The auction house isn't the problem, it just sped up people discovering how fucked up the itemization in the game is. Same thing would have happened without the auction houses, it just would have been a much slower process. Dumb MMO shit like ilvls and a focus on a few core stats on items was the problem. They approached designing this game like they did World of Warcraft in several important ways and that damaged the game significantly. They showed outright hostility to the community following the games release which really upset longtime fans. They started blocking farming and making other 'balance' changes that didn't make sense. The balance changes were always fast to appear yet fixes took much longer of course.
Their Saturday Morning Cartoon story didn't help and it was jammed in the audiences face at every opportunity. The game was downright patronizing in its story telling and many people didn't like it. I forget the head writers name but they need to be rid of him, Blizzards audience is growing up but Blizzards story telling and design isn't. This is going to be a real problem for them in the future. I'm not buying anymore MWUWHAH I AM THE EVIL VILLAIN HERE IS MY PLAN games. The gaming industry is growing up, these people can tell competent stories with real writers and still make a great game.
Jay should feel some gratitude to his elders, he got to coast an otherwise mediocre 70-75 metacritic game to 12 million copies on the backs of his predecessors. The Blizzard name was built on over a decade of great games, I wonder how long it will take to undo that work.