Recently, IGE have been losing ground according to Alexa's web traffic history over the past 3 years. Their main website, IGE.com, is ranked at 41,823 on Alexa and 35,795 on Compete. While there was a loss of customers, the website is still popular compared to other big sellers such as Swagvault and Thsale whose rankings in Alexa are 40,330 and 47,853 respecitively. IGE are also falling out of favor with their customers. Bizrate's customer satisfaction score is down to 6.9 with many customers having filed complaints on Complaintsboard.com.
What's the story behind the spectacular rise and fall of this post-dotcom adventure? We tried to shed some light on the company and find out what happened.
The Beginning
The company was founded by Brock Pierce and Alan Debonneville. Brock, a child celebrity, moved to Spain after his previous company, Digital Entertainment Network flopped. He became an avid EverQuest player and met Alan in the Twelve Prophets guild on the Vallon Zek server. Both recognized the potential of the secondary market with people looking for ways to obtain virtual swords other than having to spend hours earning them. The idea gave birth to IGE (Internet Gaming Entertainment) and their first trading website called Eqnetgaming.com in 2001. Incorporated in Spain, the company was funded using Brock's own savings. In 2003, the company expanded and incorporated more offices in the founders' places of residence. An office for Alan in Switzerland and IGE Inc. in the US were added to the office in Marbella, Spain. The company maintained their offices around the world for a while, until later that year they moved to their new headquarters in Kowloon, Hong Kong.
MySuperSales
At the time Jonathan Yantis' MySuperSales had been dominating the RMT market for some time. Although IGE's sales figures never surpassed those of MySuperSales, competition between the two companies started to heat up as IGE gained more and more market share. Both IGE.IGE and MySuperSales were looking for ways to reach more customers. Within weeks, every single major community web board was approached and offered purchase or partnership deals. Competition for community sites peaked with the Interealms deal, when the owner backed out of a signed and payed deal with Yantis to go with an offer from IGE instead.
Apart from being busy with acquisitions, IGE hired the Themis Group to implement worldwide customer marketing campaigns possibly involving their game media network, Warcry. It was also rumored that building up relationships with game developers was part of the deal. The agreement lasted only 60 days before it was terminated as Themis began to fear for their reputation.
Suddenly it was announced that IGE had purchased MySuperSales. On January 22, 2004, IGE became the juggernaut of the secondary market. The deal was said to involve cash and equity but the value was undisclosed. Jonathan Yantis became the biggest shareholder in IGE and took up a management role in IGE. The merger created a monopoly in the market. The company was led by Brock Pierce (CEO), Jonathan Yantis (COO), Alan Debonneville (President) and Randy Maslow (General Counsel). Rumors about IGE trying to improve relationships with game publishers spread as the company hired high profile management executives from Vivendi Universal Games, Yahoo! and The Firm. The most notable recruit was Stephen Salyer, former President of Business Development at Ubisoft and Vice President at EA. It almost worked out: IGE was very close to license in-game exchange platforms with at least 5 MMOG titles. Pre-hype Second Life was one of them. However, nothing major came out of this as some game developers got cold feet while Linden Labs decided to create their own exchange market.
RPG Holdings, LLC.
IGE's effort to reach gamers by acquiring more community sites continued in 2004. RPG Holdings, LLC. was created to cover IGE's identity from the public so that bought out websites would not be directly associated with IGE as easily. A popular Lineage 2 community, L2orphus.com, was bought. A small media network for MMORPGs, Ogaming, was the next target. Ogaming is a hub of many subsites for different game communities. Although the owner, Okratas, labeled IGE as an "undesirable" company, Ogaming was sold. Okratas explained that he sold the site because he was frustrated with the lack of support from game publishing companies.
Thottbot, the most popular database of user submitted game information for World of Warcraft at the time, agreed to acquisition in secrecy. However, rumors began to circulate on websites like Allakhazam, CorpNews, Grimwell, and Slashdot and the deal was soon out in the open. Users were concerned about the Cosmos plugin from Thottbot collecting data and feeding it straight to the gold farmers. People started to investigate on IGE and its affiliates, and after Thottbot was exposed, soon other sites like Guild-Hall.net, Warcraftcentral.com, Rpgexpert.com, Shadowknight.org and Mmorpg.net followed. RPG Holdings became known as proxy of IGE and the owner of a large collection of MMO-fansites.
Zam Network
The next infamous acquisition of IGE in the form of RPG Holdings was Allakhazam. Allakhazam claims the deal happened in February, 2006 instead of the speculated date of November 2005. The owner was holding out strongly against RMT and IGE before he succumbed to the offer. The justification was that Allakhazam sold not to IGE, but to RPG Holdings, which owned several other businesses (including IGE. Announcing the Zam.com Network in May 2006, Allakhazam became part of a new network of game content websites - together with Thottbot, OGaming, MMOInterface and L2Orphus. IGE's influence was played down with it being labeled just another subsidiary of RPG Holdings.
