Neopets, a Viacom subsidiary, has officially graduated to the increasingly familiar free-to-play, pay-for-goods format. The world of quirky virtual pets, targeted at kids, announced they will now allow users to purchase virtual currency called Neocash, which they can spend on virtual toys, clothes and special effects for their Neopets.

The new cash won't conflict with the existing currency system, called Neopoints, which kids can earn through quests and mini-games. Players can trade Neopoints for goods, but they won't be interchangeable with Neocash. Initially, the only way to score Neocash will be to purchase it via PayPal, but the company aims eventually to explore other avenues to sell the currency, such as pre-paid cards available at retail outlets.

Additionally, the availability of Neopets goods for purchase coincides with the beta of Viacom's new NC mall, which will house virtual boutiques where kids can shop for add-ons to their pet and its world. Neopets will work with Nexon, a Korean online gaming specialist, to handle the virtual transactions, as an extension of a partnership between the two announced last November.

Up until now, Viacom's revenue from Neopets came from the sale of banner advertisements on the site, which boasts over 40 million registered users around the world, and more than 12 million unique new users monthly. Viacom purchased the Neopets world in June 2005, to the tune of $160 million. Given such a large installed base and continued global expansion, the sale of virtual goods in the Neopets world may well prove to be enormously lucrative for Viacom.

The Virtual Goods Summit is set to take place June 20-22nd at Stanford University-- and it's the first conference of its kind, focusing on emerging market opportunities for virtual goods and economies. It's produced by Susan Wu of Charles River Ventures, who's looking to foster a forum wherein entrepreneurs, venture capitalists and gearheads can meet to discuss the future of virtual economics and the surrounding issues.

Panel topics include, "Why Virtual Goods Matter: What's Driving User Adoption?" And "Making Virtual Economies Work: What Does it Take to Get it Right?" The conference will also feature an impressive slate of speakers, like GaiaOnline CEO Craig Sherman, Raph Koster of Areae, and Three Rings' Daniel James.

IDG Ventures and Bodhi Investment LLC (managed by SoftBank China and India Holdings) announced a joint Series A investment in Kreeda Games, an Indian online multiplayer games company who recently launched their online game portal in beta. Their first offering, a Bollywood-themed dance game called Dance Mela, is set to release this August.

Manik Arora from IDG Ventures India and Anil Viakara from SoftBank’s Bodhi will join Kreeda's Board of Directors as part of the investment. Kreeda's CEO, Quentin Staes-Polet, said that the company considered several offers, but chose IDG and Softbank for their experience in building internet gaming globally-- Softbank previously acquired Gravity Corp, creators of Asian MMO Ragnarok Online, and also established Movida Investment, a fund specifically geared to promote development of MMOs in Asia.

Initially, Kreeda will license titles from around the world and localize them, tailoring media and cultural elements to the preferences of the Indian game market. The company aims to release three games by year's end, with more to follow when the market is "ready". Subscriptions, hourly charges, in-game advertising and in-game item sales are all planned revenue sources; Dance Mela, however, will at least initially be free to play.

"The online game industry, though nascent in India, is on the edge of becoming one of the largest markets globally," Staes-Polet said.

Doppelganger Studios' new project, Virtual Lower East Side (VLES) will attempt to recreate the iconic Manhattan neighborhood in the virtual realm, according to a Metro New York post.

The idea is to create an online hangout where scenesters can check out the LES's hip venues and musical acts without paying New York's high cost of living. The project, currently in the testing phase, will also employ the expertise of music and culture mag VICE, who will consult on various venues and ensure their virtual representations are as true-to-life as possible.

"[The VICE guys] kept saying, ‘Make it darker, make it darker, make it grimier, make it grimier," says Andrew Littlefield, founder of Doppelganger.

Hangouts slated to receive detailed replicas include the infamous Bowery Ballroom, the 205 Club and even a branch of American Apparel, whose clothing line represents the hipster style popular among neighborhood natives.

As of yet, no specific date has been set for the formal rollout, but Doppelganger hopes their extensive alpha and beta testing will continue proceeding quickly.

The latest MMORPG from NCSoft (Lineage, City of Heroes, Tabula Rasa) is called Dungeon Runners. It's free to get in on the first floor, but users are encouraged to pay $4.99 monthly for access to premium content, items and bonuses. NCSoft spokesman Mike Crouch said the split free and pay-to-play model is an "experiment" for NCSoft.

With a less-complicated interface and a lower cost of play, Dungeon Runners seems to be geared toward a slightly younger demographic, or toward the casual gamer hoping to avoid the big time and cash commitment required by a full-size MMO.

Thus far, the game has received some favorable critical reception; 1UP.com gave it a 7.6, saying it "might be the most outrageously cynical take on the genre ever;" GameShark.com assigned it a B rating, saying "it’s not quite good enough to be a full meal, but it’s certainly a deliciously indulgent little snack."

