Quite a few very different estimates of the volume of real-money trade of virtual items (RMT) are available. Part of the reason for the different estimates is the very rapid growth of the user base, and the number of potential real-money traders, in virtual worlds. New service types also spring up, and there are difficulties in defining what RMT should actually include. Regardless of what we decide to include in it, measuring it directly is practically impossible. In this post I review the existing estimates, speculate on what exactly might be included in them, and try to sum up some of the latest regional figures to produce an estimate of the grand total size of the RMT market.
In what follows, I conclude that what I consider as an important part of RMT is often excluded when RMT is discussed. In many cases it is also very hard to say exactly what the RMT market estimates include. Summing up the current RMT estimates from Asia and extrapolating from the recent Station Exchange statistics, I estimate the total worldwide RMT volume to reach USD 1,820M 2,090M (see comment below). The main contribution to the figure comes from the Asian market.
Perhaps a disclaimer is in place here. This article includes very rough estimates and heavy generalizations, all of which are not explicitly stated but should be apparent. I also rely exclusively on secondary sources of information.
What exactly is real-money trade of virtual property?
Even though many are used to thinking of virtual property as something that exists in full-fledged virtual worlds and MMOGs only, it is hard to find qualitative differences between buying a three-dimensional object in Second Life and a two-dimensional object in Tencent QQ or IRC-Galleria. According to Fairfield’s definition, both are virtual property. While virtual worlds get more attention in the press, other community services may have significant RMT as well.
In addition to including only the virtual world RMT, it seems that RMT is often restricted to the so-called secondary markets. These include the user-to-user trade in e.g. eBay or in dedicated marketplaces and, more recently, also the IGE-type trade through a middleman.
Apart from the secondary market of MMOG items, there is also a kind of primary market for virtual property, in which the operators of certain services sell virtual items to users for real money. Such services are usually free to use. Typically players buy the service’s own internal currency with real money, and use that currency for microtransactions inside the service. Examples of virtual property sold at such primary markets include the virtual furni, basically tradable personalization of the users’ accounts, in the Habbo Hotel; the cars, car paintings, weapons, and other items sold in Kart Rider (played mainly in Korea); the land sale in the hyped Second Life; and the virtual personalization items of accounts in Tencent QQ, the Chinese instant messenger service.
In addition to the typical MMO game avatars, there are other types of “avatars” as well, e.g. desirable Tencent QQ and ICQ numbers, which can be sold. The Q-coins, the internal money of Tencent QQ, are also an interesting issue. If virtual items sold by the operators are to be included, what part of the trade that happens with Q-coins should be counted in? The purchases of personalization items at the least, because they are clearly virtual property. However, the Q-coins are used also as e-payment for purchases of “real” goods and services, so all of the Q-coin trading cannot be included.
The list of controversial examples could be easily continued. Even if the trade from the operator to user is not counted in, there are quite a few open questions concerning the RMT concept. Drawing the line between the primary and secondary markets is artificial, since the motivations to purchase items in either market are likely overlapping, and in both cases real money changes hands for virtual property. Why should the real-money trade of virtual property as a term include only certain kind of real-money trade of virtual property?
The scope of some popular estimates
Some of the current estimates are collected in the following table.
Edward Castronova published the first estimate of the volume of RMT in 2001. The figure was based on measuring the daily volume of Everquest-related RMT transactions, and estimating the yearly volume based on the daily volume. On one day at one web site, the total volume of RMT auctions was USD 12,900. The site in question was presumably eBay. On a yearly basis, assuming constant trade volume, this adds up to about USD 5M. As for an estimate of the total RMT of Everquest in 2001, doubling the figure to about USD 10M has been proposed.
This first well-known estimate of the RMT market is, to my knowledge, the only one for which the source of the data and the exact method of aggregating the data are known. Assessing the scope and the reliability of the following estimates is harder.
Castronova gave a slightly more recent and more complete estimate in a New Scientist interview in 2004. He estimated the total volume of eBay and Korean ItemBay RMT transactions of MMOG virtual items and currency to add up to USD 100M. The rest of Asia, all other types of virtual property, and all other marketplaces are not included in this figure.
Slightly later in 2004, Steven Salyer, the president of IGE, announced that the volume of the secondary RMT market reaches USD 880M. In a Guild Wars interview, (available only via web.archive.org) Salyer said that the figure is an estimate of the annual worldwide secondary market size. It would seem safe to assume that the figure includes only the kind of virtual property IGE is providing, i.e. MMOG currency, items and avatars/accounts.
The same types of virtual property were included in the USD 100M estimate by Castronova earlier. We could form an estimate of 2004 total MMOG secondary market RMT excluding eBay and Itembay: this amount would be USD 780M. The share of RMT done in eBay was small, maybe surprisingly so.
