Wednesday, January 21, 2009

Gold 101 - Auction House Basics

Every now and then I get the question how I handle my gold and what I do to get more of it and the simple answer is: Play the AH game

I am no farmer or grinder, I don't do many dailies and I don't really do much questing once I hit my level cap. I don't farm reputation, I don't do many (high-level) instances and to add to that I spend a lot of time on gold-sucking alts. In short, I do whatever amuses me and this rarely makes me any gold.

So truthfully said that beyond what little income I can generate through playing my alts I am 100% dependant on the AH for an income.

Rather than telling you my specific business ventures I am going to attempt to give you the basic toolkit needed to make a profit in the auction house, give you a few tips on how to discover niche markets and most importantly dispell the Nr 1 myth or rather half-truth that currently floats around in regards to making money on the AH.

In fact lets deal with the half-truth first because it can be the decider on whether or not you decide to play the AH game or stick with your daily grind:


You can make a ton of gold with only 15/30 minutes a day on the ah

This is a myth for those who start out playing the AH game and will become closer to a truth a ways further down the line.

Getting that gold train started takes a lot of time in the beginning. Organizing bagspace, supplying resources, scanning the AH, finding niche markets all these things take up time. If you're just starting out with the AH game and you're serious about getting some form of income from the AH expect to invest 3+ hours initially... Eventually you can bring it down to maybe 30 mins per session but that assumes that you already are organized and have found your various niche markets.

You will also become good friends with excel or whatever you choose to keep track of your investments. Basic bookkeeping is a necessity if you're serious about money and just writing down cost/profit will really help in the long run to determine the viability of your investments.

If nothing else you will probably have to write down some market prices for various mats or other things depending on your chosen market.

This means ADMINISTRATION and Administration takes time.

Making money on the AH is easy but while you can make much much more gold on the AH than doing dailies you should expect that you will have to sacrifice doing your dailies in favor of spending that time on the AH (or in excel).



Ok, I hope the above really made it clear what you're up against with playing the AH and so lets move on to

The Basic toolkit

Auctioneer, an addon widely available through various addon sites is your primary tool. Get it, download it, install it and run the scans preferably at least once a day. Ideally scan before you're getting ready to dump a whole bunch of stuff on the market.

Don't have Auctioneer yet? Get it, run scans daily for at least a week and only then start making decisions. You will really need the average price indications auctioneer provides and you will lose hundreds if not thousands of gold if you decide to play the AH game without auctioneer.

That said, once you're used to auctioneer check into the various option menus. You can do a lot of beneficial customizing that may help your specific ventures but until then the default settings will do fine. Auctioneer generally also comes with extra tools like bottomscanner and beancounter etc. Try them all and see what they mean to you.

Be aware that a scan can, depending on your connection speed and processing power take up to 30 minutes on a decently saturated AH. My scans currently run 10-15 mins for about 300 pages in the AH... time you stand in the auction house and pretty much can't do anything except guildies over guildchat.

Even though it takes time: Auctioneer scans are absolutely vital!

The other thing that's absolutely vital is: Bag space. Have lots of bag space available especially on characters you want to be involved in your grand gold making schemes.


Seed money

Seed money is your basic starting funds. Just like a farmer would buy seed and expect to grow crops for a profit you need seed money to expect to grow a profit in the Auction house.

The simple truth of seed money is this:
All your gold is seed money. The more seed money you have the more profit you can make. Seed money sitting in your bank does nothing for you.

You can start the AH game at any time and at any gold amount however be aware that you may lose your investment in a bad deal so make sure you have enough gold available to cover your daily repair cost/ consumable cost for about a week in case stuff really goes bad.


With your seed money in your pocket and your Auctioneer scan freshly completed there's a couple of things we can start doing:

1. Flipping
2. Bidding
3. Market research


Flipping

Flipping is the art of buying low and selling high. You don't need a specific market for this... you can simply run a blank search on the AH and then sort by the percentless column. The lower the percentless value (blue) the more the item can be re-sold for. You can check the average price of an item by hovering over it and checking what auctioneer says is the average moving price.

Pick items that you think are popular (ores, rare crafting materials, specific weapons/armors etc.) or that you know a lot about and buy the ones that have a percentless value less than 50% and immediately put them back on the auction house at approximately 80%.

So if a stack of copper ore (20 pieces) normally goes for 8g and you see it on the market for 4g buy it and re-list it for 7g or 6g50s. The only time when you don't want to do that is when there's a lot of people offering copper ore for less than the average price of 8g. In which case you can either decide to list it for less (but always more than what you paid for + the auction house cut) or to hold on to the materials until the market is more favorable.

That's all there is to flipping... buy low, sell high. The percentless column will help you tremendously in this and you can decide whether to resell specific stuff or generally try and flip everything available in the auction.


Bidding

Bidding is a lot like flipping except that it takes a little more time to 'flip' the item. Do a blank search on the AH and sort it by how much time is left on the auctions.
See all those 30m / 2h remaining auctions?

Go through them and once again look for items that either have a really low percentless value or a very low low-end bid.

Just put in the minimum bid on the item and move on to the next item.

The beauty of bidding is that even if you get outbid you don't lose money (you get your bid back) and if you win you just picked up an item for an extremely low amount of gold and can then flip it for the average price (or a little lower).

This is especially interesting for slower moving markets like weapons and armor where auctions can often run their full duration. That said there's really no restrictions on what you should bid on. If you think there's a decent chance of selling it for even a little more than what you bid then you should bid on it.


Market research

Flipping and bidding are both very basic activities. You can make decent gold off of them without really worrying about book keeping and other things. If you just want to make some money on the AH to keep your characters afloat then bidding and flipping are usually enough.

The real money however comes from the results of market research. Market research is all about figuring out what people want and then providing the supply to their demand.

