With Sales Of Virtual Goods, The Reality Is Serious Revenue
CORNER SHOP: PAGEFAD LLC
By JANICE PODSADA | The Hartford Courant
January 07, 2009
A dollar doesn't buy much these days, but at a fantasy sports website run by PageFad LLC, a fledgling Hartford tech firm, a buck or two can buy an energy boost for your team or a sneak peek at the competition.
The company's website features six sports games, but much of the firm's profit is made from the sale of "virtual goods," items that cost real money but exist only in cyberspace.
The 10-month-old PageFad offers a twist on the sports fantasy concept: Users can turn friends on social networking sites such as Facebook into athletes and assemble them into a sports team at onlineathletes.com, the company's gaming site.
Competing in any of the online tournaments is free, but Adam Alfin, the company's 27-year-old chief executive, hopes you'll skip the latte and instead buy your online team a pair of virtual binoculars for $1.25 to check out the opposition. Or pay $2.50 to give your team more energy.
"When you buy an item, you'll see one of the on-screen icons light up," said Alfin, PageFad's co-founder.
Who's buying these online goods? Young, computer-literate and mostly male customers from around the world, Alfin said. He said his site's 3 million registered users have put the company on track to gross $1.2 million in revenue in its first year.
Seventy percent of that amount is derived from the sale of virtual goods and virtual currency, which can be used to expand your team's virtual stadium or even to bribe a referee, Alfin said.
Last year, Americans spent an estimated $200 million on virtual goods, including designer jeans for online avatars and virtual kibble for their virtual chihuahuas. Worldwide, sales total more than $2 billion, analysts estimate.
"Compared to other kinds of entertainment, most virtual goods are really, really cheap. ... Most items cost from $1 to $20," said Charles Hudson, a social games developer in Mountain View, Calif., who tracks the virtual economy. The sale of virtual goods is steadily increasing and expected to double in the next few years, Hudson said.
"We're still in the first generation. People are continuing to devise more ways to create revenue streams," Hudson said.
Facebook currently sells more than 400 virtual items and gifts, from jewelry to cupcakes, priced at about $1 each. Supplies are limited, and the selection changes regularly.
PageFad's virtual goods can also be bought with credits, which can accumulate when registered users complete an online survey, for example, or sign up for a service from one of the company's advertisers, which include Blockbuster, Netflix, Sony Bravia HDTV and the iPhone 3G, Alfin said.
Last May, Alfin, co-founder Joshua Viner, 21, and founding team member Robin Weston, 24, raised $500,000 from angel investors. The sum allowed PageFad to move out of Alfin's West Hartford home into a 2,000-square-foot office in downtown Hartford and hire seven full-time employees to expand the company's offerings.
"We're developing a sports game application for iPhone and Blackberry users, and we're adding more virtual goods for our users to buy," Alfin said.
Hudson said the recession is unlikely to dampen the growing appetite for virtual goods.
"In the virtual world as in the real world, people want to accumulate things, keep up with the Joneses and improve their social standing," he said.
Reprinted with permission of the Hartford Courant.
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