Broken down in terms of some interesting numbers, Ted Sorom has laid out a year in review summary of the virtual goods industry at TechCrunch. Perhaps most interesting figure is that $7,300,000,000 is the expected global revenue for virtual good sales from 2010, although the number of virtual hotdogs eaten by NPCs in Ravenwood Fair is a close second.

The full article is available at TechCrunch.

This is, of course, a somewhat diverse and limited set of measures. It is also one that includes everything from the sale of digital game software to the sale of goods within the games and other environments themselves. However, it offers a glimpse not only into the size of the virtual goods industry, but some of the many features, goods, and values that are currently available for considering these economies.

Relay for Life

Many virtual worlds have a large, overarching economy, based on market economy principles. However, these economies can also contain smaller economies that function somewhat differently from the overarching economic features of the world. While Second Life is based largely on a market economy, there are other economic elements such as charity that also come into effect in ways that can be both interesting and potentially useful for understanding both online and offline giving.

Charitable works within Second Life can be remarkably effective. While there are many smaller charitable causes supported throughout the world, there are also examples of significant and highly successful charitable drives. For instance, Second Life’s 2010 Relay for Life raised US $222,804 for cancer research while the 2009 event raised US $ $274,000.

The success of these endeavours raises the question of what makes charitable efforts so successful within the virtual world, and centres on three main features of the world and its economic system: resident generosity, small but frequent donations, and the ability to offer virtual goods in order to benefit charitable causes.

First, although there are also elements of Second Life and its economy that may facilitate charitable donations, a great many Second Life residents are inclined to be generous in a multitude of ways, as seen in the significant amounts raised for Relay for Life and other charitable causes.

There are, however, elements of the virtual world that can help to redefine and increase charitable giving. In the case of donations, it can be easy to give relatively small amounts in Second Life. Donations of 20, 50, 100, or even 250 Lindens are common, but with the exchange rate of around 250 Lindens to one U.S. dollar, 20 Lindens equals about $0.08 and 100 equals about $0.40. Although the amounts may be relatively small when converted to USD, many small donations can add up quickly. At these levels, most residents can afford to donate. As a result, it is appears that more residents are donating than otherwise would if donations were expected to be higher. Consequently, the frequency of donations can drastically increase the total amounts donated even when the amount of each donation is relatively small.

While many residents give generously on their own and without expectations, there are also charitable efforts in Second Life that are based around more reciprocal arrangements where virtual goods also come into play. Because virtual goods do not usually have many associated material costs, it also very common to find items donated for charitable causes and then either given away to donors or sold so that profits can be donated.

Offering goods is an established technique for generating charitable income in three interrelated ways. First, the act of giving something away – a flower, perhaps, or return stickers for addressing envelopes – generates a sense of expected reciprocity. This tactic can make the recipient more likely to feel that they owe something in return for the small gift they have been given. Second, getting something in return for a donation is rewarding for those who are giving. This is the model frequently adopted in fundraising drives of public television stations as well as by charities who based their fundraising efforts on reciprocal arrangements. Receiving a tote bag, CD, or pin as recognition for making a donation is an attractive way to encourage giving by allowing the giver to receive something in return. Finally, releasing specially created items for purchase with proceeds going to charity is an effective way to generate funds. With goods available for purchase, residents can go about their normal consumption activities while still supporting charitable works.

Generally speaking, it is the latter two models that seem to arise most frequently in Second Life, especially with regards to some of the larger fundraising events. Given the extremely high quality and established generosity of many Second Life designers, there is no shortage of donated goods available on which to base charitable efforts. Furthermore, because they are virtual, there are few, if any, costs required to create a large number of whatever goods are offered for sale. At the same time, by offering goods to individuals in exchange for their Lindens, those who support charities with their purchases also get something of their own choice in return.

Despite the fact that funds are spread out over a huge number of charities and causes, the potential effects of such efforts are not lost in Second Life. Although there are hundreds (if not thousands) of in-world charitable causes and efforts, Relay for Life is one of the largest examples of charitable giving in Second Life with their US $222 804 contribution in 2010. This amount was raised using a combination of sponsorship, stand-alone donations and the sale and auction of a huge variety of virtual goods.

While virtual worlds are certainly worthy of consideration in their own right, perhaps there are lessons that we can take from instances of charitable giving to apply in other situations. Offline we are perhaps not as free of the costs of offering goods in exchange for donations. However, the combination of many small donations and the offering of virtual goods as a form of donor recognition is a powerful way of generating contributions that can raise significant funds for charitable causes that have very definite and positive effects.

Companies are so eager to tout total subscribers but I don’t think I’m alone when I say that number is fairly useless when it really comes down to it.

What we really need to know is the MAU at the very least and then the DAU to top it all off.. I have a few examples but I’d love to hear more if anyone has any.

