Compared to a movie or video game, virtual merchandise is a bargain

During breaks from caring for her 1-year-old son, Samantha Whipple plays virtual world games on her cellphone. She buys a few outfits for her avatar, spending maybe $30 a month on shoes, jewelry and other virtual merchandise that she'll never hold in her hand. "I'm a stay-at-home mom, so I don't have the time to go out and do all of this stuff," said Whipple, 25, of Fresno, CA.

She also buys salon treatments and gets her nails done with FunCoins she buys on her phone at Cellufun's Web site. "It's a way to do things that you can't do that you want to do," she said.

While it may sound odd to buy such virtual merchandise -- whether farm equipment in the Facebook game Farmville or accessories for an avatar of yourself -- it scratches the same itch as buying a video game for $30 or going to a movie, say industry leaders and players.

It's also a $1 billion market that's only growing and is recession proof, according to Neil Edwards, CEO of Cellufun. "The relative cost that people are spending for virtual goods is less than they would spend on a vice that they have," such as smoking or buying a cup of coffee, Edwards said. Buying a pair of designer shoes at the store will affect your budget, he pointed out, but paying $1 for one of Cellufun's 11,000 pairs of virtual shoes won't put a meaningful dent on the family budget.

Joe Reynolds of Montgomery, Alabama, spends $20 to $40 a month on the online role playing game Runes of Magic. Reynolds, 37, buys gear to enhance his virtual weapons, and sees it as a cheap form of entertainment. "When you compare it to what I would be spending on movies in a month," it's not much money, he said. Reynolds spends six to eight hours a day, and more on weekends, playing the games, which doesn't leave much time for going to the movies, watching TV, mowing the lawn or other endeavors.

"I'm getting the value out of it as far as it being entertainment," he said.Instead of paying for each virtual item individually through microtransactions, most game sites have create their own online currencies. Players buy them in lots, such as 100 coins for $5, and some games include so many coins in their monthly membership fee.

A $5 monthly membership at Vector City Racers, a racing game aimed at boys, includes 80 Vector bucks players can use to buy vanity items for their virtual cars. Buying Vector bucks in one transaction instead of having a credit card dinged for each purchase is a lot easier on the buyer and seller, said Chris Bergstresser, CEO of Vector Entertainment. It's also a way to get them to spend more money.

"If you go and say it's 10 cents for this, 20 cents for that, people do the real-world math and say "I don't want to spend money on this," Bergstresser said.

The virtual money is sold in odd quantities, making it more difficult to convert the sale into real money, he said. And a one-time credit card charge is more palatable to mom and dad than repeated charges. "If we had real-world dollars, people wouldn't go on and purchase," he said.

"Kids love getting the virtual currency and they love playing with it," said Bergstresser, whose core audience at Vector City Racers is boys ages 9 to 15.

Animax Entertainment, a creator of virtual worlds, has 200 such worlds live or in production that are aimed at kids, tweens and teens. "It's kind of a gold rush out there," said Tucker Aaron, Animax's lead strategist.

Along with paying for clothes and other things for avatars, players can earn money by completing certain tasks or can take surveys or sign up for services such as credit cards, Aaron said.

The average player spends $1 to $1.50 per month on virtual items, he said, adding that this is a better return on an entertainment dollar than playing an arcade game or spending $60 on a console game to take home and hope that it's fun.

"This model is free to put your toe in the water and test it out," Aaron said. "It you like it, you put in another quarter,and if you like it again, you put another quarter in."

And it's not just children who are spending their money this way. Seventy-five percent of Cellufun's transactions are by players between 24 and 49 years old, said Edwards, the company's CEO. And many of those are women. "It really resonates with women that they want to be the most stylish," Edwards said.

Gifts are also popular virtual goods, making the social online game much more social, said Mike Trigg, vice president of marketing and business development at hi5, a social entertainment Web site. "The psychology of buying virtual goods is an expression of self," he said.

He believes that a $1 bouquet of flowers can say more than a real gift because it can stay on someone's profile page indefinitely.
"In fact it's more visible socially than a real world gift," he said.

They can also serve as casual gifts for people you socialize with online. "It opens up a sector of gift giving that wouldn't be done in the physical world," Trigg said.

Some sites, such as Virtual Greats, are even selling virtual merchandise related to celebrities and other copyrighted material. If you want your avatar to look like Snoop Dogg, for example, you can do it -- for a price.

"With the Internet, people spend an inordinate amount of time on social networking, staying glued to their computer screens when they get home," Edwards said.

Spending a few dollars each month on such games shouldn't hurt anyone. Or does it?

Reynolds, the Runes of Magic gamer who spends much of his weekend playing online, said his wife doesn't understand how he can buy things online that he can't hold in his hand.

"She hates the game," he said. "She can't grasp the whole idea of it. She can't grasp the idea of spending money on the stuff I do."

Aaron Crowe is a freelance journalist in the San Francisco Bay Area who can be reached at

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