Including digital gifts and digital clothing for avatars, virtual goods may be classified as services instead of goods and are usually sold by companies that operate social networks, community sites, or online games. Sales of virtual goods are sometimes referred to as microtransactions, and the games that utilize this model are usually referred to as freemium (free + premium) games.
A large majority of recent sales have been in Asia.
The first virtual goods to be sold were items for use in MUDs, early, text-only online games. This practice continued with the advent of MMORPGs. Players would sell virtual goods, such as swords, coins, potions, and avatars, to each other in the informal sector. While this practice is forbidden in most blockbuster online games, such as World of Warcraft, many online games now derive revenue from the sale of virtual goods.
When Iron Realms Entertainment began auctioning items to players of its MUD, Achaea, Dreams of Divine Lands, in 1998, it became the first company to profit from the sale of virtual goods. But it wasn’t until the mid-2000s, with companies like the Korean Cyworld leading the way, that virtual good sales became instituted as a legitimate revenue-making scheme.
Virtual goods may continue to be a primarily Asian phenomenon, as between 2007-2010 70% of worldwide sales were made in this region.
In 2009, games played on social networks such as Facebook, games that primarily derive revenue from the sale of virtual goods, brought in 1 billion USD, and that is expected to increase to 1.6 billion in 2010. Worldwide, 7.3 billion USD was made from virtual goods that same year.
Estimates of the future market for these small items vary wildly depending upon who is making the prediction. 2013 sales will be 4 billion USD according to one analyst and a year later reach 14 billion according to a different analyst.
While many companies have embraced exchanging cash for virtual goods, the practice is forbidden in most blockbuster games, which derive income from subscription fees. This doesn’t deter all players from saving playing time by illicitly buying in-game currency with real-world cash–violating their agreement with the game’s operator in the process.
In a speech addressing a high-level Internet consortium in Santa Monica 2006 Rob Holmes, CEO of IPCybercrime, stated that Virtual goods are the next frontier in Intellectual Property. He was right and we are at the forefront of the enforcement efforts now.