Virtual Goods is NOT about buying pixels
When talking to others - say, journalists - about Virtual Goods models in general, and about WhatsYourPlace in particular, I hear fairly often some “money for nothing” allegations. Such reasoning apparently stems from a materialistic perspective, which holds that only tangibles are worthwile objects to spend money on. I do not believe this materialistic perspective to be consistent with average contemporary consumption patterns, as I have explained at length elsewhere (in German though).
However, there is another, softened objection: virtual goods is about buying pixels, the objection goes. Here it is acknowledged that money is not spent for nothing but something (pixels). Together with that claim there comes usually a judgement, namely that pixels were nothing worthwile to spend money on. I agree. I would never consider spending money on pixels and I would call anyone stupid who does that.
However: virtual goods is NOT about buying pixels, that is a complete misperception. To explain why, I offer an analogy to the more custom field of online marketing: Marketers who buy online banners do not purchase pixels. Pixels is only the medium to express something, for example to express advertorial content. But the advertizer does not pay for that medium. Rather, he pays for reactions on that medium. Hence, page impressions, leads, or sales are the “objects” traded in online banner business, not pixels.
With virtual goods it is all about reactions of the environment, too. Call it the social aspect. Nothing specific about virtual goods here - to care for reactions of the environment is equally important part of buying many material goods, for example branded clothes. Although many people tend not to emphasize their concern about outside opinions too much, there is nothing wrong with that concern. After all, that is an essential part of being social. So anyone buying facebook gift icons for example, is not paying for the pixels that make up these icons. Rather, he pays for making someone smile. The motivational aspects of gift icons have been explored comprehensively (among related issues) by Jeremy Liew in a post trilogy, starting here -Facebook recently followed some of this advice, as FB insider Kristen Nicole observed here and here.
So, dear journalists, please forget about this “it’s crazy”-thinking when writing about virtual goods. It appears crazy to you, because you confuse the object of purchase and the medium transmitting this object. Doing so is like claiming that people buying books pay mainly for paper with some text on it. That is nonsense. Book readers pay for how that book is enhancing their mind: learning things, being entertained, offering stuff to talk about with others. And this is what buying a piece of land on WhatsYourPlace is about. Sometimes to learn things, but mostly to be entertained and to gain a new and very particular way for social exchange with others.
——
For those who want to explore the subject of Virtual Goods further, I recommend the following reading:
On use cases for virtual goods, Jeremy Liew’s (Lightspeed Ventures) post has become a classic. In addition, the much debated Techcrunch post by Susan Wu is a must read. More recently, Vili Leondonvirta has also produced great contributions from an academic point of view. Most recommended his “Why Do people buy virtual goods“? [Update: precisely the same question has now also been tackeled by Jeremy Liew I already refered to]
On market size, see Charles Hudsons estimate and the equally great resource on Virtual World News.
—
In the past this blog was written in German. This will change this month to address the international audience.
Blog post summary for German readers:
Häufig wird verständnislos geäußert, virtuelle Güter seien “Pixelhaufen”, für die reales Geld bezahlt würde. Das ist Unsinn, wie ein Vergleich zum etablierten Online-Marketing-Markt zeigt: Die Online-Werbebanner, die in einem milliardenschweren Markt gehandelt werden, kann man zwar als “Pixelhaufen” bezeichnen. Dennoch kaufen Werber keine Pixelhaufen, sondern sie bezahlen für die Reaktion der Menschen, die diese Pixelhaufen sehen. Page Impressions, Leads, Sales heißen die gehandelten Einheiten, nicht Pixel. Die Pixel sind nur das Anzeigemedium. Genauso ist ein Grundstück auf WhatsYourPlace nicht mit dem Anzeigemedium gleichzusetzen. Stattdessen stehen der durch das Grundstück ausgelöste Unterhaltungswert und die Einbettung in eine soziale Umgebung im Vordergrund - genauso wie viele materiellen Gebrauchswerte (Markenkleidung etc.) ebenfalls aus sozialen Gesichtspunkten (und nicht aus rein stofflicher Bedürftigkeit) erworben werden.