by Azure Bonds, special HSM guest contributor

On December 3rd, Lockwood Studios introduced a new venture into Home, the Auction Machine. The auctions went live on December 19th, with a variety of items available for Home users to bid on. Items ranged from clothing, jewelry, two unique costumes from their Panthabot line, and a rideable mount. The auction was advertised as an experiment to see how it would function in Home.

After the auctions were over, I went through the closed auctions and compiled the data below, to see if the Auction Machine was a success or not for Lockwood. Based on the average amount paid per item in the auctions as compared to the estimated cost of the item in the store, and based on the auction’s mechanics, I believe the Auction Machine was an unqualified success for Lockwood.

A set number of each item was listed as available. Jewelry was set at ten, clothing and the rideable mount at twenty and the Panthabots at fifty per auction. The number of items available per auction and the minimum bid were both listed on each auction.

Lockwood’s decision to charge the winners what they bid was the correct financial decision. An extremely fair minimum bid was posted. The minimum bid they placed was below the price that they would charge in the store. A “token tax” of 10% of losing bidders was also included, so that even if bidders didn’t win an item, they were still charged for using the machine.

The Auction Machine is very similar to eBay, obviously. The person holding the auction (in this case Lockwood) puts a fair or lower minimum price on their items (usually) than what they expect to receive. In most cases, the winning bid is higher, sometimes significantly so, than the opening price. It’s not the fault of the person placing the auction if people want to pay more. Humans are competitive by nature. I know I got caught up in a bidding war on eBay once, and paid probably $15.00 more for an item I won just because the other person kept upping the bid on me.

The team at Lockwood understands marketing, and has a firm grasp on the pulse of Home.

In the marketing realm, using Lockwood tokens instead of cash was a brilliant decision. Why? Look at the high bid for Kiburi the Lion for the answer. Which sounds like more? 5000 tokens or $45.00? If using cash, would this person have bid $45.00 for that item? Probably not. So by using tokens instead, it gives the appearance that the bidder is not spending real money.

When using a credit card, the average consumer doesn’t think of the price at the time of purchase. Just swipe the card and go. It’s a similar situation here. Bid the tokens and go. Also, the average Home user is probably in the seventeen- to twenty-five-year-old range. And a good percentage of people in that age group don’t really have a firm grasp on their finances (or budgeting).
On the other hand, can you imagine the cries for blood if the items were placed in the store for the average price paid per item in the auction? Again, look at the Linked Chain – Male. I would think the price in the store would be $1.49. Compare that to the average price in the auction of $14.00. That’s a 1000 percent increase in price. Not bad… Not bad at all.As for the pulse of Home, everyone knows that a large portion of the community likes to see their names at the top of the leaderboard. That is the main reason why I think there were such large bids; knowing that, Lockwood gave users that option. Another thing that might have led to the large bids was the assumption that only one was available. But as indicated earlier, Lockwood listed the number available in each auction. Also, people on Home like rare items; having things that other people don’t have and can’t get. I’m guilty of that with my EVO Arcade Joystick companion. I love the little guy, and show him off quite often. Could Lockwood have made more money selling the items in the store directly? Absolutely they could have. Take the Linked Chain – Male. They made a rough total of $280.00. Selling it in the store at $1.49, I would guess they could have made easily a few thousand, and probably more.

(It’s worth pointing out that this is four dollars more than the Mech Jets. Remember uproar over the price glitch that occurred at their debut? – Ed.)

So from a purely financial point of view, Lockwood probably made only a small percentage of what they could have made placing the items in the store at the estimated price or even the minimum bid price. But based on the cost per make and the return, I would think they accomplished what they set out to do with the Auction Machine: to make a decent profit.

Lockwood is happy because they made money. Sony is happy because they made money. The auction winners are happy because they have a rare item that only a set number of people will ever have. On the flip side, non-winning bidders are not happy because they lost 10% of their bid (this was a known condition, not something sneaky Lockwood did), and the winners who bid a high token amount are probably not happy once they realize how much their bids are in actual cash, but they have no one to blame but themselves.

There are a couple of items that I am unsure of, as I did not place a bid or win any of the items.

1. Did the user have to have the tokens on hand to cover the bid before bidding?
2. If they didn’t need to have the tokens bid on hand, was there a penalty for a user not completing the agreement upon auction close?
3. Why were the two panthabots (Gladius and Khanda) advertised as “Super Rare” when there were 100 of each available, compared to the two clothing bundles with eighty available and the rideable mount with 40 avaliable being advertised as “Rare?”

