The American market for virtual goods will grow 31 percent to $2.1 billion in 2011, according to a new report from Inside Network. A huge driver of recent growth has been the social games sector, which “came out of nowhere” as co-author Charles Hudson put it. He said that virtual goods sold in social games are set to already account for 40 to 50 percent of the market, or at least $840 million in 2011, and that Facebook is responsible for “pretty much all of social.”
Many social game makers such the biggies — Zynga, CrowdStar, Playfish and Playdom — are transitioning to using Facebook’s Credits payments system, from which Facebook takes a 30 percent cut of all sales. Taking that rough math further, that means the social network stands to rake in $252 million in revenue from Facebook Credits for U.S. games next year. Facebook also has a second revenue stream from games from developers buying advertising on its site.
Hudson said that even with Facebook’s newly introduced tithing policy, game developers stand to benefit. As Facebook Credits are adopted, “The lift to conversion and monetization should offset the 30 percent,” he said.
What’s interesting about that market is that fewer than 5 percent of social game players ever buy anything, however, they account for the vast majority of the revenue from these free games. Virtual goods were worth $1.6 billion in the U.S. during 2010 and $1.1 billion in 2009, according to Inside Network. Hudson said that the Asian market for virtual goods is likely two-to-three times bigger.
Besides social games, Inside Networks included in its virtual goods market estimate virtual worlds, MMOs (massively multiplayer online games), console games, and mobile games.
Please see the disclosure about Facebook in my bio.
Related content from GigaOM Pro (sub req’d):
- The Real Impact of Facebook’s New Approach to Gaming
- Will Games Help Google Figure Out How to Be Social?
- A Mobile Payments Glossary