Inside Virtual Goods: Tracking the US Virtual Goods Market 2011 – 2012, Is Here

With an up-to-$2 billion IPO that Zynga may file in the coming weeks to fund its continued global expansion, Facebook’s migration to Credits, Google’s launch of Google+, and the continued rapid growth of in-app purchase-based businesses on the iOS and Android mobile platforms, virtual goods are impacting businesses across the media landscape. Virtual goods, and the companies that distribute them, are continuing to bring about one of the largest disruptions entertainment, communication, and e-commerce infrastructure businesses have seen in years.

Inside Network is proud to announce a new original research report by Charles Hudson and Justin Smith that presents a comprehensive examination of the size and future of the virtual goods market in the United States, entitled Inside Virtual Goods: The US Virtual Goods Market 2011 – 2012. This is Inside Network’s third annual edition of the US Virtual Good Market report. The big picture? The US virtual goods market will reach $2.9 billion overall in 2012.

Where will the virtual goods market go in 2012 and what are the biggest opportunities left unclaimed? How will existing players fare as Facebook, Apple, and Google reshape the mobile gaming landscape, and larger and more sophisticated players enter the market? Inside Virtual Goods: The US Virtual Goods Market 2011 – 2012 provides deeper insight into monetization, development, and the key questions facing the space in 2012 than you’ll find anywhere else.

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About the Report

Inside Virtual Goods is a new report researched and created specifically for entrepreneurs, investors, and analysts interested in the growth of this exciting new category of online commerce that is fueling the growth of games-as-a-service businesses. During a research phase spanning the last few months, co-authors Justin Smith and Charles Hudson have spoken with dozens of executives and entrepreneurs from all parts of the ecosystem in order to form what we believe are the most detailed estimates, analyses, and predictions for 2011 and 2012.

We focused and organized the report around the following areas:

  1. Social Networks, Applications, and Games – The continued growth of the virtual goods market on social networks is one of the biggest stories of 2011. We delve deeply into the trends, stats, key players, opportunities, and challenges facing the space this year and next.
  2. Mobile Applications and Games – Mobile application developers that have been early adopters of the free-to-play model are have seen significant growth in 2011, making mobile the fastest-growing component of the US virtual goods market. Our study breaks down the key opportunities and challenges facing this emerging space going into 2012.
  3. Casual  and Hardcore MMOs – Developers in the MMO / MMORPG space have been among the earliest adopters of the free-to-play model, while Virtual worlds and casual MMOs continue to represent a share of the virtual goods opportunity in the United States. Our study breaks down the key trends in monetization and engagement, and the prospects for the future.
  4. Console Games – The console market continues to be one of the areas where microtransactions are establishing a meaningful foothold in the market. We explore why the model is succeeding, revenue and user trends, and the key issues facing this space as we head into 2012.

Each section contains:

  1. A brief history on the evolution and growth of this space in the US, including a description of key players.
  2. Estimates on the size of the US virtual goods market in 2011 in that area.
  3. A diagnosis of the key opportunities and issues facing the growth of that space, including our outlook and projections for 2012.

In addition, prior to delving more deeply into each market segment, we’ve provided an overview of the emerging payments ecosystem that is growing to serve these new businesses. Traditional e-commerce infrastructure providers only offer a partial solution, and the virtual goods payments layer is currently in a major state of flux. In the report, we describe the variety of solutions that have been brought to market to date, and the key challenges facing the industry from a payments perspective as a whole.

For more details, check out the full table of contents below.

The annual membership, which includes the report and three additional quarterly updates, is USD $2,495. Alternatively, you can obtain just this report for USD $995.

Table of Contents

1. Introduction

  • How We Got Here: A Brief History of Virtual Goods Worldwide
  • Defining Terms
    • Registered users
    • Active users
    • Average revenue per user (ARPU)
    • Average revenue per paying user (ARPPU)
    • How do different developers manage their businesses?
  • Growing Virtual Goods Markets in the US
    • Social Networks, Applications, and Games
    • Casual MMOs and Virtual Worlds
    • Hardcore MMOs and Free to Play Games
    • Mobile Applications and Games
    • Emerging Areas: Consoles, Subscription MMOs
  • Methodology

2. The Virtual Goods Payments Ecosystem: An Overview

  • Large Payment Platforms
  • Mobile Payment Providers
  • Offer Providers
  • Direct Payments vs Offers
  • Pre-paid Cards
  • The Migration of Facebook Credits
  • Platform Payments – Facebook, Google, and Apple
  • Managing Fraud
  • Related Companies

3. Social Networks, Applications, and Games

  • Introduction
    • The Global Rise of Facebook
    • The Virtual Currency Payment Ecosystem and the Migration to Facebook Credits
    • Increased Optimization for Virtual Goods
  • Social Networking Platforms Today
    • Facebook
    • Google+
    • Twitter
    • MySpace
    • Others
  • Significant Changes to Facebook Platform Dynamics in 2011
    • Distribution & Engagement
    • Monetization
  • Social Application and Game Genres: How Do They Perform?
    • Role Playing Games and “Hardcore” Mini-MMOs
    • Simulation and City Building Games
    • Pet Games
    • Poker Games
    • Gifting Apps
    • Arcade Games
  • Who’s Buying Virtual Goods?
    • Gender Breakdown
    • Age Breakdown
    • Geographic Breakdown
  • How Are They Spending Money?
    • Item Type Breakdown
    • Payment Method Breakdown
  • Market Size Estimate
    • Total Number of Monthly Paying Users
    • Total ARPPU Per Month
    • Total US Virtual Goods Revenues from Social Networks in 2011 and 2012
  • 2012 Outlook
    • Growth Rate
    • Major Risks that Could Hamper Growth
  • Leading Companies