Runes of Magic for example has a 20% rate of active users. When they had 3 million registered accounts they were reporting roughly 600k active. Altough I’d really love to know when they say 600,000 active users if they are talking about DAU’s or MAU’s. I have to assume it is MAU just to give them the opportunity to use the biggest numbers possible

WeeWorld: When they had 26 Million registered accounts they were reporting 1 million active

Fantage: Now Fantage says that they have 3.3 million unique visitors per month and 7.7 registered accounts. A few sources have foolishly taken it upon themselves to report Fantage with 3.3 Million MAU’s based on this unique visitor count. Which isn’t the case as we have no idea how many of that 3.3 are actual members or people just passing through

PCCU = Peak Concurrent Users

Gaia online: When they reported 15 million registered accounts they had about 64,000 PCCU. The PCCU rate is about 5-10% of the Active User rate(as juddged by Runes of Magic having 600k active and 30k PCCU). So that would put them at about 800,000 active users

Dark Orbit: 35 million users and 80,000 PCCU or about 1.2 million Active users.

Obviously this active user rate is going to consistently go down the older the game is and the more registrations they accumulate so time needs to be included in the calculations. With an average industry churn rate of 33% that shouldn’t be too hard to do though.

I would just love to have a framework in place where we can easily look at these numbers being spit forward by companies about how many users they have, take a look at how long they’ve been in business, and quickly translate their total reg’ed users into something we can actually use in our business models like MAU and eventually DAU

Wondering if any one has any stats on the growth of an IP over mutliple years.. We see a ton of stats showing Title X reached 1 million users in the first week, or that Title Y has 100 million users after 5 years but I’d be keen to see how the growth rate changes in relation to time as well as relation to in game population.

Obviously if Title X maintained that growth they would be at 52 million users in the first year which I can’t see happening as a rule so I assume the growth rate begins to slow.

The same goes for the virality of a product, something will reach a critical mass when enough people are talking about it that it spurs growth.. Just curious about these two topics if anyone has done the research and tracked the numbers

Actually the latest Universe chart from Kzero contains a lot of intermittent quarter by quarter pop numbers in it that indicates, surprisingly enough that a lot of mature titles maintain consistent growth rates even at the 30+ million player count

A presentation I gave at Virtual Goods Forum 2010 on June 23th in London.

I highly recommend clicking the “view on slideshare” to see slide specific notes for more detailed descriptions.

The Japanese social gaming scene is dominated by three platforms: Mixi, Mobage-town and Gree. The great majority of people access these social networks via a mobile phone instead of a computer browser. It’s a big market: according to David ‘dc’ Collier of Japanese social game developer Pikkle, it’s just as big as the U.S. market: half the population, but twice the ARPU (David gave an excellent introduction to Japanese social games at GDC this year, covering everything from business models to game design). No wonder major social game developer PopCap’s APAC bizdev Giordano Contestabile recently said on Twitter that he was “doubling down on social games in Japan. As are most other companies. Next 6 months will be a pitched battle. Expect fireworks”!

At the same time, it’s interesting to note that Japanese developers are increasingly reaching out to Westerners, and they’re doing so through Facebook. Amebe Pigg, a year-old virtual chat world with over 2 million users, was recently launched on Facebook in English as Amebe Pico. Activities in this cutesy isometric environment revolve around shopping, decorating your room and gearing up your big-headed avatar, similar to Finland-based teenage virtual world Habbo. The developers of Poupée Girl, a Japanese community site focusing on dress-up avatars and the bewildering world of Japanese teenage girl fashion, debuted on Facebook yesterday with Poupée Boutique: a shop simulator that leverages the art assets from Poupée Girl. The UI seems to be in English. The boutique is advertised both in English and Japanese.

Besides being a path to the Western market, these forays into Facebook may also be a way for developers to hedge their bets on the domestic market. Facebook used to be a very minor player here, and it’s still minor. But I see more and more Japanese tuning into it now – especially those with foreign friends and some English ability. Two years ago, people used to ask me if I’m on Mixi. Now they ask me whether I’m on Facebook or Twitter (I am now). Japanese who join Facebook moreover find that a surprising number of people from other countries speak Japanese. Mixi requires a Japanese mobile phone to register, so you’ll find few of these foreign anime fans there. The network dynamics are complicated here, but in the long run, the bigger network tends to dominate.

I usually don’t do self-serving posts about media appearances, but this one is good enough to point out: WSJ Blogs’ Real Time Economics has an article titled Real Economist Learns From Virtual World. It’s a decent story about the space MMO EVE Online published by CCP Games, and HIIT’s virtual economy research collaboration with them. My boss Marko Turpeinen is interviewed. The only thing they get wrong is the name of our unit (it’s the Network Society research program, not the Social Media research group:).

