While most consumers tightened their real-world purse strings in 2009, but that did not seem to hurt sales of virtual goods. Users of virtual world Second Life spent $567 million buying virtual goods in 2009. 65% year-over-year increase in spending on user-generated virtual items for avatars. It’s marketplace saw virtual goods sales of $6.1 million. The economy is based on the Linden™ dollar (L$), Second Life’s virtual currency. You can buy and sell L$ on the LindeX™ the official virtual currency exchange of Second Life. In 2008 more than USD $100 million worth of L$ were bought and sold on the LindeX. While Facebook gets the media hype, Second Life generates real money – even though it starts as virtual money. Let’s look at the figures.

Second Life: Virtual Economies Continue To Rise

Second Life’s worldwide user base increased by 15% to 769 million, while the amount of time spent in the virtual world climbed even faster, by more than 21%, indicating increased engagement.

In 2009, Piper Jaffray predicted more than $2.2 billion in virtual goods revenues worldwide, including $621 million in the US. By 2013, more than $6 billion will be spent worldwide on virtual items.

It predicted that virtual worlds such as Second Life would fall behind in the virtual-goods economy while social network players like Facebook become more involved in the space.

Second Life Highlights of Q4 2009

• US$153 million in User-to-User Transactions, 53% growth over the same quarter last year
• All-time high and continuing rapid growth for the Xstreet SL online marketplace
• All-time high in Monthly Repeat Logins, at 769,000 in December 2009
• 3.1 billion Voice minutes, up 15% from the same quarter last year

Total user hours continued to trend downward in Q4 while peak concurrency remained flat. This decline stems from a decrease in user hours contributed by heavy usage accounts (300+ hours per months).

Second Life Economy – Financial Highlights

• User-to-User transactions in 2009 totaled US$567 million in 2009, growth of 65% over 2008.
• Virtual currency in circulation reached L$6.95 billion, growth of 23% over December 2008
• US Dollar value of L$ in circulation totaled US$26.5 million in December 2009
• Sales of User Generated virtual items on Xstreet SL, reached L$1.6 billion or US$6.1 million, growth of 74% over 2008
• Total US dollar value of all Linden dollars traded on the LindeX™ currency exchange in 2009 reached US$115 million in value,  7% growth over 2008
• Total US dollar value of all Linden dollars traded on the Xstreet SL™ currency exchange in 2009 reached US$1.5 million in value, 169% growth over 2008

Cary Rosenzweig, CEO of IMVU, another virtual world with extensive user-to-user virtual item offerings, described that service as “more like an e-commerce company … in the sense that we get our money from the purchase of these virtual credits that people use to buy virtual items.

“Virtual goods have value to people,” Mr. Rosenzweig told eMarketer. “People buy virtual goods usually for one of three reasons: to express themselves—so they’re buying virtual goods to make their avatar look terrific—or to build relationships with other people in the form of gifts. And [the] third reason, especially in gaming environments, is that virtual goods enhance your power to effect change, to win, to do what you would like to do in that area.”

Do you buy Virtual Goods?

Have you ever bought any Virtual Goods for your avatar? How much would you pay to bling your avatar or online user experience? What do you think are the main barriers for Second Life? Do people think it’s too weird? Do you use it?

You can now create galleries / slideshows of other people’s photos in Flickr by using the new Gallery tool. Whereas the Collection and Set features lets you organized your own photos, the gallery option lets you collect photos from other Flickr photo-streams.

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The idea is that you create a central theme, for example, Second Life, and then add any nice virtual world and Second Life photos to this gallery.

What is a gallery?

Galleries let you gather up to 18 public photos of your fellow Flickr members into one place. In general, it’s an opportunity to organize photographs around a theme, an idea or just because.

You can give each gallery a title, an introduction and include descriptions for the individual photos or videos to bring it all together.

How does a gallery different than favorites, sets and collections?

Sets and Collections are based on your photos and Favorites is an ongoing stream of images within the Flickrverse that you like.

Galleries let users curate their view of Flickr, to bring together up to 18 photos or videos. It lets you create a ‘shop window’ of sorts where you can show off the most interesting photos you’ve seen on Flickr, organized in logical groups, headings or themes.

How to make a gallery in Flickr

It’s very simple.

1. Find a photo that you want to add to your Gallery.

2. Click Add to gallery.

3. Create a new gallery or add the image to an existing one.

Create a new gallery window

Where is the “Add to gallery” icon?

The “Add to gallery” icon is available on “safe” photos.

If you’re looking at photos and don’t see the icon, it means the member has decided not to allow their content be available for galleries.

