Virtual Goods and Social Gaming to Disrupt the Market

A report from Inside Network and the Virtual Goods Summit suggests that the virtual goods market may severely disrupt the media industry. Titled “Inside Virtual Goods,” the report reveals that U.S. consumers will spend more than $1 billion on virtual goods this year. An increase to $1.6 billion in 2010 is expected as the market continues to grow.

What’s to blame for this purported growth? Social gaming. It has become the mechanism by which social networks can introduce virtual goods in a manner that supports an entire industry. Already standard in Asian countries, virtual goods has been a tougher market to crack in the U.S. in part because of the established advertising methods used online.

As social networks have become hubs for online activity of many kinds, social gaming has been able to increase its distribution, ability to become social and leverage integrated networks. As a result, we have seen an interesting merging of several fronts, from social networking to mobile, in order to support the growth and flourishing of social gaming. The industry of social gaming has become a useful conduit for new advertising options within the social network and mobile markets, with virtual goods offering yet another Trojan Horse for the monetization of gamers and other end users.

In the past two years the virtual goods market has really emerged as an industry full of potential for social networks, brands, advertisers and end users. Virtual goods have manifested in many forms, from small item gifting to fully incorporated MMOs with sub-markets of their own.

The report does not cover the mobile front as directly as it addresses the role of online social networking, but I think it is important to note the potential mobile devices have for the ongoing distribution and support of social games. This is further exemplified with the ongoing cooperation between online social networks and mobile platforms, including the partnership between Facebook and Apple, making it easier for social gaming an virtual goods to permeate additional markets.