A seminar on virtual economy research is starting in a few minutes here in Helsinki. The seminar marks the conclusion of a 2.5-year virtual economy themed research project at the Helsinki Institute for Information Technology. The purpose of this post is to disseminate the 119-page final report of the project. Here you go! (edit: summary version added) Excerpt from the report below.

Introduction

In 2007, the AVEA project proposal called for a new research effort into “so-called virtual property, artificially scarce digital objects that have rapidly become a viable business model for software products and online services.” Gold farmers and real-money traders in massively-multiplayer online games had recently broken into popular consciousness. There was an expectation that virtual economies were going to continue to expand in one way or the other. Helsinki Institute for Information Technology HIIT and the Finnish interactive media industry had already had a good start in grasping the phenomenon thanks to some successful early ventures and research projects. Now was a time to push on and take part in creating the next wave of the phenomenon.

The AVEA project plan put forward the following research questions: What drives the value of virtual goods and how can we model it? How can we measure economic activity in virtual economies? How can the virtual economy model be extended to new platforms and non-gaming applications? These questions reflect the fact that while significant revenues were already being made in the virtual goods business, there was no comprehensive understanding of why the goods were so valuable, and whether some opportunities for value creation remained unexploited. Edward Castronova at the University of Indiana was putting forward GDP estimates for virtual economies, but game operators were not convinced that tools from national economies were the correct ones for managing virtual economies. Furthermore, while the prevailing virtual economies at the time were massively-multiplayer online games, we were questioning whether the same principles could not be adapted for other platforms and purposes, such as mobile and serious applications.

During the three years that then followed, virtual goods, currencies and economies saw almost explosive growth on the Western market. Virtual goods sales became the dominant revenue model for online and especially social games, and many game developers referenced the publications of this well-timed project in designing their offerings. Virtual economies not involving real money also increased in complexity, and the project yielded an alternative to GDP for measuring them. The development of mobile virtual economy prototypes during the first project year heralded the eventual commercial breakthrough of the virtual goods model in mobile gaming applications, although this breakthrough did not happen in Finland.

This report is intended to provide an overview of the main research streams in the project and their key outcomes. Following the structure established by the research questions in the project plan, the report is organised into three sections: Value, Measuring and Applications. Each section contains three chapters that address the research questions from different angles by summarising work conducted in the project. Each chapter is also prefaced by a one-page summary.

The project resulted in no less than 20 scholarly publications, including articles and papers published in some of the leading venues of digital social sciences and HCI research. One PhD thesis and a total of four Master’s theses were completed during the project. A number of manuscripts are also still being worked on. This is a significant volume of publications for a three-year research project with a core team of only a handful of researchers. In part it reflects the fact that digital scarcity is a novel research topic, and is taking by surprise some academic disciplines still grappling with the implications of digital abundance. HIIT and the individual researchers involved in the project are now exceptionally well positioned to continue work on these topics.

Furthermore, AVEA’s publication success also certainly reflects the project’s strong element of international collaboration. HIIT’s main partner in the project was the Distributed and Ubiquitous Computing Laboratory at Waseda University, Tokyo, lead by professor Tatsuo Nakajima. Thanks to professor Nakajima’s team’s expertise in pervasive technologies, serious games and realistic prototyping, we were able to conduct applied research and user studies that were published in such venues as the prestigious ACM International Conference on Ubiquitous Computing. As part of the project, we also developed the Virtual Economy Research Network into an even more prominent hub and forged new international links that are already proving their value in follow-up research initiatives.

We would like to express our strong gratitude to the companies that took part in the AVEA consortium: Nokia, CCP Games, SWelcom and EveryPlay. CCP provided us with unprecedented access to a virtual economy data set that continues to yield results in follow-up research, for which we are very thankful. Finally, we would like to express our extreme gratitude to the Finnish Funding Agency for Technology and Innovation Tekes, for their crucial support in the form of funding as well as networks and advice, without which the project would not have been possible.

On behalf of the project team,

Kai Huotari
project manager

Vili Lehdonvirta
editor

7 June 2010

I will be giving a presentation on virtual goods business models and how to describe them using academic business model frameworks at Virtual Goods Forum 2010 in London June 23th.

If you wish to meet, please drop me a line to the address found here.

VERN readers can claim a 20% discount using code: C0015VERN here.

Also posted at Terra Nova

According to Playspan, and reported by various outlets this week, 13% of internet users bought virtual goods last year, spending a little over $90 on average.  (If this is accurate, it matches the percentage of voters who claim membership in the Tea Party, the percentage of CEOs who drove hybrids in 2007, and the percentage of teenagers who eat the recommended amount of fruits and vegetables.)  Estimated global revenues from sales = over $10B.

In related news, 44M game passwords were reportedly stolen, presumably with the hopes of supplying a bit of that 13 percent, multi-billion dollar market.