Virtual goods growth market

Players of the social game Farmville sent 500 million Valentines over 48 hours this past weekend, the Gigaom blog reported. The valentines were free, but players pay for a lot of other virtual goods. Engage Digital Media recently released 2009 figures for "virtual goods-related investments," showing that "more than $1.38 billion was invested in 87 virtual goods-related companies," triple 2008's figure. In a more in-depth story, the BBC reported that most of the virtual economy's momentum is in social games, not so much social network sites (though some social games, such as Farmville, are found on social-network sites). "In Asia, sales are already around the $5 billion mark and rapidly growing." The BBC piece describes how this economy works.

Ning adds virtual gifts

Seems all the social sites are taking a queue from virtual worlds and letting users buy and sell virtual goods (e.g., virtual clothes, furnishings, holiday stuff, even hair-dos). Now Ning.com, the site that lets users create their own social networks, is letting them create their own virtual gifts, "bringing a built-in virtual goods store to the site’s 1.6 million networks," TechCrunch reports. So, for example, the "Brooklyn Art Project network can offer gifts that are miniature versions of hand-drawn artwork" and "the New Kids on the Block" network can sell gifts like the bandmembers’ faces," TechCrunch adds. Meanwhile, Marketing Vox reports that the virtual goods market will hit $1 billion this year. For background on Ning, see "Zillions of social network sites" and "Anyone can have a social site now."

Virtual economies & kids

Virtual worlds make their money very differently from social-network sites - mostly from selling virtual objects. Though Disney's Pixie Hollow and Webkinz and Webkinz, Jr. sell real objects such as "friendship bracelets" and plush toys, the economies of most virtual worlds (and multiplayer online games) rely on objects and artifacts such as clothing, furniture, and other property. Social sites, which to date have focused more on display ads, too, are moving into virtual-object retail (see this about Hi5 selling virtual gifts). A figure cited by The Economist indicates everybody may be moving in this direction, though there's much to be learned about this business model. The article mentions that users at a popular VW aimed at teens, Gaia Online, "spend more than $1 million per month on virtual items." Gaia recently hired a full-time economist, The Economist says, "to grapple with problems that are well known in the real world, such as inflation and an unequal distribution of wealth" (maybe child psychologists will need to employed too!). The British news magazine otherwise paints a more measured picture of virtual-world popularity than do other news outlets, but the figure it cites is "regular visitors," not overall registered users. "In America, nearly 10 million children and teenagers visit virtual worlds regularly," it refers to eMarketer as finding. Virtual Worlds News earlier cited data from Strategy Analytics projecting an overall global population of 186 million now, growing to 640m by 2015 (users of all ages - I blogged about that here). My most recent post on VW population is here.

Social site + virtual world = Hi5

It's the first marriage I've seen of social networking and virtual worlds: that of Auckland-based Small Worlds and San Francisco-based Hi5.com, by most measures one of the world's Top 20 social-network sites. A bit about SmallWorlds.com (which is not a kids' virtual world) from Venture Beat: Like Hi5, it's aimed at people 13 and up. It has signed up 650,000 users since launch last December, about 65% of them female and half aged 13-18 (30% 19-35). One of its attractions is that, in building out your "small world," you can "easily import anything [you've] created on the Web." Small Worlds also has "built-in incentives to keep users coming back. The more you participate, the more access you get to virtual items." Hi5 had already launched its games channel earlier this year, so this seems a very logical next step. It also already had a virtual economy in place (users could pay for virtual gifts with real-money-based Hi5 "Coins"), so now users will have spaces in which to place virtual furniture, art, plants, etc., along the lines of the very international Habbo, which could be considered a precursor to the Hi5/SmallWorlds arrangement. What's new is mature social network and fairly well-established VW making a go of it together.

Game worlds: Growth economy

The virtual economy is strengthening - for gamers, anyway. This is a business story, but of interest to us parents because it offers indicators of where the industry's going. Electronic Arts will soon be offering the next version of its popular Battlefield Heroes game for free, the New York Times reports. You heard right - it will be downloadable for free. EA will make its money on advertising and in-game sales of virtual gear - weapons, clothing, etc. This is not a big leap of faith, of course. EA tested the approach in South Korea, "the world’s most fervent gaming culture," according to the Times, which adds that "in 2006, the company introduced a free version of its FIFA soccer game there ... [and] signed up more than 5 million Korean users," generating more than $1 million a month in virtual-objects sales. [See also "Virtual money, real income" and "Converting virtual cash to real."]