Entrecard black market?
Written on June 25th, 2008 by multippt
Sounds like Entrecard’s new “market price” model is being manipulated by others who are selling credits way below the official price set by Entrecard. Predatory pricing is not an advisable practice as it results in rapid devaluation of Entrecard credits, or inflation which would lead to long term consequences.
Nonetheless, it does raise a pretty interesting question – is 1000 Entrecard credits really worth $9.50? If others are able to price even over 7000 credits at a mere $17 on auction sites like Ebay, it just goes to show that perhaps Entrecard overpricing its own credits. A more surprising find is that most of the auctions go for less than half of the price allocated by Entrecard.
On the other hand, the price of $9.50 is certainly justified in some cases, particularly in the eyes of Entrecard and the majority of users. After all, this $9.50 isn’t really going to go to the pockets of Entrecard. Rather, it goes back to the community, and if you happen to be one of the lucky few who got chosen to sell credits back to Entrecard, you’ll largely benefit from this.
However, for those who unfortunately many who aren’t “selected”, the option of selling credits elsewhere is probably better than ideal. After all, what would be a better way to “waste” your thousands of credits other than simply spending all of it on buying ads? Selling credits for some cash probably beats having your credits sit in your account when you have no idea what to do with it.
Nonetheless, I feel that the price given by Entrecard should not change. Rather, the price should remain fixed for the coming days until a conclusion has been reached on whether the pricing decision made by Entrecard is suitable or not. In the meantime, if you do wish to purchase Entrecard credits from Ebay, do go ahead (Entrecard hasn’t forbid that yet), but remember that those sources are not verified, unlike Entrecard which you can be assured you will get your credits. However, I feel that the ultimate solution to the price disputes is that Entrecard should probably do what users on Ebay has done – auction the credits off. A system like this ensures predatory pricing never takes place, and that the prices are decided by the community themselves.
What’s your take on this?
Credits to GrandWealthForever for giving a tip off this.
June 25th, 2008 at 1:22 pm
If Entrecards are allowed to be sold in an open market, then people will always try to undercut one another. That’s the fruits of the open market. If it’s a choice between 1ec for 1c and 20ec for 1c, I know which it is I’m liable to buy.
Correct me if I’m wrong, but the price of a share in a company is worked out by asking people what they are willing to pay for it, and then taking an average of that. That’s what is happening to Entrecredits. The EC admins have decided on a price, but the open market has decided otherwise.
It could be the case that EC’s could only be bought and sold via Entrecard.com, but people will probably find a way around that. It’s the same any time a commodity is given value by people – other people will try to make money off it.
June 25th, 2008 at 1:34 pm
The open market was happy to pay a high price at one time. What happened is a few greedy people didn’t understand basic supply and demand, and drove their own prices down. Rather than use a “For Sale” sign, they put their credits up for auction. No matter what you sell, if you flood the market the price drops. If you announce “1 Cent Starting Bids” and have a set ending date, you will drop the proces down. Each time the same customers bought from the same person, they paid less and less. Other’s saw that lowered price, and never bid more. Foolish yes, and it was a couple of self proclaimed marketers that did it to themselves too.
June 25th, 2008 at 9:38 pm
It is unknown how many credits are being held for sale by Entrecarders who haven’t been chosen to sell via the Exchange and don’t want to sell via ebay. (I’m guessing it is in excess of 200,000 ECs.) Entrecard has sold about 25000 ECs in the last 10 days at $9.50, a slower pace than when the Exchange first debuted. I want to think that Phase II of the Exchange will be a good thing, but I suspect that the market price will hover in the $3-$5/1000 range, as I believe there are more sellers than buyers. I believe that Entrecard should lower their price to $5/1000 and maintain the same $2 margin they have now, which should result in greater sales volume and greater income to Entrecard. I chose $5/1000 based on a very unscientific survey I took and that is the number that seemed to represent the max that most people in the survey would pay.
June 26th, 2008 at 1:52 am
Are you guys socialists then? Who decides the “correct” price?
The value of EC’s is whatever people are willing to pay for them. Let the market decide the price, the more liquid it is the market is the more accurate the price will be.
I can not even begin to list the examples of centrally imposed exchange rates failing.
June 26th, 2008 at 5:52 am
I think maybe $9.50 is a bit too high. But the low prices on the “black” market are too low.
I think Entrecard should have a way to stop folks from selling on ebay or other ways – perhaps with a temporary ban? – with a warning first of course. If they plan to build a market internally I think this will be a necessary step.
Entrecard credits are a virtual commodity – owned and created by Entrecard so they have a right to decide about these things. Even in online gaming – some games do NOT allow their virtual form of curreny to be sold on ebay (some do of course).
It’s not just a matter of building up a real economy and pricing, it is also a matter of trust. If someone gets burned by a raw deal buying entrecard credits from an unknown source – that resentment is going to spill over to Entrecard. So its a win win situation if Entrecard protects buyers. Of course there needs to be a way to sell Entrecard for a reasonable return also (which should be coming hopefully soon through the dashboard **fingers crossed it is soon**)
June 26th, 2008 at 8:38 am
The business plan has been corrupted, that means the time has come to add value to the credits alone, pull ebay out of the loop by making it more worthwhile to spend them here. Open up the stores to more people, allow those stores to open up their sphere of influence to private websites, allow the webmaster to use the EC’s for his own websites personal gain. Your stores are what is in need of the largest work. I have found many here, like myself that Digg, Stumble, Tag, and Technorati fave for free, so the stores become useless.
