Post by Morreion on Mar 6, 2010 0:33:27 GMT -5
Extravagant and Outrageous Virtual Goods (Forbes.com)
"Social games are growing extremely rapidly," says Edward Castronova, an economics professor at Indiana University, Bloomington, who has written about virtual economies. "The places where this phenomenon was birthed, like online role-playing games, have leveled off, but virtual economies are exploding in social networks like Facebook."
But with lower average revenues per user, how do social games do it? Volume.
The most successful social games can have 10 to 20 times the number of users of virtual worlds or MMORPGs. For example, "World of Warcraft," a popular MMORPG, has more than 10 million monthly subscribers. FarmVille has some 76 million active monthly users due to its popularity on Facebook. "Instead of getting people to come where the game is at [as in MMORPGs], you put the game where people are," says Charles Hudson, an analyst at Inside Virtual Goods.
To be sure, the more mature virtual worlds and MMORPGs aren't idly standing by. Taking a page from social games, some are looking into ways to incorporate social networks and micro transactions into their frameworks.
Second Life, for instance, is considering integrating with something like Facebook Connect, and other ways to increase the social nature of the world. Tom Hale, chief product officer at Second Life parent company Linden Lab, thinks social games have had a positive impact on the overall industry. "What social games have done is make it perfectly acceptable to spend $10 in a game," says Hale.
Beyond PCs and laptops, the spread of virtual goods markets is also making its way onto other devices. Many developers have begun to replicate the model on mobile devices, especially after Apple allowed free-to-play virtual goods-supported games in its App Store just a few months ago.
Videogame consoles are also often overlooked, but they have greatly benefited from the rise of the virtual goods industry. Sony says the entire PlayStation Network has brought in more than $520 million in revenue as of December 2009. Hudson estimates that Microsoft's Xbox Live is a nine-figure business.
But for all the buzz around virtual goods, you might still wonder why people are willing to pay for things that don't really exist. Susan Wu, founder of social games developer Ohai, says her game's players use virtual goods as a form of communication and as decorations on their sites. Virtual goods can also help them win games. "It's about relationship building, and things like rank and status," Wu says.
Castronova had perhaps the simplest explanation. "Why do people buy diamond earrings?" he says. "They are something that make you feel good."
But with lower average revenues per user, how do social games do it? Volume.
The most successful social games can have 10 to 20 times the number of users of virtual worlds or MMORPGs. For example, "World of Warcraft," a popular MMORPG, has more than 10 million monthly subscribers. FarmVille has some 76 million active monthly users due to its popularity on Facebook. "Instead of getting people to come where the game is at [as in MMORPGs], you put the game where people are," says Charles Hudson, an analyst at Inside Virtual Goods.
To be sure, the more mature virtual worlds and MMORPGs aren't idly standing by. Taking a page from social games, some are looking into ways to incorporate social networks and micro transactions into their frameworks.
Second Life, for instance, is considering integrating with something like Facebook Connect, and other ways to increase the social nature of the world. Tom Hale, chief product officer at Second Life parent company Linden Lab, thinks social games have had a positive impact on the overall industry. "What social games have done is make it perfectly acceptable to spend $10 in a game," says Hale.
Beyond PCs and laptops, the spread of virtual goods markets is also making its way onto other devices. Many developers have begun to replicate the model on mobile devices, especially after Apple allowed free-to-play virtual goods-supported games in its App Store just a few months ago.
Videogame consoles are also often overlooked, but they have greatly benefited from the rise of the virtual goods industry. Sony says the entire PlayStation Network has brought in more than $520 million in revenue as of December 2009. Hudson estimates that Microsoft's Xbox Live is a nine-figure business.
But for all the buzz around virtual goods, you might still wonder why people are willing to pay for things that don't really exist. Susan Wu, founder of social games developer Ohai, says her game's players use virtual goods as a form of communication and as decorations on their sites. Virtual goods can also help them win games. "It's about relationship building, and things like rank and status," Wu says.
Castronova had perhaps the simplest explanation. "Why do people buy diamond earrings?" he says. "They are something that make you feel good."
