Virtual goods: big business like FarmVille

When speaking about Virtual goods, we immediately think about FarmVille on Facebook. But some others exist as well. If you ask your family if somebody can make money with virtual goods, than chances are that they would declare you nuts and would say "no". Well, think again, as this multi-million industry is here to stay...

Due to the massive growth of social networks, came also a new way of doing business, virtual goods.

Source: Ralf Schengber 2009

First, what's important is that you hook yourself onto a huge social network. Facebook being the biggest one. In fact, it's so big, that if it would be a country, it would be the 4th biggest country with over 300 million citizens. And those citizens are no couch potatoes, they are active with photo sharing, content sharing and even sharing videos. This last one is becoming so important, that if you would want to play all the shared videos on Youtube, you would need 3500 human years to look at it. By the time I type, this, this figure has become obsolete as every 60 seconds, 15 hours of video are uploaded. So you need a critical mass to start and guess what, with social networks, you have it... so let's start talking about the virtual goods business.

Here is an overview of how popular social networks are becoming, the searches for Facebook compared to eBay (the success story of the first hour and if they don't watch out, the first big loser...)

 

Virtual goods... what? In fact it are goods which aren't tangible, like a virtual birthday cake, or a special birthday bunny. Or credits to get the power to play further or do more stuff online... My granny would now say... stay off the coke Hans ;-)

And yes, it's a powerful new business. FarmVille is the best example. More than 80 million people are playing farmer of which 26 million are feeding their cows every day. On top, they buy credits and this generates for the company behind FarmVille a revenue of over 100 million $ every year! (Source: Business Week) The company behind FarmVille, Zynga, employs today more than 500 people. Don't say at dinners that FarmVille is stupid as the owners are having a huge smile on their face.

Again, 100 million $ revenue, for giving people the opportunity to be a farmer.

Another example are the virtual goods of Facebook itself. So you can by for a dollar a special virtual (so none existing) birthday cake for somebody in your network. According to C't Magazine, this generates for Facebook an extra revenue of 90 million$ per year. Again a good example of a highly valued product, but with a very low initial start-up cost. Which is the same as FarmVille. You just hook yourself onto a network that has the critical mass, you create a good idea and let it grown or explode by the number of users. As it's shown by everybody in your friend lost, the growth is organically.

This means 3 things:

• entrepreneurs with good ideas and original concepts have an easier platform to launch it
• if it's new, innovative and your audience likes it (so power to the people), you can have an explosive growth
• you can't push it, it's another type of marketing. Like Coca-Cola with their fans's first strategy, grow organically and you'll have success. Push it down the throat of people and you'll loose.
• Take virtual goods serious

Of course, initiatives like FarmVille will have to re-invent themselves after a while and that's where most of the long term failures reside, you boom for two years and than... the crash, so you will have to continue being creative and innovative and don't just think about one shots.

Comments

[FarmVille Whiz Kid]

Great Site!! There are more and more people joining the ranks of FarmVille every day. No one can get enough of this game and there are plenty of reasons why. In FarmVille, you can get away from the noise and stress of everyday life. Just relax, plant some seeds, harvest some crops – not a bad way to spend an weekend.