There was a conference a few weeks ago at Stanford that caught my eye. The topic was virtual goods and emerging economies around them. From fireworks on Facebook to flowers on HotOrNot to real estate in SecondLife, virtual goods are becoming a mainstay in games and social networks. Their growth over the past few years has been astonishing. Here are a few key stats from Susan Wu of Charles River Ventures who helped organize the conference.
- Neopets users have created over 206 million virtual pets
- Tencent has over 250 million active users in China and generated $100+ million in Q1 2007, 65% of their revenue comes from virtual goods and services
- Nexon generated $230 million in 2005, 85% of which came from virtual item sales
- Habbo Hotel has over 75 million registered avatars in 29 countries
- Gaia Online does over 50,000 person to person auctions a day
Virtual goods create real value for users. Whether that’s social status in a game or letting a girl know you think she is pretty. They are just another form of online expression. Plain and simple.
Where are we headed with virtual goods?
Customization will drive future growth of virtual goods. Consumers want to be able to *easily* create their own avatars and gifts online. Whether it’s online or in the real world, people like to have a sense of ownership and a feeling that they are the only one “with a blue flame on the side of my car.” Anyone should be able to create a virtual good and integrate it with existing online platforms (with revenue sharing mechanisms). Why not allow FaceBook users to create and sell their own virtual gifts? People want customization and it’s only a matter of time until we get it.
Games and social networks will continue to serve as launching pads for virtual goods. Secondary markets such Sparter will continue to popup and compete with the likes of eBay.
Are there business applications of virtual goods?
Absolutely. How about sending a valued customer a virtual gift basket to show appreciation? That sounds kind of outlandish, but is it? How about interviewing a candidate in SecondLife? That’s already happening. Then there’s the metrics and data around effectiveness of virtual goods. Measuring how sticky and viral virtual goods are is of the utmost importance. Slowly but surely we’ll continue to see novel uses for virtual goods in the business arena.
