What Is a Virtual Good?
Let me explain to you what a virtual good is: it's an intangible asset traded in a virtual economy, like those in online games. These goods are nonphysical by definition, and their value comes entirely from what users are willing to pay for them.
You've probably noticed how the market for virtual goods has grown exponentially lately, thanks to the rise of social media platforms.
Key Takeaways
- Virtual goods are intangible assets traded in virtual economies, such as in online games.
- The market for virtual goods has exploded in recent years, with annual revenues estimated to be over $52 billion.
- The line between physical and virtual goods may blur in the years ahead as transactions involving the exchange of physical and virtual assets become more common.
Understanding Virtual Goods
If you're not familiar with virtual goods, you might wonder how companies charge big money for things that don't exist in the real world. But their popularity is real—in 2012, FarmVille from Zynga generated over $1 billion from virtual goods sales. More recently, Fortnite sold $1 billion worth in 2018, and global revenues are now over $52 billion annually.
Think of virtual goods not as products, but as services that improve your experience in the game or community. This makes sense because many of these games are free to play, so buying virtual goods is completely up to you.
That said, virtual goods have their challenges. Since they're virtual, they can be lost to hacking or glitches, and their legal status gets murky with complex transaction histories. Many platforms encrypt these transactions to mitigate risks.
Real-World Example of a Virtual Good
Looking ahead, the distinction between physical and virtual goods will likely fade. This is already happening—in China, trading virtual for physical goods got so common that the government banned it in 2009. Zynga also partnered with Frito-Lay in 2012, where chip buyers got codes for virtual goods in games.
The virtual goods market will keep surging with online gaming growth, boosting demand for avatars, power-ups, and rare items via convenient in-app purchases. Prestige items will be especially sought after; for instance, someone paid $330,000 for a virtual space station in Entropia Universe back in 2009.
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