietnamese Farmers soon ?
*Farmers are usually Migrants from rural areas looking for work in urban areas, Young unemployed people based in urban areas and College students, who would work only part-time (and study part-time).
*Farmers are paid by results (plus Bonus) :average 1.25 USD for every 100 gold in China in 2006. And 1000 gold takes about 6 to 10 hours in game to be collected depending on how skillful and how lucky is the farmer. But this "salary" is decreasing with the entrance of new competitors and a farmer usually don't work more than 10 hours a day.
*Extrapolation suggests 50.000 Gold Farming firms only in China

Retailers.
First, why Gold Farming companies should work for a Broker instead of working alone ?
There are many fixed costs which can be reduced by Scale Economies : this is why many Farmers work for a Gold Farming company (producers) who work themselves for a Broker (retailers). That's why.
Some data :
*Average 75% profit
*Some Brokers start to trade items from other games such as Maple Story or Audition Battle Dance (F2P games) but these activities are still minor since the F2P culture is almost only Asian.
*Great discrepancies between brokers so many fusions since 2006. Also, every RMT service has its own specialty (specific games or items) with different currency. Sites like mmobux are becoming very useful to track and compare different currencies or prices from different RMT services.
*Some Brokers have their own Gold Farmers or try to cover all the chain value in order to rise the profits. But because of the risks, the major Brokers (the most "famous") still buy items (Gold included) and re-sell it to end-users
*Trust is central and a broker have to be well-connected to the community. Let's see the next player : the players ;)

Buyers.
Why they buy ?
*Players buy Gold because they have more money than time.
*Some of them buy items that are difficult or almost impossible to have
*The main issue is to enhance the personal gameplay and gaming experience.

How they buy ?
*Trust is central in RMT and that is why the majority of the buyers still prefer to buy to a well-known Broker than directly to a Gold Farming Firm even for a higher price.
*Gold remains to be the core RMT product. Before 2006, buyers use to RMT items directly but now, the current trends since 2006 is to trade only Gold and buy stuffs with these Gold in game. In this way, Buyers can focus only on currencies.

How are they seen ?
*RMT is very badly seen by the Western players. Considered as cheaters. The RMT itself is considered as cheating or hacking. The Western players usually hate Chinese players who are all considered as potential Gold Farmers (on Eve Online, there is a global server and a specific Chinese server).
*In China, Japan and Korea, where F2P business model is widely used, RMT is seen as "normal" or "regular".

In one hand, there are players who see RMT as a more "fun to play" or more "realistic" and the other hand, the
players consider that video game is a way to escape the reality so RMT is breaking the experience.

The GOD(s).
*RMT cost money to game companies in terms of manpower and financial resources
*Gold farming is specifically prohibited by the game's EULA (end-user license agreements ) or terms of service and is grounds for termination of the account.
*All of the content in WOW is the property of Blizzard Entertainment, and Blizzard does not allow "in game" items to be sold for real money. The company even goes so far as to suggest this is "illegal".
*Mythic and Jagex CEOs both announced officially they were against RMT and will do everything to reduce this illegal activities.
*In Warhammer Online, the community managers don't just ban gold sellers, they publicly humiliate them in the chat channel.
*In Lineage, Gold Farmers are publicly known and players are asked to track them and slaughter them in the game : the death penalty system in Lineage is very harsh so it takes great time (and money) for these Farmers to recover

YET.
Each time Blizzard (WOW creator and publisher) massively bans the farming accounts and trading accounts, the gold
sellers and farmers have to buy another the CD-Key, the
account, level up new characters etc. so Blizzard itself has got millions of US dollars from the farmers : are the game
companies ban but don't want to kill the industry because of that ?

THE GREAT PARADOX

The RMT is mainly based on currency trading and if the Gold value drops too much, the global system could end. The guesstimation of the limit
of profitability, based on the information from 2006, for a gold seller is 4.7 USD for 10 gold in WOW in 2008…
average Gold rate in WOW is currently 0.7 USD for 100 gold. But we have no evidence for any sub-sectoral
shrinkage : there are even more and more actors.

WHY ?
Increased productivity: finding ways to make more in-game currency per hour.
Automation: making use of macros, bots, etc. to increase productivity and/or cut costs.
Revenue adjustment: changing the profile or distribution of income.
Consolidation/Disintermediation: brokers being farmers and farmers cutting out brokers.
Diversification: into other activities (like said, powerlevelling or account selling etc.)

