Business in Virtual Worlds, Deep Thoughts

Virtual Goods Worthless? Now wait a minute…

Cyndy Aleo-Carreira, a contributor to the Industry Standard, writes a pretty spot-on refutation of her colleague Jordan Golson’s claim that the volume of virtual goods sold on Facebook and its ilk will not be a serious contender to advertising revenue.

Aleo-Carreira cites the example of Electronic Arts, who gave up the battle against the pirating of its FIFA soccer game in South Korea and chose to give it away online for free. Rather than making EA’s bottom line suffer, this hurt the pirateers tenfold, and the company started to sell online customizations like outfits and enhancements starting at $1.60 a pop. It goes without saying that this was a successful gambit.

She says that online gaming is the place to look for models where people will pay for content. She also argues that the cheaper the goods (for example, $0.99 songs on iTunes and elsewhere) the less time a consumer will give thinking about purchasing. She calls these micropayments, and writes that, as small as they are,

Any money coming in is a good thing, and it’s fairly safe to assume that companies like Google (and Facebook) are looking beyond the typical CPM-dependent ad revenue model to alternate methods of collecting those nickels and dimes consumers aren’t afraid of dropping, even in a faltering economy.


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