Virtual goods bubble looming?
Virtual worlds and social networks are looking to monetize users through virtual goods. Viable strategy or the Internet version of the pet rock?
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.