I’m trying to add a photo, but I don’t see the “Add to gallery” icon!

It’s usually because of permission option or because:

• Photo/video is not public.
• Photo/video is not “safe” (it’s either “moderate” or restricted”).
• Photo is NIPSEA (not in public site areas).
• Member who uploaded the photo is blocking you.
• Member who uploaded the photo has opted out of galleries.

Can I add my own photos to a gallery?

No.

The idea is to use other photos to jazz up your account.

How do I edit a gallery?

1. Click on the Galleries link, select the gallery you want to edit and make the adjustments.

2. You can change the title and description, move photos around using the thumbnails at the top, remove items, or add notes.

How do I change the featured photo for a gallery?

The featured photo is the default photo that is displayed for the gallery. To change this:

1. Open the gallery you want to change

2. Click on the image you want to move

3. Drag and drop the thumbnail from the right-hand side unto the featured image on the left-hand side.

Basically, you just drag the new image unto the older image you want to replace.

How do I know if my photo has been added to a gallery?

When someone adds one of your photos to their gallery, Flickr sends you an email letting you know.

Who’s using my images?

You can see how other Flickr members are using your photos in their galleries by checking the Galleries With Your Photos link in your Galleries page.

Tip: When a photo is added to a gallery, it is shown in your Recent Activity.

How do I remove my photo from a gallery?

If you don’t like how another Flickr member is using one of your photos in their gallery, just click the [x] next to your image in their gallery.

You can also click the “remove it” link when Flickr tells you about someone using your photo in Recent Activity.

Or change the preferences in your account. In this screenshot, you’d change the setting to No, thanks.

That stops everyone from using your photos.

Links

My Galleries http://www.flickr.com/photos/ivanwalsh/galleries/

Flickr FAQ http://www.flickr.com/galleries/

Patrick Hoge, writing in the San Francisco Business Times, reports that Second Life “residents” have spent more than $1 billion in transactions to date and spent 1 billion hours logged into this virtual world.

Facts

1. In 2008, Second Life users spent $360 million on virtual goods ranging from land (virtual real estate) to designer shoes to stylish homes.

2. Second Life’s economy almost doubled in size – 94% up – between the Q2 2009 and Q2 2008.

3. User-to-user transactions now amount to nearly $50 million per month, according to a Linden Lab press release.

4. Subscribers has spent 115,000 years in Second Life socializing, attending concerts, creating, selling and shopping for virtual goods, learning languages, attending business meetings etc.

5. User hours grew 33% year-over-year to an all-time high of 126 million in Q2 0009

6.  Second Life residents spend an average of about 100 minutes “in world” per visit.

How does Second Life make money?

A basic account in Second Life is free.

Linden Lab, the developers of Second Life, make money by selling and renting virtual real estate.

They also offer premium memberships and charging fees on sales of Linden dollars, the currency used online. 276 Linden dollars is approx 1 US dollar.

Second Life residents — members are from 200 countries — create more than 250,000 new virtual goods every day, such as clothing, vehicles, buildings and other digital goods such as language translators and consultancy services.

Link: http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2009/09/21/daily24.html

Viximo, a developer of virtual goods solutions for social networking sites, has partnered with Fotolog, the world’s most popular photo-blogging site. Fotolog intends to use Viximo’s technologies to offer virtual goods to its 27 million members.

How does it work?

Viximo’s software will provide a virtual gifting experience for Fotolog’s users in combination with Viximo’s Content Marketplace.

Fotolog’s storefront will include an inventory of premium content including licensed content from brands, celebrities, and musicians.

Virtual Goods Software Applications

Viximo’s solutions are designed to help social networks/gamers sites launch or grow a virtual goods business including:

Analytics

Micropayments

Content

Viximo claims to be the only complete virtual goods solution for social networking, online dating, and casual gaming sites.

Links

http://viximo.com and http://www.fotolog.com

Reuters note that Asia is also a playground for a range of virtual business models such as rentals.
Georgina Prodhan and Tarmo Virki report that, Cyworld rents background skins of popular South Korean baseball players for limited periods.

These rentals drive repeat sales and tap into trends.

Asian social networking sites allow users to chat, play games and share photos with some advertising thrown in.

But most of their revenues come from users, who are “represented by avatars and acquire virtual currency from the sites to buy digital goods, game packages or upgrades.”

How western SNS make money

• Habbo sells virtual clothes and furniture.
• Pet Society, which is available on Facebook, let you raise virtual pets and sell virtual pet accessories and e-food.
• With 7 million inhabitants, Second Life offers e-wares for sale for Linden dollars, the in-game virtual currency.

