US virtual economy to make billions

The sale of virtual goods for social games, such as Farmville and Mafia Wars, are set to become worth $5 billion in the next 5 years according to industry experts. Sales of virtual goods are already worth around $5 billion and still growing in Asia.

Jeremy Liew, of Lightspeed Venture Partners who have invested $10 million in virtual goods companies told the BBC that the rapid growth of the sector was unprecedented.

"This is just an exploding part of the gaming business right now," he said. "It is the most exciting area in gaming. We have seen companies go from nothing in the last 18-24 months to tens and hundreds of millions of dollars in revenue."

Playfish is just one example of this. Started two years ago, it now has 11 online games which are played by over 61 million people worldwide. Although they also sell advertising within their games, it still accounts for just a very small amount of the company's revenue - fairly typical according to Liew. "Virtual goods is the whole story in the world of social games. It accounts for 90-95% of revenue for a lot of these social game developers," he said.

Although the products only exist in pixels on a computer screen, Playfish's Tom Sarris believes the reason why people are willing to purchase virtual items for games is just for the experience. "The way we look at it is it's no different from paying money to go and see a movie or rent a dvd. What you are paying for is the experience and that notion of entertainment," Sarris told the BBC.

Social gaming doesn't look like it will die down any time soon either. Data from analytics firm AppData shows that 10 of the top 15 applications on Facebook are games, pulling in over 100 million users a month. This hasn't gone unnoticed by games giant Electronic Arts either - in November the company agreed to buy Playfish in a $400 million deal.

"We are still in the growth stage of this industry," said Liew. "We are still seeing people come out of nowhere and become a leading player. Five years down the line, it will become more stable with five to ten companies becoming more valuable."

He added, "The virtual goods industry is one of the most exciting categories of 2009 and will remain an exciting category in 2010."

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tele-fragd said,
Meanwhile the government is still trying to figure out a way to tax virtual sales.

Because they need virtual money to build virtual health insurance, virtual roads, virtual schools and virtual government full of virtual bureaucrats.

If there is a future in this sort of thing then the world is bleaker than I thought.

Where are people going to get "real" money to spend on virtual lives. Work takes effort... Who will swap real food and life sustaining commodities to these lard a** virtual farmers. Perhaps the developers can find a way of programming a terminator gene into these programs, to kill off (quote) Henry Kissinger's "Useless Eaters"

These games are brutal, I tell you. I have a sibling who's currently addicted to Farmville/Yooville (whatever its called) and Mafia Wars. Those games are like WoW in some ways - Addicting beyond belief and it's no good!

este said,
These games are brutal, I tell you. I have a sibling who's currently addicted to Farmville/Yooville (whatever its called) and Mafia Wars. Those games are like WoW in some ways - Addicting beyond belief and it's no good!

Don't blame a game when someone can't control themselves and limit their use

Again, the worlds wealth will trickle up to the wealthiest people in the world, while those who could use some real economy (foreign aid, etc) will have to die so johnny can buy some pixels on the screen.