Other questions:

1. Will other developers follow this example and create Auction Machines of their own?
2. If other developers follow suit, what changes might they make?
3. What item (generically speaking – personal space, for example), if added, would tempt more people to participate in a Home auction?

For the last few days of the auction event, the Auction Machine was not allowing users to bid or increase their bid. The bug was found in the system when the Lockwood team returned from their Christmas break, but too late to do anything about it. A post by Lockwood Tim on the EU Forums gives the details of this bug, and is included at the end of this article.

Here are the results of the finished auctions. Lockwood should not be vilified for the Auction Machine. The Auction Machine is not evil. It is a carefully thought out and designed mechanism to make Lockwood money. All they are doing is using proven marketing strategies and knowledge of Home to generate revenue. I believe that due to the success, even with the lost revenue from the Auction Machine being non-functional for the last few days, that Home users will be seeing more auctions in the future from Lockwood, and perhaps by other developers as well. The only thing I disagree with is the 10% token tax for non-winning bidders.

Notes:

1. All dollar amounts are estimates.
2. The 10% token tax by non-winning bidders is not taken into account, as I didn’t have that information.
3. The tokens purchased by non-winning bidders to participate are not taken into account, as I didn’t have that information.
4. The dollar amounts listed are based off of the largest token package available to cover the tokens noted. Item Grand Totals may be different than the individual auction totals added together.
5. Not all users spent $50 for 6240 tokens, and the smaller token packages have a higher cost per token. Therefore the actual amount of money received is also higher.

Token prices:
80 tokens = $0.99
480 tokens = $4.99
1180 tokens = $10.99
2780 tokens = $23.99
6240 tokens = $49.99

Drey Limited Edition Sunglasses – Male:
Estimated Store Cost: $1.49
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 3000 tokens = $25.00
Auction 1 Total Winning Bids: 7483 tokens = $61.00
Auction 1 # of Winners and Average Price: 10 Winners/748 tokens = $6.00
Auction 2 High Bid: 965 tokens = $9.00
Auction 2 Total Wining Bids: 6156 tokens = $49.00
Auction 2 # of Winners and Average Price: 10 Winners/616 tokens = $5.00
Item Grand Total Winning Bids: 13,639 tokens = $105.00
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 682 tokens = $5.25

Kiburi the Lion Rideable Mount:
Estimated Store Cost: $2.49
Minimum Bid: 250 tokens = $2.00
Advertised Number of Winners: 20 winners per auction
Auction 1 High Bid: 5000 tokens = $45.00
Auction 1 Total Winning Bids: 34,678 tokens = $325.00
Auction 1 # of Winners and Average Price: 20 Winners/1734 tokens = $16.25
Auction 2 High Bid: 1501 tokens = $16.00
Auction 2 Total Wining Bids: 13,182 tokens = $100.00
Auction 2 # of Winners and Average Price: 20 Winners/659 tokens = $5.00
Item Grand Total Winning Bids: 47,860 tokens = $375.00
Total Number of Winners: 40 winners total for all auctions
Average Cost per Item (All Winners): 1197 tokens = $9.00

Figment Occasion Gown and Shoes – Female:
Estimated Store Cost: $3.99
Minimum Bid: 250 tokens = $2.00
Advertised Number of Winners: 20 winners per auction
Auction 1 High Bid: 3500 tokens = $38.00
Auction 1 Total Winning Bids: 23,275 tokens = $190.00
Auction 1 # of Winners and Average Price: 20 Winners/1164 tokens = $9.50
Auction 2 High Bid: 2200 tokens = $22.00
Auction 2 Total Wining Bids: 18,271 tokens = $150.00
Auction 2 # of Winners and Average Price: 20 Winners/914 tokens = $7.50
Auction 3 High Bid: 2800 tokens = $24.00
Auction 3 Total Wining Bids: 16,378 tokens = $140.00
Auction 3 # of Winners and Average Price: 20 Winners/819 tokens = $7.00
Auction 4 High Bid: 3100 tokens = $26.00
Auction 4 Total Wining Bids: 27,250 tokens = $230.00
Auction 4 # of Winners and Average Price: 20 Winners/1363 tokens = $11.50
Item Grand Total Winning Bids: 85,174 tokens = $700.00
Total Number of Winners: 80 winners total for all auctions
Average Cost per Item (All Winners): 1065 tokens = $8.75

Figment Signature Watch – Male:
Estimated Store Cost: $1.49
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 2200 tokens = $21.00
Auction 1 Total Winning Bids: 12,967 tokens = $105.00
Auction 1 # of Winners and Average Price: 10 Winners/1297 tokens = $10.50
Auction 2 High Bid: 2001 tokens = $20.00
Auction 2 Total Wining Bids: 12,605 tokens = $100.00
Auction 2 # of Winners and Average Price: 10 Winners/1261 tokens = $10.00
Item Grand Total Winning Bids: 25,572 tokens = $200
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 1279 tokens = $10.00

