Last week local news reporter Jon Keller of WBZ (Boston’s channel 4) caught wind of the emerging virtual goods industry and came by and did an interview with Viximo about virtual goods and the holiday season.  The holidays bring along some very good opportunities for publishers with virtual goods models to increase revenue.  As I sit here at Starbucks writing this blog post, the similarities between offline merchandising and virtual goods merchandising become very clear.  Here are just a few best practices for virtual goods providers on how to capitalize around the holiday season.

The Content

Go to your nearest Starbucks (it’s probably only 100 feet away) and the first thing you’ll notice is their holiday merchandise. This includes specialty drinks such as the Peppermint Mocha and Gingerbread Latte, Christmas themed bags of coffee beans, mugs and even pastries with festive toppings.

Starbucks Peppermint Mocha points to the most important thing about any virtual goods holiday program; creating fun and compelling holiday themed merchandise.  Users are in the spending mood around the holidays, and creating specialty items for them to purchase increases what they would normally spend.   The December holiday season provides a timeframe of several weeks for users to purchase holiday content and release the content in waves.  New sets every week will keep users coming back during the entire holiday season.

Holiday Context

It is not just the merchandise that gets people to spend, but the overall environment.  The moment you walk into a Starbucks right now you are surrounded by holiday decorations, Christmas music, and more.  These things set the environment and mood which contributes to a consumers purchasing behavior.

How do you recreate this in the virtual environment?  Simple things like giving the storefront and shopping experience a holiday theme can set the tone.

Promotion

As you walk into a Starbucks you are immediately hit with promotional messages informing you of their specialty holiday merchandise.  A sign in the window, a billboard right inside the door, a holiday themed menu, and a promotional stand up at the counter provide four touch points before you even order.

Similar to offline merchandise, no one is going to buy your virtual merchandise unless they know about it.   The holidays provide an opportunity to reach out to your users in a fun and festive way to promote your specialty products.  As with Starbucks, make sure you have multiple touch points within the purchasing flow in the form of promotional emails, calls to action, storefront, and purchasing dialogue.

Limited Time Only

Could Starbucks sell their specialty holiday drinks year round and profit?  Absolutely.  But offering them for a limited time only sparks interest and creates urgency.  If customers know it is only around for a limited time, they had better get their fill while they can.

Make sure you get the same message across in promotions about your virtual holiday items.  Leave them in the storefront for a couple days after the holiday, but make them unable to be purchased so consumers who want to purchase them know they missed out and will have to get in early next time.

Pricing

Taking a quick scan of Starbucks Holiday drinks you’ll notice that they are 25% - 50% more expensive than any other drink on the menu.  Does it cost Starbucks more to make?  Maybe, but certainly not 25% - 50% more.

Consumers are willing to pay more for specialty, limited time only items, especially during the holidays. Does this sound familiar:  “It’s more expensive then I usually spend.  Oh well, that’s what the holidays are for.”  Price your holiday items higher than the average price of your other goods and you will see increased results in revenue and engagement.

In order for virtual goods to be successful, they need to be a core part of a product’s experience. Virtual goods need to be more than just one of many features, but a thread throughout the overall social experience. Users buy virtual goods for three primary reasons: status, socializing, and winning. In order for virtual goods to accomplish one of those three goals, they need to be tightly tied with the actions a user commonly takes.

A virtual goods business model is not one that can be “duct taped” on the side of a community (i.e advertising). There is a mindset in the technology industry that you should build the least amount you can to test and see if it works. While in many cases this is an effective means of testing new ideas, in the virtual goods case this typically means the legs are cut from beneath before virtual goods even has a chance to rise. As a result, we see many failed virtual goods implementation attempts that involve a link to a storefront buried within a site, stocked with some images from iStockphoto. While a certain amount of “test” traffic will be funneled to that experience, if a user doesn’t see it as a core piece of the overall experience, they aren’t going to enter their credit card.

