Virtual Currencies: The Rise of a Not-So-Virtual Monetary Unit

From FarmVille Dollars to the Evony Cent, nearly every virtual world, multiplayer game and online environment seems to be adopting synthetic currencies - the little tokens we happily give our real money to acquire.

Virtual currencies each have their own exchange rate, from L$250 to $1 in Second Life to 50 Evony Cents for $5 and everywhere in between. But once successful virtual currency company now claims the success of a virtual currency has little to do with its price.

Marketing Virtual Money

Cellufun V.P. of Marketing recently spoke with industry news site PocketGamer.biz about the success of its cell phone-based virtual currency and the state of virtual currency's evolution. Cellufun, which pulled in millions of dollars through "FunCoins" used to purchase cell phone games and special in-game items, holds that people will pay more for a virtual currency if the content it can purchase is solid.

From the article:

Ultimately it's not about the currency itself. It's about having content that people want to buy. This applies to any freemium model, but on the mobile platform you also have to ensure ease of transactions, offer a sense of security, and provide a tailored experience for mobile.

You can't just port a PC game experience over and expect people to like it. If you could, you'd see Zynga and Playfish doing games across mobile devices now rather than just one-off iPhone apps.

Content may be king for virtual currency purchases related to games, but how could these virtual currency systems be adapted to provide a service to consumers and non-gamers? PayPal already jumped into the mobile market with an iPhone app, lending a distinctly mobile flavor to buying junk from eBay. But could true virtual currencies ever make waves in mobile/digital consumer markets?

Though it's not likely that a virtual currency will ever replace our already virtual credit cards - one needs the other in order to survive - it could soon be the case that real-world purchases are made in virtual worlds using the currency of that world. 

Much like powering up a pre-paid card, virtual currencies can serve the purpose of both enabling purchases while in virtual worlds and restricting how much can be spent. If projects like Near London take off, consumers could spend more time than ever purchasing real-world goods with virtual currencies.

What About Virtual Content?

There are uses for virtual currencies beyond the standard graphical virtual world. Anyone who has ever added content to an XBox 360 game through the Game Marketplace is familiar with how easily we are already transitioning legal tender currency into another iteration of "game points."

But game points purchase more than mere in-game content. Users can purchase high definition movies, customizations to their XBox home screen, music and television shows. Interestingly, game points are not convertible back into legal currency - once redeemed in the virtual environment of XBox, the points remain purely synthetic.

This essentially traps the consumer into expending all of their points, but again, content rules the day. Users would not continue to purchase gamer points if XBox didn't provide enticing content to spend them on. How long until something as ethereal as "game points" move to the rest of the Microsoft network - perhaps your Windows 7 purchase could be done entirely in game points?

The online space fantasy game EVE Online already allows users to pay their $14.95 monthly fee with in-game currency. Players can even redeem their ISK for a 30-day membership extension and then sell that extension on the in-world market for even more ISK. The potential to then sell ISK on a secondary market makes EVE less a virtual economy than a real, albeit illicit, one.

What do you think? Will virtual currencies eventually make all of our transactions into a few clicks and automatic deductions? Will online gaming evolve to the point where non-game items (such as other products from the developer) can be purchased using amassed in-game currency?

Comments

[Jonmatonis]

Max,

I think that the ability to simply purchase related in-world goods and to pay for monthly membership fees is a distraction.

The primary reason that 'Chaumian' digital cash die-hards (like me) from the late '90s are intrigued by virtual currencies is that they offer the promise of a non-political monetary unit that can have a broad appeal, if properly backed. See Open Metaverse Currency (OMC)at https://www.virwox.com for an early example of what is possible. Also, see http://www.hypergridbusiness.com/2010/03/in-world-payments-come-to-opensim-grids/

Furthermore, unlike PayPal and VISA, virtual money units can be digitized and remain both anonymous and untraceable. Digital currencies that can be earned in-world and also have exchange value in the real world (for goods, services, etc) will not require credit cards to survive. They will represent the digital equivalent of being paid in $100-bills at your place of work (tax-free, just like the Austrians at George Mason University would be proud of). To gain market share and rapid adoption by the public, a successful virtual/digital currency can have greater anonymity and untraceability than that of a paper $100 bill, but it CANNOT have LESS.

--Jon Matonis

[Virtual Currency Monetization]

If you ask me, virtual currency monetization is an industry of the future. It's already very developed, but it hasn't reached its fullest potential yet.