Virtual Goods Summit 2007

Hanging out at Virtual Goods Summit 2007 at Stanford. I’ve been working on a HUGE posting about virtual worlds – with an emphasis on World of Warcraft, so sitting in the audience with a wifi connection should prod me to make some progress on that!

Virtual Goods is, of course, all about the brilliant notion of making cheap virtual goods and selling them to a captive audience for real-world money. It’s a surprisingly large market. One of the first speakers was from Tencent, the operators of QQ, the major China web site. Some 65% of their quarterly revenue of some $100M is from virtual goods. This might sound like a lot, but considering that QQ is Alexa – ranked 10 in the world, it’s actually a relatively humble number.

On the whole, I’m skeptical of the enthusiasm for virtual goods. Fundamentally it boils down to what regular time-interval payment you are willing to commit for an ongoing source of entertainment. In that regards, virtual worlds are little different from things like cable. And virtual goods is just one way of generating revenue from a virtual world. E.g. when my son asks for permission to buy doubloons, I weight the sum he wants to spend against his allowance, which is a time-unit-based monetary source. It’s not clear to me that it is more efficient than subscription. It is notable that the most successful online virtual world (World of Warcraft) is decidedly non-virtual-goods (it’s against their EULA) and makes their money from subscriptions; and their revenue (over $50M per month) dwarfs all the other online efforts.

It’s not that I don’t believe in the value of online games, I think it’s huge. But I’m skeptical that virtual goods is a better monetization strategy than subscription. China is a notable exception (but WoW sells time-based subscription there, e.g. online minutes).

But there are several notable speakers on the agenda today. Let’s see if they can change my mind!

Other bloggers who are here: Net, Raph, Susan.

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