UGC is Vital For Expressive and Behavioral Virtual Good Models

Andrew Chen has a good post that reviews some of the things you need to consider when deciding between a user generated content and first party (in house) model for your virtual goods implementation. I posted some additional thoughts in the comments, but thought I would re-post and expand here.If you are implementing expressive and behavioral (i.e. gifts) goods, the need for some form of UGC is very high. Virtual goods are largely about self expression, personalization, customization. Which means that the more personal and unique anitem is to a person, the more social value it has, which increases the users willingness to buy. But there is a key fact here. Virtual goods are just that….virtual. Which means there are no limitations to what an item can be, and thus what a user wants. Thats why we see some of the most random virtual items being the most successful.Â

An example….there might be a virtual gift that is a Cucumber. I bet that has no social meaning to you and plenty of other people, and therefore has no value to you. But I have an inside joke about a Cucumber with my friend Bret Terrill. So to Bret and I, that cucumber has a lot more social value, and our willingness to buy and send to each other is much higher then yours.

Combine my two previous points together, and it causes a couple problems:

1. Providing a large enough inventory to fill your users aggregate virtual demand by using an in house content team is near impossible. Content is expensive and time consuming.

2. No one person, or group of people will be able to predict what virtual goods will be successful and what won’t. Nor will a first party content team be able to fully capitalize on all timely events such as pop culture, trends, holidays, etc.A marketplace that includes thousands of content creators that are properly motivated is required to solve these problems. However implementing such a marketplace is not an easy task. It is very resource intensive to build and manage.