Primer: Virtual World User Business Models

This section of the Virtual Worlds Primer takes a look at the emergent economy connecting virtual world to physical world currencies. Often this economy is generated by the two extremes of user types – those who are cash poor but time rich, and those who are time poor but cash rich. Add to this the fact that many elements of virtual worlds require a great deal of time to achieve, then the emergence of an economy becomes almost inevitable.

Game worlds

Gold Farming – Currency, Items & characters

The primary user-driven business in game worlds is the selling of in-world currency, items or characters / accounts. This business is known as gold farming: “gold”, because that’s the unit of currency of Ultima Online (where this practice first came to prominence) and “farming” because the activity has become industrialised through the use of cheap labour and automation. Groups engaged in the practice are sometimes known as Chinese Gold Farmers, but it is certainly not the case that all these businesses are run out of China. However, labour cost arbitrage is a favoured basis of this type of business model due to the essentially negligible cost of the movement of goods.

The practice of gold farming is controversial for a number of reasons:

    • It often breaks the terms of the contract users have with the virtual world provider.
    • It leads to in-world inflation (sometimes termed mudflation).
    • Gold farmers tend to use the game rather than ‘play’ it, engaging in unpopular activities such as ‘camping’ where they monopolise an area, preventing players from using it.
    • Many players see the use of farmed gold as cheating.
    • The arguments for this practice are:
    • Any player should be able to do what they want with the currency and items they generate in the game as it is value created from their ‘labour’.
    • The EULA (End User Licence Agreement) fails to recognize player rights.
    • Many parts of the game are not sufficiently interesting, hence game makers have generated the practice by putting interesting content only at the start and end of the game.
    • Players with multiple characters claim that as they have done the ‘grind’ of lower levels once they should not have to do it again and again.

Power levelling

A variation on the Gold Farming model is power levelling. Instead of buying a pre-created character, a user will give their password to a 3rd party (often refer to as “giving someone the keys”) to play the character up to a higher level for them. This is also controversial for many of the reasons noted above.

Pay-to-raid

Another, though less common, variation on the above is hiring people to play as a group in a complex part of the game. As with other business models, this is motivated by players wanting to achieve certain goals. Specifically certain items bind to a character when they are ‘picked up’ hence cannot be transferred / sold between player. There may only be one of these at the end of a 40 person raid, which means that 39 people do not get it, yet have played for hours. A raid for hire will enable a player to gain such items which are often highly prized.

Brokering

A slightly different model is the trusted third party or broker model. This arises out of the number of scams that exist in item trading. For example one player may offer gold for sale, a second player might transfer money to that player who then simply does not deliver the gold. Alternatively a player may receive the goods but then issue a ‘charge back’ to return their funds. In this business model, both parties place their part of the deal in the hands of a trusted third party who ensures the exchange is what was expected and transfers the assets for a percentage of the deal.

Social worlds

Social worlds do not have the same built-in level structure as game worlds, and so avoid some of the controversial businesses /cheating related issues mentioned above. However, those worlds allowing in-world creation have generated a whole set of skills that effectively mirror physical world ones. Hence, in Second Life a range of businesses from coding and design through to advertising and marketing have emerged. What’s more, the divide between virtual and physical is dissolving, as marketing specialists look to Second Life as simply another medium in which to interact with customers.

So with virtual worlds like Second Life it may be better to think of how any standard business model might be adapted to the medium, rather than asking what business models exist within it. Notably, there are a few agencies emerging as specialists in virtual worlds. These companies tend to work with existing brand holders to develop some form of business within one or more virtual worlds. The three most prominent businesses of this type are: The Electric Sheep Company , Millions of Us  and Rivers Run Red.

Sex

As with many emerging technologies, sex has been one of the primary drivers of Second Life. It has been claimed  (though this figure is disputed) that up to one third of Second Life’s economy is based on some form or derivate of the commercialisation of sex – from cyber-prostitution and clubs to in-world body parts and animations.

In short, if something can be found in the real world, it can also be found in social virtual worlds and often game worlds, sometimes heightened in fantastical ways, but still grounded in existing economic and social principles.

Check the other sections of this Primer for an examination of business models used by publishers and the growing amateur-to-amateur market.

A PDF version of this complete primer is available for download: Virtual Worlds Primer
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