Tuesday, June 26, 2007

The "Blingest" Avatar: Virtual Goods

Last week Charles River Ventures hosted the Virtual Goods Summit at Stanford University.

Wish I was in the Bay Area, it would have made for a great conversation.

Susan Wu, principal at CRV, posted a good write-up about the event on TechCrunch.

Her aggregated ideas point towards a shift that we are seeing in the last couple of years as binary code is being converted into real capital. Capital that amounted to over $1.5 Billion in sales during the last fiscal year according to Wu.

These real numbers are a pathway into what I see as one of the main portals that will allow for facebook app developers to quickly monetize their code.

Earlier this month James Hong, co-founder of HotOrNot.com, noted that he saw a huge potential market for virtual goods on facebook while attending the monthly NY Tech Meetup hosted by Scott Heiferman. Hong went so far as to divert the efforts of his programmers upon hearing about facebook's new 3rd party application process. To me this speaks volumes about where smart people are hedging their bets about things to come.

Two weeks ago at the Web 2.0 conference here in New York, Steve Rosenbaum, founder of Magnify.net, noted that his young child wants to use allowance money to buy a disco floor for his igloo in the virtual world Club Penguin. Its real money that children are now using to buy virtual goods. This is a schism from the thought process that we as a generation grew up understanding. Although many items that we purchased were petty, say a comic book or a Barbie doll, we at least had the tacit knowledge that these items existed in three dimensional form. Where will our children look for their memories as adults? Will their be an archive of all the virtual goods purchased whilst growing up?

Nevertheless, we as adults purchase virtual goods on LinkedIn through virtual invitations. We can buy flowers on HotOrNot or we can equally buy lingerie or cupcakes on facebook to give to friends. This trend is not going away anytime soon. Perhaps in a decade's time we will see commodities markets spreading around the buying and selling of virtual industries - we will short Linden Dollars. Who really knows?

I am not really into predicting the future, but its a sweet deal to view the world five to ten years from now based on the early trends emerging now. This is an emerging market for sure, one that is going virtually nowhere fast.


Andy Swan said...

My first response was "wow, what a bunch of suckers."

Then I remembered that I've paid $50 for an arrangement of flowers that I KNEW were going to die in 2 weeks. Or $5 for a drink at a bar that a girl probably didn't want.

So it hit me...when it comes to gifts that help us express ourselves...the physics of how they are created really isn't what matters. Virtual gifts prove that it truly is the thought that counts.

Kristian said...

I can't remember how many times I've bought girls drinks that they probably didn't order or even want.

The worst is when they hand it over to their boyfriend.

But we live in a consumer economy where people buy $1200 chrome wheels because they look cool or clothes at H&M/ Forever 21 that will be worn twice a season and tossed out. Price isn't even a factor in these decisions. If it was, why would we be willing to pay $3 for a coffee at Starbucks that only cost 20 cents to make?