Virtual goods turns away from old models, such as ads and subscriptions that are interruptive and stifling, and embodies a business model that is a core part of the social experience which adds value. As a result, virtual goods is a massive opportunity, but one that requires a certain level of dedication and consistent iteration. This is part of the reason we created Viximo, to drastically reduce barriers to implementing and managing a virtual economy, while still being flexible to the differences of every community.

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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We Are Still Early

North America is still in the first inning of the virtual goods ballgame. Virtual goods only started to gain serious traction in the US near the end of 2007, early 2008. The Asian virtual goods market, however, has developed over a period of almost 10 years to reach the point it is at today. Despite being new, the US virtual goods market has seen some very promising growth in just the past several years. Virtual goods revenue in the US has grown from negligible amounts in early 2007, to, a projected, over $500 million in 2009. Key road blocks, like payments, are being solved by new startups while companies like Viximo are providing expertise, and content/technology solutions, to help those new to virtual goods.

A Lot Of Room For Growth

Virtual Goods in North America still has a large amount of room for growth. The percentage of internet users that have been exposed to virtual goods in North America is still small compared to the exposure rate of the Asian internet population. In addition, the US’s internet population is 66% larger then Korea and Japan’s internet audience combined. Japan and Korea being where a significant amount of Asia’s virtual goods revenue is generated.

Atul Bagga from ThinkEquity had some interesting data comparing virtual goods purchasers in China to the US. When compared, users who buy virtual goods in China spend 3X the amount per month , then virtual goods purchasers in the US, despite the fact that Chinese users have 1/6^th the average income. Consumers in the US have much more discretionary income. As virtual goods become more prevalent, we expect per user spending to match, if not exceed that of the Chinese user .

The largest companies in the North American market have yet to fully implement virtual goods models. Facebook recently started rolling out their payment platform as a first step in an expanded virtual goods strategy. MySpace has been rumored to have virtual goods as a serious part of their near term road map. Recently, at Casual Connect in Seattle, virtual goods and social gaming was the talk of the conference by large gaming companies, with EA announcing a significant virtual goods strategy.

Mobile Is A Big Factor

The size of the internet audience isn’t the only factor. In Asia, a significant amount of virtual goods revenue comes from purchases of virtual goods on mobile phones. Largely this is due to the fact that mobile penetration is larger in Asia then North America, and the technology infrastructure, particularly in Korea, is far superior. In comparison, the North American mobile market is also in its infancy. But with innovations like Apple’s app platform, and Android, we have already seen a significant increase in virtual goods purchases on mobile phones.

Asia Leads North America In Innovation

In a must read report titled “Lessons Learned From Asia”, Benjamin Joffe of the consulting and research firm 8 Plus Star debunks two very common assumptions. One, everything in Asia is “weird,” and two, Asia is full of copy cats. But as Joffe explains in the presentation, Asia has actually lead much of the innovation on the internet citing companies such as Hozom, Qifang, Digu, that existed and were successful, before their North American counterparts Plaxo, Kiva, and Twitter. If this trend holds true, then virtual goods in Asia aren’t “weird,” but more of an indicator of where North America is headed.

Conclusion

Overall, Viximo predicts the North American virtual goods market will grow to reach, and surpass Asia’s current virtual goods market size of $5 Billion. But it is important to note that it won’t happen overnight. 2010 and 2011 will be important years for the industry. However, commitment and innovation is still required from companies subscribing to old ad driven business models.

Value Add Business Model

Everyone can agree that online ads do not contribute positively to the user experience in an online community. Mostly, this is due to that fact that users behave quite differently within a community product then an editorial product, such as NewYorkTimes.com. As a result of this difference, online advertising CPM’s are extremely low due to poor user engagement and click thru rates.

Virtual goods, on the other hand, provide premium avenues for users to do what they want to do: communicate. Virtual goods are not only tightly integrated with the way users behave, but they also enhance that behavior, and thus add value to the overall user experience. Virtual goods are part of the conversation, not an interruption like online ads.