Think Viacom, Altria, PepsiCo, Coca-Cola…
Diversify son, diversify…
June 26th, 2008 at 12:09 pm
I think the whole thing is silly.
The EC’s belong to Entrecard. Do not let anyone sell them. If any buying or selling is done it should be done through Entrecard.
The problem I see on Entrecard is the about of sites that are just sitting there. I found one that had no post since 2007 this morning.
Instead of going after the fast droppers go after the people that do not drop at all.
Thanks
June 26th, 2008 at 12:10 pm
I think the whole thing is silly.
The EC’s belong to Entrecard. Do not let anyone sell them. If any buying or selling is done it should be done through Entrecard.
The problem I see on Entrecard is the amount of sites that are just sitting there. I found one that had no post since 2007 this morning.
Instead of going after the fast droppers go after the people that do not drop at all.
Thanks
June 26th, 2008 at 12:45 pm
I agree with Russ as well. I run into too many dead sites that I still drop to. I have even liked some of the dead sites, as well as stumbled a few of them. And commented as well.
It is still the old wheat and chaff scenario.
Start looking at these by hand? Good Luck, let us know how it goes with that.
June 26th, 2008 at 8:16 pm
I heartily agree. The government should continue to support the value of the Bhat at all cost.
June 26th, 2008 at 8:33 pm
Trying to reason your way to a correct price is a fools game. Price is what it is. Some of the economic thinking you see here is hilarious.
Price is what a willing buyer will pay a willing seller. If someone undercuts someone and someone is willing to pay, than that IS the price. Collusion never works in the long run.
Remember this, if credits are “really” worth $9.50 per 1000, then you are in effect paying $11 per day for a spot on the top EC sites, or a monthly rate of $356.
Entrecard, cleverly I might add, doesn’t provide any information about traffic about sites you buy ads on. If these same sites were selling ads for cash on the open market, there is probably no way in hell they could be getting $350/month for a 125×125 ad.
If you believe that the top sites are worth over 1,000 credits per day, but not $11 per day, then clearly the credit/dollar exchange ratio isn’t correct. Comparable prices on ProjectWonderful bare this out. (the reason why it might be worth while in terms of credits but not money, is that if you put your ad on a top EC site, you may get people to click on your widget, earning credits back on your investment.)
If Entrecard wants to make credits be a type of currency, then the sure way to failure would be to put price controls on credits. People value credits at different levels. That is what makes the market and why some people will buy and why some will sell at different rates.
The primary reason why $9.50 is way too expensive is that credits are trivial to farm. You can get rid of the easy drop sites, but that wont stop people from putting widgets on tons of semi legitimate sites or scrapper sites.
Again, if two people are willing to engage in an exchange for a price less than $9.50, then any arguments for why the prices “should” be $9.50 is meaningless.
June 27th, 2008 at 12:41 am
I think maybe $9.50 is a bit too high. But the low prices on the “black” market are too low.
Um, no. The low price is what the market has truly valued EC credits at. The official rate is therefore currently inflated and not a good deal.
Commie economics (i.e. price fixing) leads to market failure.
The Market determines the real price and nothing else.
June 27th, 2008 at 2:03 am
Stolen merchandise always cost less than buying it at the store. Now that entrecard is focusing on removing credit farms and fast dropping sites, the price of credits will go up as supply shrinks. Ad prices will go down. People only buy credits because they are dirt cheap. Then they spend them unwisely on expensive ads. That cycle will be broken except for those who truly desire to buy credits rather than drop. Not to mention, a stable credit will bring in real items to purchase in the shop. How many credits would you pay for a year of web hosting or a month of playing a MMORPG?
June 27th, 2008 at 2:25 am
Turnip. You might be right. We’ll have to wait and see.
Nonetheless, setting an arbitrary price for credits just isn’t going to work. I put way more faith in people trying to scam the system. The sites which are being banned now are really obvious ones. It doesn’t take too much to set up a blog, make empty, meaningless posts once every two weeks, and use that as a site to farm credits.
If that gets banned, up the post rate to once every week. Or sell posts on DP. At some point you run into a line of what is a legitimate blog and what is just a bad blog.
I don’t think it is possible to ever make credits stable so long as people can trad them amongst their selves. At least MMOs can control the client and server software. Entrecard can’t do that. All they have is a widget and the rest is out of their control.
The only way Entrecard could possibly prevent this is to ban all private transfers of credits. If they do that, they will basically have given up on credits being some sort of currency (which it will never become for all the above reasons). Then they can have a true monopoly on selling credits.
June 27th, 2008 at 3:52 am
I think $9.50 per 1000 EC is a bit high, especially when advertising on popular sites can be higher than 4000 EC for only 24 hrs. worth of ad space. It seems pretty expensive compared to the other advertising options out there, like Project Wonderful and the like, where advertising can cost as little as 2 cents. The cost of advertising on the same site with EC if their ad queue was up to 2000 credits would be $19. Huge difference.
I think that the price should be set as Tim Neale (above) said in his comment. Let the market set the price. I’ve seen 1000 EC on Ebay sell for $3.25.
June 27th, 2008 at 3:58 am
I think you should let the community decide what the price should be. Therefore, there is no harm for you to auction off the credits at eBay so that others will have better choices and you could sell yours as well.
It is an open market and that’s what making Entrecard different from any other sites out there.
That’s my opinion…
June 27th, 2008 at 8:47 am
This is an easy problem to fix in your revenue model… give back. Allow users to “cash in” their credits at half of what they can be purchased for. Why would I auction off my credits if I can just cash them in through your site?