The number of stories about people buying virtual goods continues to explode. This weekend, NPR produced a piece about people paying real money for items in FarmVille and other social worlds. Other stories continue to pile up like this one from CNET and another from the Social Graf. So, yes, virtual goods are the next big thing. In related news, Sony’s Everquest has changed from being subscription-based to free-to-play. This is the model of the future. Many worlds have been doing it for years, see e.g. Second Life, Club Penguin. If you’re dealing with large numbers of users, you just need to monetize a small percentage of those players, approximately 10-15%, and it’s all supposed to work out swimmingly. It makes sense that this could work, since you lower the barrier to entry, get more people hooked on your world, then wait for them to start driving 40 miles to the store to spend $30 to get FarmCash to rescue their virtual puppy. It happened in the the NPR story! But what does it all mean for the future of virtual worlds? Profit!
I’ve written about the fluctuating legal status of virtual goods before and the more I think about it, the less it really seems to matter. The cost is usually pretty low for many items (though some can be insanely expensive and vulnerable to space armadas) and they have no resale value as they usually go right into the user’s account. Thus they aren’t likely to be considered property the same way some people think that things in Second Life are property because you are allowed to re-sell them. The same goes for virtual worlds in Korea and elsewhere that have permitted sales for real-world currency or its equivalent. Although some courts in Europe have found that interference with virtual world accounts was a crime, most of the law remains ambiguous. As the economist of the article I just linked to puts it, “there is [economic] inefficiency in allocation of rights in virtual property.” It seems too easy to say that if you spend real money on something you own it, because you first have to distinguish between it being an asset or a service. If virtual “goods” are actually services, then there’s nothing to really own. This is why Linden Labs prefers to say that you don’t actually own anything in Second Life, you just have a “limited license to access server resources”–hardly a compelling sales pitch, but effective if you don’t want people to sue you (ahem, let us know how that works out, Linden).
So why do people continue to shell out real cash? Because it’s fun! People have been paying crazy amounts of money for things of nominal value since time began. Remember beanie babies or Magic cards? Compared with baseball cards they were a great deal, at least you could play with your adorable little penguin or your Shivan Dragon, what the heck did a mint Willie Mays card do for anyone besides sit around in 3 inches of lucite?! Maybe virtual goods are just another craze that will die out to be replaced by some new craze. For now, as people look for low-cost ways to wile away the Great Recession, there will be more virtual goods sales and more stories by incredulous journalists. Bet on it!
I just dusted off an article from Tech Crunch that I bookmarked a while back about retailers using virtual items as a new kind of incentive to get people into their brick-and-mortar shops. It’s a clever idea, since the virtual items themselves cost significantly less than what the retailer might have to discount his/her regular merchandise for to get the same effect. Plus it makes them look hip, trendy and ahead of the curve (I know I’m already sick of seeing the Facebook and Twitter icons on everything!). It already seems to work for fresh produce, as evidenced by the Farmville Cash tags attached to potatoes and celery that I’ve seen at Super Target. So, I wonder what other virtual items we’ll start to see. It’s going to require platforms with large user-bases or it won’t really get many people interested. Fortunately for Zynga, Farmville, with its 60 million users is just the tip of their social game iceberg.