It's tough not to laugh at articles that talk about the idea of giving someone a virtual gift. Back in the old days of the Internet the idea of transferring money for a virtual item stems from hardcore Diablo 2 video game players who would trade real money for virtual weapons in the game.
The trend obviously never took off outside of certain internet circles so it is hard to look at such trades as signs of anyone company pulling a profit. In the case of trade, a company might find it hard to break even if it is only taking a commission out of the trade.
So let's look at the practical reasons for having a virtual gift system in place. The new web era is rolling in and websites are looking for ways to monetize their websites in a down economy. Traditionally a website without a business strategy will use advertising to support itself economically but as money gets tight these sources of income become scarce.
The blog Venture Beat has an article on sites like MySpace and their plan to implement a virtual gift system just like Facebook. The high number of people on sites like Facebook and Myspace might explain for the reason as to why sites are pulling in the cash.
Sites like Myspace might actually have a chance of pulling a profit due to the fact that they are ten times the size of Facebook and probably have more users who have a vested interest in the site.
I am amazed that a person would be willing to purchase a virtual piece of property or to that end that the site is making up to $40 million. The old conventional wisdom said that people are most comfortable with purchasing tangible goods but obviously not every site can provide what Amazon and Ebay have.
Perhaps we are heading towards an era where people can find value in virtual commodities, a not so strange concept when you consider the fact that sites like Facebook control the number to virtual gifts to artificially create the illusion of demand.
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7 comments:
Your article seems very interesting. I was also wondering why people would pay for a virtual gifts on these social networking sites. We have been so digitalized in this modern world and have created different types of virtual realities which can actually make a profit. It is quite surprising who much profit that can be made using these small virtual gifts. How do we actually measure the value of these items since they are not even tangible? I am very curious about the future of this virtual gift system and where it might end up. Who knows what will be the next item that could be sold as a virtual gift on the internet? It is obvious that technology is rapidly changing the way we think.
I think that the virtual gift thing is bit crazy. Sure some of them are cute and funny, but to spend a dollar on something that you can place no real value on I can’t understand. Perhaps if they were twenty five or fifty cents then the purchase could be more justified. But when you pay a dollar for a song on itunes it is at least something more tangible and you can get continued enjoyment from it—real value. I guess the value is placed on a virtual gift by the enjoyment that the recipient gets. I'll be interested to see where the virtual gift market will go in the next year or two. Will people continue to be willing to spend an estimated $ 28 million dollars plus on virtual gifts, which are difficult to attach real value?
This is a very interesting article. I can see both sides of the spectrum that paying over a million for a virtual piece of property with really no intrinsic value is absurd. However, Facebook recently shows that members’ spending on the $1 virtual gifts was over a million and now teamed up with NPO's to link a charity with a specific gift you give. Your dollar would go to the nonprofit you choose, accompanied by a picture to show the cause you helped support. So you can send a picture of lips, and know that you helped a correct a child with a cleft palate, you send a picture of a flower and you’re helping preserve the rainforest, sending a picture of a hot dog to help feed a hungry child. Just imagine the impact these new incentives can have and help get people involved in charitable causes.
Going off of what Lauren said. This is an interesting concept because traditionally you just send a check in the mail and get the pure satisfaction that you did something, "good." This might change the way people donate because if college students (like us) want to send a gift to a friend on Facebook we can do so while also donating to a good cause. Unlike before, we have something to show for it. I think this is a great way to raise money and if people are going to buy virtual gifts anyway, the revenue, or some part of it, might as well go to a good cause.
Another popular way of spending real money on virtual items is Second Life. The popular game in which you lead a life through an imaginary character. One might pay $10 so that your person can have a Toyota in the world. I think we need to realize that some people are satisfied by such things. If I go out and spend $10 on a movie ticket, how is that any different that somebody spending $10 on a piece of clothing for their virtual person? You might even go so far as to say that the movie only lasts for two hours but the clothing or car will last...a life time. Maybe even a third life?
Have you heard of Flooz? I remember that quite well...I think the Capital One case talked about that a bit. You should check it out, the failure of that virtual currency is a really interesting case.
This is a very interesting issue. I understand free gifts on an application on facebook as a fun thing, but I have also seen them on various sites as a fundraiser for various groups, which is a great idea considering the amount of people on sites such as these
I remember in the not so old days of the Internet that I was playing f2p (free to play) online games that made pretty good profits on selling virtual items to players, but not requiring it. The basic premisis of such games (which not only thrive today but actually grow in number and popularity by the month) is that you simply cannot compare to other players unless you also chip in for virtual items. The issue with Facebook and MySpace selling virtual gifts uses the same idea - it plays off on people's inherent competitiveness and one-upsmanship. It is not so much that we need physical objects to express our status - we actually need exclusive objects, things that not everyone can have. This is why the artifically created demand Michael talks about is so effective.
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