The huge Asian RMT market
The volume of the Asian RMT market is very high in some recent estimates. An estimate of the Korean RMT market only, given by Korean Game Development and Promotion Institute (KGDI) (see the English source by Jun Sok Huhh at Gamestudy), is as high as USD 830M. The Gamestudy article also mentions poker and traditional Korean card games, but it is not clear whether these are included in the KGDI estimate or only in the separate survey that was made on RMT composition. If online gambling is actually included, it’s not surprising the estimate is very high. Steven Davis assumes that the estimate contains only the secondary market, though the original English source does not include this information.
There is also a way to estimate the Korean primary virtual property market. In Korea, free-to-use services are very popular. The operator of the service collects revenues from selling virtual property inside the service. Summing the revenues of some of the largest players in the Korean primary virtual property market gives an estimate of the total primary market in the country.
The popular Kart Rider by Nexon is free to play, but better cars, decorations and such can be bought using real money. The revenue model in other Nexon’s games (e.g. the 50-million-user Maplestory) is basically the same. The total revenue of Nexon includes virtual item sales, advertisement sales and licensing etc. It has been reported that “most” of Nexon’s revenues (USD 230M in 2005) come from virtual property microtransactions. I assume three quarters of the revenues can be accounted for virtual property sales. Nexon’s share of primary virtual property market is USD 170M. Cyworld, a Korean social network -type service, provides free accounts, or users’ 3D rooms. However, personalizing one’s account with virtual items is not free. The estimate of Cyworld’s total virtual item sales in 2006 is about USD 100M. The estimate for the total Korean primary RMT market is thus USD 270M.
According to Chinese government statistics (via PlayNoEvil), the total value of “virtual item trading” in China was about USD 901M in 2006. The figure reportedly includes the domestic consumption in online gaming (i.e. excluding gold farming), which takes about USD 514M of the total. The rest probably come from e.g. the Q-coin purchases in Tencent QQ. However, it might be very hard to actually separate the different uses of Q coins, so the figure may include also non-RMT transactions.
Extrapolating the EU/US secondary market
The recent white paper on Station Exchange (SE) also sheds some light into the secondary market MMOG RMT volume. The sanctioned RMT of Everquest II virtual property in Station Exchange reached USD 1.87M during one year. A total of about 40,000 users were registered on the two servers in which RMT was sanctioned. The introduction of Station Exchange had very little or no effect on unsanctioned RMT on other servers. It might be fair to say that RMT is not very much more likely to occur on the sanctioned server. I assume that on the average one Everquest II user uses about as much money on RMT as any other MMOG user. If the reported USD 1.87M is as large a part of the total RMT as the 40,000 users are of the total MMOG user base, we can form an estimate for the grand total worldwide secondary market. According to Bruce Woodcock, MMOGs had about 12.5M users in June 2006, so the estimate of the secondary market total RMT is about USD 585M. The 12.5M users include only paying users of MMOGs, i.e. users with a monthly subscription or similar.
Though the monthly subscription is in dominant use in EU/US games, the 12.5M users include also subscribers of popular Asian games. To produce a EU/US estimate, only EU/US users should be included, but is impossible to find exact numbers of the regional distribution of MMOG users. As an estimate, I exclude the users of both Lineages I and II, and the users of Chinese servers of WoW from the 12.5M total users, and end up in 6.1M users (all user statistics come from the above-mentioned source). My extrapolated estimate of the size of MMOG secondary RMT market in the EU and US is therefore about USD 285M.
The virtual property in the sanctioned RMT servers of Everquest II is traded also at other marketplaces, which is not taken into account here. This figure is only a lower limit for the total RMT volume. There are obviously many other sources of errors in this number, including any differences between an average MMOG user and an average SE-server Everquest II user.
An Asia-centric aggregate estimate of the worldwide RMT market
Let’s make some assumptions and try to come up with an estimate of the total worldwide RMT volume.
- Take the total value of gaming-related virtual item trading given by the Chinese government statistics as-is. The figure is USD 514M.
- Take half of the remaining USD 387M reported by the Chinese government, because e.g. some of the Q-coins are used for purchases of “real” goods and services, and some are used to purchase virtual assets. This figure is USD 193M.
- Take the RMT volume reported by the Koreans as-is. Assume it does not overlap with the Chinese government estimate. Assume it does not include gambling, but includes both the primary and the secondary markets. The figure is USD 830M.
- Take the extrapolation from SE numbers as the EU/US MMOG secondary RMT market value. This figure is USD 285M.
- Update: Take the estimate of the Korean primary RMT market that was derived from the revenues of Nexon and Cyworld. This estimate is USD 270M.
Summing up the estimates 1-4 1-5, the worldwide grand total is about USD 1,820M 2,090M. (see comment on the updates below)
As commented in the beginning, this figure lies on heavy assumptions, but then again, is transparent in the sense that its sources are traceable. Especially, it should be noted that the EU/US estimate includes only the MMOG secondary market, whereas the Asian market includes also other types of RMT.
Vili Lehdonvirta also contributed to this article.