Why Commercialize a Virtual World?
There is a strong case for commercializing virtual worlds. The problem many have with seeing the potential for business in virtual worlds is that the potential product offerings are often intangible. For example, many of the products sold in Second Life are digital addons for a person’s avatar. Some are compelled to decorate their characters with fancy clothing and other accessories in order to provide a complete representation of themselves or their desires. In Second Life’s case, these individuals will have to spend real money to acquire Linden Dollars (the currency of the game) so that they can purchase items within the game. These products are limited to the worlds they exist in. Some wonder why they should purchase something with such limited usage. It doesn’t matter what limits exist for such virtual products. The point is that there is a market that can be capitalized upon.
There are existing cases of how accepted purchasing intangible digital products can be. An existing MMORPG, Eve Online, has recently banned over 6,000 accounts that had been trading virtual goods for real money due to a violation of the terms of service. It should be noted that this type of MMORPG differs from Second Life in that the Eve Online traders were focused on existing in game items. Second Life is focused on user created content. The existence of such a large number of accounts relative to the active user base indicates that a market exists and is substantial. The highest number of concurrent active users on Eve is 45,000. Eve Online currently has a total of 300,000 subscribers.
Zynga is a company that many Facebook or Myspace users should be familiar with. If you play or have ever received an invitation for Mafia Wars, Farmville, or Fishville you have encountered Zynga. These virtual games offer users the chance to purchase credits that they can use to purchase in-game items. In some instances, the items they purchase do have in-game benefits. In other cases, they will fulfill a user’s desire to accessorize their character. Sales of these virtual goods account for over 90% of Zynga’s revenues of which is approaching $200 million per year. The company’s founder and CEO, Mark Pincus estimates that the current market for virtual goods stands at $4 billion dollars and he expects it to quadruple within the next 5 years. Zynga currently has more than 100 million unique users per month.
The economic reports from Second Life itself are staggering. The Q3 report for Second Life indicated that the total value of the transactions stood at $1.6 million dollars for a 74% growth from the previous year. Consumers are making more purchases of virtual goods as time goes on. The active user base is actually decreasing due to a correction caused by Linden Lab’s pursuit of bots (automated users that exploit Second Life) so remains to be seen if the population in Second Life will continue to grow. This should not detract from the fact that a marketplace does exist within Second Life and that opportunities to make money exist.
The three virtual worlds mentioned here are but a small number of the virtual worlds that exist on the internet. They have all shown that business opportunities within these realms. With that known, the actual problem in commercializing virtual worlds is knowing how to capitalize on such immature markets. It will take a great deal of ingenuity to bring the consumers what they want. It will be difficult but there is too much opportunity to be ignored.