There's a few things you can do to determine demand:

1. determine needs. We know people 'need' consumables. We know people 'need' certain crafting materials. People need a whole bunch of stuff, some of it is more needed than others but based on their needs markets develop. All we really need to do is figure out what isused the most (like consumables for example ) and what crafting materials are in demand and then figure out how we can get those cheap and then drop them on the AH. I recently traded a few frozen orbs to someone who had more mammoth meat than they knew what to do with.
The market for mammoth meals was terrible at the time so he happily parted with 10 stacks of mammoth meat for some frozen orbs. After a few weeks mammoth meals were back in demand and I was able to sell all my mammoth meats as mammoth meals and made enough profit to buy back my frozen orbs and still be left with a lot of gold. I determined the need and used that need to my advantage.

2. Determine gluts. Not too long ago I picked up 20 stacks of netherweave for 2g50 a stack which was exceptionally low for my server. I couldn't resell the netherweave due to the market being covered in people trying to sell netherweave but I managed to get my netherweave crafted into stuff which I then disenchanted selling the enchanting materials for quite a profit (at least a hell of a lot more than the 2g50 a stack I paid). Using raw materials from a market that is flooded with said raw materials is a very good way to turn a profit.

3. Determine shortages. There are shortages. Keep an eye on trade for people asking for specific things. If the thing is not on the AH and people are asking for it in trade then they are willing to pay a premium for the item once it does get put on the AH. A shortage is different from a need in that needed items will always be needed, a shortage may occur for very off-beat items (levelling gear for example) which no one really needs but a lot of people would want to have. If you can supply a shortage with your goods then you are practically guaranteed a profit. Unfortunately unlike needs shortages go away and may never come back. But keep in mind... there are always shortages somewhere.

4. Re-evaluate professions. You have crafting professions, or at least you're very likely to have them. Go through each item on your profession list and have a look at what the raw materials cost and what the end-product goes for. Normally you won't be able to turn a profit but every profession has a few items in there that can turn the raw materials you need into a profit.

Never stop researching your markets. All good business ventures go down the drain at some point or the other. Just because you can make a profit selling x now doesn't mean you'll be able to sell x tomorrow. Keep an eye out for opportunities.


Keeping track

I know you think you'll remember all of it. And maybe in the beginning when you have 1,2 or 3 little business ventures you will... but at some point you're going to have to keep track of how much you make and how much you spend for each of your little business ventures.

Determining what raw materials cost on your realm and how much they would have to cost (max) for you to turn them into a profit is also worth noting down.

If you do not keep track of your business ventures you will eventually have a few business ventures that seem to be profitable but really aren't. In the end if something takes 1h of your time and you make 200g then you need to ask yourself if you could make the same amount of gold doing dailies or something else. If the answer is yes, then why are you doing it?
If you can't provide a good reason then you should probably find something else to spend your time on.


Grinding / Farming

Grinding and farming generally isn't needed when playing the AH game. However if an hours worth of grinding can fork you a tremendous profit then there really is no shame in getting down and dirty with some monsters especially if you can also gain xp at the same time.

My paladin has been farming some rhino meat for a while to supply the huge demand that was present at the time based on the cooking daily. I made a good chunk of gold from the rhino dog sales and half a level to boot.

Grind and farm when it is profitable to do so. If you can do something else to make you more money then why grind in the first place?

In the end you would ideally want to bring your grind/farm time to 0. This is very much possible... but don't be so shortsighted as to say farming/grinding is for idiots because every now and then you can make some serious gold by grinding the right things.



Before I leave you to your thoughts I'll leave you with a quick comment: smaller stacks sell better than bigger ones on the AH. I alway thought that to be obvious and yet I still see a lot of people trying to sell a full stack of frozen orbs on the AH for 1000+ gold and be surprised no one ever buys it even if they sell if for half the average price. No one wants to spend 1000+ gold on a stack of frozen orbs unless they intend to sell them as singles for a profit in which case you might as well have put it on the AH as singles in the first place and made a decent amount of extra gold.

*edit* If it's hard to read leave a comment and I'll chop it up a little... the post's structure made for some very long sentences that could use shortening. if you tl:dr then it's your loss. I don't cater to people who only want to voice an opinion and not read someone else's.

12 comments:

thedoctor said...

"I don't cater to people who only want to voice an opinion and not read someone else's."

Preach on Captin! You tell em!

This is an EXCELLENT guide for people that are thinking about "playing the AH".

I don't know if you could explain it any better then what you did...I especially like the part where you stated the reasonable time expected rather then what everyone else states...ie - "ZOMG, MAKE 5000G A HOUR!!"

I posted this on my blog, let me know if you have a problem with that. =D

Captain The First said...

@thedoctor:

Link away, I don't mind link love. You can even take the post content and rewrite to be a little more clean since I never really bothered to double check my draft.

There's also a lot of additions that come to mind which I hope to jot down at some point.

And the whole tl:dr and l2p thing definitely is going to get blogged on :P although it'll probably be a rant hehe.

How are your finances doing anyway?

Darraxus said...

I prefer to farm and play the AH when I have time personally. Also, you are spot on with sell in small stacks. I sell stacks of two crystallized fire for 14.5 gold. Eternal fire only goes for about 38-42 gold on my server. I getting people to basically pay 72.5 gold per eternal thru the power of small stacks. People dont always look at the alternatives, and would rather spend less money even if it is a much higher percentage. If it were me personally, and I needed two crystallized fire I would buy and eternal, beark it down, and sell the leftovers for a profit.

Anonymous said...

One other thing I would add, get to know your guildmasters on your server. Many don't have time to repost and are happy to use you as a fence to fund the guildbank.

-Someone who posts 1500 auctions a day on a small server. I am the AH :)

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