Virtual goods start bringing in real cash.

Virtual goods start bringing in real cash
Netizens Pay Hard Money To Get Ahead In Online Games Or To Give Friend A Gift
Claire Cain Miller & Brad Stone | November 8 2009 | Times of India Bangalore

San Francisco: Silicon Valley may have discovered the perfect business: charging real money for products that do not exist. These so-called virtual goods, like a $1 illustration of a champagne bottle on Facebook or the $2.50 Halloween costume in the online game Sorority Life, are no more than a collection of pixels on a Web page. 

But it is quickly becoming commonplace for people to spend a few dollars on them to get ahead in an online game or to give a friend a gift on a social network. Analysts estimate that virtual goods could bring in a billion dollars in the US and around $5 billion worldwide this year all for things that, aside from perhaps a few hours of work by an artist and a programmer , cost nothing to produce.
Its a fantastic business, said Jeremy Liew of Lightspeed Venture Partners , a venture capital firm that has invested $10 million in several virtual goods companies. Because its digital, the marginal cost for every one you sell is zero, so you have 100 percent margins.

 
The companies that create and sell virtual goods, including Zynga, Playfish and Playdom, three online gaming startups in the San Francisco area, say they are recording significant revenue and profits, which have been elusive for many web companies.
Virtual goods have been popular in Asia for years. In the US though, only ardent video game fans spent money on them, mostly for swords and spells in virtual fantasy realms. That is rapidly changing, driven by the popularity of widely appealing games for social networks like Facebook and mobile phones like the iPhone.
The people playing these games on social networks dont define themselves as gamers they are just killing time, having fun, Liew said. 

In Restaurant City, a game by Playfish on Facebook, 18 million active users manage their own cafe and stock it with virtual casseroles and cakes. In Zyngas game FarmVille, 62 million agrarian dreamers cultivate a farm, plant squash seeds and harvest their crops with tractors . These games and many others have casual gamers reaching for their wallets , along with a few rationalizations, as they make the peculiar purchase of pixels on a computer screen. 

Its an experience, like going to the movies. Thats how I describe it, said Sara Merrill of Parsonfield, Maine, who plays Pet Society on Facebook with her two young sons five times a week.
Recently, the family used a credit card to buy $20 worth of the games currency , then bought items like a haunted mirror and a potion that helped their pet, Demon Baby, grow bat wings. Its still cheaper than taking the kids to Target where they will ask for a toy, she said.
Some game fans claim that in some cases, virtual goods can be better than the real thing. Jamie Kwong, a 13-yearold in Altadena, California, spends hours a week on a paper doll site called Stardoll, buying dresses and handbags. She created Juillet606, with brown eyes and hair to match her own. Unlike the actual paper dolls she used to play with, the tabs do not rip off. 

With Stardoll it all stays on there, my brother cant get on it, and everything is good, she said. NYT NEWS SERVICE 

Interesting:
> Analysts estimate that virtual goods could bring in a billion dollars in the US and around $5 billion worldwide this year all for things that, aside from a few hours of work by a programmer, cost nothing to produce 

> The companies that create and sell virtual goods, including Zynga , Playfish and Playdom, three online gaming start-ups , say they are recording significant revenue and profits, which have been elusive for many web companies