Money for Nothing?
By Samuel Greengard
One of the fascinating things about the online world is the emergence of digital economies. In games as diverse as Farmville, Mafia Wars, World of Warcraft and Second Life, people are buying and selling virtual goods using virtual currencies. In some cases, they're spending hundreds of dollars or more for items.
It's not exactly chump change. The overall market for virtual goods was somewhere in the neighborhood of $7.3 billion in 2010, and that figure is expected to hit $14 billion by 2014. In fact, about one-quarter of Web users are playing social games and trading virtual goods.
'It's clear that people are willing to pay real money for all sorts of virtual goods," explains Vili Lehdonvirta, an economic sociologist who is a visiting fellow at the London School of Economics. He points out that virtual objects--just like physical ones--take on meaning based on "perceived status, scarceness and emotional value." This can include everything from weapons and costumes to space stations and horse dung.
Virtual objects are also ushering in changes that reverberate in the physical world. They're influencing the way governments, researchers, the legal system and the population at large think about goods--and the way people behave in the physical world.
Already, a handful of gamers and Second Life participants have made millions of dollars swapping goods or selling real estate within these virtual spaces. Companies have also emerged to convert virtual cash into real-world currency. And a number of people have been convicted in actual courtrooms for stealing virtual possessions.
Less surprising is that fact that government entities are looking to tax virtual currencies, and this "money" is increasingly used to affect social change in areas as diverse as diet, health care and CO2 emissions. For example, in 2010, Zynga's Sweet Seeds initiative raised more than $1 million for children in Haiti.
"Virtual objects are very real, and they're always intertwined with the physical world," Lehdonvirta points out. "We see them as things just as we see physical objects as things. It's only because we mutually agree to play by a certain set of rules that anything--including paper money and stocks--has any value."
Make no mistake, virtual economies will increasingly drive real-world business, IT and political decisions. There's no turning back now.