Three Japanese, Korean Virtual Worlds Generated Over $510M In Virtual Goods Revenue For 2008

Plus Eight Star Ltd's "From Virtual Worlds to the 3D Web: Online Communities In China, Asia, and the World" is an EU-China Information Project-sponsored overview of virtual worlds. Among other things, it contains 2008 revenue data for two major Japanese and one Korean virtual goods businesses that are not online games. 

Together, they generated $510 million through virtual goods sales in 2008. Other platforms are discussed without revenue figures and others are simply left out, so while we know the market generated more than the $510 million reported for 2008, the cap is likely significantly higher. 

The virtual worlds that Plus Eight Star Ltd provided data for were as follows:

• Cyworld, Korea: $200 million in 2008 revenues, 22 million registered users, valuation unknown.
• Mobile Game Town, Japan: $250 million in 2008 revenues, 12.6 million registered users, valuation $1.4 billion.
• Gree, Japan: $60 million in 2008 revenues, 8 million registered users, valuation $1.2 billion.

Cyworld is the Korean cultural equivalent of Facebook or MySpace, with most Koreans between 15 and 30 having a real-name profile page available. The virtual goods are part of the site's rich graphical interface, which allows users to place mini-rooms, houses, and avatars directly onto their page as decorations. The service was originally offered on the Web and later extended to mobile and has come up before in discussions of why MySpace and the other social networks need to be doing more with virtual goods.

Mobile Game Town is a mobile-only service, as the name suggests, of a sort that relies on Japan's essentially 1:1 ratio in cell phone ownership and high penetration of powerful phones with Web features. The service uses free Flash-based online games to attract users. Mobile Game Town reports that roughly 10% of its users spend on the service's virtual goods, which are primarily used to customize a user's avatar.

Gree is essentially similar to Mobile Game Town, though it also offers limited Web services. Also like Mobile Game Town, Gree is a publicly traded company that is highly valued as a result of its strong revenue streams. It seems odd that Gree's market valuation is nearly as high as Mobile Game Town's when it generates less revenue and has fewer users, but there may be other factors to explain this that simply weren't covered in the Plus Eight Star report. Western observers have compared its revenue model favorably to TenCent's famous QQ in the past, as well as Mobile Game Town's parent company DeNA.

It is interesting to consider that all three of the profitable services above are essentially 2D virtual world applications. The purpose of the Plus Eight Star report is to discuss 3D virtual world applications throughout Asia and the West, but the 2D worlds are mentioned essentially as a point of comparison for how relatively unprofitable and little-used 3D worlds are by comparison.

The report names a slew of recently-launched Japanese 3D virtual worlds including Splume, AI sp@ce, Daletto World, Hatena World17, Internet Adventure iA18, Meet-me19, ntomo20, Poki Poki21, PRUM22, and Vizimo, all for the Web. Mobile saw the launch of Disney Wonder Days, Softbank's S!Town and Metamo. All were essentially pronounced unsuccessful, at the very least little-used and not yet profitable.

Korea appeared to be doing slightly better with its 3D virtual worlds, as there was one small success to name. PuppyRed is a 3D virtual world targeted for tweens with colorful avatars and plenty of virtual goods to purchase for them. The world has 1.8 million registered users and generates $100,000 in revenues per month. Roughly 80% of that is generated directly by virtual goods sales and the other 20% come from advertising.

For the Japanese 3D worlds to be dismissed as unsuccessful by the report, it can only be concluded that their numbers of users and revenues are at the very least inferior to PuppyRed's. The report also names one Korean 3D virtual world flop Cyworld Mini-Life, a spin-off of the more popular 2D Cyworld discussed above. The ultra-realistic Nurien was mentioned as "interesting," but also too new to have produced any results yet. [Ed: Nurien is still in open beta in Korea, but interested in coming to the West as well.]

The report's perceived problems with 3D virtual worlds not monetizing as efficiently as 2D worlds is a trend continued in China and the West, with Linden Lab's Second Life being the only venture the report chose to acknowledge as a success. In general, the report concludes (perhaps correctly) that most 3D world ventures have tried too hard to emulate Second Life and in doing so over-emphasized the role of user-generated virtual items to the detriment of revenue that can be generated by having the world's operators simply design and sell individual avatar items.

If other trends observed in the Korean and Japanese data in the report extend out to the West in similar fashion, then it seems likely that 2D worlds targeted at youth users where the platform designers sell virtual goods directly to users will continue to be much easier businesses to monetize than more sophisticated 3D offerings that rely on user-generated content and land purchases. Another potential is simply that 3D worlds typically require installed clients, which makes them hard to play in Internet cafes and adds a barrier to adoption more generally, which is critical for free-to-play operations.

We can also expect an explosion of mobile worlds in the future as Western mobile infrastructure and hardware continues to grow more sophisticated, perhaps to appear first on the iPhone now that it supports proper microtransactions. Finally, Cyworld seems to be another foreign success story that indicates America's big six social networks need to put an emphasis on selling more virtual goods and incorporating avatars if they want to monetize more efficiently.

You can obtain the full report for free here.

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