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REAL VALUE FROM VIRTUAL GOODS

Ravi MehtaVP, Publishing - Viximo

ravi@viximo.com - Emailwww.virtualgoodsinsider.com - Blog

Proprietary & Confidential

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WHAT IS A “VIRTUAL GOOD”?

Proprietary & Confidential

VIRTUAL GOODS INDUSTRY

As virtual goods evolve, they’ll grow to include all digital media including music and video

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VIRTUAL GOODS ARE GENERATING VERY REAL REVENUE FOR PIONEERING COMPANIES

Proprietary & Confidential

VIRTUAL GOODS INDUSTRY

China’s largest Internet portal generates 65% of its $500M revenue from virtual goods

Korea’s Facebook generates $160M revenue annually – entirely from virtual goods

Facebook’s Gifts service has generated $15M since February 2007

The youth oriented dating site generates 40% of its revenue ($6-7M) from sale of virtual flowers at up to $10 per flower

This virtual world with over 75 million users globally generates $60M annually from virtual goods

This niche social community for pet owners has had over 50 million giftings by its 500,000 users since its gifts program started 2 years ago

NORTH AMERICA EUROPE ASIA

In 2005, this Korean gaming giant report ed $230 million in revenue with 80% generated by in-game items

MindArk’s virtual world, Entropia Universe, holds the 2008 Guinness World Record for “Most Expensive Virtual Object”, a space resort that was sold for $100,000

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WHY DO PEOPLE SPEND REAL MONEY ON STUFF THAT ISN’T “REAL”?

Proprietary & Confidential

VIRTUAL GOODS INDUSTRY

1. A $100 bottle of Diaka Vodka which is colorless, flavorless, and made from $2 in grain

2. A $97,500 Piaget watch that contains a few ounces of precious metal and tells time (less accurately than your cell phone)

3. A $100,000 piece of “virtual” real estate that can be traded on a highly liquid market and generates a 20% annual return (2x most stocks)

POP REALITY QUIZ

POP REALITY QUIZ Which of the

following is most “real”?

A Stanford University research study has shown that people aren’t wired to distinguish between “real” world stimuli and digital stimuli:

Study participants showed the same tendency to smile back regardless of whether smiled at by a real person or a digital avatar.

Study participants felt the same feelings of elation when receiving a physical gift and when receiving a “virtual” gift.

Can’t relate? Put yourself in the shoes of someone who spends 20-50% of her waking hours immersed in an online community. How real and tangible would that community be to you?

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WHAT VALUE DO PEOPLE GET FROM VIRTUAL GOODS?

Proprietary & Confidential

VIRTUAL GOODS INDUSTRY

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VIRTUAL GIFTS PROJECT THEIR VALUE ONTO SOCIAL GESTURES AND ENRICH COMMUNITES

Proprietary & Confidential

VIRTUAL GOODS AND SOCIAL NETWORKING

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CASE STUDY: DOGSTER

Proprietary & Confidential

VIRTUAL GOODS AND SOCIAL NETWORKING

• Members spend between $0.25 and $4.00 to send virtual gifts• Dogster’s 500,000 mainstream members have sent over 50 million gifts

in the past two years• Gifts sent for friendship, support of sick/dying pet, acknowledgement of

community contribution, to reciprocate for gift given, “just because”