"The issue is obviously, that it legitimized too much trading. It made it easy. We all know this and the consequences D2R Items. We were concerned about the consequences in the past We believed that the benefits would be greater than the negatives, and [World of Warcraft's auction house] appeared to be a great demonstration of the concept. We were clearly wrong."
The error was due to two main areas. The first was that the auction house featured a real-money element, which allowed players to purchase loot in real-money. This feature opened Blizzard to criticism for engineering low-quality loot drops in order to increase the value of market exchanges.
It took a tiny percentage of each transaction, it took a small cut from every. Whether or not this was the case, the overall quality of loot was extremely poor at launch, and fans were justifiably suspicious--especially given that Blizzard's acquisition from Activision was only a few years old at this point, and longtime Blizzard fans were watchful for any resulting changes in corporate culture.
The second reason is that the real-money markets made anti-cheat measures essential for the overall health in the gaming. If one could create an item of value indefinitely, such as, for example, this could result in scams and eventually reduce the value of products.
This was a part of the online-only aspect that caused players to be frustrated in the beginning. If you're always connected cheap diablo 2 resurrected items, the system will constantly look for glitches in duplication, such as cheating however that didn't make players who prefer to play offline feel any better.