Prediction for 2009: Major increase in revenue from Virtual Gifts in social networks

I went to Noshi Sushi with seven friends on Tuesday. Great food. My friends are in their early to mid-thirties. I asked them if they would ever buy virtual goods. None of them would. They think it’s silly and they don’t see the value. While they do accept virtual gifts from friends through Facebook, they hate it when they are asked to “install the application and share my personal information.”

Today, I sent them some virtual gifts.

I predict virtual gift revenue will finally break through in the US in 2009. Unlike interruption advertising, virtual goods and branded content works great in social networks. Proof? Facebook reportedly made $35M+ in virtual goods in 2008. Now, if they can make that kind of money with their boring clip art - then I predict there’s 100% revenue increases in store for 2009.

How big is this market? In Korea the virtual gift economy is huge and it’s the driving revenue model for loads of market leaders such as CyWorld ($160M annually) and Nexon (80% of $230M revenue). Charles Hudson has a great post here with loads of data (and assumptions.) Thanks Charles! Of course, you may know that virtual worlds like Habbo Hotel and Second Life is all about virtual goods, but those eco-systems are closed and there is no doubt the massive markets are in social networks and mobile.

Viximo is betting big the social market. They seem to think they can be market makers (see interview with CEO here) and their Giftd shop just opened in time for the Holidays. Hi5 just launched their own gift store and MySpace is reported to be working on a version of their own (I have to say, I don’t really understand what’s taking so long. Maybe you know?) Other players in this market includes FooPets, NeoPets, Digital Doll House, and major Scandinavian player StarDoll. There’s Zynga and major player Social Gaming Network who recently bought niche Facebook app developer (fluff)Friends . Also have a look at Artist Licensing and IP companies like Virtual Greats.

My friends say they won’t buy virtual gifts. Would you?

Tags: media, socialnetworks, virtualgoods