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Weekly Column

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

Status: [CLOSED]
By Robert X. Cringely
bob@cringely.com

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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