Whither the Virtual Currency?
I haven't posted to this blog in a while; I took a bit of a hiatus from Second Life when the SL client suddenly stopped working on my laptop. No manner of installs fixed the problem.
Luckily, I was involved with Gnomiverse (www.gnomiverse.com) which has an IM client - so I used that for a while to stay in touch with virutal friends while I was out of world - shouldn't there be an acronym for that? like afk, but specifically for 3d virtual world users who aren't around - oow? Maybe there already is one.
Now that i'm back, I'd like to write about virtual currency.
In many ways the idea of virtual currency has been around for a while, dating back to earlier games like Ultima Online, EverQuest, etc. But with Second Life, the idea of having a fully legit virtual currency which could be exchanged (again legitimately) for US dollars was kind of a new innovation. How much virtual currency is in use today?
It's hard to say since there are so many different games (both 3d games like World of Warcraft and non-3d games, such as social applications built on top of myspace and facebook, which now also increasingly have virtual currency).
It's also difficult to say because it's not just a matter of finding out how many virtual units were exchanged for so-called "real" money - you have to look at how people are using virtual currency and exchanging it.
There have been many estimates for the amount spent on virtual goods. A virtual good can be any digital items ranging from images, flash objects, to in-game 3d objects like virtual clothes within Second Life or a weapon within other games.
Korea has been an innovator in the market for virtual goods: "The size of the market was estimated at 1 trillion won, or about $1 billion, last year, according to the Korea Game Development and Promotion Institute. About 60 percent of such item trading company's profit comes from the cyber money trade." (src: http://www.playnoevil.com/serendipity/index.php?/archives/1045-When-is-a-Virtual-Currency-not-a-Virtual-Currency-When-you-cant-trade-it-in-Korea.html )
The hottest virtual currency in China last year was the QQ, so much so that people were wondering if it might not have an influence on US/China trade relations:
"Xinhua News has reported that the volume of virtual currency has reached several hundred million USD a year in China. My firm estimates the size to grow 30% in 2007. " (src: http://seekingalpha.com/article/24227-china-s-virtual-e-commerce-currency)
The rise of virtual currencies in Facebook and other Social Applications is interesting. I know a little about this one - I was an angel investor (and interim CTO) in OfferPal Media last year - which is one of the leading monetization platforms for Facebook apps which have or use a Virtual currency. For Facebook alone, here's a recent VC-oriented statistic: "With even a fraction of this expected growth, it’s almost certain that the Facebook virtual economy will be worth more than $100 million in the next 12 months." (src: http://venturebeat.com/2008/09/09/facebooks-virtual-economy-may-be-making-up-to-100-million-this-year/). This sounds inline to me.
In Second Life alone, there were an estimated 8,417,000,000 Linden Dollars changed hands in September 2008. At the last closing exchange rate of L$264 lindens per USD 1, that makes for $32 million worth of transactions per month being traded.
Of course, not all virtual currency can be estimated in real world dollars, since there is no established exchange rate. For example, Blizzard does not encourage buying and selling of World of Warcraft Gold, nor does Gaia Gold, but a number of black market sites specialize in selling and buying this
The expansion of Virtual Currency over the last few years brings up some interesting questions for economies of scale. It seems to me (and I'm currently at Stanford Business School) that it's an area being overlooked by economists. They're still trying to come up with good models to rationalize the economics of internet-based businesses like eBay and Amazon, let alone Social Networks and Virtual Worlds. In the book, Exodus to the Virtual World, the author brings up the issue of income earned within virtual worlds - should it be taxed? There are after all a number of people now who earn money only through virtual worlds.
Those are issues to debate another time. So how much is each virtual currency worth?
Here are some latest estimates (some of these are published and some had to come from the black market):
So, the question is, would it be possible to trade 1000 WoW Gold for an equivalent number of Linden Dollars? Or Q? Not directly. You'd have to go through a whole series of machinations before you could do that. Still it's an intriguing thought...
Luckily, I was involved with Gnomiverse (www.gnomiverse.com) which has an IM client - so I used that for a while to stay in touch with virutal friends while I was out of world - shouldn't there be an acronym for that? like afk, but specifically for 3d virtual world users who aren't around - oow? Maybe there already is one.
Now that i'm back, I'd like to write about virtual currency.
In many ways the idea of virtual currency has been around for a while, dating back to earlier games like Ultima Online, EverQuest, etc. But with Second Life, the idea of having a fully legit virtual currency which could be exchanged (again legitimately) for US dollars was kind of a new innovation. How much virtual currency is in use today?
