There’s HUGE Money in In-Game Virtual Goods Purchases, Approximately $168 Million

In: Breaking|Cellphone|Editorial|Gadgets|iPhone|Online|Software|Video Games|Wireless

24 Jun 2010

There's HUGE Money in In-Game Virtual Goods Purchases, New Magid Report Finds U.S. 2010 Market for Mobile Virtual Goods to be Estimated at $168M

I’d consider myself somewhat of a gamer. I own a Sony PlayStation 3, I own a Nintendo Wii, I own a PC that I built around my video card (yes, it plays Crysis… quite well thank you) and I’ve purchased games on my Apple iPhone. On the Apple iPhone, I had found myself gravitating towards OpenFeint enabled games, a gaming framework created by the folks over at Aurora Feint that shares your high scores and accomplishments with your friends that also have that game, allows for announcements that range from free games for the day to updates and challenges from friends to beat their scores. All for free.

But what I noticed that a lot of OpenFeint enabled iPhone games had the ability to support in-game purchases on these games that… well, I thought they were losing money and just giving away the game but charging minor prices for trivial, and optional stuff. Boy was I wrong. There’s a lot of money in in-game virtual goods. According to a new Magid report, about $168 million dollars worth of money. That’s huge. And it’ll only get bigger in later years.

In-Game Purchases via Aurora Feint's OpenFeint enabled games

Virtual goods purchased on smartphones are a new emerging market in the United States. Who is actually buying them and how much they’re spending, however, has not been completely understood. Today, Frank N. Magid Associates and mobile social gaming network OpenFeint are shedding some light on the subject by providing the first-ever estimate on how much Americans are currently spending on virtual goods.

According to the study, Magid Media Futures 2010 Wireless and Consumers, Americans spent $168 million on mobile virtual goods in the last year. Magid estimates that over 70 million Americans now own smartphones – that’s 23 percent of the population. With 45 percent of those smartphone owners playing mobile games and 16 percent of those spending an average of $41 per year on in-game virtual goods, the market has already exceeded $168 million.

“The market for virtual goods has already exploded in web-based games like Zynga’s Farmville, and we’re just now starting to see this trend in the mobile space,” said Steve Lin, VP Operations of Aurora Feint. “In just the last few months we’ve seen amazing interest from our game developers in building mobile social games with virtual goods. Our internal numbers reflect the study in that free-to-play models will be the dominant pricing structure in the future.”

With 55 percent of smartphone gamers interested in buying virtual goods, the market is poised for strong growth as more virtual goods-based games enter the market. The study also shed more light on who is likely to play games on smartphones. Compared to the general population, smartphone gamers skew male and are between 18 and 34 years of age.

Buying virtual goods isn’t really anything new if you’ve ever played Diablo II or Farmville. But those micro-payments – I’ve personally bought a couple of extra levels for a couple of games to extend my enjoyment of some titles for 99 cents or so – add up. And apparently, it’s a back door to increasing the enjoyment and profitability of a game. And the best part, the people are buying into that mentality and in a big way in the aforementioned age groups (18-34).

“Everybody knows free-to-play social gaming models on PC platforms have been making a killing but mobile virtual goods aren’t as well understood,” said Mike Vorhaus, President, Magid Advisors. “With almost 20 percent of smartphone gamers already making purchases, there’s a lot of room for the market to keep taking off as smartphones continue to increase in popularity.”

Magid has looked pretty deep into the explosion growth of in-game virtual goods purchases of smartphone gaming. I think it’s time I dusted off my programming skills and got serious about making a socially aware, OpenFeint enabled smartphone game that allowed for in-game purchases to get my share of that $168 million and growing market.

[ Links: OpenFeint, Aurora Feint, Magid Advisors ]

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