• by Shankar Gupta , February 2, 2007

This week, online auction house eBay banned the sale of "virtual goods" from massively multiplayer online games, but exempting Second Life property, meaning that islands, housing or fursuits (click here or here, if you really, really want to know) can continue to be sold on this, and other, secondary markets.

The why of eBay's move is a little bit elusive. Hani Durzi, a spokesman for the company, said that the decision was made due to "legal complexities" surrounding the sale of online goods. Currently, the IRS is considering how best to take the taxman's share of virtual loot, and nearly every game's terms of service state explicitly that all in-game property is actually the property of the game developer or publisher, and not the player in question.

EBay likely could have put off this decision until the legal complexities were resolved and not come out any the worse for wear, but it is very, very likely that the company has been under pressure from game developers to end the secondary market for virtual goods. Why? Developers hate this market, especially when it creates entirecompanies dedicated to making money by "farming" virtual worlds for in-game cash and rare items. It's such a huge business that workers in Korea who spend hours a day doing nothing but farming virtual goods have attempted to form a trade union, claiming that virtual farming is a $1-billion-per-year industry.

MMO developers, obviously, don't see a cut of this money, and on a more fundamental level, secondary trading of items and currency can destroy a finely balanced virtual economy by causing massive inflation. Professional farmers spend hours collecting money and rare items. They can then put the rare items up for sale in-game, for in-game currency. Then, all the currency they've received is sold outside the game for real cash. Players then use the cash they buy to buy in-game goods, putting that virtual currency back into the pockets of the pros, who can then resell the currency out-of-game again. Over and over again. Got that?

Second Life gets a pass because it's not really a game -- it's a virtual world. Second Life has no game rules to speak of, other than the limitations of the platform and the rules set up on individual islands, and no goals, other than the goals that users set for themselves. And the process of people buying and selling virtual items in- and out-of-game is part of the appeal of the virtual world.

EBay's move to ban the sale of virtual goods is a boon for game developers, who recognize that buying and selling virtual goods online is the equivalent of offering your friend $50 for the Park Place card in a game of Monopoly. The exemption of Second Life helps draw a distinction between virtual worlds and simple online gaming.