It's hard to say since there are so many different games (both 3d games like World of Warcraft and non-3d games, such as social applications built on top of myspace and facebook, which now also increasingly have virtual currency).
It's also difficult to say because it's not just a matter of finding out how many virtual units were exchanged for so-called "real" money - you have to look at how people are using virtual currency and exchanging it.
There have been many estimates for the amount spent on virtual goods. A virtual good can be any digital items ranging from images, flash objects, to in-game 3d objects like virtual clothes within Second Life or a weapon within other games.
Korea has been an innovator in the market for virtual goods: "The size of the market was estimated at 1 trillion won, or about $1 billion, last year, according to the Korea Game Development and Promotion Institute. About 60 percent of such item trading company's profit comes from the cyber money trade." (src: http://www.playnoevil.com/serendipity/index.php?/archives/1045-When-is-a-Virtual-Currency-not-a-Virtual-Currency-When-you-cant-trade-it-in-Korea.html )
The hottest virtual currency in China last year was the QQ, so much so that people were wondering if it might not have an influence on US/China trade relations:
"Xinhua News has reported that the volume of virtual currency has reached several hundred million USD a year in China. My firm estimates the size to grow 30% in 2007. " (src: http://seekingalpha.com/article/24227-china-s-virtual-e-commerce-currency)
The rise of virtual currencies in Facebook and other Social Applications is interesting. I know a little about this one - I was an angel investor (and interim CTO) in OfferPal Media last year - which is one of the leading monetization platforms for Facebook apps which have or use a Virtual currency. For Facebook alone, here's a recent VC-oriented statistic: "With even a fraction of this expected growth, it’s almost certain that the Facebook virtual economy will be worth more than $100 million in the next 12 months." (src: http://venturebeat.com/2008/09/09/facebooks-virtual-economy-may-be-making-up-to-100-million-this-year/). This sounds inline to me.
In Second Life alone, there were an estimated 8,417,000,000 Linden Dollars changed hands in September 2008. At the last closing exchange rate of L$264 lindens per USD 1, that makes for $32 million worth of transactions per month being traded.
Of course, not all virtual currency can be estimated in real world dollars, since there is no established exchange rate. For example, Blizzard does not encourage buying and selling of World of Warcraft Gold, nor does Gaia Gold, but a number of black market sites specialize in selling and buying this
The expansion of Virtual Currency over the last few years brings up some interesting questions for economies of scale. It seems to me (and I'm currently at Stanford Business School) that it's an area being overlooked by economists. They're still trying to come up with good models to rationalize the economics of internet-based businesses like eBay and Amazon, let alone Social Networks and Virtual Worlds. In the book, Exodus to the Virtual World, the author brings up the issue of income earned within virtual worlds - should it be taxed? There are after all a number of people now who earn money only through virtual worlds.
Those are issues to debate another time. So how much is each virtual currency worth?
Here are some latest estimates (some of these are published and some had to come from the black market):
- Linden Dollars: 265 Linden Dollars per One USD (src: www.secondlife.com)
- World of Warcraft Gold: This can be gotten through the black market only. There seem to be advertisements for 1000G for $5, but when you actually go to the sites, the prices seem to be 1000G for between $17 and $23 USD, so let's say an average of 55 Gold pieces per One USD. Another site has it even higher, between $23 and $42 per 1000 Gold pieces. On the high end this would be 23 Gold per One USD. One site has it for $.019 to $.021 per piece of WOW Gold (src: various sites across the internet, aka the Gold Black Market)
- Gaia Gold. From the black market, it seems to be in the range of $8 or $9 per 1000 Gold, or 112 Gaia Gold for One USD. (src: various sites across the internet, aka the Gold Black Market)
- Q: The Q currency used in China. The best price I could find was .82 Yuan for a single Q coin (src: http://virtual-economy.org/blog/the_q_coin_secondary_market_in ). Since One USD is worth 6.84 Yuan, that means that you could get 8.34 Q for one USD.
So, the question is, would it be possible to trade 1000 WoW Gold for an equivalent number of Linden Dollars? Or Q? Not directly. You'd have to go through a whole series of machinations before you could do that. Still it's an intriguing thought...
Labels: Chinese Virtual Currency, CyWorld, Gaia Gold, Korean Virtual Economy, Q, QQ, virtual currency, Virtual Economy, virtual world, World of Warcraft
posted by Zen Entrepreneur at
10:23 PM
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