“They were all blown away even though some of them already knew about what was going on here,” said George Godula, founder of consultancy Web2Asia. “They (Asian social networking sites) are quite nimble at finding out business models or ways of how to make money,” he told Reuters.

Link: http://www.nytimes.com/reuters/2009/09/08/technology/tech-us-asia-socialnetworking.html

Reflecting the fall of property values in the real world, it now seems that the price of real estate in Virtual Worlds is also collapsing. 
Second Life, which is one of the most populated and advanced virtual worlds, may be seeing prices fall more than most.

PathFinder at Flickr – http://www.flickr.com/photos/pathfinderlinden/227316648/

Comments from a Second Life blog asked if there, “seems to be there is trend in the downfall of land purchases. Anyone have any idea why the market is declining.”

Why is virtual real estate falling?

It’s probably a combination of factors:

1. Gamers are now spending less time in games (as they have other financial obligations) and are less likely to buy land

2. It may also be related to a recent price hike by Linden Labs, the developers of SL

Sessie replied on a Flickr blog that, “If you lost your job in RL (real life) hard to pay for SL.”

This was echoed by another SL enthusiast (Kitty) who added that, “You can only base real value on something that has scarcity, and in the case of virtual land, there really is no limit to it, you can always make more.”

3. XavionSaltair summarized the problem facing virtual retailers saying, “Second Life is one of the few Internet businesses that suffers from the hurtful economy downfall. Losing your RL job does make it difficult to pay for anything that doesn’t replace the missing income from that job loss.”

It seems that competitors have cut the price on their land sales down to 1L$ only to raise them back up again.

XavionSaltair advice is: Take care of your 1st life first, then worry about the 2nd.

Unless you have a virtual business that can offer you a rescue from the poverty-like conditions that some of the world is facing, then it’s probably best to give a wave goodbye to building your dreamland Utopia…at least for now.

Note: 1L$ is 1 Linden Dollar, the virtual currency used in Second Life.

Links: http://www.flickr.com/groups/secondlife/discuss/72157619799197927/

Have you seen real estate prices drop on Second Life or other Virtual Worlds?

Linden Lab, the Makers of Second Life, have rolled out the first virtual learning environment in the world at the University of Texas.
The Transforming Undergraduate Education Program, at the University of Texas System, awarded a grant to fund the initiation of a pioneering statewide virtual learning community of students, faculty, researchers and administrators in Second Life, that offers an innovative, low-cost approach to undergraduate instruction.

“The System’s virtual collaborative learning community… will allow participants to learn, share, collaborate and grow alongside one another,” said Leslie Jarmon, Ph.D. , the primary investigator for this statewide virtual initiative for the University of Texas 16-campus System.

He adds that in this evolving system-wide virtual learning community, all of these players—and especially our undergraduates—will be seen as learners with expanded roles:  learners as scientists, learners as designers, learners as researchers, learners as communicators, and learners as collaborators.

Like many higher learning organizations, the University of Texas System’s has an imperative to continually enrich the learning experience for students while reducing—or even eliminating—expensive brick-and-mortar costs while becoming energy efficient. These are the key drivers that led the University of Texas to invest in a virtual learning environment in Second Life.

1. The year-long rollout involves all 16 University of Texas campuses

2. It will be designed for extensive inter-campus, intra-campus, and out-of-state collaboration

3. It will occupy over 50 Second Life regions.

Each campus will develop its own SL (Second Life) project plan according to its needs and priorities.

Throughout the project, evidence-based research data will be collected and shared with the Second Life education community on best practices to offer to all educators—and other similar organizations—that are interested in holding classes and building campuses in Second Life.

“Hundreds of educational institutions from around the world have used Second Life as a compelling and cost effective platform to augment an existing curriculum and explore new models of learning. But, the University of Texas System’s ambitious system-wide program is not only an industry first, but it will also create the largest virtual learning community in existence,” said John Lester (SL: Pathfinder Linden), Customer Outreach Advocate at Linden Lab.

In an interview on Second Life, Pathfinder asked Dr. Leslie Jarmon, “What were the biggest challenges you faced, and how did you overcome them?”

He highlights:

1. Finding the most effective language and concrete examples from within the generous educational community in Second Life to craft a proposal that would be hearable by key administrators.

2. When an opportunity arose, a real time demo of SL using Voice with real educators and Linden Lab officials answering the Chancellors¹ questions right there on the spot was more effective than 100 pages of textual description. Very pragmatic, concrete, visionary ­ at the same time.

