Facebook Sparks the $3.6 Billion Virtual Goods Space

Posted Feb 4th 2010 3:00PM by Tom Taulli
Filed under: eBay (EBAY), Next Big Thing

It seems kind of strange, but the market for virtual goods has become red-hot. Basically, these are nothing more than digital footprints, such as cool graphics used as gifts on a social network or even weapons in online games.

So how big is this market? According to Atul Bagga, an analyst at ThinkEquity, the market is expected to double this year to $1.6 billion. And by 2012, the market may reach $3.6 billion.

So far, a big part of the action for virtual goods is on Facebook. In fact, some companies -- like Zynga -- have made a fortune by leveraging this massive platform.

Although, the hottest market for virtual games is still in Asia. Keep in mind that the Chinese gaming company, Tencent, has a market value of $33 billion. That's at least twice the value of Facebook.

Of course, online payment companies -- like eBay's (EBAY) PayPal, Kwedit, Boku, Offerpal, Visa (V) and MasterCard (MA) -- want to get a piece of the virtual goods market. For example, PayPal recently teamed up with Green Dot to allow consumers to purchase payment cards at places like Walmart(WMT), CVS(CVS), Kmart(SHLD), Rite Aid(RAD) and Walgreens(WAG). In other words, this makes it much easier for younger people to pay for virtual goods.

However, the biggest winner may actually be Facebook. After all, the company is rolling out its own payment system. The result could be a major revenue stream to monetize Facebook's enormous user base, showing that the company is more than just about online advertising.

Tom Taulli advises on business tax preparation and resolving tax problems. He is also the author of a variety of books, including the including The Complete M&A Handbook. His website is at Taulli.com.

Tags: ebay, Facebook, inthenews, ma, paypal, Virtual goods