Business,  Marketing,  software

Paying Real Money for Branded Virtual Goods

I was having an interesting conversation the other day with a friend who’s creating a platform for game developers to add brands to a game. They’re building some really cool tech around the idea, not unlike AdWords/AdSense for virtual goods or in-game achievements, both for social and more traditional console games.

I think it’s quite clever on their part, and it feels like a natural evolution of the gaming ecosystem as advertisement starts to creep into the gaming experience. Social gaming has already seen some partnerships with large brands, like the Farmer’s Insurance blimp in Zynga’s Farmville, or deals with charities whereby they reap the benefits of virtual goods sold in the game. Some console games also have deals with advertisers that show brand ads on billboards in a stadium, for example.

But what if you combined a commercial brand with a virtual good that cost real money?

Let’s say you’re playing a sports game and your players are tired, so you need to re-energize them. Well, you can perform some “grind” action, or have them drink water, but you now also have the option to let them drink Gatorade. Drinking Gatorade will give your players an extra boost, superior to water or resting, and will give you a slight edge in the game. The catch is that the Gatorade option costs game credits.

Now some might say that paying for branded goods would be crazy because, after all, advertising is annoying and painful and we tolerate it only so that we can enjoy things like free television. We don’t pay extra to have ads shoved at us. If anything, we pay less when ads are involved, right?

Not quite.

In fact, we, the consumers, pay advertisers all the time. Not only do we buy their products, but we proudly wear their giant logos, and flaunt their designs. Why? Because it signals status. For the same reason that someone will shell out $50 of hard earned money for some awesome suit of armor in a MMORPG, or purchase a limited edition mansion on Farmville, other people will spend $500 or more on a purse because it has Louis Vitton’s logo stamped all over it.

As humans, we are drawn to social hierarchy, and we love status. “Aspirational” brands are just that – something for people to aspire to. Anyone can ride a bicycle. But it takes some real scratch to drive an Audi R8. Cruising down the street with your R8 purring will definitely turn some heads and might even get you laid. In a game, however, its superior performance might help you win the race.

So is it really such a stretch to think that people would pay a premium to unlock a branded virtual good in a game that provided some premium features or game play? I don’t think so. In fact, I believe that branded goods that cost real money could be wildly profitable, assuming they’re built into a game in a way that doesn’t spoil the core game mechanics.

The best part for game developers is that it could evolve into a two-sided market. Will I offer Gatorade or Powerade to my users? RedBull or 4Loco? Depends on which one of them pays for exclusivity. Then you can turn around and sell the branded virtual good on top of that. It’s a win-win.

I haven’t heard of anyone doing this yet, but if any of you know of real life examples of this, please let me know in the comments.