The 2007 Supernova Conference was held June 20-22nd in San Francisco, where think tanks in government, enterprise and technology put heads together to discuss the effect decentralization and connectivity are having on the way we do business. The panel "Virtual Life, or Virtual Hype?" featured discussion by Raph Koster of Areae, Ruben Steiger of an ad agency called Millions of Us, and essayist Clay Shirky, and was liveblogged and transcribed in several places around the web, including Wonderland, the official Conversation Hub page for the conference, and Mama Musings.

The panel addressed the fundamental question: Are virtual worlds life, or just hype? Koster says that almost all of 35 million users of virtual worlds (by his estimation) are playing games, and that while the user base for other purposes-- such as advertising, business and creative development-- is small, it's rapidly growing. He theorizes that there's some grains of concrete forecasting in the "metaversey" hype around the idea of the "3D internet," particularly in the real estate arena, but "right now, we're in a bubble," owing to a "misunderstanding about what their real purpose is."

Steiger wants to see the real-versus-hype battle as a "non-issue," pointing out that virtual worlds are primarily about social communities and connections, and they have merit as "an adjunct to established online communities."

When Shirky notes Second Life as the exception to gaming's dominance over the 3D world space, highlighting visual appeal as a major driving force behind broad adoption of virtual worlds, all of the panelists seem seemed to agree that a virtual world like Second Life, as a "sim of space," is a game, because as Steiger says, "Life is a game." Check out the links for more on the thought-provoking discussion, including theories on virtual real estate, 3D society and why Second Life doesn't monetize well.

Susan Wu of Charles River Ventures, co-producer of the first Virtual Goods summit being held on the 22nd of June, has a great guest post up on TechCrunch dealing extensively with the concept of virtual goods as the next big thing in business-- people spend more than $1.5 billion annually on digital consumerism.

Wu lists the heavy-hitters in the virtual goods market, including Tencent, a Chinese internet portal who made $100 million in revenue in the first quarter of 2007-- 65% of that revenue from the sale of virtual goods-- just like 90% of Habbo Hotel's roughly $60 million annual revenue. Gaia Online needs a staff of three whose sole occupation is opening envelopes full of cash being sent to buy online goodies.

And, as Wu highlights, virtual goods aren't just for gamers-- sites like Dogster and HotorNot are successful in splitting income sources between advertising and goods-for-cash.

Wu's article goes on to explain in depth the four major reasons why people spend money on online goods-- first, they're more services than goods, in that they're graphical representations of "trophy" gestures we already engage in in real life. Second, as experience-enhancers, virtual goods create real value for the people who participate in a game or service. Another idea is that buying objects is easier and less-time consuming than having to "earn" them the way users do in a points system (hence gold-farming controversies in WoW). Lastly, Wu points out that users who buy into the virtual market can also sell on it, thereby earning profits on their purchases-- like "Second Life's first real estate millionaire."

A variety of speakers participated in a panel at the first 2007 Virtual Goods Summit on June 22nd to share their stories of success driven by virtual goods.

Min Kim, Director of BD at Nexon (Maple Story, Kart Riders), ought to know. Nexon is the largest privately-owned online game company in South Korea, and 85% of its 2005 revenues-- about $240 million-- were from item sales. 3PointD reports that Kim said at the summit that Maple Story has now reached about 3.5 million users in the US, and that the company would begin selling pre-paid cards at Target "soon" with which users can purchase virtual items. Nexon's most recent project, Audition, already claims 100,000 registered users, more than half of which are female.

Why are Maple Story's virtual goods so compelling? "They get at showmanship and self-expression, they enhance the gaming experience, and they’re meaningful," explained Kim. "For someone playing Maple Story more than 40 hours a month, it’s very meaningful for them to change their haircut or get a different pair of sunglasses."

Kim also said Nexon will soon announce the US version of its Kart Rider, a 3D casual racing game which has been in closed beta up until now. It boasts 50 million Korean subscribers, and has sold 20 million virtual cars at $10 apiece. Owing to the high advertising rates in the US, Kim suggested that Kart Rider might adjust its business model slightly for the US version to include more ad sales.

Kyra Reppen, SVP of Neopets, also spoke at the success stories panel, reports 3PointD. Her company, acquired by MTV in 2005, is up to 2 million registered users, and is adding virtual goods to its traditional "Neopoints" economy. According to Reppen, users complete over 750,000 daily transactions of virtual goods at 22 million user-created shops.

With MTV's marketing team providing a 20% lift in traffic since the acquisition, Reppen said Neopets is now looking to diversify its business model from pure ads and sponsorship revenue to boutique merchandising, possible licensing, toys and books.

Here's a virtual item set most people are buying in a retail box - it's in the Top 5 PC charts in both the UK and US on Amazon right now - which is interesting, to say the least!

H&M, a clothing line whose UK success has begun to translate into quick penetration of the American market, has a virtual clothing line for The Sims 2. EA Games' iconic PC life sim will now offer designer H&M fashions that users can purchase as an expansion to the game.

The Sims 2 has no online play mode, of course, but the incredibly successful franchise includes masses of expansion packs that add new options, styles, pets and other accessories. The H&M fashion line, which costs $19.99, is just the latest example of virtual clothing being a big deal to fashion-conscious game players.