Sales of virtual goods, a relatively new and wildly successful business model for mobile and social applications, are expected to soar to $2.1 billion in 2011, according to a new report published by Justin Smith and Charles Hudson of the Inside Network.
Though it had already topped $1.1 billion in 2009 and $1.6 billion this year, the market is expected to double that 2009 figure by 2011, welcome news to all the virtual good-fueled startups and businesses on social sites and mobile phones, like Zynga, Playfish, and Tapulous.
Those three companies, along with countless others developing for Facebook, iPhone, and more, rake in loads of cash by selling bonus content in their games for cheap. In Zynga’s “FarmVille,” for example, a user can either patiently accumulate money over time to purchase advanced in-game technology, like a tractor, or they can just type in their credit card and buy it instantly. In Tapulous, gamers spend money on new tunes to tap along to, since the game only comes with a set number of songs.
Likely foreseeing the rocketing value of the virtual goods market, EA acquired Playfish for $400 million last November and Disney acquired Tapulous in July. The other big player, Zynga, has no intention to be acquired or go public anytime soon; the startup is perfectly happy to expand its business globally with a half million dollars in investments and nearly that much in yearly revenue.
No matter the exit, Zynga, Playfish, and Tapulous combined will account for half of all social gaming revenue next year. All three are very good at one thing: attracting millions of users to their free, addicting games and encouraging them to buy into virtual good microtransactions.
“They’re focused on getting users more engaged and converting engaged users into paying users,” said Smith, the founder of Inside Network.
The real trick for these companies is to ensure that they can retain users in the long-term, a task that at least Zynga is already obsessed with.
image source: moaicapitalgroup.com
