Are Virtual Goods the Future of Facebook?

With the boom in social gaming on Facebook, one doesn't have to look to far to see what revenue sources currently exist for virtual economies. Facebook is rapidly becoming a center of the virtual economy which is why we are seeing the rise of companies built around virtual transactions. Today, AdNectar released a white paper which discusses the state of branded gifting within social media. Facebook has been selling virtual gifts for a while now but even Facebook is finding it to be a challenging pitch to large brands as it's a non-traditional advertising model and companies don't know how to account for virtual gift campaigns. Despite the uphill battle, Facebook is still launching a number of branding gifting campaigns including a current one for the Watchmen movie which just came out. AdNectar is looking to become a dominant force in the virtual gifting space, serving as the leading network to monetize virtual goods. The report released by the company today, supports their position that virtual gifting has a bright future ahead. According to the report "branded social gifts increased purchase intent, awareness, and engagement while actually improving the user's experience." AdNectar presents a case study in the whitepaper which states some interesting results. Most interesting to me was that consumers prefer sending "branded social gifts over generic social gifts." The whitepaper also suggests that consumers prefer this integrated form of advertising over traditional ads that are placed "on the sidelines". Personally, I believe that AdNectar is in a great position to become a leading force in the virtual gifting space but we are still very early on in the world of virtual goods. Tomorrow I will be posting news about another new company in this space which I think is truly on to something monumental. The reality is that brands are still testing the waters of virtual economies and we still have some time before there is widespread brand adoption. Regardless of this being a nascent industry, early reports suggest extremely high response rates. AdNectar's white paper states that initial campaigns resulted in a "20 X better click-through with AdNectar deployed gifts" over traditional banners on both MySpace and Facebook. With such high click-through rates, it's difficult to deny virtual gifts have immense potential. Do you think the future of Facbeook is in virtual gifts? Do you send a lot of gifts to your own friends? Have you ever spent money on virtual goods? Note: I use virtual gifts and virtual goods interchangeably in this article for the most part. The primary difference being that virtual gifts are given from one user to another whereas virtual goods can be purchased and kept or gifted to another user.

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Are Virtual Goods the Future of Facebook?

Nick O'Neill

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Nick O'Neill