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."









