People using Facebook or other social networks are getting used to the idea of sending each other "virtual" gifts such as roses, or birthday cake or even a teddy bear. Often they are paid for with "virtual" currencies which can be exchanged for dollars or pounds. To those who don't indulge, such practices will seem bizarre, and further proof that something odd is going on in the world.
The other way of looking at it is that we may be at the early stages of a movement akin to the industrial revolution, albeit on a smaller scale. Those who left their villages to seek work in the new factories 200 years ago never thought they were part of something that would later be given a label. They just did it. Which is what people all over the world are doing now with virtual goods. Global figures are hard to come by but year-old estimates put the value of virtual goods on Facebook at almost $100m. A team including the guru of virtual world economics Edward Castronova has been poring over internal transactions for Sony's Everquest II online game. Writing in New Media & Society, it found that income per capita in the game was between $130 and $164 a year, putting the average player on par with citizens in developing nations such as Congo. It also found that economic behaviour in the game was very similar to the real world, though with more volatile fluctuations (such as inflation shooting up to 50%).
Unlike the industrial revolution, the virtual one is led by the East, not the West. Market researcher Plus Eight Star puts the virtual goods market in Asia at more than $5bn, or 25 times higher than recent estimates for the US, though they may be a serious underestimate. More than half of this activity is in China where one social network, TenCent, earned $1bn of revenue with an astonishing 90% coming from selling virtual goods including $204m from mobile phones (an activity that companies such as Flirtomatic are exploiting over here) plus $120m from ad revenue.
Is all this a passing fad or a seismic economic change? There are several reasons to expect the latter. First, the technologies behind virtual spaces are powering ahead. It is even possible, indeed likely, that products will be constructed in a virtual world and then "printed" out in the real world as a tangible product. Meanwhile, social networks, virtual worlds and the three-dimensional web get more powerful every year. Second, the user base for virtual activity is exploding among young people, as reflected in a 39% rise in membership of virtual worlds in the most recent quarter – mainly young people – and the continuing growth of Facebook and other networks. Third, growing awareness of the necessity to combat global warming favours virtual goods and virtual worlds. It is much more cost-effective, as increasing numbers of international companies are finding, to meet or collaborate in a virtual world such as Second Life (or more likely their own private world) than to fly everyone to a destination. Fourth, the engine of economic growth in virtual worlds has been micropayments, providing an easy way to buy virtual swords or roses or whatever for a very small amount of money. If micropayments – with Rupert Murdoch leading the charge – finally make it to the mainstream internet, then virtual goods would get a huge boost.
We should beware, however, of being carried away by the word virtual. A piece of chocolate will disappear into your mouth in seconds to become virtual, while a virtual rose sent to your phone could last a long time. Many things we think of as real – such as "money" in the form of a pound or dollar note, or the value of a "brand" such as Nike – are themselves virtual; it's just that we are used to them. If the move towards virtual doesn't become a revolution in its own right, it will only be because the virtual and real worlds will have merged to the point where it is difficult to distinguish them.