Almost Perfect Price Discrimination

A major problem with a subscription or a fixed fee model is choosing the optimal price. Dating sites and games spend a significant amount of time attempting to determine the price point/s that will optimize revenue. But despite this effort, there will always be users who were willing to pay more, and users that would have been willing to pay less, but instead don’t join the service. In other words, there is a segment of revenue that is not being captured.

The amount users are willing to pay varies from user to user. Therefore, to optimize you need to allow users to pay the maximum amount they are willing to pay (in econ terms, price discriminate). Virtual goods enables this type of price discrimination by allowing users to buy as much, or as few goods as they want.

Stronger/Larger Community

A rule applies to almost all community driven products; the more users that are a part of the community, the more the community as a whole benefits. The more users a dating site has, the more potential matches for an individual user. The more users in a multiplayer game, the more potential people there are to play with.

Capturing money from the user is difficult in many cases, since charging a subscription or fixed fee installs a large gate to pass, significantly reducing the size of the overall community. Virtual goods allow for users to participate in the core experience for free, while still charging the users who are willing to pay but without the negative effect of decreasing the size of the community.

Increased Engagement and Stickiness

As explained above, virtual goods enable the ability to sustain a larger community. A larger community inherently increases stickiness and makes it more attractive for new users. In addition, with every virtual goods purchase a user makes, they are increasing their personal investment in the overall product. As users acquire virtual goods, a “trophy” effect takes place as the user is able to show off his/her personal collection .

Advertising, on the other hand, encourages the opposite by trying to convince users to go to a separate site. Similarly, a subscription business model creates a user mentality of “get in, get out.” The clock is always ticking, encouraging the user to leave the site before their credit card is charged again.

If you are intersted in learning more advantages and strategies around virtual goods, join us for our free webinar August 12th at 2pm EST.

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But virtual goods have been successful in Asia since 2000. Social networks, games, and even virtual worlds such as Second Life have been around for years. This begs the question, why are virtual goods just recently becoming the new “it girl”?

Advertising, The Lazy Mans Revenue

During the “web 2.0” era, a boom of social products, especially social networks, emerged. Users were flocking to them in large numbers and companies looked for easy revenue. Like most, they turned to advertising. Little thought or innovation had to be put into the business model. Product innovation was taking place, but left behind was parallel innovation in the business model.

Around early 2007, however, the impact of such laziness started to take its toll on most companies with social products. CPM’s were dismal for all players including Facebook, and most companies were barely profitable or running at a loss. It was time to stop jamming a square peg through a round hole, and start exploring alternative revenue streams.

US Economy Falls in 2008, and with it online ad revenues

In mid 2008, the US economy saw some pretty rough times. The stock market plummeted, banks were collapsing, and it was clear that advertising revenues were going to follow a similar path. Online Ad CPM’s started to fall everywhere including “hot” social networks and games.

Companies that were breaking even or running a small profit on ad revenues started seeing red. A fire had been lit, and “exploration” around virtual goods quickly turned to “action.” This has a strong correlation to one of the key reasons virtual goods emerged in Asia. Asia never had a robust advertising industry to lean on, so they were forced to find other ways to monetize right from the start.

The Facebook Application Platform Acts as a Catalyst

In mid 2007, Facebook released the first version of its application platform. Almost overnight, three person teams in cramped apartments had millions of users using their product. And while having this level of user adoption was exciting, most developers were there for one thing, to make money. Many tried advertising, but CPM’s were even more dismal on applications than on the social networks themselves.

Virtual currencies were originally used to incentivize users to invite their friends and spread the application virally. But agile teams of developers, with nothing to lose, started to test if users would pay or complete CPA offers to redeem the currency. Sure enough, the money started rolling in along with stories of individual developers making $1 million a month off of virtual goods. Facebook had unknowingly provided the catalyst which sparked experimentation with virtual currencies and goods.

Facebook tests virtual goods model with gifts

In February 2007, Facebook launched virtual gifts and eventually (as was estimated after the fact) their virtual gifts revenue approached $15 Million. While niche sites like Dogster and Hot or Not had previously been successful with virtual goods, it wasn’t until Facebook launched their gifts that a major North American social network with mass audience appeal was doing well with the virtual goods model. This was an important step in winning over skeptics that thought the virtual goods monetization strategy was just an isolated occurrence.

