Home > Games > 2010 and the Virtual Goods Market

2010 and the Virtual Goods Market

More than ever, people are moving their lives online. For most of us online users, everyday activities such as social interaction, shopping, banking and information gathering have all moved online to various extents already.

But whether you are just connecting with friends or having your weekly food shop done online, everything has still been connected in some way with the real world. You receive your real groceries, you use a service to for example pay bills or to find entertainment online by for example playing a game. But in 2009 the line between the products and services we have all grown used to using and the state of real versus virtual started to blur…

During 2009 and in parallel with the growth of social networks, the virtual goods industry has started to take off. According to a BBC News article 90 – 95% of all revenue of social games developers comes from virtual goods! When you put a figure to this and consider the fact that in Asia, the virtual goods industry is already worth about $5billion, a value that the US is also expected to hit in the next five years. That is a lot of virtual champagne, cute puppy pictures and farm equipment created from a few pixels…

One of the interesting thing with regards to social gaming, virtual goods and gambling as forms of online entertainment is that they are tapping into a whole new audience of gamers. A new breed of people who would never describe themselves as gamers, but are still spending an increasing amount of time online, finding instant gratification and showing off their gaming skills.

Another thing that has caught my attention is the great variation in ARPU that can be seen across the three areas. Social gaming is a mass market, low ARPU part of an industry that can most closely be compared to the more specifically games oriented market of gambling that sees ARPUs that are ten times higher. It will be of great interest to see how ARPUs from the virtual games market will develop, both from an analytical point of view as well as from a share holder point of view.

My bet is on the virtual goods ARPU surpassing the social games ARPU during 2010, bringing a very profitable niche of social networking out in the open. I would also say that we will see more acquisitions by gaming companies of these companies developing these virtual goods as they realise the potential earnings a few pixels can provide.

Interestingly enough, people dont seem to mind the fact that they are only getting a few pixels for their hard earned cash. Does this mean that in a society where we already have more than we really need, we are forced to create a parallel reality of virtual goods to satisfy our consumption needs?

Personally I cant really decide what I think about this. Part of me is super excited about the possibilities that this new virtual reality provides for a computer geek.. Part of me is horrified that in 2010 I might be getting a virtual bottle of champagne for my birthday instead of the much more satisfying real thing….

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