Wednesday, May 19, 2010

The AH food chain

Today's entry is on the subject of markets, niche markets, and all the things that exist underneath them. This is something that not many take the time to figure out and understand even though it is absolutely essential to getting ahead in the AH game. With every market that is not RAW materials, there will always exist at least one secondary market that decides how the primary one will fluctuate. You need to be aware of these sub markets at all times as they will decide if you should: continue crafting whatever it is that you're crafting, up and sell the materials themselves, or hold out on selling anything at all.

I cannot stress enough how important it is to be aware of what secondary markets you are relying on. Even if you have people CoD'ing you materials each and every day they will eventually look at the AH and if they find you're screwing them out of a significant amount with the CoD they won't do any more business with you. This is where honesty comes up as being very important. If nothing else the secondary markets (SM) will give you small clues here and there as to a particular direction your primary market (PM) might be taking.

With that being said and proper emphasis placed, here's the general food chain of a few markets to give you a small demonstration of what I'm talking about.

Saronite ore = Saronite bars = titanium xmutes = titan steel = toc epics

Here's that same flow with the prices of only the raw materials.

16g/stack = 50g/stack = 50g/2.5 = 90g/1 (minus 30g for eternals) = 44g profit

That 44g becomes 440 when you craft 10x titansteel bars. Add in another 960 for crusader orbs and 40g for the saronite dirks (for the razor plate) you're looking at about 1500g or so of an investment. Then you turn around and sell that bad boy for 3,800. All of that from a single purchase of a few 16g stacks of saronite ore.

And here's a simple one for glyphs

Adder's tongue = IotS/snowfall = glyphs + scrolls

Now materials

15g/stack = 8 IotS + 2 snowfall = 8 glyphs + 2 scrolls

Ok that's just the basic crafting chain, shouldn't be anything new to most. Now taking a sharp turn to the left we're going to take the same thing but get much more abstract with it. Remember me saying that you have to be able to think abstractly to do well? Well here you go.

Price of saronite ore =

price of saronite bars
Price of eternal fire, shadow, earth
Price of titanium bars
Price of titansteel bars
Price of titansteel based products

Price of the above = amount of interest = increased farming = increased supply = market flooding = price drops

And how about glyphs? Their supply is based off the price of frost lotus actually, NOT the price of herbs.

Price of frost lotus =

price of herbs native to sholozar basin
Price of eternal life
Price of select flasks/elixirs
Price of ALL inks
Price of fortitude scrolls
Price of inscription off hands
Price of darkmoon card crafting
Price of DMC: Greatness

Now going with the glyph example, what happens if we see a huge spike in demand for flasks? That means that every single thing in that list will be effected. With the assumption that all supplies are essentially infinite in that you can't go skinning gorillas in sholozar and eventually have them go extinct we can apply the basic economic formula of more demand = higher prices = increase in supply, so you can see how the rest will be effected.

~ More flasks need to be supplied so frost lotus goes up in price.

~ The supply of non-flask herbs will greatly increase, thus dropping their price greatly.

~ Prices on all inks will drop as the scribes are buying up and milling the cheap deadnettle and adder's tongue.

~ Eternal life prices will drop due to the mass farming being done

~ Prices of DMC will go down as the crafting price is far less causing mroe people to invent into them

~ Fort scrolls will go down due to the flood of snowfall inks (depending on the price of frozen orbs, the off hands may be effected as well).

Are you getting the idea of just how deep the proverbial rabbit hole can go? Now lets have us some devious fun shall we? What happens if lets say... YOU decide to gobble up every single flask you see on the AH? What happens if you keep at this for a week? Well you can surely imagine that all of the above would go down, but how does this benefit you aside from giving you a shit load of extra flasks? Do this during a time when supply of flasks are high, and therefore lower price on frost lotus. In addition to buying all the flasks, also buy up all the frost lotus and associated herbs. Watch then as more and more herbalists will crop up farming to their wits end to meet this "unexpected" demand spike.

Prices will rise on all flask related materials, SM, and PM. Now there's you behind the curtains with a bank tab filled with all of these assorted goodies and when the time is right prices are leveling out or showing a slight decline... baffam! Start listing all the stuff you bought for super cheap the week before from flasks to lotus to lichbloom, to snowfall inks, and absolutely everything that can be crafted with them. Lo and behold you have manipulated almost a dozen different markets with a simple purchase. You are now forcibly flipping the horde of items you were stokpiling for a massive profit. Next stop, saronite!

Wrapping up all of that non sense, these sort of massive market shifts usually don't take place over night. This takes place because on every server there's several big time AH players that buy up everything they see in a certain price range. Hell you might even be one of them or have a hand in it. If you remember the last patch and how it effected frozen orbs and everything they're needed for you can see the truth in this. Granted that was a very limited effect, but that does not make it's reach and effect any less profound. Mind you I said usually as with the example I just illustrated, it can indeed happen be it by intent or mere coincidence. So keep an eye out next time you're buying mats eh?

Thanks for stopping by!


  1. *** 15g/stack = 8 IotS + 2 snowfall = 8 glyphs + 2 scrolls ***

    Please be careful when making comments like these - as it is far more common to only get 6 IotS and 1 Snowfall per stack of high Northrend herbs.

