Virtual Goods are a Major Source of Revenue for Social Game Developers

Developing games for social networks isn’t at all shocking in this day and age. Companies both big and small make thousands of applications and games year with a fair amount of these games and apps sharing the common goal of making money. Eric Eldon of VentureBeat recently posted details on how quickly virtual goods are becoming a serious income stream for both small self-funded teams and large companies building social games. Eldon writes,

Various estimates given to me by developers themselves and other sources peg some applications as making hundreds of thousands of dollars a month — this is money that a connected investor tells me Facebook itself isn’t even fully aware of.

Virtual goods (or micro-transactions as its known in some circles) have proven that small games and apps such as (fluff)friends, which works with the same principles of the popular 90’s Tamagotchi toys, can get users to pay for items, features and upgrades with real world money. If these micro-transactions are made by just a small portion of regularly engaged users, developers can see healthy margins.

Korean MMOs have been doing similar things for several years. Games such as RF Online, Archlord and World of Warcraft, which has over 12 million subscribers, can be played for free in Korea, and users only pay for items in the game world which improve character development and other status levels. Microsoft, Nintendo and Sony have also done their own brands of arcade and mini-games withadditional fee based, downloadable content. For example, Square Enix title Final Fantasy Crystal Chronicles: My Life As King charged small fees for additional content after the game was launched.

We’ll be tracking the growth of the virtual goods economy within social games as the space matures.