Virtual goods bubble looming?

The buying and selling of virtual goods is an extremely nascent market that seems to be heating up dramatically. Almost daily there are announcements pronouncing large virtual good revenues on the horizon and new forms of payments and rewards for the intrepid user.

Just today social network Hi5 introduced multicultural holiday gifts along with a new payment system. Virtual world Habbo also introduced a new type of currency and reward program for loyal users.

With all of this interest and efforts toward monetization, is this a bubble waiting to burst?

So far, my answer is no.

Virtual goods are part of the walled garden in which they are purchased and consumed. If they fail, they only fail within that specific environment and don't take down the ecosystem because there really isn't one.

There is no portability of the goods between social networks or virtual worlds due to technical and business reasons and therefore there are limited opportunities for outside providers to base their businesses in other-world environments. That insulates others (meaning not the base site) from going down with ship.

For example, I can't start a company to sell virtual cookies on Facebook (though I can use Viximo, which takes the lion's share of the revenue) and even if I could sell on Facebook the virtual cookies wouldn't transfer to other sites Gaia or Habbo. I also can't take the sword I purchased in WoW and use it in IMVU. And while that might be nice, it probably doesn't matter.

It's not clear just how big the virtual goods market is, nor have we seen it become completely bastardized as we eventually will when marketers try to sell anything and everything. In the mean time, it's nice to see any economy flourishing.

[karpenterskids]

I find the whole concept of virtual goods quite stupid.
(Except for maybe in WoW, if it's something you're going to use in your conquests)

But as for buying "items" on Facebook or Hi5?
Give me a BREAK.
Why would anyone ever want to pay $1 for a lousy JPEG? =P
Why not just copy the jpg, host it onto photobucket. and give it to the person FOR FREE?!

Especially if you're feeling the pinch of the economy and your budget's tight.

[justindavey]

I think this will be a growth industry in the next year within both dot-com and mobile social networks. Advertising within SocNets might not be incredibly effective, but tons of people will buy a knick-knack, JPEG or not, for a buck.

[man_w_balls]

totally pet rock.

[t8]

I have a 0 and a 1 for sale. Together you can combine and replicate these binaries and create anything. Any bids?

[Len Bullard]

Today the market is either vertical (one world), or tools-based (eg. Maya) or VRML/X3D/Collada (which all the industry is trying unsuccessfully to drown).

Here is one option for the customer: buy the virtual from a tools-based vendor. For a small fee, have the vendor store the product you buy on their server in the original tool format. If you lose a copy, they'll give you another. If you want to take it into a different format world, for a small fee, they customize one for that world.

You get the picture. It is somewhat like buying from a clothes tailor who takes you on as a permanent customer and keeps your last measurements. If you attest you haven't gained weight, they'll make new clothes for you and ship them anywhere in the world.