Friday, June 22, 2007

Virtual Goods Summit: Virtual Items: Mainstream or Not?

Virtual items are beginning to appear in many new contexts. As virtual items continue to penetrate new markets, what will it take for them to become more widely accepted? Is becoming mainstream the right goal for virtual items? Our team of speakers will share their views on the prospect for virtual items becoming mainstream.

» Jia Shen, RockYou!
» John Vars, Dogster
» James Hong, HotOrNot
» J.T. Stephens, Six Apart
» Robert Scoble, PodTech (moderator)

Hong: We were not the first company to offer virtual goods, but we were pretty close for Hot or Not. There was one other company out there.

Vars: We do do virtual gifts - free gifts that are advertising supported by Del Monte or Clorox, and we have paid gifts with virtual currency. We have an advertiser coming in that will now send a real treat when a dog gets a virtual treat. It's crossing over from virtual to real world.

Hong: You don't need to convince people of virtual goods - even though it's not a huge market in the US like it is in the East, because everyone focuses here on advertising. We started as an ad-supported model, and said screw it. Do you have to convince people a virtual good is worth it? People care about how they are perceived, and it is a differentiator. Roses cost $10, and they do die after 2 weeks - so if you want to impress the girl, you have to buy them again. It's the trophy affect of the flower, and the nice gesture.

Shen: For us, it's about social - it's not about games, but it's about social networking and personalization. People want to stand out individually, and it's the tools that you can use. It's a popularity contest, like high school.

Vars: The users of Dogster are people that watch Oprah, not gamers or virtual worlds people. It's bonding, thanking, commenting, social status - it's a way for communications. And, these virtual gifts have real meaning in Dogster. And, it's the thought that counts with these gifts. Virtual gifting is not necessarily a way to acquire users - we haven't used them that way yet - but it's a way to get users to kick ass. Virtual gifts make our users become more experienced, use the service and more.

Stephens: LiveJournal has virtual gifts - we got the idea from Hot Or Not - and we see people using them for friends that might be sick, or to cheer someone up. It's going to continue to be a big component of our site.

Shen: You have to keep up and keep doing new stuff - like the widgets for Facebook - if you are creative and set a standard for social network users. By getting a gift, and comments and more gifts, it keeps you on a site. The virtual goods and widgets - some are temporal - but it does keep you on a site, and make you grow.

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Hong: We have tested our site and the interest for people, and who wants to meet whom. Double matches are allowed to contact each other, and if you bought a flower, there was a greater possibility. Fundamentally, in an online world, online relationships are not less valuable than offline. It's about the relationships with the people. It's about giving those people time - whether offline or online - and that would involve the virtual goods. You are going to give those only if there is a connection.

Stephens: Links and comments are like virtual gifts. It's the pat on the back, that creates more of a community.

Vars: Is an MP3 virtual? Maybe a few years back, but now it is not. Some things are "physical" but they are now bits and bytes.

Shen: These sites are just a new culture, it's a way to interact and be a part of communities. It's about putting interesting, easy-to-use social media tools in a youthful market. In the end, the social crosses all platforms and demographics.

Vars: Scarcity creates more value, as has been talked about. Even though there are free gift applications on Facebook. They have not created a culture where the gifts mean something. They are just pictures right now.

Stephens: The gifts on LiveJournal are not part of a limited addition. It's the epheremal nature of the gift that is the "high" that does subside over time. It's about driving more activity and more interaction. We have added charity virtual gifts - v gifts - that was $2.99. There was a tribal, community network of people joining together for one cause.

Hong: For the tsunami, we raised $50K in three days with special roses where the money went to charity.

Shen: There's too much inventory in Facebook.

Vars: These gifts have to have a well-defined meaning, they have to be more than just a gift.

Hong: The ultimate model for us was where we set the price on a rose, and we tell the woman what you spent on the flower. The margins on virtual goods are so good, that you can give it away.

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