Virtual Goods Market

I have been playing an online game on Facebook called Farmville for about a week now. Farmville allows you to own and manage a farm on Facebook, and is quite an interesting game. I won’t call it addictive, but it does make me come back to it every day.

You can grow crops, trees, own animals and decorate your farm with all sorts of buildings on Farmville. As you gain more experience, you jump up levels, and are able to grow a bigger variety of crops, and own more animals, trees, buildings etc.

You can invite your friends to be your neighbors, and having neighbors is one of the keys to unlocking more stuff, and allows you to do more.

There is a market in the game, and you can buy and sell stuff on this market. The game has two currencies, called – coins and cash. You get coins when you harvest crops, and then these coins can be used to buy more seeds, trees and other things.

But, the cash currency is one that interests me the most. There is no way to earn cash within the game, and you have to buy cash with real money.

Why would you do that?

Because there are certain things that can be bought only with cash. For example, a manor in Farmville can be bought only with cash. No matter how many coins you have, if you want to buy a manor, you need to buy it with cash. A manor costs 56 cash.

Farmville sells cash in lots of — 25, 55, 115 and 240. You can buy 55 cash with 10 dollars. They give you 5 cash to start with, so you can spend 10 dollars, and buy yourself a nice manor on Farmville.

Selling virtual goods is a relatively new business model for most companies, but it has been around for a few years now. The market for this is bigger than you might think.

Charles Hudson estimates the virtual goods market to be a whopping 200 million dollars in the United States!

Companies like Gaia online are transacting a million dollars a month in virtual goods. It is my guess that most of this goes to the bottom line because there can’t be much of a difference in cost between selling a thousand or two thousand virtual barns.

WSJ ran a story recently, which said that a lot of internet companies are finding that ad revenue is not enough to support such games, and they are turning to “branded entertainment campaigns”, where an advertiser is incorporated in the game, and also on selling virtual goods.

The industry is experimenting to see if selling virtual goods is a viable business model or not, and it will be really interesting to see how this shapes up a few years from now.

In the meanwhile, I don’t see myself buying any virtual goods, houses or animals with real money, what about you?

5 thoughts on “Virtual Goods Market”

  1. Farmtown has an option to purchase coins with real money, but you don’t have to. I’m up to level 33 without having to do that. Farmville doesn’t give you a choice. I started playing the game and enjoy it, but now my farm is about ready to burst with crops and I want to expand and get more items but it will cost me real money to do so. I think that is AWFUL. Perhaps instead of luring you into the game and then springing the fact that you have to come up with some real cash to buy things, expand your farm, etc. they ought to just charge a dollar a month or something menial for everyone to play games. They’d be making money hand over fist and we wouldn’t really miss it and Farmtown could so something about their servers and/or programming.

    1. I had no idea that after a certain point you have to pay to expand. There are some annoying features like that.

      For instance, the fuel for the tractor that was introduced a few days ago needs fuel, which either gets refueled very slowly or you are forced to buy it with real cash. It’s really annoying and I see a lot of people complaining on blogs and such.

  2. Virtual stuff with real money??? You must be joking!!! I got a ton of other things, which are very much real mind you, which I would rather spend the hard earned cash on….or save it for a rainy day 😛

    I play farmville too…and have grown addicted to it (Geez!!) but I wait for the coins to pile up as the days go by, thru virtual selling of the harvested crops to buy stuff 🙂

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