4. Mobile Applications and Games

  • Introduction
    • History of virtual goods model in US
    • Major genres for free-to-play iPhone apps and games
      • Resource management and simulation
      • Platformers
      • RPGs
      • MMOs
      • Board / Casual
  • Mobile Application and Game Platforms Today
    • iOS
    • Android
    • Others
  • Mobile Application and Game Genres: How Do They Perform?
  • Analyzing the Market Opportunity
    • Total Player Base
    • ARPU
    • ARPPU
      • Distribution of monetization between virtual goods, advertising, and initial purchase of downloadable product
    • Payment methods
    • Total US Virtual Goods Revenues from Mobile Applications and Games in 2011
  • 2012 Outlook
    • Predictions and Growth Rate
    • Major Risks that Could Hamper Growth
  • Leading Companies

5. Web-based MMOs, Free to Play Games, and Virtual Worlds 

  • Introduction
    • History of free to play MMOs
    • Emergence of the free to play MMO market opportunity in the US
    • Major genres for free-to-play MMOs and hardcore games
  • Payments
  • Analyzing the Market Opportunity
    • ARPU
    • ARPPU
    • Market Size Estimate
  • 2012 Outlook
    • Growth Rate
    • Key Challenges
  • Leading Companies

6. Console Games

  • Introduction
  • Analyzing the Market Opportunity
    • Total Player Base
    • ARPU
    • ARPPU
    • Payment methods
  • 2012 Outlook
  • Leading Companies

7. Investment Landscape

  • Venture Capital
  • M&A and IPO Landscape

8. Conclusion

  • Overview: 2011 Market Estimates
  • Looking Ahead: 2012

9. Appendix: Company Index


About the Authors

charles-hudson-headshotCharles Hudson

Venture Partner, SoftTech VC, CEO and Co-Founder, Bionic Panda Games

Charles Hudson is a Venture Partner with SoftTech VC and the CEO and Co-Founder of Bionic Panda Games, a mobile games company based in San Francisco, CA.

Until February 2010, he was the VP of Business Development for Serious Business, a leading producer of social games. Zynga acquired Serious Business in February of 2010. Prior to Serious Business, Hudson worked at Gaia Interactive, Google, IronPort Systems, and In-Q-Tel. Hudson also founded Third Power LLC, a conference and events company that was acquired by WebMediaBrands. Charles holds an MBA and BA from Stanford University.

justin-smith-headshotJustin Smith

Founder, Inside Network

Justin Smith is the founder of Inside Network, the first service dedicated to providing news and market research to the Facebook platform and social gaming ecosystem. Justin leads Inside Network’s analyst services, manages Inside Network’s AppDataservice, and serves as co-editor of Inside Facebook and Inside Social Games. Inside Network was acquired by WebMediaBrands (NASDAQ:WEBM) in May 2011.

Prior to Inside Network, he was Head of Product at Watercooler, now Kabam, a leading social game developer on the Facebook Platform. Prior to Watercooler, Justin was an early employee at Xfire, the largest social utility for gamers, which was sold to Viacom in 2006.

Justin holds a degree in Computer Systems Engineering from Stanford University, where he was a Mayfield Fellow and a recipient of the Terman Award in Engineering.

Get the Annual Membership

The annual membership, which includes the report and three additional quarterly updates, is USD $2,495. Alternatively, you can just download this report for USD $995.

Get Annual Membership (Includes Report + 3 Additional Quarterly Issues): $2,495
OR Buy Single Report: $995

List of Related Companies: 6waves, A Bit Lucky, Acclaim, Activision, AdParlor, Aeria Games, Amazon, Applifier, Appstrip, Artix Entertainment, Bebo, Bigpoint, Blackhawk, Boku, Boomerang Networks, Booyah, Challenge Games, CrowdStar, Digital Chocolate, Digital River, Disney, Electronic Arts, Facebook, Frogster, Gaia Online, Gala-Net, Gambit, Gameforge, GMG, Google, GratisPay, gWallet, HeyZap, Hi5, IMVU, InComm, iovation, Jagex, Kabam, Kontagent, Limasky, Lolapps, Meez, Metaplace, Microsoft, MindJolt, MySpace, News Corporation, Nexon, ngmoco, Nintendo, Offerpal Media, OMGPOP, Outspark, Papaya Mobile, PaymentPin, PayPal, PeanutLabs, Playdom, Playfirst, Playfish, PlaySpan, Rekoo, Riot Games, Rixty, RockYou, Rovio, Scoreloop, Second Life, SGN, Six Degrees Games, Slashkey, Slide, SocialGold, Sometrics, Sony, Sony (Free Realms), Sparkplay Media, SponsorPay, Sulake (Habbo Hotel), Super Rewards (Adknowledge), SupersonicAds, SurfPin, Tapulous, Tencent, TheBroth, ThreatMetrix, Three Rings (Puzzle Pirates), TokenAds, TrialPay, Turbine, Viacom (MTV), Viacom (Neopets), Viximo, WeeWorld, Wooga, ZipZapPlay, Zong, Zynga