Is Virtual Currency The Future of Social Media?
Social media websites have been seeking ways to monetize their system beyond serving ads for a while, and virtual currencies look to be the cash cow they’re after.
If you’re familiar with Facebook, you’ve probably come across Mob Wars or Farmville, the social network’s virtual game that allows you to purchase virtual currency to advance in the game faster, get better gear, or obtain virtual goods.
Previously, virtual economies were typically found in MMORPGs and life simulation games like Second Life, but lately they’re showing up in Social network sites like Facebook, MySpace, Gaia, and more.
World of Warcraft might be one of the largest virtual economies to have emerged in recent years, and while paying real money for virtual goods might seem ridiculous to some, its now a billion dollar business. Virtual real estate is another market that’s had interest too.
While virtual currency exchange rates aren’t on par with real world ones (in Second Life, its about 265 “Lindens” per US dollar), advertisers are seeing it as incentive for signing up for a product or filling out a form. One example might be Netflix offering $20 in virtual currency for someone to sign up at Netflix. App developers at Facebook and other social network sites are looking to cash in, and even mobile apps for iPhone are tapping into the craze.
While it sounds interesting, is there a down side to these synthetic economies? Aside from potential fraud or money laundering, virtual currencies could pose a threat to world economies, by shifting control of the money supply from the central bank to game developers if things really caught on.
As advertisers take notice, commercialization is inevitable, and eventually lead to further growth in virtual business. In terms of e-commerce, few retailers are currently selling products directly through social networks. But the pending launch of Facebook’s virtual currency will make it far more appealing for this purpose. The Facebook currency will allow for purchasing of both virtual and real world gifts.
What I wonder is, as this evolves, will we see a universal online currency develop? It would take a trusted and known brand (like Facebook) to take virtual currency to that level. They’d need to provide the resources, support, stability, and security it would require. Seeing as FB has the online population of a medium sized country, along with the network already in place, they might be a natural.
Image: Wired created a banknote that looks like the authentic currency of a virtual world.
November 2nd, 2009 at 4:59 pm
It can’t be long before we see virtual taxes too. Governments will find a way to tax the exchange of virtual currencies. Probably have already.
Interesting article.