3. Rigorously ensuring that our provision of the virtual infrastructure for 15 campuses and information and training support will not be dictating which directions each campus will take as they discover and create their own unique learning and research journeys.

Finally, he adds that, “Virtual worlds are a new human dimension for educational activity, and we¹re constantly exploring and learning alongside one another.”

Links:

TUE Learning Community website at http://tuelearningcommunity.com/
UT System VLCI Initiative: Dr. Leslie Jarmon (SL: Bluewave Ogee) LJarmon@austin.utexas.edu
Linden Lab: Amanda Van Nuys (SL: Amanda Linden) amanda@lindenlab.com

Reuters report that Asia’s social networking sites appear to have solved found lucrative ways to leverage profits from their online gamers. Asians spend an estimated $5 billion a year on virtual purchases via websites such as Qzone, Cyworld in South Korea and mobile-phone based network Gree in Japan, according to Plus Eight Star.

Georgina Prodhan and Tarmo Virki report that “Of the virtual sales in Asia, about 80 percent comes from the sale of such items as equipment for online games such as rods for GREE’s fishing game Tsuri Star 2. The rest comes from purchases for avatars on social networking sites.”

Such is the success of virtual sales on Asia’s social networking sites that the likes of Facebook are looking at the potential virtual money can generate.

Takeaways

To put this in perspective:

• Qzone’s Tencent Holdings made over $1 billion last year with just 13% coming from advertising revenue.
• In contrast, Facebook and Myspace depend on advertising to fund most of their revenue.
• Cultural issues. Gaming is popular among adults in Asia; in the West it mostly for kids.
• Status. Asian societies are very status conscious. No one wants to have an avatar with last year’s bling.
• Asia’s social networking sites are country specific but have very active user bases.

Stats

• Qzone had 228 million active user accounts for Q2 2009.
• Cyworld had 23 million unique visitors per month at the end of the Q1 2009.

Link

http://www.nytimes.com/reuters/2009/09/08/technology/tech-us-asia-socialnetworking.html

~~~

Doug Herman notes that while western social networking platforms like Facebook are considered distinct businesses from virtual worlds such as Second Life and There.com, in Asian, the two businesses are more integrated and provide leading social networking companies such as South Korea’s CyWorld, with very profitable revenue streams.
How does the Asian Virtual Goods Business Model work?

According Plus Eight Start, “Asians spend around US$5 billion a year on virtual goods purchases such as items to improve their capabilities in casual games and items to improve the look and status of their online avatars.”

The money represents around 80% of the total global market for virtual goods.

How does it differ from the west?

Two differences are 1)  that game players don’t have to spend much money or 2) pay a subscription fee upfront.

Doug highlights that instead, the Asian business model leverages “a large user base which views opportunities to improve their online “look”, experience or capabilities as worthy of a small investment especially when they view their online persona as a status proxy among their friends.”

“Social networking is just a way to get people together, but if you want revenue you have to sell them something. What [Asian social networking companies] found was that people were happy to pay for content related to emotion, status and entertainment. They  keep growing even though the economy’s bad because they keep making millions from [pennies] from millions and millions of people.”, Benjamin Joffe, Founder & CEO, Plus Eight Star.

Takeaways

1. Virtual goods sales in Asia is partly due to the lack of a sophisticated online ad market.

2. However, their alternative business model may be more instructive to Western social networking companies that struggle to develop a profitable revenue stream solely through advertising.

3. Recently Facebook has been developing their own virtual currency platform, dubbed ‘Facebook Credits‘.

4. Facebook already sells virtual goods and has implemented its own credits system to enable the purchases. Soon it may expand its system to push its virtual currency out to third party websites and application developers.

5. Asian teenagers also ‘rent’ virtual goods, such as skins, backgrounds and other items. This lets them bling up their web persona without paying the full amount. If they like the item, then they may but it.

Read more here: http://www.digitaleastasia.com/2009/09/14/will-the-asian-virtual-goods-business-model-gain-traction-in-the-west/

~~~

Kevin Alderman, who sells virtual goods in Second Life, has sued Linden Lab for allowing other to sell his products without his permission.
The lawsuit alleges that Eros’s virtual goods sold for use in Second Life have been counterfeited and cloned by numerous Second Life residents.

Shannon Grei, who sells virtual clothing, has joined in the lawsuit alleging that Linden Lab infringes her copyright by allowing other marketers to sell fake versions of her designs.

Making Real money for Virtual Foods

To put this in perspective.

Alderman has made more than $1 million by selling products such as virtual beds, which cost $20 to $40.

