Virtual Economy

Economic experiments in virtual worlds (or, more generally, virtual economies) have been proposed a number of times and also conducted to some extent. A recent addition to the conducting category is “Reciprocity and status in a virtual field experiment” by Andreas Nicklisch and Tobias Salz. In their study, the authors conducted a field study in World of Warcraft, seeking to investigate the role of reciprocity, and the effect of status on reciprocity, in employment relations. Reciprocity here means the observed tendency to react kindly to kind actions, even though such reactions are not enforced. Unlike previous economic experiments conducted in virtual worlds, the authors did not create an artificial setup for the experiment. Below, I summarize and briefly discuss the study and its findings.<!--break-->

In practice, the experiment went as follows: The experimenter (principal) asked the participants (agents) to perform a real-effort task in exchange of a reward. The task in question was fishing in a certain lake for 30 minutes, and the reward was either 4 or 12 gold pieces. The experimenter used two kinds of characters when proposing the task: either a low-level or a high-level character. So two variables were controlled: the reward of the task and the social status (and expected wealth) of the principal. The agents were unaware of participating in an experiment, paid in advance, and asked to deliver the proceedings of the fishing via mail. The agent, then, could choose to accept the reward and not perform the task.

In this case, according to the authors, the two main upsides of using a virtual world as the experimentation field are: first, the possibility to analyze the principal’s status (as measured by the level) in a meaningful social situation and second, the possibility to examine reciprocation rates controlling the effect of skills of the agent. Other features of the virtual world can also be considered beneficial. The main thing that comes to mind is that, true to the field experiment mindset, it is possible to recruit agents to perform tasks in manner that is natural to the environment they perform actions in. I’m not sure if asking a fellow player to perform a task for a reward is a typical thing to do in WoW, but I’m sure it is not the type of action that would never take place.

Control treatments, i.e. the varying of principal’s level and the wages, were carried out on different servers in order to reach participants not aware of other treatment conditions. The use of separate servers may in some cases lead to problematic results, as discussed in a recent Terra Nova thread. This is probably not a problem in this context since, as I see it, the authors are not trying to reach a separate instance of the world. Instead, they are trying to make sure the participants do not participate in multiple treatments. It is unlikely that the experimenter’s actions take place on such a large scale that information on them would spread to other servers. Hypothetically, though, it is possible that the participants are familiar to other treatment variations, one way or another.

What of the results then? Mainly, the authors observed that the behavior of agents is affected by reciprocity in virtual worlds as well. Wage offers are reciprocated with effort, even though such behavior is not enforced. Increasing the wage increases the probability that effort is provided, as well as the amount of effort provided, even if the level of the agent’s skills is controlled. The status of the principal has an effect: high-status principals are less likely to be provided with effort, but the level of effort is not affected by the status. It would seem that the agents evaluate the exchange offer with respect to the status, and thus the expected wealth, of the principal.

The issue of generalization is often brought up when virtual world experimentation is discussed. Reciprocity is a well-known effect, and the study confirms that it plays a role when exchange is considered in a virtual world. So, it confirms behavior that was already known to exist in other circumstances: in this sense, generalization is not necessary. Regarding the effect the principal’s status has on reciprocity, the study seems to confirm some theories on the issue. Whether they generalize on a larger scale is not discussed in the paper.

I think the most important finding is the additional confirmation that the users of a virtual world behave in a manner that is similar to behavior elsewhere. Also, the authors show how sensible field experiments can be run in a virtual world. We'll see if this type of experimentation becomes increasingly popular.

New York Times has an interesting story about Virtual Greats, a company that focuses on bringing licensed content to online environments:

For celebrities, licensing virtual products is a new way to make a buck and stay hip with a young crowd. Snoop Dogg’s manager, Constance Schwartz, said she did not have a clue about virtual worlds when Virtual Greats approached her this year, so she and her team spent a week exploring Gaia Online.

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After seeing that many teenagers were spending their time and allowances there, Ms. Schwartz explained the concept to Snoop Dogg. She said it was an easy sell, given that Snoop Dogg had been one of the first rap musicians to license works for ring tones and voice tones. His only requirement was that all of the goods be "true to himself," down to the hair braids, house slippers and plates of Roscoe's chicken and waffles he regularly eats in Los Angeles.

