Thanks to one of my readers for alerting me to the New York Times cover article: “Virtual Goods Start Bringing Real Paydays”. This is my third post on this topic, so for a background, see the previous posts.
Claire Cain Miller and Brad Stone point out how rapidly “it is becoming commonplace” for users of social games to use real money to buy virtual products. I wrote about this before, saying how brilliant it is, and how profitable. Who wouldn’t want a 100% profit margin?
The NYT says the marketplace for these virtual goods is now $5 billion – yes, “billion” with a “b”.
Where do we sign up to invest?
“It is a fantastic business” says Jeremy Liew of Lightspeed Venture Partners. Yes, it certainly is. Lightspeed is a venture capital firm which has invested $10 million in virtual goods companies. Zynga, my favorite company, isn’t the only one. Playfish and Playdom are two others with “significant” revenue and profits. Asia is a place which has lead in many areas over the years, and it is no stranger to virtual goods, which are very popular there.
And, it is not just techies, everyday people cough up money for pixels.
One mother has a good point: “it’s cheaper than…Target where (the kids) will ask for a toy”. I agree – no boxes and bags to litter the house, no Legos left lying around. No clutter!
NYT raises the possibility that some might consider the exchange of real dollars for fake goods a “swindle”. Yet no one is complaining. Zynga claims that “less than 3% of people pay for something” and this year they will have earned around $100 million of revenue from games this year.
Consider the possibility if they went from 3% to something higher.
What does this mean for us, the end user? Look for more games, and more encouragement to play games. Then when you are in the game, inevitably you’ll be encouraged to buy these goods. If it makes you happy and you feel the value is good, the both the game creators and you will be better off at the end of the day. Just know: when there’s a product with 100% profit making $100 million for just one company, we’ll be seeing more of it.
This is only the beginning. Neither good nor bad, but be aware before you part with your hard earned dollars.
Now where do I go to invest in Zynga?
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