Social Gold | Virtual Currency. Real Commerce.

Yesterday, Chris O’Brien contemplated the growing success of virtual goods on PBS’s Idea Lab, noting that while he was first puzzled by the popularity of virtual goods he now sees the great potential they hold for redefining online business models. As virtual goods economies have continued to flourish in a time when monetization of online business is still elusive for many companies, more people are examining the value behind virtual objects. Some people who are unfamiliar with these economies question the value of virtual goods and wonder why users spend real-world money on intangible online gifts or objects within social games. Virtual goods are not simply about gifting cute or quirky icons. The real value of virtual goods is the emotion they deliver, the experience they create and the feelings they generate.

Virtual goods fuel experience economies online as consumers become deeply immersed within social games. Successful virtual goods economies have turned profits because they create a differentiated and fun experience for consumers. Virtual goods are of little value if the foundation of an absorbing consumer experience is missing. Why buy seeds for a virtual farm, for example, if there is no satisfaction or amusement in planting and nurturing them? However, social games that hook players and draw them into an engaging, entertaining virtual world create an environment where virtual goods have the ability to prosper. Virtual goods may enhance an in-game experience by heightening entertainment, offering the chance to improve performance or enhancing relationships with friends on social networks.

Chris discussed what news sites and content providers can learn from the success story of virtual goods in online games. First, it is more than obvious that users are willing to pay. So, the argument that people will not pay does not hold water. Second, the users will pay for a differentiated, unique experience. It is important to emphasize this: getting users to pay for content will be much harder than getting them to pay for the experience. News sites, as much as they want to monetize, should also focus on the experience they can create for their users. A common story we hear from many news sites is that they see a lot of one-page visitors: people visiting from Google news or MSN or elsewhere, follow a link, read an article and move on. It is critical for news sites to engage their audience. Money will follow the engaged experience.

It is important, then, to support a smooth purchase transaction or else the user experience will be disrupted. People are willing to pay for virtual goods as part of an enjoyable experience but if, for example, they must leave a Facebook game to purchase a new object, this is distracting and disrupts any efforts of engagement. Social Gold helps preserve a fun and deep gameplay experience for players by enabling in-game transactions, so purchasing virtual goods is quick and simple. It’s not the object itself that holds value but rather, the quality of the overall experience in which virtual goods function.