Virtual goods are non-physical objects and money purchased for use in online communities or online games. Digital goods, on the other hand, may be a broader category including digital books, music, and movies. Virtual goods are intangible by definition.
Including digital gifts and digital clothing for avatars, virtual goods may be classified as services instead of goods and are usually sold by companies that operate social networking services, community sites, or online games. Sales of virtual goods are sometimes referred to as microtransactions, and the games that use this model are usually referred to as freemium (free + premium) games.
A large majority of recent sales have been in Asia.
Fast Moving Virtual Goods (sub category)
'Fast Moving Virtual Goods’ – essentially signifies a store of value that is recorded on a voucher/card and encoded on a remote electronic account. By way of example, a prepaid electricity voucher would fall into the FMVG category. It can be traded quickly, in small amounts, using virtual mechanisms that allow both the consumer and merchant to track every transaction. A term coined by Kuda Mushambi, the Chief Commercial officer of Nomanini. Read more on how FMVGs are fuelling informal markets via ITNews Africa.
A key revenue driver within social media, virtual currencies are specific within each game and are used to purchase in-game goods. Characters or avatars in virtual worlds own things within the context of the virtual world and users will collect each games' virtual currency to purchase land, supplies and various items used to enhance their status and add points. Some virtual currencies are time-based, relying upon measurement of in-game achievements in order to accrue exchangeable points.
The first virtual goods to be sold were items for use in MUDs, early, text-only online games. This practice continued with the advent of MMORPGs. Players would sell virtual goods, such as swords, coins, potions, and avatars, to each other in the informal sector. While this practice is forbidden in most blockbuster online games, such as World of Warcraft, many online games now derive revenue from the sale of virtual goods.
When Iron Realms Entertainment began auctioning items to players of its MUD, Achaea, Dreams of Divine Lands, in 1998, it became the first company to profit from the sale of virtual goods. But it wasn't until the mid-2000s, with companies like Korean Cyworld leading the way, that virtual good sales became instituted as a legitimate revenue-making scheme.
Virtual goods may continue to be a primarily Asian phenomenon, as between 2007-2010 70% of worldwide sales were made in this region.
In 2009, games played on social networks such as Facebook, games that primarily derive revenue from the sale of virtual goods, brought in 1 billion USD, and that is expected to increase to 1.6 billion in 2010. Worldwide, 7.3 billion USD was made from virtual goods that same year.
Estimates of the future market for these small items vary wildly depending upon who is making the prediction. 2013 sales will be 4 billion USD according to one analyst and a year later reach 14 billion according to a different analyst.
In online games, virtual goods could be lost due to some unexpected reasons. This brings problems for service providers as well as purchaser. Encryption techniques primarily used for other purposes may, here too, provide functionality. These may include access control, hashing, encryption, digital certificates, and fingerprinting.
While many companies have embraced exchanging cash for virtual goods, the practice is forbidden in most blockbuster games, which derive income from subscription fees. This doesn't deter all players from saving playing time by illicitly buying in-game currency with real-world cash–violating their agreement with the game's operator in the process.
Virtual goods purveyors
- Gaia online
- Giant Interactive
- Habbo hotel
- Iron Realms Entertainment
- Little World Gifts
- Second Life Marketplace
- Sony Online Entertainment
- Valve Corporation
- World of Warcraft
- Xbox Live Marketplace
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- How to Stay in the Game (Part 2 of 2) blizzard.com
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- About Company Nexon Official Site
- Little World Gifts to bring virtual gifts to the iPhone just in time for Christmas TechCrunch, 26 Nov 2009
- 3D virtual gifts come to the iPhone The Next Web, 25 Nov 2009
- Playdom Fuels Its Virtual Goods Business Press Release, playdom.com, September 30, 2009
- Playfish sees social games as industry driver Wed Nov 4, 2009 6:02am EST
- Second Life Marketplace Featured Items Wed April 26, 2011
- Runescape begins first microtransaction experiment develop-online.net, April 2, 2012
- Virtual Products = Real Cash cnbc.com, Oct. 09
- Trade Me founder invests in gaming tvnz.co.nz, Mar. 11
- Redefining MMOs: The massive money of microtransactions massively.com, Sep 11th 2009
- The MANN-conomy update: FAQ Valve Corp. 2010
- Xbox 360: Get the Points Microsoft's Xbox Official Site
- Zynga's Gaming Gamble forbes.com, 10.29.09, 12:40 PM EDT
- Digital tills are ringing to the sound of an unreal Christmas The Guardian, 17 Dec 2009