There are currently 2 different ways of thinking Gold Farming Business : cost reducing (by doing big consolidations
like US brokers) or margin raising (like some Chinese Gold Farmers who sell directly the Gold to the end users).
In general, Large companies prefer to cost reduce and small companies prefer margin raise.

The conclusion.

RMT is a very complex and bornhood industry which needs regulation and consolidation

RMT could be a huge industry
*RMT has always existed since the first MMO (Ultima Online, late 90s) and will probably exist forever because impossible that the publishers provide everything the gamers desire
*The global MMORPG players community is still in expansion and players are older (so basically more games to play but less time to play which could lead to the need of RMT services)
*F2P in Korea could push people to RMT even more
*On FaceBook (or other SNS) RMT already exists : people can buy "tokens" in order to play Poker for example
*Many extrapolation and hints let us guesstimate that the global market could worth something around 10 B USD

Competition is severe
*No big structure and no monopole : the market is divided in many small shares
*The lack of real regulation makes the market very chaotic
*MMO developers and RMT co-operating and working together is NOT the current mode. *But in Korea, some casual or F2P game companies are developing their own RMT platforms (Maple Story for example).

Lack of information
*No 100% reliable analysis : the RMT is still seen as underground activities and forbidden in Korea.
*We can only base our study on guesstimations and some numbers given on Forums or Game Sites to understand the very core of the market
*Once again information is key and even for buyers : many currencies/items comparison sites are becoming famous and capital for these RMT

Perspective and Guess

Now the Chinese market is closing its door, what will happen next ?

A even greater Black Market
*Due the lack of information and the difficulty of tracking these Farmers, China could become from Farming Paradise to Farming Hell.
*Brokers who officially stands in China could still hire illegally Chinese employees indirectly by contacting local Farming groups.
*If this happens, Farmers' situation will be even much worse than now.

New Farming sites
*Vietnam, Russia and Mexico could become the farming paradise.
*The issue will definitely be the ICT : Gold Farming activities need computers and broadband connection. Providers will be a stronger player in the new value chain of these countries.

The 2nd and 3rd Industry could become the cores while Gold is losing its value
*Many brokers already offer different services which are not forbidden (these services are positioned like game services such as game portals which gives cheat code or game magazines which gives tutorials)
*The current RMT disappears and comes the Virtual Barter
We could imagine a system in which Virtual Goods are directly exchanged each other even if they are from different games.
*The money could be turned into "Subscription Fees" or "account". For example : one "sword" could be sold for a "2 month account" (and this account could be resold for real money ?).

Now Gold Farming turns to be officially forbidden in China, the global RMT market could change a lot : this isn't the end but the end of the beginning in the History of RMT.

Sorry again I couldn't give you more (well, the whole document is pretty big indeed so maybe it isn't so bad to have a small, brief, article here instead of the hundred-pages .pdf).
Of course, if you guys have any question, please submit a comment and I'll enjoy answering you.
Hope this short article helps you guys to understand better this industry. And if you guys wanna know more :

Related studies :
http://www.sed.manchester.ac.uk/idpm/research/publications/wp/di/documents/di_wp32.pdf
http://www.eurogamer.net/archive.php?author=428
http://www.guardian.co.uk/technology/2009/mar/05/virtual-world-china
http://news.bbc.co.uk/2/hi/technology/7575902.stm
http://en.wikipedia.org/wiki/IGE
http://www.wired.com/wired/archive/11.01/gaming.html

Related news :
*http://playnoevil.com/serendipity/index.php?/archives/1651-BREAKING-Korean-RMT-Sites-target-of-hacking-or-Denial-of-Service-attacks.html
*http://playnoevil.com/serendipity/index.php?/archives/818-Japan-to-leave-RMT-to-the-ethics-of-players.html
*http://www.techcrunch.com/2007/06/12/sparter-launches-go-buy-some-world-of-warcraft-gold/
*http://arstechnica.com/old/content/2007/01/8693.ars
*http://virtual-economy.org/blog/sellers_liability_nexon_to_buy
*http://www.informationweek.com/news/internet/ebusiness/showArticle.jhtml?articleID=218101859

Related sites :
http://www.ige.com
http://www.igxe.com
http://www.swagvault.com
http://itembay.ca
http://www.mmobux.com