Virtual goods sales to rise 40% in 2011 - Study

Once prevalent only in Asian markets, the free-to-play, microtransaction-supported business model is increasingly gaining steam in Western markets. As reported by Venture Beat, the latest research from Inside Virtual Goods indicates that the US virtual goods market is poised to grow by 40 percent in 2011, rising to a projected $2.1 billion. The report goes on to note that worldwide sales will be several times larger, due to the model's popularity in Asia.

The report defines virtual goods as objects such as in-game weapons or decorations that gamers spend real-world currency on. Market leaders in the sector include Zynga, which operates the hit Facebook app Farmville. Mainstream gaming companies such as EA and Disney have also gotten into the sector, thanks largely to their recent multimillion dollar purchases of Playfish and Playdom, respectively.

However, despite the sizable double-digit growth, the Inside Virtual Goods report indicates that the sector's prosperity will slow percentage-wise in 2011, compared to 2010, when sales rose to $1.5 billion from 2009's $1.1 billion. (The report's coauthor, Inside Network's Justin Smith, corrected 2009's tally for GameSpot, which Venture Beat reports as $1.6 billion.)

According to Smith, the slowdown can be attributed in large part to the difficulty in sustaining massive growth. Smith also noted that Facebook's decision in late 2009 to dramatically scale back the number of notifications sent out from games such as Farmville also contributed to a fall off in growth.

However, services beyond Facebook are increasingly contributing to the US total. Last year, Apple launched in-App purchase options for the iPhone, and a growing number of Western massively multiplayer online games, such as Everquest II and Lord of the Rings Online, are adopting the free-to-play model. Virtual goods sold through Xbox Live and the PlayStation Network are also on the rise, the report noted.