Virtual Greats styles itself as "the first company to create a platform to bring high-value, copyrighted material into virtual worlds and social networks." When I first heard about them in July, I wasn't too excited about the Elvis license they were pushing, since it didn't sound like a great match with the demographic. But based on the above quote, it sounds like their portfolio has developed a lot since then. According to the story, they now also have Justin Timberlake's signature fedora on Gaia for $3.

Virtual Greats is an offshoot of Millions of Us LLC, a virtual world marketing firm that got its start creating Second Life builds for major brands. It's great example of moving from using online environments as a media to enhance brand value to using online environments as a channel to monetise that brand value.

Some figures on item sales from the story:

So far, the deepening recession has not slowed sales of virtual goods, which executives attribute to people spending more time at home. Gaia Online, a youth world with seven million monthly visitors, sells more than $1 million a month of virtual goods and expects a record month in December, said its chief executive, Craig Sherman. One rival, IMVU, has also had a 15 to 20 percent increase in sales since September.

[...]a Gaia golden halo now out of production sold for $6,000 on eBay, he said.

Similarly, Virtual Greats has learned that it underpriced some items, like the Hulk Impact Crater, which originally sold for 50 cents, then went up sixfold in the Gaia aftermarket. In its several months of testing, Virtual Greats has found that people prefer more expensive items with a brand name over cheaper, generic items.

Via Virtual Goods News.

Dear VERN readers,

I am pleased to announce that I have accepted a position with
Pillsbury, a global law firm with San Francisco roots and a high-tech history dating all the way back to cutting-edge 1880s telegraph cases. I'll be helping establish and build Pillsbury’s new virtual worlds and video games practice. Returning to practice with a large law firm means that I’ll be somewhat less free to comment on virtual law issues than I was while self-employed. As such, this is my final post at VERN.<!--break-->

I will, however, continue writing articles on issues in virtual law; some will be available via Pillsbury’s publications directory, and others will appear in mainstream and industry publications. I have already co-authored an analysis of the implications of China's new virtual items tax rules that might be of interest to VERN's readers.

For more details, please see my final post at Virtually Blind.

Virtual currency issues have been on the table for a while now: Sulake introducing dual currency system to Habbo and Three Rings launching Whirled with three separate currencies. The purpose of this post is not to go into much detail, but to encourage discussion on this issue.

I just quickly wanted to point out what implications different currency implementation currency design choices may have on different sub-business models.

Sub-business models, you ask? Here is just a brief description of this line of thinking. I consider seeing a business model as three-fold a viable way to look at business models in this industry. This perspective basically is derived from user relationship perspective, which is a major business model component (e.g. Osterwalder 2004, Heikkilä et al. 2005), and more accurately; describes what is the goal towards the customer. The sub-models are: Acquisition, retention and monetization. This line of thinking is somewhat established in the discourse surrounding virtual worlds, web 2.0 and social networking services. Blattberg & et al. (2001) coin it as Acquisition, Retention and, Add-on selling, Chinese MMO publisher Shanda coins it as “Come-Stay-Pay” and so on.

Here are some strategies from the top of my head how currencies are and could be used:

Acquisition:

• Referral
  • In Whirled currencies are used as referral fees for users who have recommended the service for other potential users. The referees actually receive a third of all Coins/Bars that the refereed customer uses during her lifetime in Whirled.
• Conversion
  • Free promotional currency
    • In IMVU new users get free promotional credits, which can be used to buy clothes etc. This also “teaches” users to buy items within the service

Retention:

• Encouraging for frequent use
  • Losing assets if idle
    • In Habbo users also get Pixels from logging in every day. This system is somewhat similar with daily quests in World of Warcraft. If you don’t log in or don’t do the daily quest you potentially lose something, be it faction reputation in World of Warcraft or Pixels in Habbo
    • Currencies vanishing if the user does not log in (not sure if implemented anywhere)
• Encouraging for continuous use
  • Earning currency via gameplay
    • In Habbo you earn Pixels (the new currency) from using the service and doing achievements
  • Maintaining world balance (translates to maintaining the game entertaining/engaging)
    • Adds one layer to managing virtual economy
  • Medium of exchange (currencies) potentially adds to the total perceived value (Hsee et al. 2003)
  • Separation between time-currency and bought currency
    • Playing the game is required to obtain items that are only available with time-currency
    • Enables time-spenders to acquire ~equal standing compared to money-spenders
  • Relative amount of obtained time-currency increases as game progresses (mostly in RPGs)
    • Sense of progression (also contributes to frequent use)
    • Enables one segmentation factor of users and has further implications of what items are being offered to differently progressed users
  • Rewarding beneficial behaviour
    • In Whirled content creators can earn currency (Bling) which is exchangeable to real money
    • In Habbo users may earn Pixels from helping other users

Monetization:

• Additional layer to pricing
  • Psychological pricing
    • e.g. odd-pricing
  • Medium of exchange may create illusion of linearity, advantage, and certainty (Hsee et al. 2003)
• Enabled trading between currencies bought with real-money and earned through gameplay
  • Monetizing “time-spenders “ indirectly as money-spenders need time-currency to buy items (Puzzle Pirates)
  • Enables taking a cut from transactions between currencies (Whirled?)
• Items requiring both time-currency and money-currency to buy items
  • similar to above examples
• Mismatch between sold currency amount and item prices
  • Enables accumulation of excess currency to users' accounts
    • Users buy more currency than they use
    • Users might be willing to buy more as the excess is too small an amount to buy more items
• Restricting tradability of currencies (e.g. in WoW there are badges as currency, which are non-tradable and there are items that can only be bought with this currency)
  • Restricts RMT, which might potentially decrease revenues
• Currencies in advertising -> advertising revenue
  • Sell currency to advertiser who gives them out to users
  • Distinct sponsored currency to buy braded goods

There are strategies which can have setbacks as well. For example mismatching amount of currency and item prices might reflect negatively to retention. Also some strategies overlap and might not be logically comparable as such. There are a lot of parallel strategies which could be looked at from another perspective, for example amount of currency obtained from gameplay could as well be described via the usual RPG gameplay design, but as the topic in this post refers to currencies, I tried to cover strategies from the currency point of view.

Other way of organizing this list could have been listing the design choices and then their implications in Acquisition, Retention, and Monetization, as many design choices have an implications in all of them. Perhaps I will make another post with similar layout covering design choices of another dimension of virtual worlds.

I would like to keep this blog post alive and encourage you to join in and submit links to resources and services where currencies are used for several purposes. I will update this list as new suggestions come in.

References:

Blattberg, R., Getz, G. and Thomas, J. (2001). Customer Equity. Boston, Harvard Business School Press.

Heikkilä J., Heikkilä M. & Tinnilä M. (2007) The Role of Business Models in Developing Business Networks, in (ed.), Electronic Commerce: Concepts, Methodologies, Tools, and Applications, Information Science Reference, pp. 221-231.

Hsee, C. K., Yu, F., Zhang, J. and Zhang, Y. (2003) Medium Maximization. Journal of Consumer Research, Inc. 30:1, June, pp. 1-14.

Osterwalder, A. (2004) The Business Model Ontology - A Proposition In A Design Science Approach. PhD Thesis, University of Lausanne.

Virtual World News has now launched a sub-site on news concerning virtual goods, covering issues in a more targeted scope. This is a well reasoned developement as the amount of emerging information is quite huge. Virtual assets sales is also one of the primary topics here at VERN and forms a well grounded, independent perspective to virtual worlds.

"VirtualGoodsNews.com Launches: The Business of Microtransactions, V Goods, Gifts and Items"
"2009 is right around the corner and with it come additions to our family of products. We're pleased to announce the launch of Virtual Goods News, a new blog focused focused on the business of microtransactions, virtual goods, items and gifts. Virtual Goods News coverage spans virtual worlds, games and social networks. You may see the occasional crosspost here. We're so bullish on virtual goods in fact that we will include a dedicated Virtual Goods track at the upcoming Engage! Expo in NYC in March (more very soon). Also, we are expanding our freelance editorial team - recession be damned."

Charles Hudson over at his blog posted an estimate of the virtual goods market size in the United States.

