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Online Game Virtual Goods Sales to Double by 2014

Video games had been the domain of teen males in the past, but this is no longer the case. Two distinct developments have changed the player demographic of online games. First, the development of social networking sites, such as Facebook. Second, the increasing prevalence of mobile smartphones.

In the past, within the U.S. market you had to pay $30 to $50 for a game -- or $20 per month for a subscription -- but now you can play them for free, thanks to the rise of the virtual goods revenue model.

This transition has driven the number of social networking and online worlds (SNOW) accounts beyond 10 billion in 2010 -- with nearly 4.5 billion of those considered active accounts, according to the latest market study by In-Stat.

"The virtual goods revenue model is one of several mediums that SNOWs use to generate revenue," says Vahid Dejwakh, Industry Analyst at In-Stat.

The basic premise is to allow everyone to create an account and play for free and then offer users the option of purchasing virtual goods to be able to move up and advance in the game or just to have more fun.

This model is sometimes used exclusively, though it is often combined with the more familiar subscription model, where subscribers pay a monthly fee to have access to exclusive content. Apparently, SNOWs also generate a substantial amount of revenue through advertising deals, from banners to branded goods offers.

In-Stat's latest market study findings include:

- The top 10 virtual goods companies earn 73 percent of current worldwide revenues.

- The Americas and EMEA regions now have grown to account for well over a quarter of all virtual goods sales. However, Asia-Pacific still dominates the global market.

- Online gaming and social networking will drive virtual goods revenue over $7 billion in 2010.

- The emergence of social and casual games on social networking sites and mobile phones has created a 2D virtual goods market that exceeds $2 billion.

- In-Stat forecasts total virtual goods revenues will more than double by 2014.

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