MediaPost (http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=113576) report that Alderman and Grei believe that “Linden Labs should be held responsible for the knock-offs because the site allegedly allows users to upload fakes, sell them for Linden currency, and facilitates the exchange of Linden dollars for U.S. currency.”

Lawsuit Allegations

The allegations are that Linden Lab has created in Second Life a system in which it:

1. Directly engages in piracy
2. Actively allows users to engage in piracy by providing tools
3. Profits from its own piracy and the piracy of its users

Linden Lab faced similar allegations in two prior lawsuits; neither resulted in substantive court rulings.

Realtime Worlds is to adopt an alternative “traditional monthly subscription model” with its upcoming MMO APB. The game’s web site confirms the adoption of a non-traditional revenue model, although it side steps giving details of the terms of payment.
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Billing services and fraud management

Worldsinmotion.biz report that Vindicia is to provide billing services and fraud management and its Cashbox solution will allow the game to support multiple numerous revenue streams, including subscriptions as well as virtual goods and currencies, and guard against customer fraud.

Realtime Worlds  called online games “particularly vulnerable when it comes to fraudulent activity,” across a variety of types of fraud, including “friendly fraud” by way of chargebacks.

APB will support varying currencies worldwide, as well as player communication in numerous languages.

Realtime Worlds is to adopt an alternative “traditional monthly subscription model” with its upcoming MMO APB. The game’s web site confirms the adoption of a non-traditional revenue model, although it side steps giving details of the terms of payment.
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Billing services and fraud management

Worldsinmotion.biz report that Vindicia is to provide billing services and fraud management and its Cashbox solution will allow the game to support multiple numerous revenue streams, including subscriptions as well as virtual goods and currencies, and guard against customer fraud.

Realtime Worlds  called online games “particularly vulnerable when it comes to fraudulent activity,” across a variety of types of fraud, including “friendly fraud” by way of chargebacks.

APB will support varying currencies worldwide, as well as player communication in numerous languages.

Mark Hefflinger reports that, as online gaming companies explore how virtual goods can leads to revenue generation, a new survey shows that, “free-to-play games attract the greatest number of virtual goods buyers, and that virtual currency is the most popular purchase.”
VGMarket performed the report on behalf of micropayments firm PlaySpan. It polled 2,425 users of PlaySpan’s Marketplace, Spare Change and Ultimate Game Card products.

Survey result s

• 58% of gamers
• 34% of massively multiplayer online game players and
• 23% of social network game players

have made virtual goods purchases in free-to-play games over the past year

Top selling virtual goods

The most popular virtual goods were

• 71% – In-game virtual currency was the most popular purchase followed by
• 37% – weapons
• 30% – subscription codes
• 26% – wearable items
• 25% – power-ups
• 19% – virtual gifts

Mark adds that “The median purchase in free-to-play games was $75; the figure was $60 for multiplayer titles, and $50 for social network games.”

Links:

http://corp.playspan.com
http://www.vgmarket.com
http://www.dmwmedia.com/free-play-web-games-see-most-virtual-purchases

This weeks Virtual Currency News roundup includes: Google Checkout to relaunch with micropayments, The Virtual Currency Revolution, Nonprofits test Facebook’s credits platform, Virtual currency takes off in Asian social networking sites, How Renting Virtual Goods works in Asia, txtNation bet on micro-payments, TrialPay and WeeWorld chose BOKU as online payments system, and Facebook Targets Paypal.

Google Checkout to relaunch with micropayments

Jessica E. Vascellaro reports that Google may be planning to help newspaper companies get paid for their work. Google is “planning to upgrade its existing Google Checkout payment service to handle billing and subscription services targeted at premium content creators like newspapers, according to a memo the company recently submitted to the Newspaper Association of America.”

Nieman Journalism Lab spotted this memo which responds to the NAA’s open request for new “paid content” solutions earlier this summer.

Google is working on new Checkout features that will allow publishers to charge prices from a penny (micro-transactions) to several dollars for digital content, such as news stories.

The Virtual Currency Revolution

Andy Jordan on the UK’s Guardian writes that “While local currencies have come and gone, many involved in social networks are hoping peer-to-peer (or P2P) virtual currencies will, given the momentum to retool the financial system, have more staying power.

He quotes the founder of Hub Culture. “You’re going to see inexorably, the movement towards peer to peer finance,” Stan Stalnaker says.

Hub Culture created a digital currency — Ven — which is pegged to the dollar, and allows members of the social network to trade goods and services as well as knowledge.

Why start a new currency?