    To err on the side of caution, should always go with the rough "minimum" that you can get instead of the rough "maximum" that you can get - that way, there's no delusions of folks reading your comments and wondering why they aren't getting the same as you.

  2. Awesome stuff. Just started reading your blog and I can't get enough. Especial since we both play Horde on Ysera and you have taken over my spellthread business. (Oh Deadfish...)

    Congratulation on the million gold reached. And I thought the server AH was too small to reach gold cap. Let alone 5 times! Was I ever wrong. Now please leave the AH so I can make some gold too... :)

    Again very good blog. I have read all post up to March so far and I plan to read them all.

    Keep up the good work,

  3. @ Mulegirl
    Zomg I know you! I'm of the mind that any server is big enough to hit the cap, you just might need to work more markets than your standard niche to get there any time soon. I'm glad you enjoy the blog as you've definitely given me a fight worth remembering hehe.

    I've mostly left like 80% of my markets, though spellthreads are still one of the ones I keep up with. Admittedly not as much as before though. There will always be markets open to make a killing in, it's just a matter of finding a certain demand and supplying it. Like you and your epic ammo that I noticed you basically dominated for a good amount of time.

  4. @Stokepile

    I have noticed you left some markets. Such as netherweave bags. :) I just created 70+ yesterday and they do sell like hot cakes.


  5. this is a great exposition of the way I got to 100k back in TBC (I've never actually bothered to hit the cap, but I think hitting 6 figures in TBC was roughly equivalent to capping in wrath).

    My first 1-2k was made just selling my own stuff and doing auctioneer resale scans (well back when that was just the scan). By the time I'd made that money, I'd been scanning the auction house for a few weeks, and had started to pick up some of the patterns, and researched a bunch of the crafting arbs and market relationships. So I dabbled with really playing markets, I'd have a sense of when to buy it all up, even when there was a lot, and when to sell, pretty soon I was over 10k, bought a 3-tab guild and really started going to work.

    I never did any big craft industry, and in fact, typically found myself pushed away from good craft industry markets by the people who were working goblin-style. I would buy everything up, but the stuff would just keep coming. Crazy thing is, I usually ended up making money on my market control even against goblins if they weren't willing to camp me. they would sell me 20 items for 10g, I would sell 5 for 20g, then I'd buy another 20 for 10g, and sell 5 more for 20g before they relisted, etc. At the end of the thing, I basically had a huge pile of this stuff that was worth 10-20g ea, that I had effectively paid 5g ea. for. If I decided I hated the market, I could sell it all out undercutting the goblin at 7-8g and end up making a profit on my whole interaction. The problem is that it just didn't make as much gold/hr as doing the same stuff in markets that couldn't easily be resupplied, or when I operated on both the crafted market and the mat market.

    So after a while, I got to where I focused solely on mediumprice very high volume farmed items (LPS/LBS/SRS/GPE/GEE/GNE/Illdust/rep items), high price farmed items (primal nether/nethervortex/HoD/MotI) and very high price, low-medium volume crafted items (spellthreads, leg armors, crafted gear, cd cloth).

    Not to dissimilar from what I do now in wrath, just the new versions of everything.

    My #1 money maker was large prismatic shards, and gettign people to shatter void crystals. I bought so many of those void crystals for 10-15g and then sold 2 shards for 20g after paying somebody 1-2g ea to split them. outrageous. What put me to 100k was when mid-level guilds started emptying their guild banks near the end of TBC as it became clear that their guild wouldn't be getting that full set of shadow resist gear etc. I bought up shitloads of hearts of darkness for 1-200g when I could still sell them slowly for 4-500g. Marks of the illidari for 4-5g when I could get 20-30g for them. Got stuck with a stack or so when the prices finally crashed for real, but I was already many thousands of gold in the black by that point.

    Then I had too much life happening when wrath hit. I would have capped easily within the first month the way volatility was working, but the 50k gold I invested as I figured out what the key mats were at the start of wrath, ended up losing half its value when I failed to log into the auction house for almost 2-months, and typical start of expansion deflation killed me. I wasn't around for the beginning of TBC or I probably would have been a lot more careful about stockpiling so much.

    Anyway, you are the first ah writer to really talk coherently and accurately about the kind of forces that I was playing with when I was the king of the forgotten coast-US auction house.

  6. "15g/stack = 8 IotS + 2 snowfall = 8 glyphs + 2 scrolls"
    Just to reiterate that, at least when I left 9 months ago, the drop rate from Adder's Tongue was (somewhat conservatively) estimated at 6 IotS and 1 Snowfall.

    It doesn't seem like a lot, but who buys 1 stack? I buy scores of stacks when I can. In your model, each "item" has a cost of about 1.5g at your listed cost of AT. The more conservative model pans out to 2.142g per "item" - almost 1.5 times the cost.

    Basically, if someone works off the assumption that AT = 8 glyphs and 2 scrolls and tries to price accordingly, there's a high risk of loss if there's a goblin pushing margins to razor thinness.

    Personally, I don't mess with any glyph that doesn't look to have a "market" price of 10g or more, at least not right now, but many folks use the carpet bombing methodology.

    At any rate, I love the blog, just wanted to raise an eyebrow about that drop rate. Seems a bit high to me.