News, research and discussion on virtual goods, currencies and economies globally.

Virtual asset sales

Does Pressure Play Into Second Life Purchasing?

In the first quarter of 2009, the virtual world of Second Life saw $120 million USD exchanged through user-to-user transactions, with a record monthly $45 million USD in transactions in March. In August alone, users completed 28 830 768 transactions in with the greatest number of these happening around items that are valued at one Linden dollar, or about $0.004 USD [4].

Based on regular economic reports from Second Life developers Linden Lab and raw data files made available on their website, it’s possible to get a basic overview of the economic facts and figures associated with the virtual world. However, one of the questions that is asked on a fairly regular basis – especially by those who are somewhat unfamiliar with virtual world economic systems – is why people pay money for things that exist only virtually.  Read more

Aligning virtual economy design and business modelling

This is a rough working-in-proggress draft of a figure on how virtual economy design would fit into a business modelling ontology. Please forgive me the graphics quality and harsh colors, they will improve once I recreate it with a proper software :).

Figure on SlideShare.

The model is based on business model ontology developed by Osterwalder et al. (during 2002-2005), best documented in Ph.D. Thesis in 2004. Found here.

I will just leave the figure here as is for now, and later upload the whole thesis with more rigorous documentation and explanations.

The model is not supposed to depict all business related aspects, but
more preciesly the relevant aspects in revenue generation logic through
virtual economy design.

I welcome all comments and discussion.  Read more

Virtual goods in context: presentation slides

For those who asked for the slides I presented today at the Virtual Goods Conference, please find them here. Feel free to get in touch if you have any comments.  Read more

Community dynamics that create demand for virtual goods: case Habbo

Update: the authoritative version of the article is now up on Routledge’s site, here. For those who don’t have access to that repository, the pre-print version is still available here .

Early this year, I posted a pre-print version of an article (see Why do people buy virtual goods?) and promised to post more later, as the scholarly publication process can be as slow as the proverbial snail. Here you go: a pre-print version of Virtual Consumerism: Case Habbo Hotel, a sociological study of the motivations and practices of virtual consumers in a popular teenage online hangout. The publication venue is a reasonably prestigious journal called Information, Communication & Society, to whose reviewers I and my co-authors are much indebted.

The bulk of this work was actually completed two years ago. While virtual goods have continued to spread like crazy since then, I believe the motivations for purchasing them remain the same. In contrast to the previously posted article, the main audience of this paper is sociologists. People who are in the business of selling virtual goods to other people might also find some “actionable insights” there.  Read more

15% discount – Engage! Expo

Tomorrow (Aug 14th) is the last day to register with the earlybird registration fee and with a code VERNVIP you’ll get additional 15% off. (The code will work after the earlybird registration deadline as well).

The two-day Engage! Expo comprises four parallel events: Social Media Strategies, Virtual Goods Conference, Digital Law Conference, and 3D Training, Learning and Collaboration (3DTLC) Conference.

Our very own Vili Lehdonvirta will be speaking at the first session of the virtual goods track – ” Analyze This: The Virtual Goods Marketplace & State of The Industry”.

Overview of the schedules.   Read more

Game design as marketing: How game mechanics create demand for virtual goods

Hamari, J. & Lehdonvirta, V. (2010). Game design as marketing: How game mechanics create demand for virtual goods. International Journal of Business Science & Applied Management, 5(1), 14-29.

In short: In this paper, we consider the question of what leads consumers to purchase virtual goods. Most previous studies adopt the individual user as their unit of analysis, focusing on motivations and decision processes that lead to virtual good purchases. We adopted a complementary approach, focusing on how the rules and mechanics developers build into MMOs encourage virtual good purchases.

Download paper here and read more below.

  Read more

"I have an avatar therefore I exist" – Virtual commerce special issue @ Electronic Commerce Research

I added papers published in Electronic Commerce Research journal’s special issue "I have an avatar therefore I exist" into the VERN bibliography.



Meredith A., Hussain Z., Griffiths M.D. (2009).  Online gaming: a scoping study of massively multi-player online role playing games.  Electronic Commerce Research. 9(1-2), 3 – 26. Link

Bryceson K.P. (2009).  The development of VAG — a 3D virtual agribusiness environment and strategy game.  Electronic Commerce Research. 9(1-2), 27 – 47. Link

Cagnina M., Poian M. (2009).  Beyond e-business models: the road to virtual worlds.  Electronic Commerce Research. 9(1-2), 49 – 75. Link

Guo Y., Barnes S. (2009).  Virtual item purchase behavior in virtual worlds: an exploratory investigation.  Electronic Commerce Research. 9(1-2), 77 – 96. Link

Lehdonvirta V. (2009).  Virtual Item Sales as a Revenue Model: Identifying Attributes That Drive Purchase Decisions.  Electronic Commerce Research. 9(1-2), 97-113. Link

Goel L., Prokopec S. (2009).  If you build it will they come? — An empirical investigation of consumer perceptions and strategy in virtual worlds.  Electronic Commerce Research. 9(1-2), 115 – 134. Link

Bourlakis M., Papagiannidis S., Li F. (2009).  Retail spatial evolution: paving the way from traditional to metaverse retailing.  Electronic Commerce Research. 9(1-2), 135 – 148. Link   Read more

Live Gamer acquires N-Cash – towards integrating primary and secondary markets?

Live Gamer announced the acquisition of Korean virtual good sales facilitator N-Cash. The acquisition expands Live Gamer’s current service repertoire from secondary market targeted v-commerce solutions to facilitating both primary and secondary markets of virtual goods.

As separated these two service elements might not provide anything new. But the possibilities provided by integrating primary and secondary markets under a single platform are highly interesting. What kind of integration strategies would work under which kinds business models and service design? How integrated markets would affect the internal economies of MMO’s? What new revenue streams can be harnessed?   Read more

Press release below.

China attempting to keep virtual and real economy separate

… by restricting purchases of real goods or money with virtual currencies.

Pre-paid cards are also considered virtual currency, but virtual items are not.

The new law states: "The virtual currency, which is converted into real money at a certain exchange rate, will only be allowed to trade in virtual goods and services provided by its issuer, not real goods and services."

Justifications offered:
– prevents illegalities
– prevents gambling
– prevents money laundering
– preemptive step towards preventing "virtual economy" having a negative influence on Chinese financial system

– farmers selling virtual currency – the definition of currency only covers medium currencies between real-money and items. This situation becomes a bit hazy though, because in some VW’s there is only one currency (earned through gameplay AND at the same time purchased with real money). In a way farmers selling virtual currency would still fall into the banned category, but the legistelation doesn’t seem to be targeted to "harmless" currencies such as WoW-gold, but towards currencies such as QQ-coins, which are widely used outside the Tencent QQ service.

– users doing business in VW’s (such as Second Life)
– Prevents gambling? Because you can not convert v-currency back to real money?
– Secondary market of pre-paid game cards
—> everything that includes exchanging virtual currency (as defined by the law) into real money or products.

Doesn’t affect:
– farmers selling virtual goods directly
– operator selling v-currency and v-goods   Read more

ARPUs in social networks and social games: An acronym that needs scrutiny

How do you monetize social networks and social games? Similar to the online games space, there is a growing consensus that the answer is by complementing advertising with a virtual goods micro-transaction business model. Social networks and start-ups are positioning themselves accordingly. Hi5 has announced its own virtual currency. Facebook is now implementing “credits” and MySpace seems to be working on their own payments platform.  Read more