Freeconomics' last hurrah - selling items that don't exist

We have been fascinated by virtual goods ever since reading more pieces of furniture were sold online in Korea in socnets like Cyworld than in real life. You may also recall that a number of companies experimented with virtual goods in 2nd Life (c'mon, you can't have forgotten 2006 - unless you were one of those 2nd Life marketeers ). Anyway, hey ho we are off again.

.....some large companies are testing whether they can raise awareness of their brands — and sell more actual goods — by creating and offering their own pretend merchandise. Volvo Cars of North America, the clothing retailer H&M and MTV Networks are among the diverse brands entering the market for virtual goods — the make-believe items offered on social-networking games, smartphone apps or fantasy Internet sites.

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So far, the virtual goods market largely consists of micro-purchases. Consumers typically pay $1 to $3 while playing games like FarmVille or Mafia Wars, both created by the social-gaming company Zynga, to get a jump on game rivals. Users also can give a gift, like flowers, or build a collection of items — just as collectors do in real life.

Those impulses will be worth nearly $2 billion in revenue or more this year, according to ThinkEquity, a financial research firm in San Francisco. Its analyst for new media and games, Atul Bagga, said his research found that the market could reach $2.6 billion next year.

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To succeed, “branded virtual goods have to be identifiable and have a real world relevance,” said Ravi Mehta, vice president for products at Viximo, a social gaming platform provider. “They are driven by the relevance to the purchaser. Paris Hilton has people who buy her virtual goods because they are fans and want to identify with her, her hair, her place in pop culture.”

I think he is actually serious about Paris Hilton.....

Actually, we've been arguing for a while that this is the best model for Facebook, but whether people will buy virtual trainers etc on SocNets any more than they did(n't) on 2nd Life is still an open question. Those "decorate your own room" socnets have largely passe'd away. All the evidence is that virtual goods are bought in pursuit of another (typically game based) objective, not "real world relevance" - unless maybe they can be converted into free drinks, like 4square mayoralties at Starbucks.

I await with fascination to see if Nike will be selling under-armour gear on World of Warcraft, and Wilkinson Sword will sell...... but I think this is far more likely to be more akin to the 2nd Life experience, as corporate clumsiness leads to egg on faces and rivers running with red ink.....

Still, as these goods cost nothing to make and distribute, they could be the last hurrah of Freeconomics