1. Mostly to accommodate members who were juggling multiple currencies traveling all around the world.

2. He adds that “a social network is an ideal place to start a personalized currency, as it has trust built into the infrastructure already.”

Another virtual currency plugs into Microsoft Outlook. It uses a digital currency called “Serios,” which is attached to emails to signify urgency.

As you only gets a fixed number of Serios per week, it creates a marketplace for attention. You can “earn” Serios by performing tasks, such as completing an assignment ahead of deadline, for instance.

This reflect Chris Andersen’s thinking in this book, Free.

This makes sense given the “gift economy” as there is an abundance of information but as scarcity of attention, attention, trust, and reputation.

Not everyone is convinced.

Douglas Rushkoff, has tried to convince Craig Newmark to start a digital currency based for Craigslist.

“What people want is the ability to transact,” Rushkoff says. “They live in a world now where the money they want to use to transact is also being used by speculators to extract value from their communities. And it’s not a tool that can do both jobs well,” he says.

Nonprofits test Facebook’s credits platform

CNET reports that four nonprofit organizations will help test Facebook’s “credits” platform.

“We’re going to be reopening up charity gifts in the Gift Shop,” said Facebook. “We are exploring ways for developers to use the Gift Shop to offer…virtual, real, and charity gifts.”

The four test partners are Project Red, Kiva, Toms Shoes and the World Wildlife Fund.

Inside Facebook also reported that online gift and greeting companies–American Greetings Interactive, GreetBeatz, Someecards, and Real Gifts–would also be selling virtual gifts in the Facebook gift shop as part of a test of the new “Pay with Facebook” virtual currency.

Facebook uses “credits” to sell internal and branded virtual gifts, a change it made last November (gifts had originally been listed in U.S. dollars).

Virtual currency takes off in Asian social networking sites

Brenda Goh, from Reuters, reports that, Asia’s social networking sites appear to have solved the conundrum of how to leverage big profits from their extensive user bases.

Asians spend an estimated $5 billion a year on virtual purchases via websites such as Qzone, Cyworld in South Korea and mobile-phone based network Gree in Japan, according to Plus Eight Star.

That’s about 80 percent of the global market for virtual products.

80% comes from the sale of such items as equipment for online games such as rods for GREE’s fishing game Tsuri Star 2. The rest comes from purchases for avatars on social networking sites.

Brenda adds that “The evolution of virtual money on social networking sites in Asia is partly due to a less developed online advertising market which drove Asian web businesses to seek new ways to profit.”

How Virtual Rentals Work

Asian social networking sites earn most of their revenues from their users, not advertising.

Members are represented by avatars and acquire virtual currency from the sites to buy digital goods, game packages or upgrades.

1. Habbo, a social networking site for teenagers owned by Finland’s Sulake Corporation, sells virtual clothes and furniture.

2. Pet Society, which is available on Facebook, let you raise virtual pets, sells goods such as virtual pet accessories and e-food.

3. Second Life offers a range of e-wares for sale for Linden dollars. Some are mundane and others are controversial such as guns and virtual phalluses with price tags based on the size.

In Asia, Cyworld rents background skins of popular South Korean baseball players for limited periods. Such rentals drive repeat sales and tap into trends.

txtNation bet on micro-payments

If micro-payments are finding their own target market, it appears to be in the market for digital goods like games and social-network applications.
mENABLE announced that the mobile processing product it shares with its parent company, txtNation Ltd., has added several million unique transactions from the start of this year with the introduction of a new billing widget, adding further integration and payment options for websites.

Users could rely on credit or debit cards, but sending an SMS to a number is easier and less distracting, Whelan says. “It’s a lot easier to send a text message than reach for your wallet.”

Role-playing games, for example, see additional revenue from microbilling at rates as high as 90 per cent of their initial sales, while other games are generating as much as 60 per cent of their initial sales profits in micro-billing transactions.

Recently, the Financial Services Authority (FSA), responsible for implementing the European Union’s Electronic Money directive in the United Kingdom, relaxed the guidelines that determine what can be purchased via a mobile device. As a result, micro-payments are expected to steadily grow in popularity in major markets over the coming years.

TrialPay and WeeWorld chose BOKU as online payments system

“Mobile payments for digital goods is one of the fastest growing segments of mobility,” said J. Gerry Purdy, Ph.D., VP & Chief Analyst, Mobile & Wireless at Frost & Sullivan.

He adds that BOKU is clearly one of the early winners in this fast growing market with impressive customer wins and millions of transactions per month. We see billions of digital assets being purchase via mobile phone in the next few years.