More links to such estimates can be found here at VERN forum. Feel free to add your links.

Virtually Blind periodically runs “quicklinks” — items that are not long enough for a full story, but are worth a click. Here’s the current batch.

The Chartered Institute of Taxation will be conducting a seminar on virtual world tax issues at Second Life’s Depo Business Park on Tuesday, the 2nd of December at 3:30pm GMT / 07:35am PST. Here’s a SLURL. It’s a bit early for U.S. readers, but should be well worth attending.

I just ran across a fascinating discussion of Second Life’s “patent peace” policy from a 2006 listserv post. The post was written by Linden Lab’s Gene Yoon, and it sheds a lot of light on the thinking behind the rather non-standard patent clause in Second Life’s Terms of Service.

Interesting twist in the SLART trademark lawsuit (via Massively). It turns out that the avatar ‘Victor Vezina,’ who Richard Minsky named as a defendant (along with Linden Lab) is the avatar of technology writer Victor Keegan, who writes for guardian.co.uk. Keegan says he “was a pawn caught in the crossfire between Linden [...] and Minsky.”

Last year VB covered a video by Second Life’s ‘Bernard Drax’ of a virtual Guantanamo Bay Detention Camp. The video of the installation is up for an “Every Human Has Rights” media award. Congratulations!

There’s a solid breakdown of the Blizzard v. MDY case (.pdf) from the North Carolina Journal of Law & Technology. The interesting thing about this article is that it sets out a potential argument for appeal based on what the Journal sees as the trial court’s somewhat vague restatement of a key test. Definitely worth a click if you’ve been following the case.

This one’s not directly related to virtual law, but I wanted to highlight Geri Kahn’s new California Immigration Lawyer Blog, because Geri is current VP of Finance of the SL Bar Association, and active in virtual worlds.

Also in SL Bar Association officer blog news, Stephen Wu, the SLBA’s President-Elect, recently posted on the possible impact of an Obama administration on virtual worlds. Interesting analysis.

Just came across a list of the top-50 internet and digital law blogs that includes VB. Lots of good sites on here, including a few I hadn’t heard of.

One more blog note: Sean Kane, one of my co-chairs of the Virtual Worlds and Multiuser Online Games committee of the ABA’s Section of Science & Technology Law, is periodically posting at his new site, Virtual Judgment.

Finally, in case stated-income home loans seemed insufficiently high-risk for your investment profile, some of the usual suspects in the always-entertaining Second Life financial markets are selling securities in Second Life in order “to raise the funds [...] potentially to sue Linden Lab” for incresing the price of some types of virtual land last month; proceeds from the lawsuit supposedly go to investors.

Bubbles, a "rental"Sulka Haro, Lead Concept Designer of Habbo, informs us that Sulake is introducing a dual currency virtual economy model for Habbo:

As of today, Habbo is a dual currency economy. Credits are bought and used to purchase persistent value, and you can earn Pixels by doing Achievements and just hanging around online. We're piloting the change in UK, and if it's working fine, the other countries will get it at some point in the future (as usual).

More details and screenshots below.<!--break-->

 

 

Torch, a "special effect" Habbo Credits continue to be a "cash-money" obtainable with real money. Pixels are a new currency earned through participation and gameplay. True to the dual currency model, the set of items that can be purchased using Pixels is different from the set of items purchasable with Credits. Sulka notes that while Credits are exchangeable between users, Pixels are not yet so. It will be extremely interesting to see how the model works for Habbo and its 10 million monthy visitors.

Interestingly, the items that are purchasable with Pixels have a limited lifetime. Items currently available in the "Pixel shop" are titled "Rentals" and "Special effects", and all expire in one hour. Cash items in Habbo continue to last indefinitely. This is the opposite of e.g. MapleStory, where cash items have a limited duration, usually 90 days, and items earned through gameplay often last indefinitely.

The Pixel shop also allows a very small selection of cash items to be purchased at a discount using a combination of Pixels and Credits.

Minibar, a Pixel discount item Last year, Sulake introduced Ecotron, a "recycling" machine that Habbo users can use to convert 20-60 old items to one new item, effectively siphoning otherwise indestructable cash items out of circulation.

