Digital Media Buzz > Virtual Worlds Go Mainstream For Businesses

Virtual Worlds Go Mainstream For Businesses

By Ron Callari

Viximo, a 2-year-old start-up company, is fast becoming a leader in the burgeoning virtual goods industry. For those who are new to this commercial space, virtual goods are digital products that are gifted, bartered or paid-for items online or via mobile phones. Videos, icons, e-cards, personalized avatars - items that allow people to better express themselves, add gravitas to their online persona, or increase their enjoyment of a game - make up the products that are now known as virtual goods.

Considered an unlimited opportunity for thousands of Web publishers, Viximo distinguishes itself from its competition in how it addresses the market. It claims it is the first and currently the only virtual goods provider that brings together everything a publisher needs for virtual goods in one complete, easy to implement, customizable solution.

Viximo is one of the only companies that offers both a system for selling virtual goods and the goods themselves. This then permits clients to either upload directly into their own virtual gift stores or customize at will.

In addition to partners such as Fotolog and Zorpia, Viximo just added BlackPlanet.com, SmartDate.com and FanIQ.com into its virtual goods platform. These deals extend Viximo’s reach to 60 million users, a new milestone for the company.

The increased interest in virtual goods is apparent by how quickly it has scaled. U.S. consumers spent $1 billion on such items in 2009, according to Inside Network, a market research company focused on Facebook and social gaming sites. Daniel Strang, the newly appointed CEO of Viximo, says he “sees these types of purchases as a potential substitute for dying revenue streams (such as subscriptions) in the publishing world.”

Brian Balfour, founder and vice president of product marketing for Viximo, speaks with DMB about how companies can capitalize on the virtual goods market.

What is the current status and future of the virtual goods market and how does it break down percentages between social networking, online gaming and online dating sites?
The current size of the virtual goods market in 2009 was about $1 billion in North America, and about $7 billion world wide. While North America still represents only one-seventh of the global market, it is the fastest growing - quadrupled in 2009 - and the youngest. There is still a lot of room to grow in North America and we expect it to double in 2010. I am unsure of exact percentages, but the majority of virtual goods purchases are taking place on social networks, which includes social gaming - probably around 50 percent. The next biggest area is more traditional gaming and virtual worlds, with online dating being the smallest piece at the moment.

What do traditional brands use virtual goods for? (e.g.  Kohl’s, American Apparel, Sears, K-Swiss, Eberjey)
There are a couple opportunities for brands to get involved in virtual goods.

The first way is a sponsorship model. Users are highly engaged with virtual goods and spread them virally to their friends, so it’s a great place for brands to embed themselves. Brands can pay to have branded virtual goods offered to the users in various social networks and games. It basically acts as a very engaging form of promotion that performs much better then banner advertising does on social communities.

The second way is a licensed model. Certain brands that have a luxury appeal to them have an opportunity to sell virtual goods around their brand to users for actual money.

Does Viximo supply Second Life with virtual goods? According to the blogosphere that site has lost popularity over the years? Why?
Viximo does not supply virtual goods to Second Life. We primarily work with social networks, online dating and casual gaming sites. These areas are where most of the growth happened in 2009 and will continue to happen in 2010. I think the fact that the public has lost interest in Second Life is a good thing for the virtual goods industry. Typically people originally associated virtual goods with something very geeky and non mainstream like Second Life or other 3D worlds. The fact is that they represent a smaller portion than other areas like Social Networking. Virtual goods is a mainstream thing and as users become exposed to it more often, it will become more socially acceptable and we will continue to see the industry as a whole grow.

What types of sites are “hot” right now? And why?
The three verticals [that we] mentioned are where we will see most of the growth in 2010. There are still thousands of these sites worldwide that have yet to institute virtual goods. But looking forward beyond 2010 there is a question of how virtual goods will expand into the broader social Web and content arena. It will happen, but just how we don’t know yet. Other areas of potential opportunity in North America would be consoles (xBox, Wii, etc).

Ron Callari is a freelance journalist and editorial cartoonist whose work has been published on AlterNet, CounterPunch and the Sacramento News & Review. He is currently a social media blogger for InventorSpot.com and the author of two graphic novels.