Fearful that it could affect the “real” economy or lead to money laundering, the Chinese government recently banned the use of virtual currency to buy real-world goods, and imposed a tax on all profits made from the sale of virtual items. Whether or not that’s an overreaction, one thing is clear: There’s real money to be made in fast-growing virtual economies, for developers, advertisers, content distributors and consumers alike.
Of course, the biggest chunk is still coming from MMOs (massively multi-player online games), with players buying and selling virtual currency, properties and other assets to get ahead in their virtual worlds. In fact, “gold farming,” or hiring people to play so they could earn in-game advantages that can then be sold to other players, generates nearly one billion dollars a year worldwide, according to The University of Manchester’s Institute for Development Policy and Management.
But that's not the only place where virtual currency is a big factor. Facebook, for example, lets users buy credits to send virtual gifts to friends, starting at $1 for 10 credits. Some applications also let consumers earn currency by taking surveys or completing ad offers online.
This growing market is good news for developers looking to monetize their Web apps and games. This is also good for advertisers looking for alternatives, especially as more and more users block ads on their browsers or simply ignore banner ads completely.
“We believe that what contextual ads did the for the Web, virtual currency is doing to the social Web,” Adknowledge CEO Scott Lynn told Mediapost, after his company plunked down an undisclosed amount (close to $50 million, according to TechCrunch) for KITN Media, parent of Super Rewards, a virtual currency platform. It’s an interesting buy: Together, Adknowledge and Super Rewards will be dealing with 80 percent of all top social networking apps, and is expected to generate $250 million in revenue this year.
So what’s next? How about virtual currency that can be used — ideally — on any site? If reports are true, Facebook plans on launching such a system, using Facebook Connect. Basically, users will get to buy credits and spend them not only on Facebook, but on all the Web sites that use Facebook Connect, eliminating the need for multiple credit card transactions and earning Facebook a hefty commission in transaction fees, a la PayPal.
