Inside Network recently released a report that the virtual goods market is expected to drive $1.6 billion in revenue in the U.S. in 2010. The market is driven in large part by virtual items sold in social games, which account for $835 million of the total sales projected. While publishers such as Zynga, Playfish, Playdom and Serious Business are hard at work creating the content and engagement mechanisms to drive sales, payments solutions such as Social Gold (online), Zong (mobile), Open Network Entertainment, Inc. (prepaid cards) and the newly launched Kwedit (cash) are striving to help customers purchase those virtual goods seamlessly.
Today, Kwedit launched their new payments services (Kwedit Direct and Kwedit Promise) in partnership with Social Gold. Thousands of online games and virtual worlds currently using the Social Gold virtual economy platform now provide access to the Kwedit service. The service enables players to purchase digital goods online, and then print a receipt with a bar code (or save it to their mobile phone) and pay for the goods at a retail store in cash (or mail in cash via a postage paid envelope). For the millions of tweens and teens in the US without debit or credit cards, also referred to as “the unbanked masses,” paying for virtual currency and goods with cash is the only option, and this new solution will make it easier for publishers to monetize this growing market.
What’s also particularly unique about the Kwedit payments service is that customers are on the honor system when it comes to actually paying for their virtual goods. Customers are asked to pinky swear that they will pay eventually, and if they don’t, then their virtual Kwedit score will decrease (much like a real FICO score) and it will be much more difficult to obtain Kwedit to buy more virtual goods. Does this teach kids about financial responsibility? Possibly.
The Kwedit service is a very unique alternative to direct purchases via a credit card, PayPal, or even a prepaid card. TechCrunch’s Michael Arrington gave the new payment service a glowing review, calling it brilliant. It will be interesting to see how the service performs in the competitive payments market, and whether cash-paying consumers will quickly adopt the model.
Meanwhile, while I play Mafia Wars and, inevitably, buy reward points to boost my experience level and sharpen my attack and defense skills for big boss fights, I’ll be thinking about how these payments solutions are making it faster and easier for me to make those impulse purchases. When I’m just a few simple clicks away from receiving that instant gratification, the term “buyer’s remorse” doesn’t even cross my mind. As the market appears to be on track to exceed last year’s sales of virtual goods by over 40%, I suppose we have the obsessively engaging content and also the increasingly frictionless purchasing experience to thank for this!