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While the business of virtual goods has probably been popularized most by social games such as Farmville, the mobile market for virtual goods has developed into a lucrative space for mobile games as well.

There's a good reason for this: charging for a mobile game itself has become increasingly difficult for many game developers, and virtual goods offer one of the best ways to implement a freemium model.

According to mobile ad network Flurry, as of June 2011, well over half (65%) of the revenue for top-grossing games in Apple's U.S. App Store was generated by freemium games. Just six months earlier, 61% of revenue was generated by paid games.

So with freemium on the rise, Flurry decided to take a closer look at how freemium games were implementing their freemiums. In looking at more than 50m in-app purchases across both iOS and Android, Flurry determined that more than two-thirds (68%) of in-app purchases were of consumable virtual goods -- "goods that users deplete." 30% of purchases were of durable virtual goods and just 2% were personalization-related.

It's not really surprising that consumable virtual goods are so popular, as they happen to have the greatest potential to drive recurring revenue. But Flurry has some good advice on durable virtual goods:

From a game design standpoint, it's important to have a good selection of durable items in a game as it offers important variety to the consumer with respect to the core gameplay, such as erecting buildings in a city. 

Buying increasingly better performing durable items gives players a sense of progress, which can be important for engagement.  Additionally, offering bigger, better durable items allows users to set goals, or even change their gameplay strategy, in order to save up for, and make, bigger purchases.

It goes on to note that:

...the ratio between consumable and durable should vary depending on how critical these items are to the core gameplay experience. For example, a city-building game could lean more toward durables (e.g., buildings), since user progression is measured by creating a larger city, which is made up of individual buildings.  In contrast, a farming game could lean more towards consumables (e.g., seeds and fertilizer), where the game is about growing, harvesting and selling crops in order to earn grind currency.

This, in my opinion, is an important point. On the surface, the business of virtual goods looks a lot like mining for gold at the height of a gold rush: anybody can do it and succeed.

But the reality is that successful monetization through virtual goods will increasingly require great strategy and flawless execution. Just as selling paid mobile apps has become harder due to competition, getting your users to shell out for virtual goods won't be a walk in the park either.

The good news is that virtual goods are clearly here to stay. From Facebook to the mobile phone, they're one of a handful of monetization options that works across channels and platforms and if in just six months virtual goods have taken over as the primary driver of revenue for games in the App Store, virtual goods may prove to be one of mobile's most potent monetization options.

Patricio Robles

Published 18 August, 2011 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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