Warm welcome to those reading, I hope you’re all well and refreshed for today’s tour!
“THE YEAR 2009, THE YEAR OF VIRTUAL GOODS” (Mitham, 2009)
So welcome to our destination #2, which is about the Virtual Goods Model. Now you’re probably all wondering, “The Virtual Goods Model”, what is it exactly?
The virtual goods market has grown over the years, with it standing at $2.9 billion in 2012 for the US, with that, for the global market, it was a staggering $14.2 billion (KZero Worldswide, 2009)
Remember playing those games such as Candy Crush, Temple Run, FarmVille, Habbo Hotel and Club Penguin? Then remember how because you needed seeds to grow more plants, you would buy those virtual currencies such as “coins”? Well that my friend is essentially The Virtual Goods Model placed in simple terms.
Businesses are potentially generating revenue by having players purchase virtual goods. That is, players are spending their real money to purchase virtual money, so that they can purchase items for the virtual game (Hamari, 2015). It may sound simple, and you may be thinking, “who would be stupid enough to actually spend real money, to buy virtual money, just for a game that isn’t even real life?”. Well my friend, you will be amazed as to how much and how many individuals actually purchase these virtual coins/money.
To show you, I have some figures which illustrates how much businesses actually make from players buying these virtual currencies.
- Club Penguin generated $65MM in 2007
- League of Legends generated $250M in 2010
- Habbo Hotel had an estimated 75 million registered avatars across 29 countries, where 90% of their $60 million revenue came from virtual goods yearly
- Tencent, one of the largest Internet portals found in China had over 250 million active user accounts. They generated an estimated $100 million in the first quarter of 2007, with over 65% of their revenue coming from virtual goods (Wauters, 2007).
Traditionally, games were based through subscriptions, where players had to pay a fee to play the game. Over the years however, there has been a shift and change. Games are now free, however, players are invited to enhance their playing experience, create a better virtual character, accelerate their progress or to create a space that is more visually pleasing, by simply purchasing virtual goods using real money. Additionally, selling of virtual goods isn’t only seen in online games or virtual worlds, but is increasingly becoming familiar among social networking sites also (Lehdonvirta,2009).
It’s truly amazing as to how much people are willing to spend on virtual items yearly. In 2008, people were spending a total of over $1.5 billion on pets, coins, avatars, seeds, gold, diamonds and bling (Wauters, 2007). What could possibly be the reason behind possessing individuals to spend their real hard earned money on objects which ultimately have no tangible substance?
So tell me, I’m curious to know, have you ever purchased any virtual goods? Leave your thoughts in the comment section below. I’m interested to know your views on virtual goods as well, is it worth it? Or is it not?
And for now, that’s the end of today’s tour.
I hope we all had a great time, but now it’s time to hope back onto the bus.
Until next time,
Destination #3 here we come!
PS. For those would like like to know more about the purchasing patterns of virtual goods, I have a reading for those interested.
For those who still don’t understand virtual goods, here’s an extra short video on virtual goods to watch: Spending Real Money: Purchasing Patterns of Virtual Goods in an Online Social Game
For those interested in knowing how marketing ties in with virtual goods, this reading will be useful.