The Heated Debate at VGS

I want to first start off by recognizing Charles Hudson and the extraordinary VGS event he orchestrated last Friday. Panels focused on emerging market opportunities within the virtual goods and economies space. Speakers included some of the most insightful and successful leaders within the industry. It was certainly a packed day complete with knowledgeable exchange amongst speakers and attendees.

The conference ended a bit different though...well...very different. The Virtual Goods Summit this year, needless to say, ended with a big bang and left people throughout the industry questioning the ethics of companies such as OfferPal. The debate between TechCrunch editor Michael Arrington and OfferPal CEO Anu Shukla sparked a great deal of interest and drove an enormous amount of attention to the typically “behind the scenes” ad offer industry which provides an alternative form of monetization for social game companies such as Zynga, Playdom, and many others.

The following article written by Dean Takahashi at Venture Beat summarizes the debate and the discussions surrounding it.

http://venturebeat.com/2009/10/31/video-of-arrington-shukla-fight-highlights-controversy-of-special-offers/

I have also included some interesting data collected and provided by Peanut Labs (I am an Advisor at PL).

http://tiny.cc/PLdata

Economics 101: Supply, Demand, and Usefulness

It is the actions of players that define the economic conditions of a virtual world.  Therefore, limited or hard to obtain supply of virtual items lead to an increased demand for those items, ultimately stimulating the virtual economy and its respective currency.   In game-play, the "usefulness" of the virtual item is also factored into the value of the currency.

There is certainly a tremdous demand for dressing up avatars, obtaining a sword, getting to the next level, dressing up my furry friend...I am always fascinated at how the game industry has been able to successfully create and grow its own economy which, I must say, at this point, seems to be growing at a more robust, valuable, and healthier rate than our own US economy. 

Recent data estimates the market size for virtual goods in the US by 2013 to be $2.5 billion.  

$2.5bn market size estimated for virtual goods in the US by 2013 August 30, 2009

Posted by jeremyliew in virtual goods. 
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Last month Piper Jaffray published a research report titled “Pay to Play: Paid Internet Services”, which included their analysis of the paid social networking, virtual goods, online dating, domain registration and paid online content (primarily video and music) industries. Included was the following market size estimates for virtual goods in the US and for the rest of the world (encompassing games, virtual gifts on social networks, and potential virtual goods on portals such as Yahoo.)

http://lsvp.wordpress.com/2009/08/30/2-5bn-market-size-estimated-for-virtual-goods-in-the-us-by-2013/