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Virtual Goods to Hit $1B in 2009

The virtual goods industry is on track to become a $1 billion business this year, and is expected to grow to an estimated $1.6 billion in 2010, according to a new report by editors at InsideFacebook.com and Serious Business.

The growing popularity of virtual goods represents a new opportunity for online marketers to generate practically overhead-free revenue while marketing their brands and services to consumers spending increasing amounts of time on social networks and with other Web 2.0 tools.

The report found that the expansion of social networks such as Facebook and MySpace has contributed to the rapid growth of virtual goods, which are often sold through the free web applications or games hosted on those sites.

The new findings reflect the results of a July study by the analyst firm Frank N. Magid that found that 12% of Americans had purchased a virtual gift within the past 12 months.

Virtual goods, which most commonly consist of accessories for avatars or items that will speed the process of a user’s online game, are usually purchased by credit card, online payment services such as Paypal, or earned through advertiser promotions.

Facebook’s Gift Store

Last week, Facebook announced that it had partnered with several vendors to add music tracks and virtual sports merchandise to its growing Gift Store, which enables users to purchase items using Facebook credits ($1 for 10 credits) bought using a credit card.

In August, Facebook opened its Gift Store to third-party developers to sell both virtual and real-world items. Initial sponsors included American Greetings Interactive, GreetBeatz, Someecards, and Real Gifts.

And in a recent move to try to make virtual gifts more accessible to the younger set and those who do not have credit cards or Paypal accounts, Facebook partnered last month with Zong to test a program that lets users buy Facebook credits by billing their mobile phone.

Facebook’s virtual e-commerce business is estimated to make up approximately 10% of the social network’s estimated revenue of $500 million this year, according to MediaPost.

Ning Enables Customized Gift Creation

Ning, a website that enables users to create their own social networks, announced last week that it too will open its own virtual gift shop.

The store will allow users to buy and sell virtual gifts as well as create and sell their own customized gifts – a feature it claims hasn’t been offered until now.

Early participants in a test version of the store include artists at the Brooklyn Art Project, who have created miniature versions of their artwork for sale, the New York Times reports.

Ning users selling their gifts will receive half of the revenue from the sale, and Ning will keep the other half. The gifts will cost $1.50, and users can purchase credits through Paypal.

Ning, which currently generates revenue by selling ads and offering a premium version of its service, sees virtual goods as one of three additional revenue streams it will put in place by next year.

Using Virtual Goods for Good

Meanwhile, social gaming site Zanga is allowing users to donate portions of their virtual-goods purchases to good causes.

Zanga’s popular game FarmVille, in which users plant crops, take care of animals, and socialize with neighbors, permits players to purchase sweet potato seeds, with 50% of the proceeds going to two non-profits in Haiti, Fatem, and Fonkoze, the New York Times reports.

As of Oct. 21, the game’s 56 million players had contributed nearly half a million dollars by buying the virtual seeds.

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