Business Opportunities Weblog

November 12, 2009 by Rich Whittle | 2 Comments

Silicon Valley may have discovered the perfect business: charging real money for products that do not exist reports, The New York Times.

These so-called virtual goods, like a $1 illustration of a Champagne bottle on Facebook or the $2.50 Halloween costume in the online game Sorority Life, are no more than a collection of pixels on a Web page.

But it is quickly becoming commonplace for people to spend a few dollars on them to get ahead in an online game or to give a friend a gift on a social network.

Analysts estimate that virtual goods could bring in a billion dollars in the United States and around $5 billion worldwide this year — all for things that, aside from perhaps a few hours of work by an artist and a programmer, cost nothing to produce.

“It’s a fantastic business,” said Jeremy Liew of Lightspeed Venture Partners, a venture capital firm that has invested $10 million in several virtual goods companies. “Because it’s digital, the marginal cost for every one you sell is zero, so you have 100 percent margins.”

Photo by Playfish.

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Tags: Creations, Ecommerce, Virtual