InsideFacebook.com editor Justin Smith and industry expert Charles Hudson of Serious Business have recently released a report for purchase that estimates the total US virtual goods market value will reach $1 billion by years end. This estimation effectively doubles the market value of the previous year, and puts a $1.6 billion dollar amount to 2010’s sales.
While the free-to-play traditional PC gaming platform certainly contributes to this overall figure, Hudson and Smith squarely point to the rapid expansion of casual gaming, firmly finding it’s roots in social networking. “One of the major forces that has led to growth in virtual goods this year is the explosion and seeming ubiquity of social networking in the U.S.,” said Smith in an interview.
This newest estimation is not new to the virtual goods market, as we’ve heard various valuations for quite some time, with no one definitively being able to put a finger on just how much virtual goods are actually worth. Early this year, research firm Plus Eight Star valued the Asian market value at over $5 billion, which, if seen in the light of Hudson and Smith’s newest findings clearly falls short, as the US market alone is expected reach $1 billion this year. Conversely, Brian Balfour of Viximo argued that the US market should be valued in the neighborhood of $400 to $600 million. So who’s, quite literally, on the money here? While valuations and projections are always a sticky science, it’s arguable that no one up to this point has done as much extensive research as Smith and Hudson. Again, the report should not be taken as gospel, but it is perhaps the most researched in detail.
The report, available for purchase from insidevirtualgoods.com focuses on four main areas, thoroughly investigated by Smith and Hudson:
- Social Networks, Applications, and Games - The explosion of the virtual goods market on social networks is in our view one of the biggest stories of 2009. We delve deeply into the trends, stats, key players, opportunities, and challenges facing the space this year and next.
- Casual MMOs and Virtual Worlds - Virtual worlds and casual MMOs continue to grow as a meaningful share of the virtual goods opportunity in the United States. Our study breaks down the key drivers for success in this segment, trends in monetization and engagement, and the prospects for the future.
- Hardcore MMOs and Free-to-Play Online Games – Developers in the MMO / MMORPG space have been among the earliest adopters of the free-to-play model. We explore why free-to-play MMOs are succeeding, revenue and user trends, and the key issues facing this space as we head into 2010.
- Emerging Areas: Consoles, iPhone, and Subscription MMOs- As the virtual goods business model becomes more well understood, it is beginning to show up in new and interesting areas of the games and entertainment landscape. We highlight a few of the more promising areas where virtual goods are emerging as a promising opportunity.
“I don’t know anyone who expected it to grow this fast. The Facebook platform went from zero to hundreds of millions of dollars in two and a half years. It reflects a broader shift in society where people are spending more time on casual games,” says Smith.
An of course, fatfoogoo, as an industry leading provider of microtransaction and virtual goods payment systems is profiled in the report. We’d like to send out a big thanks to Charles and Justin for this outstanding industry report.