Virtual goods ARE real!

Do you want to buy this red tractor?

Buying a red virtual tractor in FarmVille or a particularly nice piece of virtual furniture may seem crazy to most bystanders, but virtual goods are extremely popular these days, and they are generating very large profits. In a somewhat cheesy metaphor one commentator wrote, that the “Online FarmVille game ploughs new fields of revenue“, and repeated the rumour that “fanatical farmers bought 800,000 new tractors yesterday and today they will buy another 800,000.” The title of another article states that “Virtual goods continue to make (real) serious money” and predicts, that the “U.S. market for virtual goods will reach $1.6 billion in 2010”.

But what are virtual goods?

In a very basic sense, virtual goods are goods or services, which only exist as digital code, and thus have no physical form.

It may be a flying horse to cover grounds more quickly in World of Warcraft, a piece of furniture to decorate your room at Habbo Hotel, a health pack to regenerate health in Battlefield Heroes, or a tractor to help plow your fields in Farmville.

What is particularly peculiar in all the above cases is, that buying virtual goods is not a compulsory part of playing and/or socializing, i.e. you can do without buying anything. All right, Battlefield Heroes got hard to play without buying health packs etc., yet in principle it is possible. A pressing question seems to be, that if playing is possible without buying, then why the heck are so many people spending such astounding amounts?

A designed marketplace

The primary catalyst of the growing sale of virtual goods is a distinctly commercial one. A couple of years ago, virtual goods was dubbed “the next big business model” and today it is almost compulsory to consider the possibility of selling digital goodies, whether you are designing an MMO, a traditional shooter or a social game to be played on social network sites like Facebook.

By emphasizing the economic importance of this approach to make a viable business, it also becomes clear, that any such service must be designed in order to strengthen player’s desire to purchase this or that, i.e. to maximize profits. The approach, thus, is no different than that of any commcerial business attempting to lure consumers into buying their products:

In addition, games and social networks are increasingly trying to break down the barriers of the payment process, offering different kinds of microtransactions with services like PayPal or the newer Facebook Credits. Again, this clearly mirrors the efforts of super markets and the like, e.g. the progress from cash to credit cards.

If everything is as always and nothing is new, then why is this field attracting any attention at all?

Consumption 2.0

Vili Lehdonvirta - researching virtual consumption

The most obvious reason would probably be, that many people are considering it inherently irrational to buy stuff, that doesn’t seem to exist. Most of us are raised to think critically about our spending, and even though many of us are doing a lousy job nonetheless, buying what seemingly amounts to nothing just occurs to be plain stupid.

So what are the reasons for spending money on goods with only a virtual existence?

As more and more people are playing games and visiting social network sites where virtual goods are prevalent, researchers are slowly demystifying the nature of  virtual consumption. A Finnish researcher, Vili Lehdonvirta, recently finished his PhD titled “Virtual Consumption“, which is a rather comprehensive study of the sociology and psychology of the patterns in virtual consumption. He set out to investigate “why do people spend real money on virtual goods?”, and reaches some enlightening conclusions.

First of all, he corrects the misunderstanding that virtual goods should somehow be “unreal”:

“The position according to which spending real money on virtual goods is insane because the goods “do not really exist” is untenable. Despite their name, virtual goods are “real” in the ontological sense that they exist in the same reality as other goods. […] Virtual goods are not figments of imagination, although they can give rise to a strong emotional or dream component in the mind of a consumer, in the same way that many brands and consumer goods seek to do.”

Now this is important, and a necessary understanding in order to address the issues of virtual consumption. It simply doesn’t make sense to maintain the perception of virtual goods as something beyond existence. He goes on to identify the parameters urging people to buy these non-unreal items:

“According to the assumptions of rational choice theory, people who spend money on virtual goods must experience some sort of benefit from those goods that exceeds the perceived benefit obtainable by spending the money elsewhere. This study identified several ways in which individuals can experience benefits from virtual goods: virtual goods can have functional properties that help the individual realise their goals; virtual goods can deliver emotional and aesthetic sensations; and virtual goods can contribute to selfidentity and enhance social status.”

In conclusion, Lehdonvirta states that “people buy virtual goods for the very same reasons as they buy other goods.”

So, again we are reminded that we as human beings have not been fundamentally transformed by digital media and virtual goods. The shape of consumption are being transformed these years, but our motivation and desires driving consumption remain relatively unchanged. We want to secure better experiences for ourselves, we want to make things easier, and we want to impress our surroundings.

Parents and schools have been trying for years to promote a critical consumer competence in children and young people, and this effort must certainly also address virtual consumption. The skills and competences required to critically decipher commercial pitfalls must be thought of as an integral component in the essential digital literacy. Understanding the nature and inner workings of digital media is closely related to adopting a critical stance towards virtual consumption.

Oh, and we might actually apply a game based learning approach to all of this.

A game to teach consumer competence?

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