Free Games With Micro-Transactions: Brave New World or Passing Fad?

Micro-transactions -- it's the word that describes the $1 to $40 for items that you buy to enhance a free, or "freemium" game. For example, if you want to get a leg up in the free-to-play Facebook game FarmVille, you can spend up to 40 real dollars for in-game virtual coins that can be used to buy rare items and more for your virtual farm.

That idea of paying for virtual goods in small increments has turned into a huge trend that's gaining a foothold in the United States (it has actually been big in Korea for years). Popular music games like Guitar Hero and Rock Band have been doing this successfully for a few years, offering additional songs for $1.99 a download via Xbox Live, Nintendo Wii and PlayStation Network.

Zynga and Playfish, the forces behind games like Pet Society, Mafia Wars and FarmVille, have also found that people are willing to pay a few dollars to enhance their social game experience. A Mafia Wars product manager told us last week that a significant portion of Zynga's income comes from these micro-transactions.A recent survey also backs up this data, finding that over half of players spent cash on virtual items last year. Roughly 1/4 of those surveyed spent money on virtual goods in social games and 1/3 bought items in otherwise free massively multiplayer online (MMO) games.

The big question remains: will people's willingness to pay for virtual goods change free games forever? Or is this just a fad? Playfish COO Sebastian de Halleux, naturally, says micro-transactions are here to stay.

"I think we'll see continued investment in different payment options -- mobile phone payments, and prepaid game cards for example -- because users are demonstrating that they'll pay cash for these experiences," de Halleux says in a interview. "But you never have to pay up front; the games are supported with ads so that the people that don't want to spend, can still enjoy."

For now, the millions addicted to Pet Society and FarmVille can breathe a sigh of relief -- your favorite social games will still be free to play ... for now. We wonder how fascinating harvesting pineapples and collecting cow's milk would be if we had to pay for the privilege.

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