Recently, there have been numerous stories about social networks, virtual worlds and gaming sites utilizing virtual goods as a way to monetize their offering. The game FarmVille is something many Facebook users are familiar with and the game allows you to “farm with your friends”. It’s currently the most popular game on Facebook with over 82 million users and members can use virtual currency to buy items for their farm or earn them by signing up with Facebook partners such as Netflix. SecondLife members use virtual currency known as Linden to purchase anything and everything to build their world; even rain. The currency is regulated by a group called Linden Labs and on average, 250 Lindens = $1 (US). Last years user-to-user transactions in SecondLife generated $567 million and virtual goods is expected to become a $5 billion market this year.
Why in the world would someone spend real money on virtual goods? There are several reasons and gifting is the easiest one. $1 for a dozen virtual roses on someones birthday is a pretty good deal but make sure that’s not the only gift given if you know them very well. Could result in bodily injury! For gaming, players can pay to have better resources at their disposal. On social networks virtual goods can used for self-expression (avatars) or to connect with others. (There is a great 4 part series on virtual goods here.) I believe the smart marketers will begin to extend their products into the virtual world with more frequency.
Facebook shows the biggest promise with over 400 million users and last year at this time, the fast growing market segment on Facebook was 55 year old women; a tremendous amount of expendable income entering the fray. Facebook also has over 100 million users accessing the site from mobile devices. Eric Schmidt recently was quoted as saying that mobile is the future of computing. Companies will lead with their mobile strategy and then have a main site as a secondary access point. This combined with Zuckerberg’s announcement that the Internet will be social by default makes virtual goods shared via mobile devices the next logical revenue leap for social media.
I wonder what virtual goods might look like or more importantly, behave like on mobile devices? In my post, What product means today, I believe that marketers must create virtual versions of their products and market them as well. So if you have a Ducati in the garage, you have one on your Facebook page. Virtual goods could end up functioning like iPhone applications on some level. Once the virtual good was on your phone it would be second nature to share them with like minded people. The application Bump allows you to share your contact information by simply turning the app on and then bumping your iPhones together. (Be careful. In an overzealous moment a person could put his life in danger if bumping is done with a little too much aggression.) These virtual goods or “social apps” could be shared the same way; maybe giving the person who shared the app a small discount off of their next app purchase, thus allowing virtual goods to become more social with an economic benefit. They are already social objects in the sense that when you meet someone with an iPhone you ask them what kind of applications they have on their phone. This sharing makes them even more social.
Also with multitasking available in OS4 (June), you could be made aware of when you’re in the vicinity of someone who participates in your virtual world and allow you to introduce yourself. (Of course – as always – you could turn this option off.)
A quick recap for those keeping score:
- Virtual goods are going to generate a lot of revenue.
- One aspect of social monetization is virtual goods.
- The future of social is mobile.
- Virtual goods could be extended to app-like (not ape-like) behavior.
After rereading this post, I’m excited about the potential for the mobile virtual good market (app-like or not) to generate much revenue over the next five years. A former student of mine is going to do this on Facebook and I will follow-up with how it went. WOD!
I like it…let’s get to work! Let’s chat about next steps.
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