Sapphire Droplet Earrings – Female:
Estimated Store Cost: $1.49
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 1100 tokens = $11.00
Auction 1 Total Winning Bids: 8547 tokens = $75.00
Auction 1 # of Winners and Average Price: 10 Winners/855 tokens = $7.50
Auction 2 High Bid: 2368 tokens = $22.00
Auction 2 Total Wining Bids: 10,063 tokens = $85.00
Auction 2 # of Winners and Average Price: 10 Winners/1006 tokens = $8.50
Item Grand Total Winning Bids: 18,610 tokens = $150.00
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 931 tokens = $7.50

Figment Occasion Suit – Male:
Estimated Store Cost: $3.99
Minimum Bid: 250 tokens = $2.00
Advertised Number of Winners: 20 winners per auction
Auction 1 High Bid: 1000 tokens = $10.00
Auction 1 Total Winning Bids: 7183 tokens = $60.00
Auction 1 # of Winners and Average Price: 20 Winners/359 tokens = $3.00
Auction 2 High Bid: 2000 tokens = $20.00
Auction 2 Total Wining Bids: 8865 tokens = $77.00
Auction 2 # of Winners and Average Price: 20 Winners/443 tokens = $3.75
Auction 3 High Bid: 1400 tokens = $15.00
Auction 3 Total Wining Bids: 6373 tokens = $52.00
Auction 3 # of Winners and Average Price: 19 Winners/335 tokens = $2.75
Auction 4 High Bid: 1400 tokens = $15.00
Auction 4 Total Wining Bids: 15,215 tokens = $130.00
Auction 4 # of Winners and Average Price: 20 Winners/761 tokens = $6.50
Item Grand Total Winning Bids: 37,636 tokens = $300.00
Total Number of Winners: 79 winners total for all auctions
Average Cost per Item (All Winners): 476 tokens = $3.80

Gold Cascade Earrings – Female:
Estimated Store Cost: $1.49
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 3000 tokens = $25.00
Auction 1 Total Winning Bids: 10,135 tokens = $80.00
Auction 1 # of Winners and Average Price: 10 Winners/1014 tokens = $8.00
Auction 2 High Bid: 2999 tokens = $25.00
Auction 2 Total Wining Bids: 12,113 tokens = $100.00
Auction 2 # of Winners and Average Price: 10 Winners/1211 tokens = $10.00
Item Grand Total Winning Bids: 22,248 tokens = $185.00
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 1112 tokens = $9.25

Figment Signature Ring – Male:
Estimated Store Cost: $0.99
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 1300 tokens = $14.00
Auction 1 Total Winning Bids: 4576 tokens = $48.00
Auction 1 # of Winners and Average Price: 10 Winners/458 tokens = $5.00
Auction 2 High Bid: 810 tokens = $9.00
Auction 2 Total Wining Bids: 5778 tokens = $49.00
Auction 2 # of Winners and Average Price: 10 Winners/578 tokens = $5.00
Item Grand Total Winning Bids: 10,354 tokens = $75.00
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 518 tokens = $3.75

Figment Chronograph Watch – Male:
Estimated Store Cost: $1.49
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 810 tokens = $9.00
Auction 1 Total Winning Bids: 6599 tokens = $51.00
Auction 1 # of Winners and Average Price: 10 Winners/660 tokens = $5.00
Auction 2 High Bid: 250 tokens = $2.00
Auction 2 Total Wining Bids: 1297 tokens = $12.00
Auction 2 # of Winners and Average Price: 10 Winners/130 tokens = $1.25
Item Grand Total Winning Bids: 7896 tokens = $63.00
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 395 tokens = $3.15

Special Edition Panthabot Khanda – Female:
Estimated Store Cost: $9.99
Minimum Bid: 400 tokens = $4.00
Advertised Number of Winners: 50 winners per auction
Auction 1 High Bid: 2140 tokens = $21.00
Auction 1 Total Winning Bids: 28,067 tokens = $245.00
Auction 1 # of Winners and Average Price: 48 Winners/585 tokens = $5.00
Auction 2 High Bid: 2239 tokens = $21.00
Auction 2 Total Wining Bids: 16,981 tokens = $135.00
Auction 2 # of Winners and Average Price: 24 Winners/708 tokens = $5.75
Item Grand Total Winning Bids: 45,048 tokens = $370.00
Total Number of Winners: 72 winners total for all auctions
Average Cost per Item (All Winners): 626 tokens = $5.14

