Virtual goods on mobile games to top $11B

Katie Gatto · November 30, 2010 · Short URL: https://vator.tv/n/144a

Juniper Research predicts in-game sales to double by 2015, and pass download-game sales in three yrs

Aah, mobile games. You play them when you are waiting in line. You play them when you are sitting in the back of your friend's car. You play them when you are just plain bored. As it turns out, when you get hooked on them, you are contributing to a multi-billion dollar industry, at least you are every time you buy an item. 

Revenues made from virtual goods, or in-game purchases, in mobile games, is expected to surpass $11 billion by 2015, thanks to Apple's in-app billing mechanism, according to a just-released report by Juniper Research. That number is nearly double the revenue of 2009. The study looks at what it identified as key distributors of mobile games. Those key distributors include: Apple, Google, Nokia, and GetJar.

And within three years, virtual good sales are estimated to surpass the traditional pay-per-download model for game monetization. 

Yes, you read that right. The revenue from virtual goods should overtake the sales from downloading games.

That means more sales of seeds for your virtual farm or an upgrade to your favorite weapon. For those of you not familiar with this system, in-game item buying works something like this: The player exchanges his or her real world money, for digital dollars or credits. This digital money can then be used to buy items in the game. These items usually give the player some advantage in the game.

Of course, the popularity of mobile games may not be much of a surprise to you, if you read a recent bit of research by the Pew Research Center’s Internet & American Life Project that showed that 60% of app users have downloaded games. Or, if you remember the research provided by Flurry, an analytics company, that showed in-game item sales rising by 80% in the last year, though, that research was only conducted with data from leading iOS social gaming applications, that had a combined reach of 2.2 million daily active users.

The in-game item purchase model has already proven to be profitable. The social gaming company, Zynga, relies on the sales of virtual goods, along with advertising revenue, to make its money. Zynga's games currently boast 360+ million monthly active users, and the company was valued at $5 billion in April of this year.  Other companies, like Gaia, sell as much as $1 million a month in virtual items.

That is not to say that the pay-to-pay model is going to be extinct in the near future, provided that you have something unique to offer. Games like World of Warcraft make brisk sales on this type of model.  In October of this year World of Warcraft surpassed 12 million paid users.  

You may be interested to know that Juniper is not the only research firm looking at in-game item sales. Earlier this month In-Stat published research stating that virtual goods sale revenue rose to $7.3 billion this year, with the total sales of 2D virtual goods, on both mobile Internet-based platforms, coming close to $2.3 billion. Other research, by Justin Smith and Charles Hudson of the Inside Network, expects the 2009 numbers to double by 2011.

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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 www.zynga.com.