Study: Americans Spend $1 Billion on… Nothing?

Posted on June 23, 2010 by Jennifer Latkiewicz

Money can’t buy you love but it sure can buy you lots of nothing. In the past year, Americans have spent more than a billion dollars on “virtual goods” (also called microtransactions) — intangible things used in online games that have no intrinsic value. We are spending a lot of cold hard cash to play pretend, and it’s enough to make you ask, “What recession?”

$168 million was spent on mobile virtual goods alone – pretend stuff purchased on a smartphone – according to a new report released Tuesday morning by Frank N. Magid Associates and mobile social gaming network OpenFeint. Users spend an average of $41 per year on mobile virtual goods but that figure will only grow as more social games offering virtual goods are developed for smartphone platforms. “With almost 20 percent of smartphone gamers already making purchases, there’s a lot of room for the market to keep taking off as smartphones continue to increase in popularity,” says Mike Vorhaus, President, Magid Advisors.

Mobile’s $168 million is chump change though, compared to the money being made on web-based games and video game consoles. Forbes estimates that sales from virtual goods on Xbox Live earn Microsoft at least $625 million a year and revenues for Zynga, the folks behind online gaming phenomena FarmVille and Mafia Wars, is said to have reached more than $600 million. In FarmVille, Zynga’s most popular game, users tend to their fields and raise livestock, and are spending lots of cash to do so. Experts predict that the Facebook farming simulation game will rake in a cool $350 million for the company, twice what it did in its 6 first months after it debuted last June. That’s a whole lot of virtual cows and crops.

So why are so many Americans spending their hard earned money on virtual goods? Some say it’s a social obligation to the person who invited you to the game, while others blame a “keeping up with the Joneses” mentality. Whatever the reason, it’s no question that developers will continue to milk the virtual goods cash cow, so save up your (real life) pennies!