How Virtual Weapons Created a Booming Economy

Initially published on Medium — January 19, 2016

Counter-Strike: Global Offensive (CS:GO) was released in the August of 2012, and immediately met resistance and concerns. Many gamers thought it wasn’t an improvement over previous iterations, and didn’t upgrade to the new version.

The launch of Counter-Strike: Global Offensive was widely regarded as a “flop.” In fact, it took a full year (August of 2013) before the average number of people playing Counter-Strike: Global Offensive surpassed the other Counter-Strike titles.

Counter-Strike: Global Offensive was growing at a very slow rate relative to it’s predecessors. Many gamers just simply wrote Counter-Strike: Global Offensive off. For months, Counter-Strike: Global Offensive struggled to break 20,000 daily players. However, the developers did not give up. Instead, they continued to iterate and ship updates.

In August of 2013, Valve shipped one of the most important game updates ever made: The Arms Deal.

This update created an item economy comprised of weapon skins. Weapon skins are camouflages and designs for your weapons.

Shortly after shipping the update, the average number of people playing Counter Strike: Global Offensive grew at an unprecedented rate. The average number of people playing Counter-Strike: Global Offensive in December, 2015 (377,447) was an incredible 26 times greater than it was three years ago in December of 2012(14,079).

Ever since introducing The Arms Deal in August of 2013, the average number of players, viewership, and prize purses have all grown rapidly.

First off, let me make it clear that weapon skins are a luxury good. They have absolutely no impact on gameplay at all. You read that correctly…one of the most important game updates ever made, had zero impact on gameplay.

The decision to make weapon skins have no impact on gameplay, sent a clear signal that Valve understands their consumers. Given the fact that Counter-Strike: Global Offensive is extremely competitive, introducing any aspect of pay-to-win would have likely destroyed the game and community.

There are several skins that are worth more than $5,000, despite the fact that skins do not affect gameplay.

http://csgo.steamanalyst.com/id/109542020

http://csgo.steamanalyst.com/id/118301869/

http://csgo.steamanalyst.com/id/120615/

There are three main types of weapon skins: Normal, Stat-Trak, and Souvenir.

Normal skins are…normal — they are the baseline for the other two categories, thus they don’t have any special characteristics.

StatTrak skins have an orange LED display attached to the gun to track the amount of “kills” by the owner of the gun. Whereas, StatTrak knives have the number of kills etched into the blade.

Souvenir:

Souvenir weapons are only dropped during Valve-sponsored tournament matches, such as ESL One Cologne 2015. During matches, special weapon cases will be randomly awarded to spectators who watch the matches via the game. These cases contain a random Souvenir weapon, plus several special stickers for the tournament and the two teams playing in the game.

Each Souvenir weapon has a message on it commemorating the match during which it dropped. Many people elect to keep their Souvenir weapons and not to sell them, so they tend to be more expensive.

Weapon Grades (Wear):

Regardless of the type of skin, each skin has a wear grade. There are five different wear grades: Factory New, Minimal Wear, Field-Tested, Well-Worn, and Battle-Scarred (in order from least to most worn). Even within their respective wear grades, there is room for variation amongst skins.

A Factory New skin will look absolutely pristine, whereas a Battle-Scarred skin will look more used and rustic.

It’s important to note that wear grades never change over time — a skin keeps its exact same wear grade forever, regardless of usage.

Factory New (Left) vs. Battle Scarred (Right)

There are four main factors used to determine skin value.

The steam marketplace does an incredible job of determining what the market price should be.

For example, the skin to the left was initially selling for $7.50; however, the market quickly corrected this. The market price is now only several cents.

The Steam Community Market enforces a $400 maximum listing price. However, items of higher value are sold through a sub-currency of keys OR via third party marketplaces. To determine the value of a skin in keys, you would simply divide the market price by $2.50 (the average price for keys).

There are several other tools that consumers can use to determine market price. One of the most common tool is: SteamAnalyst.com — I highly recommend checking it out.

When there is this much money on the table, it shouldn’t be surprising to hear that many entrepreneurs have started to create businesses around this niche economy.

OpSkins is by far the most successful company that has capitalized on CS:GO skins. In short, OpSkins serves as a middleman between buyers and sellers of skins. Players come to the website and put their skins up for sale. OpSkins will then keep the item on hold until money from a prospective buyer is received.

As a result of mitigating the risks associated with high-value transactions, they keep 10 percent of each sale. As of June, 2015 — Vice reported that OpSkins was earning over $12,000 in pure profit per day.

CS:GO Jackpot is super simple skin gambling site. You simply deposit items into a prize pool and your odds of winning the pot are determined by your percentage stake of the entire pot.

For example, if you deposit $5,000 worth of items and the total pot is $20,000. Your chance of winning would be 25% ($5,000/$20,000). This is an extremely common way for people to gain really valuable inventories of skins.

CS:GO Jackpot, again serves a middleman, thus they charge up to 5% of the entire pot as a service fee.

CS:GO Jackpot is just one of many sites that compete in this space, and there are many variations of gambling within this niche.

Disclaimer: If you decide to use CS:GO Jackpot, please be careful and smart. You can lose a lot of money.

CS:GO Lounge is also one of the go-to sites for CS:GO players. This site is typically used to find trades and bet skins on competitive matches.

Bronwen Grimes, a technical artist for Valve, was quoted to have said there were three main goals that they were hoping to achieve by introducing the item economy:

Given the fact that the average number of players, viewership of major tournaments, and prize purses have all grown exponentially — it is undoubtedly clear that this update played a critical role in accomplishing these goals.

The most recent major tournament for CS:GO, ESL One, had over 27 million unique viewers watch the tournament via Twitch. At the peak of the event, there was over 1.3 concurrent viewers. This was an increase of more than 30% from the last ESL One Counter-Strike event just five months prior.

It is hard to give The Arms Deal update total credit for CS:GO’s success.

Instead, I would argue The Arms Deal update sparked the growth and popularity that we, now, associate with CS:GO.

Valve’s direct involvement and clear understanding of it’s community’s needs and wants is the main reason for their success. Not only do they routinely ship patches and updates to the game, they have also invested heavily into the ecosystem. For example, Valve has launched: “eSports Cases” for CS:GO, where a portion of the proceeds from sales goes towards prize purses for major tournaments.

Recently, Valve demonstrated just how in-sync they are with their community by reverting back to an older version of CS:GO after making some drastic changes to gameplay. There are very developers that are as in-tune with their community as Valve. For that reason alone, I am extremely confident that this is just the beginning for CS:GO.