Money for Nothing

By | December 31, 2010
Planet Taj Mahal (#60)

Image by Christopher Chan via Flickr

Well, not exactly nothing.

I direct your attention to the Year in Virtual Goods,where we learn that in the year 2010, people worldwide found a way to spend more than $7 billion real dollars on virtual stuff. Maybe this shouldn’t be surprising, what with 80 million people playing Farmville, but what the heck — I find it surprising, anyway.

The linked article compares the $7 billion worldwide on virtual goods in 2010 to the $60 billion worldwide on games in general in 2009. Virtual goods make up a substantial piece of a huge market. Here’s the part the makes me dizzy:

$635,000: New world record for the single largest purchase in an online game, in this case a virtual intergalactic resort in Planet Calypso. A few years ago the same seller, Jon ‘Neverdie’ Jacobs, sold $335,000 worth of virtual real estate in Entropia Universe.

Shocking? I have a prediction: in a few years we’re going to look back on Jon Jacobs’s purchase and marvel — at what an amazing deal he got!  Here’s a bit of history for you, compliments from the Font of All Human Knowledge (citations, you will note, are needed):

The first clickable web ad (which later came to be known by the term “banner ad”) was sold by Global Network Navigator (GNN) in 1993 to Heller, Ehrman, White and McAuliffe, a now defunct law firm with a Silicon Valley office.[citation needed] GNN was the first commercially supported web publication and one of the very first web sites ever.[citation needed]

It’s important to note that that particular ad was not the first-ever “online ad.” Online ads had been around since Prodigy in the late 80′s. But it was the first one of roughly the type we see today. That 1993 ad had to look like something of an oddity. Maybe some looked at that transaction and predicted that a decade and a half later, web advertising would be a $26 billion dollar business, surpassing newspaper print ads.

But I don’t think many made that prediction. I know I didn’t.

I hate missing the boat like that. So here’s my prediction. (And no, I’m not ready to assign a date.)

Someday soon the market for virtual real estate will surpass the market for real real estate.

Eventually, the markets for all virtual goods and services will surpass their real-world counterparts. Yes, that will be a strange world…but then it already is, isn’t it?

Some will no doubt argue that I’m missing the point: that the Web ad placed in 1993 and the many thousands placed every day are real advertisements. There is really value there.


Image via CrunchBaseImage representing Barnes & Noble as depicted ...

Likewise, when Barnes and Noble announced that its website is making more money selling ebooks than traditional print books, well, there is still a book there, after all. Whereas an online ad doesn’t seem like a virtual ad in any meaningful way (although it might have had that kind of feel in 1993), an ebook is arguably a virtual alternative to a “real” book.

Maybe there’s virtual and then there’s VIRTUAL. After all, an ebook has all the same information as the “real” book and delivers a comparable (or enhanced) reading experience. But a virtual piece of real estate has (pardon me here, I have to do this) virtually none of the attributes of a real piece of property. Jacobs may be engaging in a shrewd bit of speculation, but is this really the wave of the future?

What I’m predicting, some will argue, is insanity. How can there be more value in an economy of make-believe than in the really, real real economy — you know, the one that gives us Enron and housing bubbles and so forth?

How much can all that virtual stuff ever really be worth?

The answer is quite simple — whatever people are willing to pay for it.

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  • stephentg

    When I was a kid I heard a sermon from an old preacher where he asked, “What’s important to you? We all say some things are important to us… we may even believe some things are important to us. But pull out your checkbook and look what you’ve been writing checks for. That tells the real story.”

    Phil: “Whatever people are willing to pay for it.”

    This is a true measure of how much we are living online – what we are willing to pay for virtual goods.

    I’m personally not likely to spend much for virtual goods. I don’t do Second Life, Farmville, or MUD’s. If you don’t live there, you don’t spend money there.

    I do spend money for digital content – ebooks, movies, music. And I shop online for a lot of the real world goods that I used to buy locally.

    But that’s not the same. All those goods and services are enjoyed right here in the “real” world. I guess that makes me a cyber tourist. I’m an occasional visitor, not a citizen.

  • Phil

    >>I’m personally not likely to spend much for virtual goods.

    Well, we’ll see. I don’t buy them myself…yet.

    In addition to new generations of Farmville and other MUDS, we’re going to see many more contexts for people to make use of virtual goods. I think we’ll be buying them before we realized what happened.

    My guess is that you and I (and many like us) are a lot closer to being citizens than we realize.

  • jsummerstay

    The rules for virtual goods are very different from real goods, however. “They’re not making any more land” is a good point about real land, but it’s possible to make an unlimited amount of virtual land. Goods can also be replicated at no cost.
    The software to allow realistic and complicated graphics is also increasing every year, so purchases will very quickly lose value as better alternatives appear.
    The solution from a company’s point of view is to introduce artificial scarcity, through control of a gameworld. But if an alternative should appear that gives more flexibility to the consumer for cheaper, the value of in-game goods could quickly drop to zero.
    Yes, virtual goods will continue to bring in more and more money each year. But investments in virtual property will behave very differently that investments in real property.