My father never took me fishing, even though I grew up in the country. We raised cattle, we had a fully stocked pond, I rode horses and a raised a donkey, but I never considered myself a farmer or a fisherman.
Maybe this is why I have trouble understanding these virtual farm games on Facebook, and the idea that a virtual payment is a sustainable business model.
Yet, people are buying virtual items to build a farm, fill a fish tank or fleece a mob boss in large numbers. While all this pretend work is occurring, there are companies making hay with these new virtual currencies.
Facebook is exploring a way to make more of a cut from the estimated 16 billion dollar virtual goods industry with a “Pay with Facebook” program.
In fact several Facebook executives think that a payment system within the network could make more money than advertising.
While I agree that a payment system structured like the PayPal model would be a great service to Facebook users, I feel that selling real products makes for a better long term opportunity.
But for now, most of the investment money is chasing the virtual farmers and pretend hit men of social gaming. In fact, “the investment activity in the virtual goods sector in 2009 has more than tripled from that of 2008”. As reported in the Social Times blog.
A sustainable payment system will need to be built around buying real things, just like PayPal supports. How long will people stay down on the virtual-farm once they learn a way to buy some real items through their Facebook account?
There are millions of families gathering together to share the details of their life on Facebook every day. The numbers are pointing toward huge generational connections in this space and soon retailers will discover ways to integrate commerce into the social fabric. Eventually we will find ways to share real products with those we love on Facebook, and this will require a convenient payment system.
If Pay with Facebook is structured to facilitate the financial transactions of e-commerce, then this is a business model that I can get behind.
Inside Social Games suggest that the U.S. market for virtual goods will reach $1.6 billion in 2010. That is a nice number, but when you consider that just the “gift segment” of total US retail sales is over $106 billion dollars, Facebook could plow some fertile ground with proven sustainability. And the harvest would yield a bigger return for the investment community.
It is a nice diversion to pretend to fill a fish tank with your laptop, but virtual goods will never replace the value of sharing something real with someone you care about.