For some discussion on the dual currency model in Korean games, see Oh, Gyuhwan and Ryu Taiyoung (2007): Game Design on Item-selling Based Payment Model in Korean Online Games.

It may also be interesting to compare the dual currency model with what appears to be a triple-currency model in Whirled.

We reported earlier about the 20% tax rate legislation on virtual currency transactions in China. Shanghai Daily has now published an article concerning this legislation and about the fall-out that followed.

 

 

“ASSET prices in the Chinese cyber world rose in the past week and the debate on the tax collection of virtual property trade continued to be hot“

The first and foremost consequence was the increased prices of virtual assets (as I predicted in the earlier post). This, of course, is in no way surprising, but it is interesting to see how the taxation in the end distributes between the sellers and the buyers.

- “Sellers will transfer tax costs to players if the regulator starts tax collection, players complain.“
- “Trade volume is at normal levels but the average price rose slightly in the past two weeks “

If the sellers in fact are able to raise prices according to the full tax rate – 20%, and the amount of sold products did not change, then the whole tax burden would be on the buyers. Probably, though, the amount of bought products would decline and the sellers would, at least, be indirectly affected by declined revenues. On the other hand, if sellers are not able to raise prices at all, they will bear the whole tax burden. Probably, though, the tax burden will distribute with some rate between the seller and the buyer -side. More about these mechanics here.

“After individuals gain income through virtual currency transactions, they should go to the tax department to pay personal income tax within seven days of the day after the transactions. For those who can provide proof of the original value of the property, they will be charged 20 percent of their profits and for those who cannot, they will be charged at three percent of the total value of the transaction.“

According to Shanghai Daily game operators support the legislation. No wonder they support it as it drives secondary market brokers into a tighter spot and makes buying assets from the operators more favorable. In the case of operators who are willing to prohibit secondary market transactions, this comes as good news as well.

After the legislation there has been some discussion about what actually gets taxed. One interpretation is that all transactions, be it virtual-to-virtual or virtual-to-real money get taxed. The other interpretation is that only virtual-to-real money transactions are taxed. In my opinion, the original announcement nor the news articles do not explicitly express whether virtual-to-virtual transactions are being taxed, although some news sites have further gone stating this being the case (e.g. Massively). For example, Steven Davis at PlayNoEvil suspects otherwise.

(Shanghai Daily story via Virtual World News)

So in 2009, Google Lively will be Google Dead-As-A-Doornaily. 

We never got too excited about Lively's current form around here.  I was always confused about how it aligned with Google's core business. Still it's too bad to see the big G moving out of this space and admitting defeat. More news via Google.  A brief post-mortem after the fold.

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Hindsight is always 20/20, but just as Google's entry into virtual world signified something more than it delivered, its exit from the marketplace is bound to strike those who don't grok virtual worlds or Google as something equally symbolic.  As a student of Google and virtual worlds, here's my quick analysis of what went wrong.

Virtual world businesses today are about three things (preferably integrated):

• Make compelling content.  See Blizzard.  If you build a multi-million dollar virtual theme park with cool toys and flying animals that people can ride, people pay for tickets and you can be a virtual Disney.  (And Disney gets this.)
• Sell trinkets.  See Maple story.  If you build something really nice and shiny and give away access for free, you can still make bucketloads of money by selling power-ups, blue hair dye, wedding quests, additional avatars, etc.  (Webkinz gets this.)
• Let them build it and they will come.  The entertainment industry has always underestimated the interest of people in obtaining the tools to entertain themselves.  Web 2.0 is a tricky proposition for a variety of reasons, but it can be done in a virtual world.  (Second Life gets this.)

So how does Google line up against these strategies.

• Making content? Google doesn't actually make new content.  It depends upon other to make new content for it and then it sends out the Googlebots to index that content.  The content Google wants to index is free (from Google's perspective).  It makes the vast majority of its profits by monetizing the Web.  The Web is free.
• Selling trinkets? Google is free.  Its brand is about getting cool stuff (search, mail, maps, books, you name it) for free.  Do you want to pay Google for something (anything)?  Do you want to pay Google for avatar hair-dye?  Should Google actually want you to pay it for avatar hair dye?
• UGC?  This is where Google should, in theory, be able to pull off something interesting.  They own YouTube, after all.  But here's the tricky point: despite what popular pundits may think, virtual worlds and UGC don't always blend well.  This isn't peanut butter and chocolate, it's caramel and fish.  Worse still, Lively launched without almost no tool-set for UGC, and despite that limitation, was immediately showing users popular rooms with sexually-oriented themes.  Flashback to the also-dead Sims Online: "UGC is coming any day, as soon as we can talk the lawyers into it."

