Are Virtual Goods Right For Your Company?

Virtual Goods and Virtual Currency are gaining a significant amount of attention these days among the press and the technology industry as a new way to drive revenue. With online ad revenues plummeting, it is easy to understand that everyone is searching for that next big thing which will help replace lost revenue. But for a publisher, how do you cut through all the hype, and get down to truly evaluating if virtual goods are right for your product?

Is Your Product Social?

Virtual goods are valued by users based on their social implications. A user doesn’t send a virtual gift because the graphics are worth a lot of money. They send a virtual gift because it’s a valued social gesture within a community. For example, a user can send the same virtual gift via email to a friend or on Facebook. While containing the same graphics, the Facebook virtual gift has much more value since it is posted on their user’s profile, announced in their friends feeds, and sets them apart from everyone else sending that person a message.

Social products typically come in the form of social networks, online dating sites, games, and virtual worlds. However if your product doesn’t fit within one of those defined verticals, but still has a strong community base, then there may be opportunity. Conversely, if the social community element doesn’t exist, then it is very unlikely a user will buy a virtual good.

Is Your Product Engaging?

With the explosion of social products over the past 5 years, users are spending much longer on an individual site. They have become a regular and important part of peoples’ lives. As a result, engagement has a strong correlation with how much users spend on virtual goods. A user isn’t going to invest money in a product that they don’t use very often. The more engaged the users are in the community, the more likely those social values that drive the value of virtual goods exist in the community as well.

Many products have a segment of “power” users that have much higher activity levels then the rest of the user base. These are the users that are likely candidates to purchase virtual goods. Virtual goods help increase engagement, but only make an already engaging product even more engaging. Virtual goods alone will not turn a boring experience into a captivating product.

Do Your Users Value Status, Socializing, or Winning?

Status, Socializing, and Winning are the three main reasons users buy virtual goods. One or all of these three elements are highly valued by users within a strong social community. Virtual goods provide premium avenues to tap into these three behaviors.

What Doesn’t Matter

It is interesting to note that items such as age, demographic, or location are not factors. Users of all ages and demographics have been found to buy virtual goods in the right social environments. You should not disqualify your product as a candidate for virtual goods based on age, sex, or location especially if you have the above three elements.

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