People often think of micro-transactions as small amounts of money spent on game items such-as powerful swords and character outfits. The most profitable free-to-play games optimize their gameplay and pricing structure to squeeze every ounce of profit from the whales (the small group of people who are big spenders in free-to-play games).
Some label this practice as malicious, but it's a difficult system to argue against. Players pay for game content that they want, and developers get to keep their children fed.
Occasionally a system arises that acts as a hybrid model, and players are able to make transactions directly with other players for game items. Some games, such as Diablo 3, have systems built-in for these transactions. While the Diablo 3 auction house has its own share of problems, the system at least has some form of moderation.
However, the practice of selling game items for real money also exists in games that specially prohibit such transactions. Since these games prohibit the sale of game items for money, the developers have very little control over the black market economy that forms as a result.
Players have been selling game items directly to one-another since the start of MMOs, but recently this practice expanded into the mobile, free-to-play market space. Since mobile, free-to-play games are still a relatively new genre, the developers have no experience dealing with black markets born from their games. This creates an open frontier for these black markets, where exploits run high and the profits are explosive.
The most extreme case of which is a Rage of Bahamut, a virtual card game of sorts akin to Magic the Gathering. Players spend game currency (which players can buy through micro-transactions for real-world money) on virtual booster packs with random cards. The game offers increasingly expensive tiers of booster packs; the more players spend on a booster pack, the better their chances of finding rare cards. Rage of Bahamut currently sits atop both the App store and Google Play store as the highest grossing game, and pulls in an estimated $5-10 million a month.
However, players can also automatically obtain rare cards through a referral system. If a player can convince their friend to sign up for Rage of Bahamut (and enter the player's referral number), the player automatically receives a free random “rare” card.
Through Rage of Bahamut, players can sell cards to other players for in-game currency. As one might imagine, this opens up the game to a massive network of black market transactions. Players easily connect through various forums on the internet, and use the trading system (alongside PayPal) to directly sell valuable cards to other players.
This kind of activity is prohibited by the game's EULA and can result in an account ban, but the frequency of abuse is so high that developers have a hard time enforcing these bans.
Rage of Bahamut has a referral system where players get a substantial amount of in-game currency in addition to one randomly-selected rare card if a friend creates a new account using the player's referral code. And Rage of Bahamut enthusiasts are rather persistent about making their referral code readily available.
Many business-minded players create new accounts using their own referral codes to obtain valuable cards and stockpile game currency, and abuse the referral system to make a profit. The next stage of exploitation comes when players create macro scripts that constantly create new accounts using their personal referral code. These entrepreneurs can make an insane amount of money without even having to play the game. Low-level cards go from $10-$20 each, while high-level cards can reach $500+.
Now that the setup's out of the way; time to get a bit personal.
About a month ago, my girlfriend started playing Rage of Bahamut quite obsessively; logging multiple hours a day into the online game. A week after she first started, messages appeared in her inbox from random players offering to pay her $60-$100 for some of her rare cards. She initially wrote them off as the work of a scammer, but the messages kept coming in from many different sources. Finally she caved.
After checking to make sure it wasn't part of a scammer's scheme, she decided to go through with a sale (proper precautions were taken to assure that the other account never had access to her banking information, the transaction was completed through PayPal). The entire transaction was completed within five minutes, and she came away $80 richer.
Confident after the first sale, she further explored the black market of Rage of Bahamut. Her transactions continued, and so did her profit. Using various Rage of Bahamut message boards and forums, she built up a list of contacts and buyers. This network exchanged exploits and tips to get the most out of card farming, and shared their profits from the game. Slowly, she dipped her toe into a market that would be considered an organized crime ring if it were dealing in real-life goods.
Before long, my girlfriend wrote up her own script that created new accounts that farmed the referral system for rare cards and game currency.
Many of the people in her network reportedly made over $250,000 in a few months by running over 1,000 account creation scripts simultaneously. One of them was even stockpiling cards in an attempt to crash the game's economy by flooding the market.
The developers of Rage of Bahamut eventually caught onto the referral code exploit scripts and released a patch to prevent users from running scripts, from Android devices only. Which is a bit absurd, given that most of the users who run scripts do from an Android emulator, and found ways around the patch within the first day.
However, this patch prompted my girlfriend to leave the black market Cards of Bahamut business after making around $900.
Though this process may be seen as sketchy by some, there's nothing illegal about farming and selling virtual cards. This method applies to many games, and has created a way for certain people to make obscene amounts of money with very little work.
As the free-to-play market comes into its own, we will see a rise in video game black markets. Developers will undoubtedly look at the financial success of Rage of Bahamut and attempt to structure their game in a similar manner, but these developers need to first solve the black market problem before the issue spins completely out of control.