Virtual Currency Reaches Critical Mass

With the growth of Facebook apps, Myspace apps, and other large social sites with virtual currencies, a critical mass of users has been exposed to virtual currencies. Users now understand “how it works” and most importantly accept the model. This has two impacts. One, the model of a currency (or stored value system) mitigates micro transaction costs where so many in the past have failed. And, two, a company can now launch a virtual currency model in their product with much less confusion and larger initial adoption from its users.

While the growth of virtual goods is exciting in general, I find it more encouraging that we are finally getting away from business models that disrupt and interfere with user behavior, but instead enhance it. We expect the next few years to be even more exciting for the virtual goods industry here in North America and abroad.

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35 – 50 Years Old

Dogster – 67% between 35 – 50 years old. In 2007, Founder Ted Rheingold stated at the Virtual Goods Summit that over 50 million virtual gifts had been sent by 500,000 users in 2 years.

Scrapblog – 58% older than 34. In February 2009, Scrapblog moved to a virtual goods business model. Revenue figures are unknown.

Viximo Network – While I am unable to release specific data, across the Viximo network, the demographic of women between the age of 30 -45 purchase virtual goods at much higher rate than younger audiences

18 – 34 Years Old

HotorNot – 50% between 18 – 34 years old, another 35% older than 34. At its peak, HotorNot was doing around $2.5 Million a year on virtual goods.

Facebook – 46% between 18 – 34 years old. Estimated to do $75 million in virtual goods sales in 2009.

Fubar.com – 45% between 18 – 34 years old, another 37% older than 34. An “under the radar” social network, been selling virtual goods for years making at least several million per year.

12 – 17 Years Old

MyYearBook – Social Network for High School students.In May 2009, co-founder Catherine Cook stated MYB was making “over 8 figures” (that’s millions) only a few months after launching its virtual currency. (http://www.virtualgoodsnews.com/2009/05/myyearbook-making-millions-with-virtual-currency-sales.html)

Gaia Online – 60% between 12 – 17 years old.Gaia has reported that it makes over $12+ Million a year in virtual goods sales.

Stardoll – 67% between 7 – 17 years old. Stardoll is estimated to have had $30 Million in revenue in 2008 and also named one of 25 most valuable startups by Silicon Alley Insider that same year. (http://www.businessinsider.com/companies/stardoll)

12 and Younger

Club Penguin – Estimated yearly revenue of $60 - $70 Million, Bought by Disney for $700 Million in 2007. Was once the fastest growing site for kids aged 6 – 12.

Neopets – Bought by Viacom in 2005 for $160 Million

Webkinz – Most recent estimates were revenues of $700 Million. Their purchase of in store toys is just a conduit for users to redeem a code to receive virtual currency and items within the virtual world.

From the list, you can probably also see that virtual goods doesn’t gender discriminate either. In dating sites like HotorNot, males are the primary buyers of virtual goods. In environments like Scrapblog and Stardoll, women are the dominate buyers.

Each segment of audience requires different techniques to make a virtual economy successful. In future blog posts, I’ll detail the factors you need to consider when matching your virtual economy to your audience.

** All demographic statistics were pulled using Quantcast.

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I originally wrote this post for my company Viximo. To see the original post go here. Viximo provides publishers and brands virtual goods solutions that help them establish and grow new revenue through virtual goods. To learn more about our solutions, visit our website or email us at publishers@viximo.com.

