U.S. virtual goods revenue on Facebook to grow 32 percent to $1.65B in 2012

U.S. virtual goods revenue on Facebook is expected to grow 32 percent in 2012 to $1.65 billion, according to a new report by Inside Network.

That growth rate is lower than the 40 percent growth for 2011, as the market analyst firm predicts that revenue this year is growing from $800 million in to 2010 to $1.25 billion by the end of 2011.

U.S. virtual goods revenue on Facebook to grow 32 percent to $1.65B in 2012

Virtual currencies and social network payments

If you are a bit confused about the ramifications of mobile payments, so is just about everybody else. The common sense notion is that "mobile payments" is principally about using a mobile phone, in some way, to buy things, in scenarios where cash, a credit card, a debit card or perhaps a check typically is used instead.

At least part of what some of us might say is growing confusion about mobile payments is that "payments" are part of the "buying," "shopping" or "commerce" activity, and there now are growing ways to embed "promotion," "coupons," "offers," "daily deals" and "loyalty" into a shopping experience. You hear the term "mobile wallet," for example, which is how some of these related processes might be integrated and handled in the future.

To complicate matters further, shopping for "virtual goods," or "content" goods, as well as real world goods, are seen as essential parts of the mobile payments business. In other words, you might use your mobile to checkout from a retail location, buy a song or video, as well as purchase virtual goods for use in a game that is played on a mobile.

Then consider a growing interest in the ability not only to buy virtual goods with real money, but then to export virtual money to other applications or retailers, in some cases as another version of virtual currency, but possibly even as "money" in the classic sense.

You can go into a Wal-Mart right now and pay cash (or check) for a Facebook payment card, to be used in virtual gaming with such companies as Zynga. That doesn't seem to trouble regulators. But many believe there are advantages to allowing points, credits or tokens to be accumulated and then redeemed back into some form of actual real world currency. And that means there now are banking and other regulations that come into play.

Virtual currencies and social network payments

Are Virtual Goods a Bigger Business Than Advertising?

Sales of virtual goods are a significant, and growing revenue stream for Facebook and many developers who seem to be finding that they can make more money selling digital goods than they can selling apps outright or selling advertising within games.



That isn’t to downplay mobile advertising revenues, as a longer-term source of revenue growth for many participants in the mobile ecosystem.



Mobile advertising in the United States will grow from $491 million in 2009 to $2.9 billion in 2014, according to BIA/Kelsey, a compound annual growth rate of 43 percent. The global market for ads in video games is expected to grow from $3.1 billion in 2010 to $7.2 billion in 2016, according to DFC Intelligence. Video Games: More Ad Revenue.



But revenue models often “are discovered” in the mobile and online space, rather than intentionally created, and that seems to be the case for virtual goods.



Revenue specifically generated from the sale of virtual goods in social games has increased 245 percent from $2.1 billion in 2007 to $7.3 billion in 2010, according to In-Stat. Virtual goods forecast



According to eMarketer, the U.S. virtual goods market is expected to generate $653 million in revenue in 2011, up 28 percent from 2010. U.S. virtual goods revenue



Virtual goods purchased for use in social games might already be a more-important revenue stream for game developers than advertising represents, in other words.



And that might also suggest that virtual goods could be a more important revenue source for at least some social networks, for example, than advertising. Facebook is probably the best example of that, at the moment.



A study published in 2010 by Flurry suggested that monthly average virtual goods revenue per user amounted to $7.80. This far exceeds the ad revenue earned from marketers which is about $1.20 per month per user.




According to PayPal, a facilitator of online payments, about 12 million consumers buy virtual goods every month in the U.S. Often, the purchases are all about online currency. Flurry virtual goods forecast



Virtual goods sales already represent the primary source of revenue for social gaming on Facebook.  Michael Pachter, Wedbush Morgan Securities video game analyst, reports that social gaming has grown from approximately $600 million in 2008 to $1 billion in 2009.   


Further, he forecasts that social gaming will generate nearly $1.6 billion this year, and grow to more than $4 billion by 2013. Virtual goods beat advertising





Javelin Strategy & Research predicts that U.S. revenue from virtual goods will quadruple between 2009 and 2012, from $0.6 billion to $2.4 billion.



The increased use of virtual currencies and socially networked payments present new challenges to traditional payments services providers, regulatory bodies, and even cross-border economies. Virtual currency issues