Digital Media Buzz > The Real World of Virtual Commerce

The Real World of Virtual Commerce

By Rebecca Jacoby

2009 might be the break-out year for virtual commerce, and it’s not relegated to avatars on Second Life. The global market for virtual goods is projected to be $5.5 billion, says Brian Balfour, founder of the Virtual Goods Market, Inc./Viximo.

It seems that everyone who’s anyone in the “micro-transactions” sector of goods, items and gifts will be at the Virtual Goods Summit this October in San Francisco: Viximo, Mochi Media, Zynga, Globespan, Norwest Venture Partners, Super Rewards, Offerpal Media, Fatfoogoo and BlueRun Ventures, to name a few. The VG Summit agenda will include:

• Why and How Virtual Goods Work
• How to get started with Virtual Goods and Virtual Gifts
• A Case Study on Launching Virtual Currency
• Managing and Marketing a Virtual Goods Offering
• How to Manage a Virtual Economy
• The Payments Landscape and Payment Options

While the bulk of virtual commerce resides in Asia (about $5 billion projected for this year), Americans will be spending $400 million on VG, Balfour says. Launched in 2007, Viximo provides a VG store of gifts and personal accessories that surprisingly does better on dating sites, online social networks and casual game sites where the products are often used as virtual gifts than in virtual worlds such as Second Life. Dana Grayson, a principal at North Bridge Venture Partners, an investor in Viximo, took over as CEO of the firm in April and will be leading the search for a long-term CEO.

When Facebook added VG to its practices, other online social media companies followed suit to supplement a slow-down in ad revenue. Overall, though, most of the “players” in the industry are relative newbies, like Zynga, which has nearly doubled its staff in the last year.

The VG business model is big business and growing rapidly, especially in the teen world of Gaia Online, where approximately 7 million visitors per month click in to play or connect with friends. The entertainment site began selling VG like Elvis’ blue suede shoes and Paris Hilton’s pet Chihuahua. These and other similar items boosted sales by nearly 20 percent within one quarter.

These affordable “luxuries” are items represented by innocent-eyed avatars whose inoffensive appearance adds to the fun and entertainment value of the online experience at Gaia, not to mention the licensing and publicity opportunities afforded to the celebrities fortunate enough to be “virtually cool.”

And should one collect the luxury VG, take note of the cost of limited editions. One such “out-of-production” Gaia golden halo recently sold for $6000 on eBay.

In fact, so lucrative is the VG industry that non profits such as the American Red Cross (ARC) are using virtual worlds in unique ways. The ARC held a fundraising auction in Second Life of donated VG. Further, check out MyYearbook.com’s “Causes” page where teens can spend their lunch money to support their favorite charity: AIDS, ending child abuse, feeding rescued animals, saving the rainforest and more. It’s microfundraising on a scale supportable by teens who really may want to save the world.

The world of virtual commerce will continue to expand beyond its traditional borders of Asia. America is poised to grow exponentially through social networking sites like Facebook. Are you ready?