]]> http://socialdegree.com/2009/07/23/virtual-goods-market-data-who-buys-virtual-goods/feed/ http://socialdegree.com/2009/07/21/3-predictions-of-facebooks-payment-platform/ http://socialdegree.com/2009/07/21/3-predictions-of-facebooks-payment-platform/#comments Tue, 21 Jul 2009 15:00:37 +0000 Brian Balfour http://socialdegree.com/?p=255 Last Thursday, Facebook officially announced the alpha testing of their Facebook Payment platform. While they are just rolling it out now, it certainly hasn’t hindered a virtual goods ecosystem from forming across many applications. Certain bloggers have even predicted up to $500 million in 2009 virtual goods revenue for application developers. But now that Facebook has started focusing on a key component which will accelerate the development of the virtual goods ecosystem, how will this impact virtual goods sales on Facebook?

1. Facebook Payments Will Expand The Market Of Virtual Goods Purchasers

Facebook’s Trusted Brand Among Consumers

Let’s be honest. Facebook applications don’t have the most trustworthy reputation. Users find many apps to be “spammy,” useless, and unprofessional, causing them to be nervous about submitting payment information .Facebook itself, however, has a more trusted brand and relationship with users. There will be a significant portion of the Facebook audience who don’t trust their payment information with applications, but do with Facebook.

Facebook’s Brand Leverage

Facebook’s brand leverage and overall size allows it to execute certain initiatives that application developers are unable to. For example, prepaid cards have been found to capture an additional segment of users that don’t have the ability to pay via credit card. However, due to size and cost, it doesn’t make sense for an application developer to launch a prepaid card service on their own. A Facebook branded card on store shelves could do very well in capturing that additional segment of paying users that are currently unavailable to application developers.

Ability To Capture Foreign Audiences

The fastest growing regions on Facebook are all foreign audiences. Developers have struggled monetizing Facebook users outside of North America. Advertising rates are even more dismal than usual, and there are few high payout CPA offers.

Virtual goods presents an opportunity to monetize these high growth audiences. The major road block is accepting international payments . While Credit Cards are a common payment method in North America, popular payment methods vary widely country to country. Habbo Hotel, for example,  has over 160 payment methods to cover their international audience and claims it to be one of the keys to success. This makes it very difficult for individual developers to serve those foreign audiences unless they integrate with an aggregator such as Global Collect. Even then, setup fees are in the thousands and therefore out of reach for most developers.

While it’s not economical for individual app developers to take on the burden of directly integrating with the wide range of international payment methods, it is completely within reason for Facebook to do so. In fact, Facebook has already placed an emphasis on international audiences by accepting credit card payments in 10+ currencies and I expect them to continue to expand this over time.

2. Facebook Payments Will Increase Purchase Conversion

Hundreds of Reasons To Buy Into Facebook Credits

At Viximo, we’ve found that on social networks a major motivator for users paying into a virtual currency is how many different outlets of purchase are available for that currency. The more reasons you give a user to buy into a currency, the higher the rate of success. With the ability to use Facebook credits across numerous applications, users will soon have hundreds of reasons to buy into the system.

Getting a user to buy into a currency is the majority of the battle. After that, the “monopoly money” mindset takes over. The psychology of spending “credits” instead of “dollars” impacts a user’s spending behavior. A test run by Viximo shows that users were 10X more likely to buy a virtual good when they already had stored value in the system. For example, if a user bought currency to play a game, but then ended up in a virtual gift store, that user is 10X more likely to purchase a virtual gift then if they didn’t already have currency available.

Access to Millions of Stored Credit Cards

Success of paid applications on the iPhone platform are partly attributable to the millions of credit cards Apple has stored for one click purchasing. Storing credit cards and one click buying drastically reduces the barrier of payment, and increases the ability of “impulse” buys (which many virtual goods are). Facebook, likely, already has more stored credit cards then any application developer just from their virtual gifting feature. The database of credit cards will quickly grow as more applications are able to integrate Facebook payments. Sharing that database across Facebooks apps will benefit all application developers.

In App User Flow

Some payment methods used by applications to date, such as PayPal, require a user to be taken off site and to a secure Paypal page. At Viximo, we have noticed drastic abandonment rates when this extra step is added into the user process. Facebook’s payments keep the user in the experience of the application with a standard Facebook popover. It might seem like a small difference, but this has a large impact on conversion.

