Virtual Good What It Is How It Works Example

Virtual goods, traded in virtual economies like online games, are intangible assets with value determined by user demand. The market for virtual goods has grown exponentially with the rise of social media platforms.

Key takeaways:

– Virtual goods are intangible assets traded in virtual economies.

– The market for virtual goods has exploded, estimated at over $52 billion in annual revenues.

– The line between physical and virtual goods may blur as transactions involving both types of assets become more common.

Understanding virtual goods:

Virtual goods, though intangible, generate significant revenue. In 2012, Zynga Inc.’s "FarmVille" earned over $1 billion from virtual goods. More recently, "Fortnite" generated $1 billion in 2018. Annual revenues for virtual goods have reached over $52 billion globally.

Virtual goods enhance the gaming or community experience, acting more as a service than a product. The decision to purchase virtual goods is voluntary, especially in free-to-play games.

However, virtual goods come with challenges such as the risk of loss through hacking or technical issues. Their legal status can also be unclear, particularly when multiple historical transactions are involved. To mitigate these risks, many platforms encrypt virtual goods transactions.

Real-world example:

The line between physical and virtual goods is already blurring. China banned the trading of physical goods for virtual ones in 2009 due to its widespread practice. Additionally, Zynga Inc. partnered with Frito-Lay to provide coupon codes for virtual goods in their games.

The virtual goods market is expected to continue growing due to the rise of online gaming. In-app purchases for avatars, power-ups, and other in-game items will increase in demand. Users also seek rare or prestigious items, as seen with a user paying $330,000 for a virtual space station in the game "Entropia Universe" in 2009.