Virtual goods are non-physical objects and money purchased for use in online communities or

online game An online game is a video game that is either partially or primarily played through the Internet or any other computer network available. Online games are ubiquitous on modern gaming platforms, including PCs, consoles and mobile devices, and s ...

Digital goods Digital goods or e-goods are intangible goods that exist in digital form. Examples are Wikipedia articles; digital media, such as e-books, downloadable music, internet radio, internet television and streaming media; fonts, logos, photos and gr ...

, on the other hand, may be a broader category including digital books, music, and movies. Virtual goods are intangible by definition. Including digital giftsSales of virtual goods boom in US
news.bbc.co.uk, 10:32 GMT, Thursday, 22 October 2009 and digital clothing for avatars, virtual goods may be classified as services instead of

goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not ...

and are usually sold by companies that operate

social networking service A social networking service or SNS (sometimes called a social networking site) is an online platform which people use to build social networks or social relationships with other people who share similar personal or career content, interests, ac ...

s, community sites, or

s.Virtual Goods: the next big business model
techcrunch.com, Jun 20, 2007 Sales of virtual goods are sometimes referred to as microtransactions, and the games that use this model are usually referred to as

freemium Freemium, a portmanteau of the words "free" and "premium," is a pricing strategy by which a basic product or service is provided free of charge, but money (a premium) is charged for additional features, services, or virtual (online) or physical ...

games.

Virtual money

Virtual money (or in-game currency) is used to purchase virtual goods within a variety of online communities, which include

social networking A social network is a social structure made up of a set of social actors (such as individuals or organizations), sets of dyadic ties, and other social interactions between actors. The social network perspective provides a set of methods for ...

websites, virtual worlds and online gaming sites. A key revenue driver within

social media Social media are interactive media technologies that facilitate the creation and sharing of information, ideas, interests, and other forms of expression through virtual communities and networks. While challenges to the definition of ''social me ...

, virtual currencies are specific within each game and are used to purchase in-game goods. Characters or

avatar Avatar (, ; ), is a concept within Hinduism that in Sanskrit literally means "descent". It signifies the material appearance or incarnation of a powerful deity, goddess or spirit on Earth. The relative verb to "alight, to make one's appear ...

s in virtual worlds own things within the context of the virtual world and users will collect each games' virtual currency to purchase land, supplies and various items used to enhance their status and add points. Some virtual currencies are time-based, relying upon measurement of in-game achievements in order to accrue exchangeable points.

History

The first virtual goods to be sold were items for use in MUDs, early, graphical online multiplayer games on the

PLATO system Plato ( ; grc-gre, Πλάτων ; 428/427 or 424/423 – 348/347 BC) was a Greek philosopher born in Athens during the Classical period in Ancient Greece. He founded the Platonist school of thought and the Academy, the first institut ...

and text-only games on other computers. This practice continued with the advent of MMORPGs. Players would sell virtual goods, such as swords, coins, potions, and

s, to each other in the informal sector. While this practice is forbidden in most blockbuster online games, such as

World of Warcraft ''World of Warcraft'' (''WoW'') is a massively multiplayer online role-playing game (MMORPG) released in 2004 by Blizzard Entertainment. Set in the '' Warcraft'' fantasy universe, ''World of Warcraft'' takes place within the world of Azer ...

, many online games now derive revenue from the sale of virtual goods. When Iron Realms Entertainment began auctioning items to players of its MUD, Achaea, Dreams of Divine Lands, in 1997, it became the first company to profit from the sale of virtual goods.The World of text MMOs / MUDs – An Interview with Matt Mihaly, CEO of Iron Realms Entertainment
playnoevil.com, Friday, September 8. 2006 But it wasn't until the mid-2000s, with companies like Korean

Cyworld Cyworld () is a South Korean social network service. Cyworld was originally part of SK communication, and became an independent company in 2014. Members cultivate relationships by forming ''Ilchon'' (, Hanja: ) or "friendships" with each other ...

leading the way,Cyworld ready to attack MySpace
money.cnn.com, July 27, 2006: 11:35 AM EDT that virtual good sales became instituted as a legitimate revenue-making scheme. Virtual goods may continue to be a primarily Asian phenomenon, as between 2007–2010 70% of worldwide sales were made in this region.

Revenue

In 2009, games played on social networks such as

Facebook Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dust ...

