Potential revenue stream for online media: virtual goods

As we develop into an increasingly virtual world, our lives are definitely moving into a “virtual reality” that is complementary to our physical life. (In philosophy, in fact, would be not so clear which of our existences is the complement, but this is not our topic now).

Virtual goods made 2.1 billion US $ compared to 16.9 billion revenues in advertising in 2007. In other words, virtual goods are worth watching closely since any digital player may get a share of this market in a coming future incorporating new revenue streams.  If online games managed to create virtual objects that are worth real money for their audience, it may be the case that we, online media, may find a similar response. In fact, if I am typing this letters right now is because I am sure that media can create virtual goods within their communities of influence.

Virtual goods (summarized from Lehdonvirta’s excellent work: Virtual item sales as a revenue model: identifying attributes that drive purchase decisions.) are not information goods (a mp3 file) but “simulations” of material objects that sometimes do not have a material counterpart with 3 key characteristics: mutually excluding (their usage by one person excludes the use of a different person), persistency (it has to exist for some length of time) and interconnection (must not exist in isolation).

Virtual purchase drivers are:
1. Functionality: goods that improve performance, new functions or gameplay options.
2. Hedonism: aesthetic attributes
3. Social drivers: like facebook gifts that sometimes got artificial scarcity

“Virtual goods are more suited to creating and maintaining social distinctions and bonds because of their built-in rivalry and scarcity.”

Therefore, virtual goods are, at the end of the day, not that different to “real” goods. As we buy a Gucci bag, or a BMW, we are not just buying the physical object (its functionality) but the social, hedonistic part… how this object differentiate us from the others by its brand, design, etc. We are defining ourselves in society by acquiring some goods are not others.  Physical goods have a great “virtual” load in their attributes.

World of Warcraft, Habbo Hotel or Second Life may appear that have nothing to see with online media, but, there may be rules of their business model we should be watching because they are making money.  Online media will probably be soon a major supplier of “virtual goods”.