Virtual goods: real revenues on mobile, to reach $4.6billion by 2016

A recent report from Juniper Research finds that soaring usage of social gaming – driven largely by the sharp rise in smartphone adoption – will push the global market for virtual goods bought from mobile social media services to $4.6 billion by 2016.

The report found that sales of virtual goods via mobile social media services are flourishing in Japan and China; as social gaming familiarises consumers with virtual goods, this trend will quickly become global. Increasing tablet usage is also expected to provide further momentum as these devices offer a significantly better user experience for social gaming than smartphones.

Revenue Share Pitfalls

One potential roadblock for virtual goods is the stranglehold app stores have on payments. Any services wishing to sell virtual goods from within their app risk losing 30% of the payment value to the app store. For virtual goods sold via social gaming this is doubly worrying, as these games are typically developed by third parties which receive around 70% of in-game spend. App stores such as Apple App Store, Google Market and BlackBerry World require that the developer surrenders 30% of in-game purchase revenue.

According to report author Charlotte Miller, ‘Mobile social media services have a serious monetisation problem. Virtual goods is one solution that has worked well in Japan and China, where consumers already have an enormous appetite for content such as clothing for avatars. The only question is: can they successfully avoid the app stores taking a slice of virtual goods revenues?’

Other key findings from the report include:

·  Spend on advertising targeted at tablets is expected to account for almost half of total mobile social media advertising spend by 2016.

·  On a regional basis, Far East & China will continue to account for the lion’s share of mobile social media revenues, followed by North America.

The Mobile Social Media whitepaper is available to download from the Juniper website together with further details of the full study.

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