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Monetizing Apps- Are Indians Ready to Buy Virtual Goods?

Jubin Mehta
20th Jun 2012
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With the app space abuzz with activity, new monetization models are being thought up but selling virtual goods online continues to remain one of the more popular means. They have become a significant part of revenues for social networks as well. Facebook revolutionized the virtual goods market by introducing a platform-specific virtual currency.

Stats

  • The sale of virtual goods within social gaming will increase from $3 billion worldwide in 2011 to $4.1 billion in 2016.
  • Similarly mobile-apps-based gaming will drive global virtual goods sales to $4.3 billion by 2016, up from $2.4 billion in 2011 says a GigaOM report.

So what are these virtual goods? This can involve anything from avatars to clothing for characters to furniture to land. One thing that has led to the rise of virtual goods is probably the rise of casual gaming. Another report from the first quarter of 2012 supported this by showing how those playing massively multiplayer online role-playing games accounted for 5 percent of respondents, while casual gamers accounted for 25 percent of respondents in the US and this trend is quite palpable elsewhere too. “The virtual goods industry has experienced a tremendous amount of growth over the past couple of years. Virtual goods were made popular by games like Farm Ville and Habbo Hotel and this trend is quite popular in US, Europe and Japan.” says Ayyappa, the founder at Possibillion.

There is a resistance to virtual goods in India and the popular opinion states that the sales will remain low for the foreseeable future. “Sales of virtual goods hasn't caught up in India. But I believe that the growth in smartphones will fuel virtual goods spending and we can expect a positive swing in the coming times,” added Ayyappa. Ashok Varma, the founder at Appstark, like many of the developers in India targets the western market but had an interesting way of looking at things, he says “One thing I can suggest is that virtual goods needed not be paid for by the user, game makers can make money by enabling branding opportunities within their apps. For example, in a dating site, you can enable users to gift virtual 'fasttrack' watches. These goods can be monetized from the brand's side rather than the user's side.” (You might want to read guest columns from Ashok in the Mobile Space)

There are a few factors which have led to this growth of virtual goods sales; the viral promotion owing to integration with social networking sites introduces these games to a whole new bunch of people is one. Also, the smart phone penetration plays a huge role here. The report also had a few interesting reasons why the mobile makes ‘virtual goods’ sales so thinkable:

  • Increased incidence of gaming as users tend to access games with more frequency on a mobile device versus a PC
  • Strong comfort level with micropayments, which are better supported in the mobile market
  • Apps developers increasingly converting to the free-to-play model, generating revenues from virtual goods purchases rather than pay-per-download options
  • Access to the youth market, which has the ability to make purchases and run charges through mobile carriers, a capability not available on PC-based gaming

Taking context into picture, all this looks merry but anyone staying in India would know that the general Indian mindset is a wee bit different. Shan, who has developed some fantastic apps in the form of PlayText and others, has a point in case, “Right now Virtual goods can be used only virtually but not in real world.This has to be changed and it can be done by offering real world coupons or discounts for those who buy virtual goods in a game.This would not only increase the user interaction for the games but also it would bring in lot of advertising opportunities for the stores in major cities.But someone needs to think more innovative to incorporate this. With a large market, I see a potential for lot of virtual goods based games in India.”

There are many other innovative ways that have come up to monetize via apps but virtual goods with a physical real world incentive seems the way ahead for the Indian market. What are your thoughts?

[If you're looking for funding in this space, Qualcomm has an appetizing opportunity]

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