The Guardian: Virtual Commerce Will Change the World

If today’s
tech article
by England’s The
Guardian is any indication, a veritable virtual world earthquake is
rumbling across the pond. Correspondent Victor Keegan gets the impression all
of this virtual commerce may be more permanent than the Furby:

Unlike the industrial revolution, the virtual one is led by
the East, not the West. Market researcher Plus Eight Star puts the virtual
goods market in Asia at more than $5bn, or 25 times higher than recent estimates for the US, though
they may be a serious underestimate.

Keegan pulls from data harvested by virtual researcher par excellence Edward Castronova of
Indiana University, who took on the heart-pounding feat of reading hundreds
of pages of Everquest 2 player transactions
in an effort to map virtual economic
trends.

It’s refreshing to see the growing virtual-to-real currency
conversion market taken seriously. What’s great about Keegan’s Guardian article is that it brings in an
area of virtual commerce that is exploding while remaining under the radar of
the graphical worlds scholars: Facebook and social networking games.

For those unfamiliar, Facebook is rife with free-to-play
games like Mafia Wars, Farmville (of
which your author is a recent addict), and Roller Coaster Kingdom. While these
games are entirely free to play, any serious player will find themselves
quickly limited unless they opt to invest real money in purchasing in-game
upgrades and currency. Mafia wars pic

Zynga, developer of
Mafia Wars, Farmville, and nearly every other big-name social networking game
on Facebook, draws a pretty penny from these “microtransactions” of anywhere
from one to five dollars, all the way to $40. 

These games aren’t a joke, and Zynga was right to bank on
the spendthrift tendencies of teens driven by immediate gratification. Zynga
recently closed nearly $50 million in revenue
on the backs of these easy-to-produce
browser games, and hauled in nearly 30 million active players. That’s a rough
average of a little over a dollar spent per player.

So what is the future of these virtual transactions? The Guardian shows no lack of hope:

First, the technologies behind virtual spaces are powering
ahead. It is even possible, indeed likely, that products will be constructed in
a virtual world and then "printed" out in the real world as a
tangible product.

While we may not be printing things out on three-dimensional
printers any time soon, Keegan is right to point out that technology shows no
signs of slowing. As the iPhone has shown, engaging games can be produced with
little start-up capital, increasing competition and raising quality. People are
willing to pay for the experience.

The economic world is changing, a dollar at a time.

2 thoughts on “The Guardian: Virtual Commerce Will Change the World”

  1. I disagree that virtual commerce will change the world. If history has proven anything to us regarding the protection of currencies within and across borders, governments will be quick to squash any competing currency that threatens the real economic value of the existing, government-backed currency.
    China has already passed laws restricting the conversion of virtual currencies into real currency, or exchanging virtual currency for real world products or services. Other alternatives may be to limit the amount of virtual to real exchange amounts per period, or tax the exchange so exchanges can be better tracked and investigated.
    The biggest problem that virtual currencies pose to governments, is that they are not guaranteed, provide no insurance against “runs on the bank”, and their exchange rate is not subject to governmental policy and control–it can be changed at whim by the owners/makers of the virtual currency. This puts the currency holders at great risk should the private company owning the currency decide to no longer support conversions.

  2. Coyle,
    You make some interesting points, especially the last one. It reminds me quite a bit of the “Wildcat Banks” of early America – releasing credit and fluctuating in value without much security.
    You have a fantastic blog, by the way! I’ll be adding it to our blogroll and doing a write-up of it in the near future.

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