Boom Watch

While the summer olympics may put a spotlight on virtual goods because of China’s huge ambitions, signs of the coming boom are popping up everywhere. The most significant recent news concerns a virtual currency engine called Twofish Elements:

… users are looking for interactive experiences online that are too costly to be paid for by ads alone, so micro-transactions are the logical next step.

… That’s where Twofish Elements comes in, with an offer to help game companies optimize these transactions.

Its software is a plug-and-play platform, and is a sort of combination of web analytics and Paypal for games. Twofish watches what players do and helps create transaction steps to optimize revenue. It handles the micro-payments (even those from players overseas) and protects against the risk of fraud and chargebacks.

VentureBeat: TwoFish Elements launches for micro-transaction economies on the web and someday the web?

Twofish Elements, billed as a “turnkey solution” for companies with online worlds and game networks that want someone to handle in-game currency, micro-transactions and other features that comprise a virtual economy.

GigaOM: Virtual World Economy in a Box

It will be interesting to see how open this is and whether Linden Lab will enter this space any time soon. Technology News has a high level overview of virtual currency systems and I’ve rounded up some notable quotes dealing with virtual goods:

the business of selling virtual items that enable internet users to express themselves is booming. Over $2bn is spent on virtual items every year and I don’t think this is a trend to bet against. Disney certainly didn’t with its purchase of Club Penguin, which could be worth up to $700m.

And it was announced yesterday that Paramount has inked a deal with Habbo Hotel to create merchandise for one of Paramount’s upcoming movies.

e-Consultancy

As massively multi-player online games (MMORPGS) like World of Warcraft have gained popularity, real-world markets have sprung up for everything from online currency and items, to favors, to entire player accounts. For the most part, players buy and sell with no oversight or regulation, a situation Live Gamer promises to change.

… Some 10 percent of each sale will be split between Live Gamer and the publisher, with the remainder going to the seller — making it roughly as profitable as using Amazon or eBay to sell goods.

The company already has some clients on board, including Funcom and Sony. However, Vivendi, the publisher of the current most-popular online game World of Warcraft, has said it will not work with Live Gamer.

Live Gamer lands $24M for virtual good trading

Redpoint, formerly the sole institutional investor in MySpace (bought for $580 million by News Corp.) and now an investor in virtual world Gaia Online, is betting that as the identities merge, people will open their real wallets to buy virtual goods.

“In your personal life, you go on a date, you’re going to invest in a nice shirt and a nice pair of shoes,” said Mr. ElNaggar, who said that companies are making real money in virtual items. “There are companies doing $100 million in revenue here and in China.”

… Scott Raney, a partner at Redpoint, said that portfolio companies like Gaia and Rebel Monkey are progressions from the company’s MySpace investment.

“We sold MySpace and looked around and figured out what we wanted to do next,” he said. “For us, what appeared to be next was virtual worlds and social gaming.”

Red Herring: Rebel Monkey Swings for $1M

“Sending a virtual flower is a way of showing lightweight attention and affection to someone online,” said Susan Wu, a partner with Charles River Ventures and Menlo Park, Calif., who’s been following the growth of virtual gifts. She estimates that the virtual-goods market is worth about $3 billion today. “It’s become commonplace behavior on social networks.”

How Real Is Your Love? – Post I.T. – A Technology Blog From The Washington Post – (washingtonpost.com)

… a recent alliance that Habbo struck with Paramount Pictures Digital Entertainment announced last week that gave the virtual world merchandising rights in the U.S. for its studio films Beowulf, Mean Girls and upcoming The Spiderwick Chronicles. The deal created a new revenue stream opportunity for Paramount with the ability to sell virtual goods.

ADWEEK: Habbo Goes Hollywood

How do you make money?
“Erepublik’s business model is based mainly on virtual goods sold to users; internal advertising from users and external advertising to brands.”

Guardian – Elevator Pitch: Erepublic offers a real second life

Virtual currency and the purchase of so-called “boosts” are particularly central to Cafe.com’s ecosystem. Members can purchase CafeCoins using real money and then use them to buy three main types of goods: attacks, defenses, and social items like virtual flowers. Gaming-specific goods can be purchased outside of gameplay and added to one’s collection for use when the time comes during gameplay. CafeCoins can also be used to buy things like new clothes for your avatar.

TechCrunch: Browser-based Games Growing Up, Becoming More Social

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