Editor's Note: This blog originally implied that Wowhead trafficked in the secondary market for World of Warcraft gold. But the company says it does not.
There's a lot of buzz in the World of Warcraft fan site universe this morning, with reports and rumors flying about fan sites being sold, about $1 million sale prices and even scuttlebutt about the uber company in the business of selling WoW gold, IGE, having been sold.
According to a report from the blog, TechSoapBox, the WoW site Wowhead has been sold for $1 million.
Another blog, meanwhile, claims that, in fact, Wowhead was purchased by IGE's ex-parent Affinity Media.
Getting away for a second from the complexities of what it all means in the WoW, that's a pretty impressive number if it's true.
Whether or not Wowhead is involved in the WoW gold business--the company says it's not--it's huge business, and it's changing with the sale of IGE, and other recent developments. I don't know any exact numbers--nor does anyone else since the buying and selling of WoW virtual assets, and those of most online games, is prohibited by the games' publishers. But by some estimates, the so-called secondary market for these virtual assets (of all online games) is approaching $1 billion a year.
And if Wowhead doesn't traffic in gold as it claims, then $1 million for a fan site is a lot of money.
More interesting, perhaps, is the fact that IGE has been sold.
When I was at the Virtual Goods Summit at Stanford yesterday, I had a talk with Brock Pierce, IGE's founder, and he didn't say anything about it. It's true, he was wearing a badge from "Affinity Media," and admittedly, I am not entirely up to speed on the latest news in this industry, but rather than suggesting IGE had been sold and Affinity was getting out of the secondary market business, he hinted he wanted to get out.
This is all very interesting, and confusing. And as I hear more, dear readers, so will you.
PALO ALTO, Calif.--Brock Pierce, the CEO of Affinity Media, which used to own IGE, one of the world's largest marketer of the virtual goods and currencies of games like World of Warcraft, EverQuest and others, is looking tired.
Earlier this year, Affinity sold IGE, but it still has a hand deep in the market for virtual weapons, currencies and the like.
For years, Brock's companies, which in many ways have created--or at least perfected--the booming secondary market for the virtual worlds of those games, have been seen as all-powerful entities that almost laugh in the face of publishers like Blizzard Entertainment, Sony Online Entertainment and others who decry the notion that anyone would trade their games' virtual assets for real money.
But now, Pierce told CNET News.com at the Virtual Goods Summit here, Affinity is finding it harder and harder to make the big profits it used to. And that's because, he said, virtual assets are increasingly a commodity and, therefore, the margins on sales of WoW gold and other virtual goods are rapidly shrinking.
In fact, he said, as Chinese competitors get more and more sophisticated, they are also willing to accept less and less profit margin. And that means, "they're perfectly happy to accept $20,000 in profit on $2 million of revenue."
That, for all you out there without a calculator, is a 1 percent profit margin. Hardly what would make it easy for an American company bent on giving its executives a comfortable lifestyle to be happy.
And that may be why, after all these years at the helm of IGE and now Affinity, Pierce said he's looking to find someone to take over for him as CEO. But he also said he's having a devil of a time locating the right candidate. No one else, it seems, has the right skills to take Affinity and transition it to the next stage of its development, one in which the Chinese gold farming operations stay in the rear view mirror.
To be sure, the execs at Blizzard and Sony Online are not feeling too sympathetic for Pierce and his fellow secondary market traffickers. But there is a mutual interest for them as they both look at the Chinese competition becoming more and more powerful.
What will it all mean? No one knows. But for Pierce, as he bounces around the world at a fierce pace, cutting deals, overseeing Affinity's operations in many countries and still trying to get home once in a while, it's a very exhausting time. And it seems like he wants out.
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