Report: Asia Driving the Virtual Goods Marketplace

They may not exist in real space, but when it comes to cash virtual goods are the real deal, especially in Asia.

In presentation made in San Francisco last week, Ben Joffe, an analyst at +8* (Plus Eight Star), pointed out that the virtual goods industry in Asia is generating almost $7 billion a year, compared to $1 billion in the US. In fact, Joffe says, microtransactions for games goods and gear are likely supporting valuation differences between Asian and North American online game companies. China's nine largest publicly traded online game companies have a valuation of $52 billion, while the top four North American and European companies are at $22 billion.

Moreover, Joffe reports that China's Tencent is expected to generate revenues of $1.5 billion to $2 billion from its QQ chat/game service, with most of that money coming from virtual goods revenue. China's total market could generate over $5 billion in virtual goods revenue in 2009.

The virtual goods market is also thriving in Japan, he said, where the top three social networks are generating more than $1 billion in revenues, mostly through mobile games and services. In Japanese games, some rare virtual items are worth more than $1,000. Additionally, Korea is generating about $1 billion in virtual goods revenue.

The presentation also pointed out that many of the leading Asian companies are making more money than US social networks such as Facebook. The Chinese leaders are Tencent, Renren, Kaixin001, and 51.com. In Japan, Mixi, Gree, Nani Suru, and DeNA top the market. In Korea, Cyworld is number one. 

With the virtual goods market in the early stages of growth here, Joffe says the potential is huge: $3 billion to $35 billion in a best case scenario.

– Wes Nihei

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