Trading Real Money For Virtual Goods
In Asia people have been paying real money for virtual goods for years. It is the primary business model for games and Internet companies in China and Korea, far more important that advertising.
We’re starting to see similar behavior in the U.S., also led here by online games and social networks. On the back of the rise of social networks and games, 2009 will be the first real breakout year for this business model in the US.
To people who do not spend time on social networks, it seems crazy that people would pay real money to buy each other virtual gifts – pictures of things ranging from birthday cakes to hugging penguins – and then display them on their profile pages. But estimates peg Facebook’s digital gifts sales in the $35 million – 50 million range this year. As more human interaction moves online, these social tokens of appreciation move online in parallel.
In the same way, gamers are more than willing to buy virtual goods In 2007, Nexon made $30 million selling virtual goods to U.S. players of their games. These items either allow players extra powers in the game (e.g a bigger gun), or allow players to customize the way that their character looks (e.g. cool sunglasses). People want to win, and they want to look good doing it. Dozens of other games companies are now employing this model in the U.S.
Why would this recession be a time for virtual goods to take off in the U.S.?
It actually has nothing to do with the economy, Rather, two new payment mechanisms are becoming available now that allow gamers, many young and without credit cards, to play these games to their full capacity.
The first is that prepaid game cards are now being sold at retail, with Target leading the charge. The second is incentive marketing. If a player take an action (like signing up for a ring tone service, or completing a survey) the advertiser who benefits will fund the purchase of that players desired virtual goods.
Asia and Europe have led the US in the adoption of free to play games because they have had good alternative payment mechanisms in place for longer, including mobile payments and credits available for sale at internet cafes. Now the U.S. is ready to catch up.
Photo by Nexon.
Angela on January 28th, 2009 11:32 am
I never did understand what was so great about virtual gifts.
An example is LiveJournal. I remember when they came out with virtual gifts you could buy others. I never really thought of them as a way to make much money.
Jaclyn on January 28th, 2009 12:02 pm
I agree with Angela…i never understood this concept either. another good example of this virtual gift is IMVU. that is a huge site where you do nothing but buy thing’s with your real money. it’s so crazy. my aunt who is in her early 40’s does this like mad on IMVU. and i was always’ getting gifts from her that she had bought me on there and sometime’s even paid extra to have it gift wrapped for me. it’s just a huge waste of money if you ask me.
cassy on February 11th, 2009 12:14 am
me too i dont get the point of this post,if there is onething that was inside of our mind is we want to know what you really want to tell us, pls let us now!
Leave a Reply