Tuesday, January 30, 2007

Trading in Virtual Goods

Business Week writes that we are on the cusp of another web shakeout as the frictionless business mavens discover the difference between a 'science experiment' and a going business. The cost of the prototype is less but the constants required for scaling remain the same, employees, machines, insurance, marketing, customer service, and so on.

The only economy that seems to evade inspection is the black market in virtual goods being reported at CNet. eBay banned sales of virtual goods but gave Linden Labs a pass because it is supposed to have a virtual economy that translates to the real economy. There are two problems with that:
  1. As reported in the last blog, ValleyWag analysts show that the LL virtual economy is a Ponsi game.
  2. Second Life is a closed system. Owning or selling something there doesn't mean you can actually take it anywhere else.
I could understand a market for virtual goods where you can actually move the goods into a different world. Like the market for used car parts, you can actually put that on a different car if it is standards-compatible. As no such thing exists for Second Life or World of Warcraft, one wonders if this is yet another frictionless economy love child that assumes something has a value just because it can be displayed to more than one person.

One gets the feeling that there is some kind of weird shakeout and wakeup call coming in this market. The pundits who have been promoting it will be there to tell they saw it coming all along. And so it goes.

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