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By 26 October 2011 | Categories: news

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The sales of virtual goods are now recorded in the billions, with this only expected to increase in the next five years. 

According to a new report from Juniper Research, social gaming and the rapid pace of smartphone adoption will account for the sales of virtual goods increasing from $3 billion (R23 billion) this year up to $4.6 billion (R36.6 billion) by 2016. 

The report defines virtual goods as intangible, digital items which cost very little to produce and are often sold in large numbers for small amounts of money. Examples include virtual gifts, which are images of physical gifts. The report explained that as they are often impulse purchases, they can result in users spending more money than if they were higher priced.

Additionally, in-game items were considered a large source of virtual goods revenues. While these can be won for free within a game, they often require hours of gameplay. “This tempts players to pay small amounts of money in exchange for an item that will improve their enjoyment of the game and allow them to proceed without spending hours attempting to acquire the items,” stated the report.
 
The report elaborated that the sales of virtual goods via mobile social media services are flourishing in Japan and China. This trend is expected to becoming increasingly global, as users become more familiar with virtual goods within social gaming. Additionally, increasing tablet use is expected to add to this momentum, particularly as tablets offer larger screens than that provided by smartphones. 

Not quite smooth sailing


However, the report’s author, Charlotte Miller, pointed out that mobile social media services have a “serious monetisation problem”. She elaborated that one potential roadblock for virtual goods is the “stranglehold app stores have on payments”.
 
She explained that any services wishing to sell virtual goods from within their app risk losing 30% of the payment value to app stores such as Apple’s App Store, Google’s Android Market and BlackBerry World, which require that the developer surrenders 30% of in-game purchase revenue.
 
Additionally, while the US is considered the next biggest market for virtual goods after the Far East and China, the report pointed out that Africa and the Middle East will likely not be large markets for virtual goods sales via feature phones.
 
The Mobile Social Media whitepaper is available to download for free, and the results of the full study can be purchased from the site.
 

   

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