Linked Chain – Male:
Estimated Store Cost: $1.49
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 2150 tokens = $21.00
Auction 1 Total Winning Bids: 14,901 tokens = $125.00
Auction 1 # of Winners and Average Price: 10 Winners/1490 tokens = $12.50
Auction 2 High Bid: 3000 tokens = $25.00
Auction 2 Total Wining Bids: 18,314 tokens = $150.00
Auction 2 # of Winners and Average Price: 10 Winners/1831 tokens = $15.00
Item Grand Total Winning Bids: 33,215 tokens = $280.00
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 1661 tokens = $14.00

Jade Celtic Earrings – Female:
Estimated Store Cost: $1.49
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 1000 tokens = $10.00
Auction 1 Total Winning Bids: 6034 tokens = $49.00
Auction 1 # of Winners and Average Price: 10 Winners/603 tokens = $4.90
Auction 2 High Bid: 2000 tokens = $20.00
Auction 2 Total Wining Bids: 8499 tokens = $75.00
Auction 2 # of Winners and Average Price: 10 Winners/850 tokens = $7.50
Item Grand Total Winning Bids: 14,533 tokens = $120.00
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 727 tokens = $6.00

Special Edition Panthabot Gladius – Male:
Estimated Store Cost: $9.99
Minimum Bid: 400 tokens = $4.00
Advertised Number of Winners: 50 winners per auction
Auction 1 High Bid: 4500 tokens = $43.00
Auction 1 Total Winning Bids: 40,312 tokens = $330.00
Auction 1 # of Winners and Average Price: 50 Winners/806 tokens = $6.60
Auction 2 High Bid: 3921 tokens = $46.00
Auction 2 Total Wining Bids: 46,315 tokens = $375.00
Auction 2 # of Winners and Average Price: 50 Winners/926 tokens = $7.50
Item Grand Total Winning Bids: 86,627 tokens = $715.00
Total Number of Winners: 100 winners total for all auctions
Average Cost per Item (All Winners): 866 tokens = $7.15

Ruby Choker and Bracelet – Female:
Estimated Store Cost: $1.49
Minimum Bid: 60 tokens = $0.80
Advertised Number of Winners: 10 winners per auction
Auction 1 High Bid: 2301 tokens = $22.00
Auction 1 Total Winning Bids: 19,887 tokens = $160.00
Auction 1 # of Winners and Average Price: 10 Winners/1989 tokens = $16.00
Auction 2 High Bid: 3000 tokens = $25.00
Auction 2 Total Wining Bids: 21,298 tokens = $180.00
Auction 2 # of Winners and Average Price: 10 Winners/2130 tokens = roughly $18.00
Item Grand Total Winning Bids: 41,185 tokens = $340.00
Total Number of Winners: 20 winners total for all auctions
Average Cost per Item (All Winners): 2059 tokens = $17.00

High Bid Only Grand Total: 70,955 tokens = $560.00
Grand Total Winning Bids: 489,597 tokens = $3925.00

The response from Tim at Lockwood is as follows:

Hi all,

Our intention with the Auction Event was never to trick, swindle or deceive any of you out of tokens! The heart of the Auction Machine’s problem was a bug in its code that we didn’t discover until Tuesday 2nd, when returning from our Christmas break, which was sadly too late to be able to fix it. Due to this issue, some people were unable to increase their bids, and therefore the entire purpose of an auction event was defeated.
We’re really sorry about this and for any disappointment or frustration caused. Hopefully you know that we would never wish this upon you, let alone intentionally build it into any of our content – that would just be crazy!
As some of you may know from pre-Auction Event promotion, we were trialing this system to see how it would work within Home; so at least the issues that cropped up will allow us to never make these mistakes again for future events – if we decide to run another that is.
If you have any further questions regarding this please email me here: contact@lockwood-studios.com

Kind regards,

Tim

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2 Responses to “Lockwood’s Auction Machine: Success?”

1. Gary160974 says:

   January 15, 2013 at 3:24 pm

   I won a male figment suit and spent much less than people do on diamond or gold suits and currently its rarer. Well thats what the idea of auctions is isnt it. Some of the bids were stupidly high, probably because it was new or the user really doesnt understand auction rules. Is the risk too high now that people have got the idea of it.

   Reply
2. Phoenix says:

   January 16, 2013 at 12:50 pm

   Thanks for this article Norse,
   I wondered what happen to the actions. I also wondered if it was just an experiment in the first place, or if it was permanent. This answers my questions.

   Reply