Virtual Goods: Good for Business?

1. Description

Author recognizes virtual goods as a new growing and significant economical power. He calls the year 2009 as a year of virtual good. Paper provides different statistics on amount of virtual goods exchanged in virtual worlds as well as capital spent on such virtual goods. Virtual goods in most popular form are formed by aparrel for avatars. Facebook, on the other hand provides virtual gifts, while in 2008 it earned Facebook over 40 million $.

Second part of the paper deals with possibility of B2B (calles B2V) business entering the virtual worlds in much broader way with much more capital. It is mentioned that a lot of global corporation experimented with entering the second life, they failed do to use adoption of wrong strategies with these attempts. Failure was due to symbolical thinking (presenting the brand like in the real world) and not metaphorically (conveying the brand) and using the broad possibilities of virtual worlds.

The last part of the paper discusses how to expand the B2V in the virtual world economies and postulates different possibilities of doing so (e.g. real world dress companies creating virtual apparel, company dress codes in the virtual environments, real world hotel providing comfortable virtual meeting rooms, architect providing virtual offices a.s.o)

Document: PDF

Key Words: Motivation, Virtual Worlds, Finance

2. Quotes

Whilst 2008 saw the emergence of the virtual worlds sector, 2009 has to be called the year of the virtual good. With online destinations such as social networks seeing a creation of brand-new revenue steams and virtual worlds ‘giving the users want they want’, the virtual goods sector is one of the fastest growing areas of the Internet.

In its most popular form, virtual goods relate to accessories for avatars–clothing, hair and other person-related apparel. These are purchased by users to customize their appearance and are popular across all types of virtual worlds, from kids and tweens right through grown-up worlds and also apply across all genres. There is an incumbent demand for users to want to change and control how they are seen in virtual worlds.

Interestingly, average revenues per paying user (ARPPU) increases in line with age, highlighting the value in older demographics. Typically ARPPUs from SocNets peak at around $5 per month, rising slightly to around $6 for virtual worlds. In terms of the overall market in total revenue terms, we estimate it to currently be worth $3 billion globally, rising to $14 billion in 2012.

Facebook earning from virtual goods highlights another facet of the model–gifting. In this context, virtual gifting simply means the sending of an item or service to another. Facebook is estimated to be earning circa $40 million per year from virtual goods, representing 10% of total revenues and gifting plays a major here.

What about the B2B side? Is a new model for business related virtual goods (B2V) about to appear? There’s certainly a strong argument to suggest B2V is a market with potential. We’ve already seen corporate adoption of new internet channels, such as blogging, micro-blogging and video (viral) activities. Also, many global corporations have already experimented with virtual worlds, most inside Second Life.
Unfortunately, the vast majority of these ‘early adopter’ companies used the wrong strategies with their first attempts. They were thinking symbolically (how shall we show our brand, products) rather than metaphorically (how can we convey our brand). They also overlooked, in most cases, what they did in the real world in relation to leveraging that product/service into a virtual context.

There’s also been a major push in the area of cost-saving across the global economy and several large tech/IT companies advocating virtual worlds as excellent platforms for business. This is another indication of future adoption. So, there are signs that businesses will use virtual worlds more moving forwards.

Corporate avatars in virtual spaces and greater adoption of SocNets for business could mean a new market appearing.

According to Gartner, who predicts that by year- end 2013, 70 percent of enterprises will have behavior guidelines and dress codes established for all employees who have avatars associated with the enterprise inside a virtual environment.’

Arguably business avatars need to look more realistic, perhaps even photo-realistic in order to drive the adoption of enterprise use in virtual worlds. This product would automatically make person-specific avatars.

Thinking more about wider business services and their application to virtual goods, companies with product or service-specific solutions need to think about how a virtual space can accurately translate these products (or brand) whilst providing value to the end user. This might be a car company providing transportation/teleportation services into a virtual world to promote a new car to business users, or an accounting firm creating a tool to manage virtual currencies.

Another examples could include a real-world hotel providing virtual meeting rooms, an architect providing virtual offices, or a company providing a prototype of a new real-world design.

3. BibTeX

@article{JVWR864,
 author = {Nic Mitham},
 title = {Virtual Goods: Good for Business?},
 journal = {Journal of Virtual Worlds Research},
 volume = {2},
 number = {4},
 year = {2010},
 keywords = {virtual worlds; virtual goods; B2B; B2V; B2C},
 issn = {1941-8477},
 url = {https://journals.tdl.org/jvwr/article/view/864/629}
}