, games that primarily derive revenue from the sale of virtual goods, brought in US$1 billion, and that is expected to increase to 1.6 billion in 2010. Worldwide, US$7.3 billion was made from virtual goods that same year. Estimates of the future market for these small

item Item may refer to: Organizations * ''Instituto del Tercer Mundo'' (ITeM), the Third World Institute * ITEM club, an economic forecasting group based in the United Kingdom Newspapers * ''The Item'', an American independent, morning newspaper ...

s vary wildly depending upon who is making the prediction. 2013 sales will be US$4 billion according to one analystA virtual farm turns new ground for game developers
reuters.com, Thu Mar 25, 2010 7:05am EDT and a year later reach 14 billion according to a different analyst.
cnet.com, November 15, 2010 9:51 AM PST In 2010, a virtual space station in the game '' Entropia Universe'' sold for $330,000. The popular, free-to-play video game '' Fortnite: Battle Royale'' generated more than $1 billion in revenue across all platforms. This revenue comes entirely from in-game purchases, which — in ''Fortnite''s case — offer no competitive advantage to the game.

Research

In online games, virtual goods could be lost due to some unexpected reasons. This brings problems for service providers as well as purchaser. Encryption techniques primarily used for other purposes may, here too, provide functionality. These may include

access control In the fields of physical security and information security, access control (AC) is the selective restriction of access to a place or other resource, while access management describes the process. The act of ''accessing'' may mean consuming ...

, hashing,

encryption In cryptography, encryption is the process of encoding information. This process converts the original representation of the information, known as plaintext, into an alternative form known as ciphertext. Ideally, only authorized parties can d ...

, digital certificates, and fingerprinting.

Illicit sale

While many companies have embraced exchanging cash for virtual goods, the practice is forbidden in most blockbuster games,Poor earning virtual gaming gold
bbc.com, 01:36 GMT, Friday, 22 August 2008 which derive income from subscription fees. This doesn't deter all players from saving playing time by illicitly buying in-game currency with real-world cash from an alternate source– violating their agreement with the game's operator in the process.

China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's List of countries and dependencies by population, most populous country, with a Population of China, population exceeding 1.4 billion, slig ...

outlawed the practice of buying real-world goods with virtual currency in 2009, something that had become popular in some parts of the country.

Virtual goods purveyors

* CellufunUnlike reality, virtual retail sales are hot, especially for avatars
USA Today, 23 Dec 2009 * Changyou *

* Gaia online *

Habbo hotel ''Habbo'' (formerly ''Habbo Hotel'') is an online community aimed at teens and young adults. It is owned and operated by Sulake, a Finnish company. Founded in 2000, Habbo has expanded to nine online communities (or "hotels"), with users from ...

* Hi5The world’s most lucrative social network? China’s Tencent beats $1 billion revenue mark
venturebeat.com, March 19, 2009 * Hotornot * IMVUABC News
March 15, 2010 * Kongzhong * NexonAbout Company
Nexon Official Site * NingVirtual goods give Web firms new revenue in ad slump
reuters.com, Tue Dec 29, 2009 12:50pm EST * Iron Realms Entertainment * Playdom * PlayfishPlayfish sees social games as industry driver
Wed Nov 4, 2009 6:02am EST * Second Life MarketplaceSecond Life Marketplace Featured Items
Wed April 26, 2011 * RuneScapeRunescape begins first microtransaction experiment
develop-online.net, April 2, 2012 *Slide.comVirtual Products = Real Cash
cnbc.com, Oct. 09 * SmallWorldsTrade Me founder invests in gaming
tvnz.co.nz, Mar. 11 * Sony Online EntertainmentRedefining MMOs: The massive money of microtransactions
massively.com, Sep 11th 2009 *

Valve A valve is a device or natural object that regulates, directs or controls the flow of a fluid (gases, liquids, fluidized solids, or slurries) by opening, closing, or partially obstructing various passageways. Valves are technically fitting ...

Tencent Tencent Holdings Ltd. () is a Chinese multinational technology and entertainment conglomerate and holding company headquartered in Shenzhen. It is one of the highest grossing multimedia companies in the world based on revenue. It is also the wo ...

Uh-Oh: World of Warcraft Introduces Microtransactions
Wired's Game , Life blog, November 6, 2009 * Xbox Live Marketplace * Zynga * FlirtomaticDigital tills are ringing to the sound of an unreal Christmas
The Guardian, 17 Dec 2009 * OPSkinsSimon Coutu
"Here's How You Make $12,000 In Profit a Day Selling Virtual Guns"
"Vice", June 30, 2015

References

{{MUDs MUDs Virtual economy Micropayment