Affinity Media
Affinity Media came to the public's attention when it took over several businesses such as the Zam Network, IGE and other overseas operations: Itemmania, the second largest auction house in Korea was acquired in August 2006, as well as GamesTV, a cable TV channel dedicated to games in China. The company purchased another popular World of Warcraft database, Wowhead, in June 2007 and added it to the Zam Network. The announcement claimed that IGE was sold off to a private investor before the acquistion of Wowhead and therefore had no associations with Affinity and the Zam Network. According to Affinity, any connection to IGE would hurt the company's image so it was decided to sell IGE back to Jonathan Yantis. However, rumors and evidence has surfaced that in fact IGE is not a sold-off subsidiary, but actually the real owner of Affinity.
IGE's downfall
Despite all the exposition and media attention IGE received through these high profile acquisitions, trouble started mounting within the company, especially at the back-end operation site in China. Gold suppliers had been left unpaid for their services. The company began losing its credibility and supply chain. Things got out of hand, there was even a rumor that an upset gold farmer stormed into IGE's Shanghai office with a gun, holding an employee hostage. This was later dismissed by IGE. In China, rumors spread that IGE was going bankrupt, that major shareholders were planning to run away and that investors' money was being transferred out of reach to a Swiss bank account. Eventually, the website IGE.com.cn went offline.
IGE's downfall received a lot of attention, especially in China. Many people including reporters, bloggers and analysts attempted to explain what factors drove IGE to their financial crisis. Nobody was able to present any hard evidence, but the following issues are likely to have contributed to the company's downfall:
- Problems with investors: According to IGE's ex-employee, Ahmed Farooq, one source of IGE's capital was Goldman Sachs who put an investment of around $100 million into the company. Another source put the number at $60 millions. Goldman Sachs was not satisfied with the company's financial disclosure and the Itemmania acquisition in Korea seemed to be a costly mistake. A regulation was proposed to ban all virtual currency exchanges for real money. Itemmania's outlook was heavily affected and Goldman Sachs subsequently asked for their investment to be returned.
- IGE's spending: IGE's spending history had been extravagant. Significant acquisitions such as Allakhazam and Itemmania required at least $12 million with $7 million for Allakhazam and $5 million for Itemmania. Former founders such as Alan Debonneville, Jonathan Yantis and Randy Maslow were rumored to have been bought out for a large compensation as well. The amount received by Yantis was probably the highest of all, being speculated to be around $40 million.
- Competition and increased costs: Competition became tougher as Chinese companies with lower operating costs sprang up left and right. With dropping margins, Brock Pierce commented during Virtual Goods Summit 2007 that IGE found it harder and harder to make the profit it had grown used to. With companies such as Thsale, Itemrate and Swagvault gaining ground, IGE's the monthly revenue dropped to 3 to 4 million dollars. Countermeasures implemented by game operators kept pushing up the cost of obtaining gold. Blizzard constantly intercepted gold deliveries, forcing IGE to repurchase the gold in order to fulfill orders.
- Internal management problems and inappropriate use of funds: Management seemed to be a problem as the most competent executives, Yantis, Alan and Randy had left the company. Brock Pierce was called incompetent. Even though the company was facing tough times and owed millions to gold farmers, Pierce was said to travel by private jet.
- Failure to list the company on the stock market: IGE tried to go public but failed due to the nature of their business. Seeing that neither the government nor game publishers had yet made it a legitimate business, stock market investors were not willing to buy stock of a potentially illegal company. Moreover, a lawsuit had been filed against IGE, accusing it of reaping substantial profits from interfering and impairing the intended use and enjoyment associated with consumer agreements between Blizzard Entertainment and its subscribers. Under these circumstances, an IPO was next to impossible.
IGE's revival
ige.com.cn was last seen online on May 19, 2007 before the operation resumed on another website. 1337.com.cn took over all activities including buying gold from suppliers. The move was the result of an intervention by former shareholders of IGE. According to the press release at the IGE.com.cn website, Atlas Technology Group was established by former shareholders who were not satisfied with the direction in which the company was moving under Affinity management. Atlas acquired IGE on April 5, 2007. This announcement confirms the comment made on Allakhazam that Jonathan Yantis bought back IGE. Furthermore, the announcement stated that Atlas would not be responsible for Affinity's obligations before the acquisition. This was an especially noteworthy fact since Affinity had a long queue of 8,095 suppliers waiting for their payment. It meant Affinity would be held responsible for paying out IGE's debt.
IGE Today
Today, IGE has a new cover. It is now owned by the Atlas Technology Group. Properties of IGE include the IGE trademark that has been transferred from IGE Inc., Hong Kong to Atlas. Websites such as IGE.com, eqnetgaming.com, mmoshop.com are now registered to Atlas Technology Group. The company was incorporated in Vanuatu. As a virtual business friendly and tax free environment, Vanuatu is a perfect destination for businesses like IGE. They no longer have any obligation to report their income or pay any taxes. Furthermore, the company receives protections from Vanuatu's electronic transaction, e-business, and interactive gaming legislation. According to a recent job posting, the company has around 400 employees working in subsidiaries located in the Philippines, Hong Kong and Shanghai. Senior Vice President Raoul Blautzik used to be an operation manager in Hong Kong. IGE has transformed itself once more and aims to redevelop the company to reclaim the industry leader position.
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