3. Negative Impact on the CPA Offer ecosystem

CPA offer networks such as Gambit, Offerpal, and SuperRewards have been popular methods to monetize virtual currencies and goods on the Facebook platform. In many ways, it was a means to an end, a way to enable the virtual goods ecosystem. Users often complete CPA offers for one of a few reasons:

1. They don’t have access to a Credit Card

2. They don’t trust an application with their payment information

3. They aren’t “sold” enough on virtual goods to enter their payment info

But as mentioned previously , Facebook payments mitigate many of these issues. I have talked to many app developers recently, and over the past 3 – 6 months they have seen the trend revenue coming from offers declining, in favor of direct payments. While Facebook payments will continue to push this trend, I suspect there will always be a place for offer networks, although their market share may be somewhat diminished.

Conclusion

Many questions remain about Facebook’s Payment plans. Who will Facebook allow to use their payment product? How much will they charge developers? Payments is a complex business, so how will they manage the challenges of the industry as their payment platform scales? Will Facebook extend payments beyond their internal ecosystem with Facebook Connect? Even with these questions unanswered it is clear that Facebook has a significant opportunity with their payment platform and  application developers selling virtual goods stand to greatly benefit from the initiative.

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I originally wrote this post for my company Viximo. To see the original post go here.  Viximo provides publishers and brands virtual goods solutions that help them establish and grow new revenue through virtual goods. To learn more about our solutions, visit our website or email us at publishers@viximo.com.

]]> http://socialdegree.com/2009/07/21/3-predictions-of-facebooks-payment-platform/feed/ http://socialdegree.com/2009/07/16/top-3-reasons-people-buy-virtual-goods/ http://socialdegree.com/2009/07/16/top-3-reasons-people-buy-virtual-goods/#comments Thu, 16 Jul 2009 10:00:38 +0000 Brian Balfour http://socialdegree.com/?p=235 The Virtual Goods industry is growing extremely quickly. Some estimate the size of the industry to reach $5.5 billion globally this year, and it is just beginning. There is no escaping the fact that consumers spend money on virtual goods, even in economic down times.

Others in the virtual goods industry, such as Charles Hudson and Jeremy Liew, have written articles explaining the psychology behind buying virtual items. Yet, the question of why people spend money on virtual goods is still one of the most common questions I am asked. So I decided I would add an additional perspective as to why users buy virtual goods.

Overview

Virtual goods are sold in four primary arenas; Social Networks, Online Dating Sites, Games, and Virtual Worlds. Over the past 6 years, these categories of social, community driven, products have grown exponentially. A new paradigm has been created in which users behave and value things very differently in these social communities compared to other types of online properties. However, despite the rise of these social products, few matched their business model to these new behaviors and values. Instead companies tried to retrofit old business models, such as banner advertising, to no avail. As it turns out, Virtual Goods is the business model that gets to the core of what users value most within these environments. To understand virtual goods we need to understand what drives this value system:

Status – Virtual goods help you stand out from the crowd

In our offline social lives, we spend a significant amount of time and money making ourselves stand out from the crowd. The clothes we wear, the cars we drive, the restaurants we frequent are all examples of measures we take to stand out and be noticed. In online social environments with thousands, even millions, of users this social behavior is amplified.

In virtual worlds, where users are socializing, playing games, and interacting with hundreds of others in the same “room,” they don’t want to look like everyone else. Paying for avatar clothing, hair styles, and other accessories is natural to ensure you establish a visual identity that represents you. Even paying for different virtual abilities like flying or dancing helps users stand out from the crowd and express status within a community.

Another great example is online dating . Most online dating sites have a standard feature where you can send someone a free “wink” or “smile.” If you are a “hot girl” on a dating site, you probably get hundreds of these. Conversely, if you are one of the hundreds of guys vying for her attention, do you think you will stand out more if you are one of many sending a free wink, or one of the few that send a visually rich, interactive, virtual gift? Naturally, users who distinguish themselves more on online dating sites, achieve their ultimate goal of getting more dates.

