Comments on: Virtual Goods: Scam, Fad, or The Next Big Thing? http://blog.agoeldi.com/2009/11/05/virtual-goods-scam-fad-or-the-next-big-thing/ Just observing... Wed, 21 Jul 2010 00:35:27 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Markus Breuer http://blog.agoeldi.com/2009/11/05/virtual-goods-scam-fad-or-the-next-big-thing/comment-page-1/#comment-1894 Markus Breuer Fri, 06 Nov 2009 11:07:48 +0000 http://blog.agoeldi.com/2009/11/05/virtual-goods-scam-fad-or-the-next-big-thing/#comment-1894 I agree, that the topic is probably overhyped by the usual suspects. On the other hand: please consider that "passing fads" are a business model that works (very) well in many industries - fashion, games etc. - like you mentioned it yourself. I don't think that this is a valid argument against commercial success and growth potential in the field of virtual goods. Looking at the "content creators" in Second Life or IMVU I can testify that this is a sustainable business model, too - sustainable not for the single content creator but for the "class" of content creators, who have to innovate constantly to keep their business going. It is certainly not a field, to "get rich quick" (or easily), but there are not many industries which fit this description. A nice example for a very successful category of virtual goods, which you did not mention, are ring tones, btw. - which amounted for the largest revenues from the sales of digital music for a long time (not anymore, though). Margins are still interesting, here ... Considering that consumer demand - at least in the developed countries - is still moving from the lower to the upper layers of the Maslow pyramid, and this is where brands achieve the highest margins, I see great potential for virtual goods. I don't know about realistically yearly growth rates in the next 10 years, but I don't see a hard limit for the growth here in the near future, neither. As you have mentioned yourself $6B is not much - it is not much of consumer's budgets, either. So, while these consumers are slowly moving a part of their "life" into the digital realm, the will spend more and more of their budgets for digital status symbols. I agree, that the topic is probably overhyped by the usual suspects. On the other hand: please consider that “passing fads” are a business model that works (very) well in many industries – fashion, games etc. – like you mentioned it yourself. I don’t think that this is a valid argument against commercial success and growth potential in the field of virtual goods. Looking at the “content creators” in Second Life or IMVU I can testify that this is a sustainable business model, too – sustainable not for the single content creator but for the “class” of content creators, who have to innovate constantly to keep their business going. It is certainly not a field, to “get rich quick” (or easily), but there are not many industries which fit this description.

A nice example for a very successful category of virtual goods, which you did not mention, are ring tones, btw. – which amounted for the largest revenues from the sales of digital music for a long time (not anymore, though). Margins are still interesting, here …

Considering that consumer demand – at least in the developed countries – is still moving from the lower to the upper layers of the Maslow pyramid, and this is where brands achieve the highest margins, I see great potential for virtual goods. I don’t know about realistically yearly growth rates in the next 10 years, but I don’t see a hard limit for the growth here in the near future, neither. As you have mentioned yourself $6B is not much – it is not much of consumer’s budgets, either. So, while these consumers are slowly moving a part of their “life” into the digital realm, the will spend more and more of their budgets for digital status symbols.

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