But the real problem here, I think, was that Google's core business is contextual advertising based on datamining.  To maximize eyeballs, Google wants to control and monetize things that it does not own (like the Web, all books, your home video collection, your mail, the Earth).  It's pretty darn good at that. 

Lively, otoh, lets Google completely own something little that it can't control or monetize. See a mismatch? You can't monetize and datamine the eyeballs if you can't attract the eyeballs.

Still, despite it all making sense from the outset, no schadenfreude here. More of a mild pathos.

[Links, pointing to the obvious targets, may soon be retroactively added.]

Journal of Virtual Worlds Research, an online journal that started this year, has just published its second number, titled Consumer Behavior in Virtual Worlds. Also, the Journal of Electronic Commerce Research, a more established online publication, has published a special issue on virtual worlds. Most of the articles from these two publications fall into the familiar group of Second Life -based qualitative studies and essays. There are also a couple of surveys. Below, I briefly introduce four of the papers that touch on VERN's topic areas.<!--break-->

In Journal of Electronic Commerce Research, Reina Arakji and Karl Lang theorize about the value companies derive from virtual storefronts. Stuart Barnes and Jan Mattsson measure how Second Life users perceive major brands in a small pilot survey. An interesting result is that experienced users have a more negative perception of brands that have conducted marketing activities in SL compared to less experienced users.

In Journal of Virtual Worlds Research, So Ra Park et al. also discuss brands, pondering what aspects of virtual environments brand owners might use to enhance the value of their brands in customers' eyes. Lastly, in a essay that is close to my own research interests, Jennifer Martin writes about the social uses of virtual goods on which the economic value of the goods is based.

According to Korea Times, MMO publisher Nexon "is preparing to repay users who own paid items" in ZerA, an unsuccessful Korean MMO that is due to be closed in January. The game was launched in 2006 and peaked at 40 000 concurrent users. According to Korea Times, ZerA took three years and 10 billion won (approx. 7.5 M USD) to develop. Plans to launch in Japan were dropped after lukewarm reception in Korea.
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Earlier this year, game publisher Electronic Arts refunded users who had purchased virtual currency in EA Land, the successor of The Sims Online. EA Land was closed down soon after its introduction, but not before many users had purchased "simoleons", a currency which EA had suggested would become exchangeable back to real money at a later date. EA apparently offered the refund only after demands from disappointed users.

I don't know how much legal liability the operators had for the assets they sold in the above cases. Players probably signed away many of their rights when accepting the terms of service. Most likely these are just examples of two different kinds of customer relations management in that situation: pro-active care vs. reactive handling.

Let's assume that either for legal reasons or simply because of a need to maintain good customer relations, an operator decides to refund the users of a virtual item platform it is about to close down. How far back in time should the refund extend? EA Land only existed for five months, so EA simply refunded all currency purchases (note that they also had non-refundable revenues from game time cards). How about platforms that have existed for some time, perhaps deriving most of their revenues from the asset sales?

With services like MapleStory and Cyworld, where assets have a limited duration, the operator can simply stop selling new assets and wait until the old ones expire before shutting the service down. What about services like Habbo, where items have perpetual duration? What is a reasonable lifespan that a user can expect an item to have?

If I don't remember wrong, some years ago Habbo terms of service used to guarantee a two-week lifespan for items. Today they seem to be less explicit on the issue (and interestingly, the UK, Finnish and Japanese versions of the TOS seem at a glance quite different, perhaps reflecting local regulatory differences). In any case, I would think users would find 14 days too short. I am looking forward to details on Nexon's ZerA refund.

(Korean Times story via PlayNoEvil)

We rarely blog about new games and services, but I will make an exception since Whirled by Three Rings seems to be an intriguing concept, design and research -wise.

