Economist: Online Games’ Virtual Economies Provide Big Money to the Developing World
What’s the News: Just as the real-world economy is crawling out of a recession, the virtual economy based around online games like World of Warcraft is booming to the tune of $3 billion per year. This money is actually making a measurable economic impact in developing countries, providing up to 100,000 jobs in China and Vietnam. According to Tim Kelly, the Lead ICT Policy Specialist of infoDev, a technology development finance program of the World Bank and IFC, “This could significantly boost local economies and support further development of digital infrastructure in regions such as Africa and southeast Asia.”
What’s the Context:
- In games like World of Warcraft (massively multiplayer online role-playing games, or MMORPGs), players accomplish goals and gather new gear to become more powerful. Some players in wealthy countries who have limited time to spend slaying dragons and earning gear themselves are willing to pay for virtual items with real cash.
- There are many ways of earning money in the virtual gaming world, but about 75% of that $3 billion market comes from “gold farming,” wherein wage-earning players collect virtual goods that are later sold. Another major money-earner is â€œpowerleveling,â€ in a customer hires another person to spend time playing the game with the customer’s characters and making them more powerful.
- Nearly 25% of all virtual game players spend real money to acquire virtual items, with some forking over thousands of dollars on a single account.
- These “gold farmers” aren’t just solitary guys in front of a computer; many actually work for large Chinese suppliers: The largest eight virtual-supplying companies have a yearly turnover of $10 million each, and there’s upwards of 60 firms with $1 million revenues.
- “Hand made” virtual currency only accounts for about 30% of the virtual economy: About 50% of the currency is generated by automated game-playing computers and 20% comes from hackers who steal goods and then sell them.
Not So Fast:
- The wages of the average Chinese online gamer is near or below Beijingâ€™s minimum wage of $1.70 an hour.
- Game studios want to squash the virtual economy because they think it undermines the game by creating “an unfair environment where legitimate game play … loses value and is represented inaccurately.” According to the report, wealthy players can now monopolize games, “making it hard for ordinary players to get their hands on the most valuable resources.” (There’s also the little fact that other companies are making a profit off the game-makers’ product.)
The Future Holds: The researchers expect the Virtual Economy to grow even more in the coming years, as digital infrastructure expands in the developing world and more companies get involved in connecting poorer residents with wealthy Western buyers.
Reference: Lehdonvirta, V. and Mirko Ernkvist. Knowledge Map of the Virtual Economy. World Bank Group. http://www.infodev.org/publications.
Image: Knowledge Map of the Virtual Economy
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