Socializing – Virtual goods help you express yourself

In the offline world, we have numerous ways to socialize, communicate, and express ourselves: the tone of our voice, our facial expressions, our mannerisms, or social gestures. But online environments unfortunately restrict us from these abilities. There is only so much we can explain through text. Yet, this ability is so important to us that we have found online alternatives such as emoticonsJ.

In social environments where you are establishing and maintaining relationships, self expression is a very valuable commodity. For example, MySpace allows users customize their profile pages to express their personal style and interests. This feature is so popular it is widely regarded as one of a few reasons why MySpace was so successful in gaining traction. So pervasive is this need for self expression that despite the fact that MySpace has never sold customized backgrounds directly, an entire secondary black market of “Pimp My Profile” sites emerged to take advantage of user’s willingness to pay (directly or via advertising).

Users actively pay for profile designs or “bling” on the various social networks to visually express their interests, style, and “who they are.” This visual message is much more powerful and engaging than reading through text under an “interests” section.

On dating sites, a lot of time and effort goes into crafting communication and messages to potential matches. It’s difficult to be consistently witty and engaging through plain text messages. The addition of Virtual Gifts provides a rich interactive visual message which can help the sender express their humor or style much more effectively.

Winning – Virtual Goods help you gain an advantage

Virtual goods are commonly utilized as a way for users to gain an advantage to reach their end goal. In gaming, that goal is beating the computer or another player. Here too, virtual goods can be used to achieve that goal. For example, users who spend hours playing a racing game will gladly pay to add wheels to their cart which will allow them to drive faster, and in turn help them win.

But these types of goods, commonly referred to as “functional goods,” aren’t just for games. We can once again take an example from the world of online dating. Here, the ultimate end goal is to land dates. To achieve this, a user can purchase a “featured spot,” on a user page or in search results, to increase exposure to the site’s audience and thus increase their chances of being noticed by a potential mate.

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I originally wrote this post for my company Viximo. Viximo provides publishers and brands virtual goods solutions that help them establish and grow new revenue through virtual goods. To learn more about our solutions, visit our website or email us at publishers@viximo.com.

]]> http://socialdegree.com/2009/07/16/top-3-reasons-people-buy-virtual-goods/feed/ http://socialdegree.com/2009/04/28/join-me-at-social-gaming-summit-in-june/ http://socialdegree.com/2009/04/28/join-me-at-social-gaming-summit-in-june/#comments Tue, 28 Apr 2009 17:00:50 +0000 Brian Balfour http://www.socialdegree.com/?p=171 Social Gaming Summit is coming up in June in San Francisco. Â This is one of a few small conferences that Charles Hudson of Serious Business organizes. Â Others include Virtual Goods Summit and iGames Summit. Â Charles and his crew always do an amazing job at bringing together some incredibly smart people. Â These summits are by far the most productive conferences I have been to in the past couple years. Even if you aren’t directly involved with gaming I encourage you to go. Â The rest of the web can learn a lot from the gaming world about motivating user interaction and monetizing their products. Â Details and discount code are available below. Â Early bird tickets are going fast, so register now. Ping me if you are going to be there.

Social Gaming Summit 2009
June 23rd, 2009
Hotel Nikko, San Francisco
Website:Â http://www.socialgamingsummit2009.com
Registration:Â http://socialgamingsummit2009.eventbrite.com

The Social Gaming Summit 2009 is a one day event focused on the intersection of games and the social web. This year’s event will focus on helping social games developers build, monetize, and grow their social games. We’re bringing together the leaders in free-to-play games, social networking, and payments infrastructure for a full day of panels and talks. We’ll have executives from Zynga, Playdom, Playfish, Serious Business, Offerpal, Super Rewards, PayPal, Zong, Challenge Games, Kongregate, Xiaonei, hi5, MySpace, Facebook, and other leading companies in the social gaming space.Register now to take advantage of our limited number of $299 Early Bird tickets. If you miss the Early Bird window, you can save 10% on General Admission tickets by registering with the code VIXIMO.Â