"Whirled is an in-browser virtual world that is open to player creations and customizations; anything can be uploaded to the Whirled, from simple image furniture to mini-MMO games. Sophisticated avatars, pets, toys and games are coded to Whirled's Flash ActionScript APIs, which support multi-player games with arbitrary numbers of players driven by client or server-side code."

So basically Whirled enables independent flash designers to freely publish and sell games using the Whirled platform, as well as virtual assets within them.

"Gamers play Whirled games to earn Coins, and may purchase a second currency, Bars for U.S. currency using credit cards, paypal, SMS, Target pre-paid cards and other payment methods. Whirled emulates aspects of the success of Puzzle Pirates: part of the power of the business model is that it provides a seamless exchange between player's time and this cash currency, thus effectively monetizing virtually the entire player base, rather than a small fraction. Creators' sales in the Whirled Shop accumulate a third currency, Bling, which can be cashed out for real-world money.Three Rings' Whirled infrastructure is fully operational today: creators are making money from avatars, interactive toys, game items and level packs."

Whirled implements the double-currency system of Puzzle Pirates (another game by Three Rings). The above paragraph hints that this currency system will monetize "the entire player base". I don't know about that, but it attempts it by enabling trading between the currencies. This way, players who will buy currency with real money and then trade that to the currency which is earned through gameplay, indirectly monetize players who are not spending real money otherwise. The driving force for these transactions are limitations in what you can buy with each currencies. I suppose items are set with a price in either or both currencies, meaning that a player needs both currencies to buy needed items. Players lacking time and thus lacking the timecurrency (Coins) trade the bought currency (Bars) to Coins and vice versa. In Whirled, players have freedom of pricing their own products. It will be interesting to see how it will work and what kind of phenomena will follow.

The UGC side of Whirled seems pretty interesting as well. Of course there are other SNS's where players accumulate wealth with UGC like IMVU, Second Life and such, but are more or less socializing oriented. Whirled, though, seems to be concentrated on gaming, and the actual game(s) are generated by users. The creators earn their own virtual currency (Bling) which can further be cashed out and which is the third of the revenue. Other thirds go to Three rings and affiliate who initiates the sale. 

It seems this business model perceives users in three larger categories; time spenders, money spenders and creators, and Three Rings has created the three currencies accordingly.

Sources:The official press release, Venture Beat

 

"The State Administration of Taxation said on its Web site Wednesday (in Chinese) that China will impose a personal income tax of 20% on profit from virtual money. The announcement, which was distributed to local tax bureaus, specifically takes aim at those who buy virtual currency from gamers and surfers and sell it to others at a mark-up. Taxation officials are granted the right to determine the original price of online virtual currency if the individual fails to provide proof of an original price, it says."- Juliet Ye @ WSJ's China Journal

The quotation would suggest that the actual gold farmers would not directly be affected by the taxes, but indirectly, via brokers paying less. It would also be nice to know how Chinese officials determine the original prices.

"The policy would cover China’s legions of online gamers, who can use online virtual currency to buy better equipment and new powers for their online warriors. But it also affects millions of others who use virtual currencies on instant-messaging services and Web portals."

This might be the case in services where the virtual currency is increasingly bought from intermediaries. Yet, I can't see how this affects the average player who buys virtual currency and items from the service operator, while brokers might increase prices due to taxes. I guess the legislation includes more detailed descriptions. Could someone with skills in Chinese language interpret them?

 

Via Massively, via The Wallstreet Journal's China Journal.

Dr. Eyjólfur Guðmundsson, the economist from CCP, HIIT's partner in virtual economy research, has published one more Quarterly Economic Newsletter (QEN) for EVE Online. The latest issue deals with Q1/2008 and can be found here (the previous ones are Q3/2007 and Q4/2007). The latest issue includes updates to some of the indices that have been published in the past. In addition, there's some information on one profession that the characters can take in EVE, that is, on manufacturing activity.

The share of characters that were engaged in some manufacturing activities during the Q1 of 2008 was 20 %, but only about 4 % of characters were doing manufacturing jobs on a continuous basis. So, if specialization is defined in this way, only a small portion of characters were actually specialized in this particular profession.

By the way, the QEN actually discusses "produc