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VGS 09: Asian Virtual Goods Worth $7 Billion in 2009

In a talk at the Virtual Goods Summit 2009, +8* CEO Benjamin Joffe reveals his estimates for the whole of the Asian virtual goods market, as well as the U.S. -- with predictions for the future.
The Asian virtual goods market is estimated at $5 billion in 2008, and could reach $7 billion in 2009, according to Benjamin Joffe, CEO of +8* (Plus Eight Star), a consultancy firm dealing with bringing Asian online market concepts to Western companies. Joffe explained his estimate during a presentation at San Francisco's Virtual Goods Summit 2009, highlighting the state of the market in Korea, China, and Japan. Says Joffe, "This is an estimate I came up with a few months ago... Some calculations with online gaming and social networks, I said about $5 billion." That number could increase to $7 billion by new calculations, although he says it's worth noting that "Asia is already more than the sum of North America plus Europe, in terms of internet users and mobile users." These markets are drastically different and much larger than the U.S. at present, he says. China alone will have a $3.5 to $4 billion online games market for 2009, for instance, according to Joffe's numbers. Japan has two mobile-only social networking services that draw 70% of their revenue from virtual item sales. The top social network in Japan, Gree, has a 60% profit margin -- the top SNS (social network service) profit margin globally. Only 25% of its revenues come from advertising; 75% are derived from games. This year, the U.S. market will be worth $1 billion, but notes that "the US market potential is somewhere between 3 to 35 billion dollars," says Joffe, somewhat jokingly. 
 The question of which market delivered virtual item sales and microtransactions first is irrelevant, he says. Though the U.S. did some pioneering work, "Asia was the first place where the market reached over $1 billion dollars." And while the top social games on Facebook are currently Western-developed, Joffe is sure that Asian competitors are coming with the big guns. One of the top 10 publishers for monthly active users, 6Waves, is based out of Hong Kong. China's Rekoo and Elex are at 30 and 36. "Execution trumps creativity in that space," says Joffe.

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