Virtual goods starting to catch on

Chris Caceres · January 26, 2010 · Short URL:

Report shows virtual goods revenues to reach $1.6 bln in the US in 2010

You know all those little bits of money you're spending on games like FarmVille, or maybe those virtual birthday gifts your sending on Facebook?  Well, those items, also known as virtual goods are expected to reach revenues of $1.6 billion in 2010, with the social gaming market contributing $835 million of that, according to a report by Inside Network.  

If you're not entirely familiar with what exactly a virtual good is, it's a digital item you buy on the Web, usually costing a very small amount of money anywhere from a few cents to a dollar.  Zynga's most popular games reach around 40 million users daily and are built to be played on top of Facebook.  FarmVille, for example sells items like virtual seeds and tractors so users can progress in the game and build cooler farms than their friends.  Also, on Facebook you can buy virtual goods like MP3's and little stuffed animal icons you can send to your friends on their birthdays.  Remember, this option is available to all of Facebook's 350 million users.  

At the same time, the virtual goods market has not taken off nearly as much as it has in other countries.  In 2009, South Korea and China had an estimated sales of $3.5 to $4 billion in virtual goods.  The market in Asia is expected to reach $5.5 billion by 2012, according to this report.  

And traditional gaming companies like Electronic Arts, which has been around since 1982, are taking note of this ready to boom business model.  The video gaming giant purchased London-based Playfish in November of last year for at least $275 million.  Playfish builds social games for Facebook, MySpace and the more popular smart phones - games include Pet Society, and Restaurant City which are free, but make money through the selling of virtual goods.

Social gaming giant Zynga recently launched a campaign for Haitian relief efforts.  The company sold limited edition virtual goods to its users, donating 100% of the profits to Haiti's recovery.  In five days alone, the company raised $1.5 million from about 300,000 users. 

The report goes on to cover emerging social game development and studio models as well as a look at the future of Facebook's platform changes and credit currency.  But it'll cost you $995 to read the full thing.

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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users.  Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist.  The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel.  Zynga is headquartered at the Chip Factory in San Francisco.  For more information, please visit