Posts Tagged virtual goods

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

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Holiday Giving and the Coming Boom

Do you remember when you first heard about buying books online or sending e-cards? How about when you first gave or received one? For many of you that was a decade ago so you’ve already witnessed a surprising boom whose footprints were first heard during holiday season. Listen closely and you’ll hear the coming boom in virtual property during this years holiday season as more and more people by virtual gifts in virtual worlds:

You don’t wrap these presents in a box. You can’t wear them, play with them or show them off, at least not in the real world.

Even so, virtual gifts — computer-generated items given and displayed online — are quickly becoming must-haves. And increasingly, people are willing to pay cold, hard, real-life cash to purchase them for friends, family and co-workers.

…Since they were introduced in February, Facebook says its users have purchased more than 24 million of these dollar items, which are sold in limited editions to generate more interest. …

The ease of giving a virtual gift is definitely part of the attraction, he says.

“A few clicks and it’s done. No worries about FedEx or the post office getting it there on time,” Roberts says.

… In a sense, these gifts are supplanting electronic cards, online greetings that are waning in popularity, according to Internet watchers. People are becoming more willing to pay for something you can’t touch or hold in your hand. …

The novelty is driving the market for virtual gifts and goods. So is the frenzy to gain status on social networking and virtual world sites, says Robbie Blinkoff, an anthropologist who studies online trends.

“There’s a lot of money to be made,” says Blinkoff, managing director of Context-Based Research Group in Baltimore. …

“It’s easy to get caught up in thinking that it’s not real because it’s digital. But we have plenty of digital items that have value,” says Jeska Dzwigalski, who works in community and product development for Linden Lab, the creators of Second Life. “Have you ever bought a song on iTunes? Have you ever paid for software?”

… Steve Auerbach, a dad in the Los Angeles area, says he’s realized that the virtual world isn’t something to fear. … “So much of our world is intangible now. (Giving a virtual gift) is still about the act of giving and receiving,”

Associated Press: Are Virtual Gifts Worth It?

As in the early days of Amazon, there are of course many skeptics who are saying it’s just a passing fad, that there just isn’t a replacement for the tangible gift … and real presents will make a comeback. However the coming boom has been mentioned in many posts here since the summer and in the first of these I noted the trends “connecting the tangible world of consumers, manufacturers, suppliers, and engineers with the virtual world.”. The foundations for this boom have been evolving for some time as the ever-increasing capabilities of 3d-printing bring a new level of empowerment to prosumers.

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China and the Coming Boom in Virtual Property

Reading reBang’s When Retail Goes Virtual post about “the impact virtual worlds will almost certainly have on real world commerce.”, I was reminded of some links I hadn’t gotten around to posting yet:

American government officials and economists from Secretary of the Treasury Hank Paulson to Senator Chuck Shumer to Paul Kruger have focused on balance of trade issues with China, the RMB-USD exchange rate, and China’s huge foreign reserves. But few mainstream economists or Government officials have looked at new forms of currency emerging in China that already is beginning to greatly affect China’s underlying economy – virtual currency.

Investors should not fail to look at this sector. Xinhua News has reported that the volume of virtual currency has reached several hundred million USD a year in China. My firm estimates the size to grow 30% in 2007.

China’s Virtual, e-Commerce Currency – Seeking Alpha

reBang references an article from the Guardian which quotes Robert Lai, chief scientist of the Beijing Cyber Recreation District talking about virtual worlds capable of supporting billions of avatars(). The Chinese are VERY serious about the meshverse. The Guardian article goes on to say:

… this is a bold attempt to repeat what China has done in manufacturing (ie, conquering the world) in services. Be warned.

… At the moment, Britain and other western economies benefit from cheap Chinese manufactured goods and the low inflation they bring while also benefiting from huge wholesale, retail and distribution markups on the same goods. If they too migrate to China, what will there be left for us to do? That is a very serious question.

Virtual China looks for real benefits

Others have raised this very serious question:

  • Whether or not such e-commerce is even feasible may be a moot point. I feel it speaks volumes as to where the country is, culturally. Now, technology futurists are in a sense saying, “You will be able to point, click, and buy anything, just how you want it, directly from any factory in the world”—so much for “Buy American.” The Beijing Cyber Recreation District is being billed as a so-called “online counterpart” to Beijing’s China Recreation District, a physical, real-world endeavor that will boast entertainment and shopping; the center is set to open in time for the 2008 Olympics, according to the AP. And where will this new entertainment center be built? In an abandoned Chinese steel plant. Can’t you just feel the irony?

thefabricator: Point, click, buy anything — from anywhere

  • Need a new refrigerator or a pair of pants? Go window shopping (that is, in your Explorer window) online in a virtual world and then buy it directly from the factory in rural Asia where the item is made. That’s what the Chinese government is proposing. According to an Associated Press report (“China Plans Virtual World for Commerce,” October 15, 2007), China’s central government is methodically constructing a vast virtual world, dubbed the Beijing Cyber Recreation District.
    “Some supply-chain experts say the project is impossibly grandiose in its goal to provide direct links between tens of thousands of Chinese manufacturers and millions of individual customers around the world,” AP wrote. But if this turns out to be the surprise hit that no one has foreseen, PLM vendors may need to refashion their sourcing and supply-chain management features.

    CADalyst: CADfidential

The west is going to have to come up with some serious innovation to cope with this but the trends I’ve covered here such as Desktop Manufacturing and DIY Gone Wild indicate that this innovation is already underway. The above-mentioned reBang post is even more expansive.

China may have low cost labor but western desktop design & manufacturing entrepreneurs can ship from down the street and do meet-ups with both creative trend setters(music, fashion, sports) and customers. This competition will play a key role in driving demand for virtual property. The coming boom in virtual property will be more far reaching than the US/USSR space race.

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