Why do people buy virtual goods?

Habbo record playerThat question has been a driving force in much of my PhD research, which is finally beginning to reach its conclusion. During this year, I will hopefully have four journal articles published or accepted for publication. I will blog about them here as they come out. Academic publishing can be slow, so some of the stuff that comes out now will have been written two years ago. Fortunately I think all of it is still relevant.

The first article I thought I would blog about is titled Virtual item sales as a revenue model: identifying attributes that drive purchase decisions. It’s due to appear in Electronic Commerce Research 9(1-2). A pre-print version (essentially the same content with a less pleasant layout) of the paper can be downloaded here.

The paper addresses the question of why people buy virtual goods by focusing on what features and attributes of virtual items users are attracted to. Using a qualitative study, a total of nine virtual item attributes are identified and discussed:

Functional attributes:

  • Performance (e.g. speed, hitpoints)
  • Functionality (e.g. teleporting)

Hedonic attributes:

  • Visual appearance and sounds (aesthetic pleasure)
  • Background fiction (what role does the item have in the story?)
  • Provenance (e.g. did a famous user own this item in the past?)
  • Customisability (the ability to personalise the item)

Social attributes:

  • Cultural references (references to outside culture, e.g. Xmas decorations, national flags)
  • Branding (virtual goods branded by real-world companies)
  • Rarity

This will by no means be the final word on the subject of why people by virtual items, but I think it’s an improvement over the “useful vs. decorative” model of thinking. It codifies what I have learned from users, developers and other scholars over the recent years. Methodologically, the paper is not a shining exemplar of social science, but it’s been useful to me as a basis for generating hypotheses for quantitative research. I hope developers could also find it handy as a checklist on what things to consider when creating a compelling line-up of virtual goods.

Feedback, as always, is very welcome — especially the most valuable kind, criticism.

Virtual item sales as a revenue model: identifying attributes that drive purchase decisions

Vili Lehdonvirta, Helsinki Institute for Information Technology

Abstract: The global market for virtual items, characters and currencies was estimated to exceed 2.1 Billion USD in 2007. Selling virtual goods for real money is an increasingly common revenue model not only for online games and virtual worlds, but for social networking sites and other mainstream online services as well. What drives consumer spending on virtual items is an increasingly relevant question, but little research has been devoted to the topic so far. Previous literature suggests that demand for virtual items is based on the items’ ability to confer gameplay advantages on one hand, and on the items’ decorative value on the other hand. In this paper, I adopt a perspective from the sociology of consumption and analyse examples from 14 virtual asset platforms to suggest a more detailed set of item attributes that drive virtual item purchase decisions, consisting of functional, hedonic and social attributes.

Keywords: consumer behavior, online communities, business model, purchase drivers, virtual consumption, RMT

Forthcoming (2009) in Electronic Commerce Research 9(1-2), Springer

Download preprint version

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New Paper on UGC

Mira Burri-Nenova has just posted a working paper on SSRN: “User Created Content in Virtual Worlds and Cultural Diversity

User created content (UCC) has often been celebrated as a grassroots cultural revolution that as a genuine expression of creativity, localism and non-commercialism can arguably also cater for a sustainable culturally diverse environment. The present article puts these claims under scrutiny and in a more differentiated manner seeks to identify the value of UCC within digital game environments considering the constraints upon players and upon creative play that these impose. The article subsequently tests whether UCC in its dynamic sense of a creative and communicative process can be seen as a channel for the promotion of cultural diversity and if so, what the State should (and could) do about this.

It is a brilliant paper. Burri-Nenova manages to synthesize the current thinking on user-generated content and virtual worlds in wide variety of fields. She presents a wonderfully sophisticated analysis of the policy issues presented. (Photo Credit: Clairegren)