In addition, BOKU announces it is going live in the next week with its payment service in Indonesia, New Zealand, Slovenia and Taiwan, bringing the company’s global reach to 55 countries.

Facebook Targets PayPal

Scott Morrison, Dow Jones Newswires, reports that Facebook might also be setting its sights on eBay Inc.’s (EBAY) PayPal online payments unit.

He adds that Facebook has accommodated more currencies, is testing new technologies and has recruited a handful of online payments specialists.

Facebook has started accepting payments in 14 new currencies, in addition to the U.S. dollar, a logical step given that more than 70% of users live outside the U.S.

This month, the company revealed it is testing a system for users to buy physical merchandise, like real roses, through Facebook’s payment platform. It also launched a test to let some users buy

Facebook Credits by billing their mobile phones.

Facebook has also hired expertise in this area, such as Prashant Fuloria, the former Google product management director who worked on Google Checkout and Ivan Kirigin, co-founder of shuttered micro-payments service TripJoy.

Analysts believe Facebook will try to establish its payment system as an on- site “wallet” and then leverage Facebook Connect — which lets people use their Facebook IDs to log into participating third-party sites – to deliver “one- click” purchasing capability across a broad range of Web sites.

If you have any other Virtual Currency News, please send it in.

Thanks

The subject of virtual currencies has been covered recently in several leading magazines, such as BusinessWeek, Wired, and even CNN. While all of these have discussed the impact virtual currency may have on the internet, very few have actually defined what a virtual currency is and how it differs from a real currency.

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In the past, money (currency) was usually either gold or silver and reflected a real-world value.

However, modern currency, is essentially fiat money, and is intrinsically worthless.

The prevalence of one type of currency over another in commodity money systems has arisen, usually when a government designates through decrees, that only particular monetary units shall be accepted in payment for taxes.

Fiat money is a currency that is not convertible into a physical quantity (ie gold) but is accepted as a medium of exchange by the government. Fiat money is declared by a government to be legal tender.

This latin term — let it be done — has value only because the government accepts it and says it can be used as a “legal tender”. The 50 dollar bill in your pocket is not actually worth 50 dollars. It’s just cotton with images and other text printed on it, albeit in a very sophisticated manner.

Most of us have our own idea of what constitutes a virtual currency but let’s look at some of the ways it differs for a real currency, such as the US Dollar.

1. Inflation – most virtual currencies are not subject to inflation. In other words, the coins you buy on club penguin or World of Warcraft will have the same value in 6 months time as the date you bought them.

2. Regulation – each virtual currency is controlled by the developers and have no bearing in the real world. For now, virtual currencies, to the best of my knowledge, are not monitored by government regulators and why should they are they weren’t created as a national currency.

But this might change if these virtual currencies gain traction and begin to effect real world currencies. 

3. Liquidity – for now, it’s difficult to convert your linden dollars into US dollars, though not impossible. However, try changing Club Penguin coins into another virtual currency and you have a problem.

Of course, this presents an opportunity.

Why not setup a clearing house online where people can ‘cash in’ their virtual currency. Let’s say you no longer want use Club Penguin but have 100 USD worth of coins in there.

The virtual currency clearing house would act as a middle man and give you a percentage of the CP coins in exchange for US dollars. 

4. Exchange rates – while most leading currencies can be converted into other currencies, there is no formal exchange rate for virtual currencies. At least not yet!

This is likely to change once Google and others see the potential of controlling currencies on the internet.

Imagine a scenario where Google has greater leverage than the Federal Reserve and you see where this could go.

Virtual currency offer many benefits, especially on websites where the users may not have access to credit cards or other types of payments. The role of a virtual currency is to act as a substitute currency allowing customers to buy, sell, and trade items without having to use a real world currency.

1. Acts as a substitute currency allowing customers to buy, sell, and trade items without having to use real world money.

2. Lets children and teenagers buy goods online without the need of using a credit card or disclosing private information

3. Teaches children, tweens, and teenagers the basics of using money, especially in transaction-based scenarios

4. Let’s people who don’t have a credit card engage in online gaming and other websites that use some form of currency, for example, trading virtual goods

5. Allows users to generate ‘revenues’ and create profits online, which can then be exchanged for other goods (real and virtual)

6. Virtual currencies are not taxable, at least not yet. Profits you make online can be converted into real monies without tax deductions. A tax loop hole that is bound to be investigated over the coming years

7. Allows you to make virtual money that can then be converted into real money. An attractive business model for students and others who want to make a living working online

Next week, I’ll look different types of virtual currencies in the US and Asia and see what types of trends are emerging.

