The reason that people buy virtual goods is the same reason people buy most things. Cynics often comment that you are "buying air", as though the only thing people spend money on is rent, food, and the other basics.
Whenever you get a community of people together, economics is something that naturally arises.
I have run a successful virtual goods business in Second Life for over 2 years. The main products I have been selling center around video/machinima production, audience and performance interactions, and avatar animation improvements.
Just because the platform that my products are built on is a 3D MMO-ish environment doesn't mean they have no value. I often make the analogy that my creations are simply software programs that I sell, because that's what they are. Hundreds of millions of people worldwide have purchased software for decades. Our entire modern economy and culture is in large part based on software and the industries that operate in around around it.
When you look at communities in "virtual" spaces, whether they be full 3D environments or sites like Facebook, people find value in software that runs in those platforms. The value that they find varies greatly from person to person. Some find an application that helps them manage their friends list useful, while others have no problems spending a few cents or a dollar to send an image of a funny puppy to someone they care about.
Another kind of virtual good is music. I used to occasionally torrent music if it was something I wanted. I was also broke then. However, it gradually happened that I have transitioned to buying almost everything I want online. For me, and I think for others, it is so much easier to find and buy a song on iTunes than it is to stab wildly in the dark on torrent sites to find exactly what I want. The same has held true for tv shows and movies. When I was broke, I torrented. The quality was hit or miss. But since I bought an AppleTV in 2008, I just buy the stuff I want to see. Its always high quality, and its instantly there.
Virtual goods are really no different than anything else people spend money on. For women, maybe its fashion. For guys, gadgets or cars. None of it is stuff we need to keep our carbon-selves running, but they're stuff we want. And if we have money, we will pay for it if its easy.
There's a very good economic lesson that is often missed by people. If you make it extremely easy for people to spend money, they will spend money. No complicated signup forms, no thinking required, and make it as inexpensive as possible. The more barriers you put between the customer's money and your pocket, that's all the less money you will be getting from them.
Making money is easy. Making something people want can be a bit harder. So concentrate on building something useful and easy to use, and make it easy to buy.
Seems like virtual goods are a new type of revenue model. The numbers are really high for buying thin air. Most of the startups should consider adding virtual goods bazaar into their products. With the rising of micro payment options virtual goods possibly will gain more speed. By the way how do virtual goods have effect on macro economics? Isn't it bad for the economy spending money on unproduced and no-value generating goods? Or am i judging virtual goods wrong?
I think it's funny that people ask about virtual goods "why do they sell so much?" and about music "why doesn't it sell enough?", when it's fundamentally the same thing: no tangible good is exchanged, the only benefit is the enjoyment and satisfaction of the buyer.
It's quite funny because before I clicked the link, I actually wondered if they were going to include the iTunes Store or the App Store as part of their "Virtual Goods". For after all, digital music and softwares are just that : virtual goods.
I actually spent some real USD in Second Life to buy decent clothes. That was for corporate use, with the company credit card. I discovered at that time that Second Life was a cheap and efficient way to organise online meetings (very decent VOIP, and the 3d-sound is a killer for large groups), but definitely not easy-to-use / intuitive.
For my not yet public startup we are actually thinking of going the Virtual Goods way... though I personally would prefer just charging users to use the product. Maybe I'm a bit old-school... well, anyway, the priority is to release the product.
Whenever you get a community of people together, economics is something that naturally arises.
I have run a successful virtual goods business in Second Life for over 2 years. The main products I have been selling center around video/machinima production, audience and performance interactions, and avatar animation improvements.
Just because the platform that my products are built on is a 3D MMO-ish environment doesn't mean they have no value. I often make the analogy that my creations are simply software programs that I sell, because that's what they are. Hundreds of millions of people worldwide have purchased software for decades. Our entire modern economy and culture is in large part based on software and the industries that operate in around around it.
When you look at communities in "virtual" spaces, whether they be full 3D environments or sites like Facebook, people find value in software that runs in those platforms. The value that they find varies greatly from person to person. Some find an application that helps them manage their friends list useful, while others have no problems spending a few cents or a dollar to send an image of a funny puppy to someone they care about.
Another kind of virtual good is music. I used to occasionally torrent music if it was something I wanted. I was also broke then. However, it gradually happened that I have transitioned to buying almost everything I want online. For me, and I think for others, it is so much easier to find and buy a song on iTunes than it is to stab wildly in the dark on torrent sites to find exactly what I want. The same has held true for tv shows and movies. When I was broke, I torrented. The quality was hit or miss. But since I bought an AppleTV in 2008, I just buy the stuff I want to see. Its always high quality, and its instantly there.
Virtual goods are really no different than anything else people spend money on. For women, maybe its fashion. For guys, gadgets or cars. None of it is stuff we need to keep our carbon-selves running, but they're stuff we want. And if we have money, we will pay for it if its easy.
There's a very good economic lesson that is often missed by people. If you make it extremely easy for people to spend money, they will spend money. No complicated signup forms, no thinking required, and make it as inexpensive as possible. The more barriers you put between the customer's money and your pocket, that's all the less money you will be getting from them.
Making money is easy. Making something people want can be a bit harder. So concentrate on building something useful and easy to use, and make it easy to buy.