Friday, 9 January 2009

Facebook 'gifting' and virtual goods

I’ve recently learned that ‘gifting’ on Facebook is creating major revenue, rumoured to be millions of dollars a month. I found this revelation surprising as I’ve never bought any gifts on Facebook unless they were free. I just can’t imagine spending my hard earned cash on something as intangible as virtual gifts on the internet. For many (me included) the idea is downright ludicrous.

As more users join social networking sites, interactions among users within social networking sites have become more bizarre. For example, poking and superpoking are common pastimes on Facebook. Gifting, giving friends virtual gifts on Facebook, has become increasingly popular since it was unveiled in 2007. Initially many thought that the idea wouldn’t catch on because it was too expensive ($1 per gift) and the gifts were virtual, i.e. not real and therefore meaningless to users. But the idea was successful, with people sending friends gifts ranging from the thoughtful (a piece of cake or a cupcake for birthdays) to the ridiculous (kick me post its, handcuffs and toilet rolls).

On the same topic, virtual goods on Second Life is another market creating major revenue (in the billions). I recently read an interesting article all about the Second Life virtual goods industry. People actually spend money on furniture, clothes and food for their avatars (a computer user’s self representation or alter ego) on Second Life. One may mock the concept but somewhere out there, there is a multi-millionaire who has made his/her fortune from the virtual goods industry. The market is estimated to be worth “approximately $1.5 billion and growing rapidly.”

I generally find the idea of a virtual world difficult to fathom, but it’s very real for some. Second Life even has its own home-grown scandals related to the virtual goods industry. An article in BusinessWeek discussed “a program called CopyBot, which lets anyone copy virtual goods without paying for them, got loose on Second Life, angering the folks who have made the place not only their second home but their main business.”

During a recession, one would think that sales of virtual goods would decrease but according to reports, that is not so. “Digital good sales within IMVU are still going strong," said IMVU CEO Cary Rosenzweig. According to an
article in Virtual World news, "In IMVU, members buy credits which are then used to buy digital goods. Credit sales are still strong. In fact, so far in October, our growth rates have actually accelerated, whether compared to year ago, or month-to-month. Over 90% of IMVU’s overall revenue is from the sale of virtual credits used to buy digital goods…Because our virtual credit revenue is strong, so is our overall revenue."

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