When It Comes to Selling Virtual Property, PayPal Isn't Always Your Pal

[R. A. Hettinga]

<http://www.pbs.org/cringely/pulpit/pulpit20040506.html>

PBS: I, Cringely -- The Pulpit


 MAY 6, 2004

PayAcquaintance

When It Comes to Selling Virtual Property, PayPal Isn't Always Your Pal

By Robert X. Cringely

Games are make believe, their rules have to be only internally consistent,
not consistent with any laws of man or nature. And that is probably the
reason we like them, because in the game, whether played in my garden or in
your computer, we can be warriors or wizards, men or mice, we can carry on
our belts the scalps of our enemies and nobody is really hurt, no laws are
broken. But games are also big business, which means they inevitably
intersect with the real world. And when that point of intersection is
through PayPal, some game players believe they are being robbed.

This story was brought to my attention by players of EverQuest, Sony's
incredibly successful and incredibly complex fantasy role-playing game, but
I am sure it applies to similar games. Understand, I am not a gamer, and
have not a chromosome of gamer DNA in me, so if you are a gamer and feel
that I am mischaracterizing an activity that occupies, say, a third of your
waking hours, just pity me and hold the complaints, okay?

 EverQuest and most other multiplayer online games like it are
subscription-based. You pay Sony a monthly fee to be allowed to be a
character in the game. Some of your character attributes are personal
choices made when you set up the account, but many are earned, given, or
even just discovered as you make your way through the many levels of the
game, gaining powers and weapons and even money. Yes, money. The currency
in EverQuest is platinum, and it can be used to buy many things, including
sometimes buying your way out of trouble.

Sony's view of its game is that everything takes place in the server and
nothing in the real world. Characters can give things or sell things to
each other in the game (weapons, magical abilities, platinum, etc.), but in
Sony's view, it is all supposed to take place in the game. Avid gamers,
however, came to see a real market in these things, selling them primarily
to players who wanted to buy their way higher in the game. So there
developed a secondary market in virtual goods, first on eBay, then on
specialized game auction sites, and there are online stores where you can
buy this stuff outright. Sony doesn't specifically allow it, but Sony also
doesn't do much to prevent it, so the practice is widespread.

The arbitrage opportunity here is based on skill and knowledge of the game.
If I am some kind of EverQuest god having made it the old fashion way to
the top of the game, it is much easier for me to acquire these goodies than
it might be for a beginner. Or maybe I have found a bug in the program that
allows me to exploit over and over again some action that yields platinum,
for example. Once I have enough valuable stuff worth selling, I would
typically give it to a second character (not my most powerful performer --
I need to keep him/her/it apparently untainted by commercialism). Then I
find a buyer through an auction site, or I just sell the stuff to a
wholesaler like Internet Gaming Entertainment, the Big Kahuna in the buying
and selling of this stuff.

How the actual transfer of goods takes place is very interesting. Once a
deal is struck, the characters of the buyer and seller have to meet at an
agreed place in the game where the hand over (no hands are actually
involved of course) takes place. Either one character just gives this big
load of platinum to the other or they give it in exchange for some game
item of much less value. This latter technique is the pure play because it
complies best with Sony rules that allow bad bargaining and character
stupidity. "Manhattan for $24 in beads? Sure!" Meanwhile, back in the real
world, real money is changing hands, typically through PayPal transfers.
The transfer is done first, then the property is exchanged.

Only it doesn't always work that way. Sometimes the buyer retracts the
payment saying that a transfer never took place at all. After all, there is
no receipt. Sounds a bit like the Diebold e-voting scandal, eh? PayPal
yanks the money back out of the seller's account EVEN IF IT HAS ALREADY
BEEN TRANSFERRED TO A BANK ACCOUNT. One minute the money is there, the next
minute it isn't, and the seller has almost no recourse at all.

The specific event that led to this column was the failed sale of $2,300 in
platinum by a group of EverQuest fanatics who wanted to use the money to
pay their way to a big EverQuest convention. It is their contention (not
mine, I'm just the reporter here, remember) that the bad guy in this deal
is either Jonathan Yantis or an associate of his. Jonathan Yantis runs
Yantis Enterprises, which was until recently the big competitor to IGE for
the buying and selling of this stuff that isn't real. Yantis is in San
Diego, IGE is in Florida, and earlier this year they merged with IGE buying
Yantis, though the web sites (they are both in this week's links) remain
separate.

The players who came to me sold their platinum through a game-specific
auction site. The deal went forward exactly as described above, and they
suddenly had no platinum and no money. Wily hackers that they are, they
tracked the mail records of the only trail that did exist, the e-mails
arranging the exchange, and claim to have found that the buyer's IP address
was from the same range used by Yantis Enterprises. Further, they explored
the qualifications of the "PayPal Verified" buyer and claim that most of
the positive feedback came from Jonathan Yantis. Finally, they claim that
the day after the transaction, the Yantis price to sell platinum on their
EverQuest server suddenly dropped as though there was suddenly a larger
supply acquired at little or no cost.

These players are fervent and angry and they have some real data so what
happens now? Not much, and that is probably the real topic of this column.

Yantis Enterprises has no telephone number and doesn't respond to e-mail
from me. IGE also has no telephone number but they do have a PR firm that
doesn't call me back. These are companies apparently doing millions per
year in business, yet they effectively don't have a physical existence.

PayPal certainly has a physical existence and they DO return my calls and
tried hard to be helpful, but the story there isn't very encouraging,
either. For one thing, PayPal can't figure out how to handle payments for
such virtual goods, so they rely on the good will of the buyers and sellers
involved. If a buyer backs out, PayPal has no recourse but to reverse the
charge (called a chargeback) or take the loss itself, which it is unwilling
to do. This applies to game goods, but it also applies to ANY virtual
goods, so if you are planning to sell software or music or video this way,
you might have to think a bit harder.

 PayPal is not built to reliably support a peer-to-peer economy.

What about feedback? Isn't the great enforcement mechanism of eBay and
PayPal supposed to be feedback from other users? Here is where it gets
REALLY interesting.

The essence of feedback is that you can run, but you can't hide, and PayPal
enforces that by limiting each user to a single account. But how do they
make that stick? They don't. PayPal asked ME to help them find Jonathan
Yantis, for example. Here is a guy who has participated in more than 10,000
PayPal transfers and they don't know how to reach him. That 10,000 plus
PayPal number is a big part of his marketing. But PayPal also told me that
part of their difficulty finding him is that they have DOZENS of accounts
under the name Jonathan Yantis. Their assumption is that these are all
different people. So I went to the People Search section of Yahoo and
looked for everyone in America named J, Jonathan, John, or Jack Yantis and
found 35 people. Say there are another 35 with unlisted numbers, that's 70
people, tops. If there are 300 million Americans and PayPal has 40 million
users then no more than 14 of those users ought to be named J, Jonathan,
John, or Jack Yantis.

So it is easy to have multiple PayPal accounts and if you have multiple
accounts you can give yourself lots of positive feedback, so the system can
be played.

I am not saying that Jonathan Yantis or IGE did any of this. I'm just
reporting what I was told and what I discovered. I can't understand why
someone would threaten a 10,000 plus PayPal score by trying to corner the
EverQuest platinum market. I'm also quite concerned over the lack of safety
measures PayPal has in place to protect buyers and sellers. I DO see here a
wonderful business opportunity, though, for someone to come up with a
reliable way to handle payments for virtual goods. That would be worth its
weight in gold, 'er platinum.

  


-- 
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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'