Drop me a line if you have any thoughts.

Virtual currency offer many benefits, especially on websites where the users may not have access to credit cards or other types of payments. The role of a virtual currency is to act as a substitute currency allowing customers to buy, sell, and trade items without having to use a real world currency.
In the coming weeks, I’ll talk more about virtual currency and show you how to create a virtual currency, develop an environment to encourage users to buy virtual goods and also ways to increase the popularity of virtual currency on your sites.

Finally, I’ll also look at how and where virtual currencies interact with real world monies and the best ways to address this.

Update:

‘Some virtual world developers officially sell virtual items and currency for real-world money. For example, the MMOG There has therebucks that sell for US dollars.

The currency in Second Life can be converted from Linden Dollars into US Dollars and vice versa. Rates fluctuate based on supply and demand, but over the last few years they have remained fairly stable at around 265 Linden Dollars (L$) to the US Dollar.

The currency in Entropia Universe, Project Entropia Dollars (PED), could be bought and redeemed for real-world money at a rate of 10 PED for U.S.$ 1. On December 14, 2004, an island in Project Entropia sold for U.S. $26,500 (£13,700). One gamer also purchased a virtual space station for U.S. $100,000 (£56,200) and plans to use it as a virtual nightclub.

Many Korean virtual worlds (such as Flyff) and other worlds outside that country (such as Archlord and Achaea, Dreams of Divine Lands) operate entirely by selling items to players for real money. Such items generally cannot be transferred and are often used only as a means to represent a Premium subscription via a method which is easily integrated into the game engine.

http://en.wikipedia.org/wiki/Virtual_currency

Most web businesses are looking for ways to reduce operating costs in order to improve their bottom lines. One area overlooked due to its complexity is the cost of credit card processing.

To help address this, Optimized Payments Consulting has launched a free online calculator.

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Developers of epayment systems and virtual currencies should take a look at this CNN report in the transition of virtual currencies into the retail banking sector.

CNN report that in March, MindArk, creator of the massively multiplayer online role-playing game, Entropia, saw its wholly owned subsidiary Mind Bank granted a banking license from the Swedish Financial Supervisory Authority.

This license allows Mind Bank to be the first bank to directly incorporate real-money transactions with virtual-world activities.

Selling virtual assets directly between players for real-world cash has been strictly prohibited by most game publishers, which find themselves looped out of the profits.

This takes the exchange of virtual currencies into real monies to a new level.

While World of Warcraft and EverQuest users have engaged in “gold farming”, i.e. gathering weapons and other status symbols, and then auctioning these off, usually on EBay.

Games publishers have started to monitor with mixed results. In response, PlayerAuctions have adopted a PayPal-like approach where it brokers the deals, acting as an open marketplace for player-to-player exchange of digital assets.

CNN interviewed Simon Newstead who explained: “The idea with dual currencies is that there is a paid currency [Gold Coins], which is paid for using real money and exchanged between sellers and buyers. In addition, there is a second currency — a free or so-called ‘earned’ currency [Silver Coins] — which is gained through activity and progression in the world or game.”

“In this way,” he continues, “the economy can recognize different forms of contribution, and in newer economies these can also be traded between each other. For example, people earning currency and selling it to people who have less time but have real money.”

Virtual currencies in Second Life

Second Life’s marketplace includes objects and services for sale, including real estate.

In 2008, over $100 million worth of Linden dollars (Second Life’s currency) were bought and sold on its LindeX exchange.

“In Linden Exchange, the U.S. dollar part of the transaction is via PayPal, a well-known entity, so there’s a certain amount of trust that comes with it,” says Darrly Chang, co-founder of D&D Dogs, who sells virtual dog pets and avatars to Second Life residents.

CNN’s reports also discusses, GoldMoney, who launched a dedicated iPhone application allowing account holders to exchange gold and silver units within minutes.

This iPhone application let you manage your own digital gold like on other banking applications.

GoldMoney is firmly anchored to real-world assets, forbidding anonymous accounts.

This contrasts with E-Gold, whose founder pleading guilty to money laundering-related crimes..

How realistic is the prospect of a digital currency?

“It all comes down to trust,” says senior economist Frederic Neumann. “We trust the government to guarantee our ‘virtual’ money for real currency. [With digital gold] the gold standard is guaranteed by a private company. Governments already have several hundred years of sovereignty engrained in people’s minds, so that trust is very difficult to establish.”

Learn more at http://goldmoney.com/ and http://secondlife.com/whatis/currency.php

What’s been your experience buying and selling digital goods, especially if it involved virtual currencies?

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