Fewer Than 6 Percent of Gamers Buy Virtual Goods…And That's Big Bucks

Fewer than 6 percent of the social game players in the U.S. spend money on virtual goods, but that’s adding up to a whopping $653 million this year alone.

When you add other sources of revenues, including lead-generation offers, which are incentives for filling out a survey or signing up for a subscription, and advertising dollars, the social gaming industry is expected to break $1 billion this year for the first time, according to eMarketer.

In 2012, revenues will rise to $1.32 billion, with a majority of sales still expected to come from virtual goods.

Still, as the audience for social games is expected to rise, so are advertising revenues. EMarketer forecasts that advertisers will spend $192 million in 2011, a 60 percent rise over last year, and in 2012, advertising revenues are expected to jump another 41 percent.

The success of virtual goods and the rise of advertising will lead to more branded virtual goods, said Paul Verna, author of the eMarketer report. “This is the largest segment of the social gaming economy, and one that marketers are increasingly turning to as a branding vehicle. We expect to see more branded virtual goods as social gaming matures over the next two years.”

Still, these figures appear modest in comparison to the turbocharged bets companies are making on the space, and the revenues that the leading companies are achieving.

Two acquisitions over the past year and a half easily exceed this year’s revenue projections alone, bringing into question whether the projections are modest or the industry is overhyped.

Disney purchased Playdom for upward of $700 million, including earnouts, and in late 2009, Electronic Arts acquired Playfish for $400 million. Those together value the space at more than $1 billion, and that doesn’t include Zynga, which remains independent and is the largest social games company on Facebook. Its revenues were estimated at more than half a billion dollars last year–up from about $300 million in 2009.


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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work