Virtual goods insanity: I’ll buy that for $330,000

While there’s a ton of hype about micropayments and their role in virtual goods, many economic trends don’t really sink in until there’s a high-profile success story that people can dream about. It doesn’t matter that less than 10 percent make any serious money, since it’s easier to buy the dream of riches than to face the reality of the statistics.

The real money in virtual goods isn’t found in the iPhone App Store, it’s in social network games and virtual worlds. While I’ve personally seen 20,000 limited edition items sell out on Mafia Wars in one day, that’s just a tiny spec in the new digital economy of digital goods.

Want an idea of what that tiny spec was worth?  The math goes like this: 20,000 items at 42 points/credits each. 42 rewards points costs $10 (source in game marketplace), so 20,000 x 10 = $200,000 retail value in one day. While that item may have been special and not everyone pays cash or PayPal directly for the points; it’s a very suggestive revenue statement – virtual goods are serious business.

But before the bandwagon starts cheering that virtual goods gold rush, I respectfully submit that this is the same trend expanding from virtual worlds to games and has been building momentum for a decade.

Let’s consider some virtual goods economies where there are indeed several high profile success stories to dream about. Forbes discusses the topic, but I’ll point out some highlights with my thoughts. The first goes back to 2004 and is all about an ROI of nearly 400 percent and a cash outlay of $26,500, but keep dreaming as there huge sums of money to be made in virtual goods:

  • Do you seek rare virtual animals or cater to those who do? Then Amethera Treasure Island should peak your interest. This business in virtual world Entropia costs $26,500, but returns ~$100,000 per year.
  • Do you want the own the latest hotspot asteroid? Then Club Neverdie in Entropia is your type of business. Purchased for $100,000 in real money in 2005, the nightclub, shopping mall, and sport stadium based on an asteroid is estimated to be worth $1 million.
  • If asteroids are too low class for you and you’d rather cater to the luxury minded types? Keep your eye on Crystal Palace Space Station in Entropia which Forbes reports was sold for $330,000 in hopes of charging the wealthy crowd fees to visit and experience the latest in space station luxury.

While the previous examples showcase the money made in virtual real estate and experiences, others are putting the sweat and blood into other ways to earn money:

  • Skilled artist or just a collector? Consider dropping north of $11,000 on an Anatomically Correct Virtual Skeleton available only in virtual world Second Life. I’ve met virtual clothing designers who reported that they earned smaller, but respectable monthly incomes selling clothes in Second Life as well.
  • White collar criminal or just a hacker? A hacker in Second Life stole the real equivalent of $10,000 when he hacked into Second Life’s stock exchange.

Back in 1999 I remember users of The Palace creating and selling props on eBay. These props could be used by in-world avatars to dress up and show your personal style. Many people made and exchanged virtual goods for free, but even then, people bought, sold, and even stole the virtual good props.

Virtual goods not only are hot, they’ve been hot since 1999, been breaking bank accounts since 2004, and are now becoming a significant factor in reshaping the way we think about making money online. More is happening in this space, so stay tuned.

About Duane Kuroda

Business ninja, deal hunter, Internet marketer, and technology fiddler obsessed about growing companies and launching products. Currently at Peerspin, Duane’s past lives include Vice President of Marketing roles at companies leading micropayments, Internet video, and online communities as well as research and consulting for mobile advertising. Duane has spoken at conferences including Digital Hollywood and Digital Video Expo on topics covering monetizing online content and online video, has appeared on TechNowTV and KNTV, and has been quoted in various magazines. Follow Duane on Twitter: @dkuroda.

One Response to Virtual goods insanity: I’ll buy that for $330,000

  1. German says:

    What an insane display of ignorance and waste of resources! Virtual goods? We are burning fast the last drops of oil available -converting what's left into plastics- so that it could be wasted on spoiled idiotic kids buying "virtual goods" on the net? Do Americans know the difference between revenue and progress, or is it all consumption to them?