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It’s hard enough for online retailers to get consumers to spend money on real goods and services — but one Cambridge company is betting that sites will want to get into the business of selling virtual goods.
Venture-backed Virtual Goods Market Inc., which does business as Viximo, provides a white-label virtual goods store with gifts and personal accessories designed to complement online identities and messages. When Viximo launched in 2007, the company’s founders thought publishers of virtual worlds like Second Life and massively multiplayer online role-playing games would be among its core customers, said co-founder Brian Balfour. However, the company is getting better traction in much more mainstream verticals, Balfour said — places such as dating sites, casual games and online social networks, where virtual goods are used as gifts, incentives and add-ons to user profiles.
U.S. users of online social networks have been exchanging virtual goods since at least 2007, when the practice emerged on Facebook. Formal estimates of the market size are unavailable, but many online social media companies are looking to virtual-goods sales to supplement sagging ad revenue.
“They want to get started with another way to monetize their user base outside of subscriptions and advertising, which you could argue has yet to be proven in social networks,” said CEO Dayna Grayson. A principal at Viximo investor North Bridge Venture Partners, Grayson took the helm at Viximo in April, replacing Rob Frasca.
Frasca had led the company in its early going and left in April. He said he is now working on a new startup company but declined to describe it, saying it is in “stealth mode.”
Viximo plans to begin a search for a long-term chief executive soon, Grayson said. In April, the company announced a $5 million venture investment from Waltham-based North Bridge and Boston-based Sigma Partners. The company aims to become a marketplace for virtual goods, connecting end users with proprietary and third-party content in a platform packaged for publishers with payment and analytics software.
A handful of companies outside the realm of online worlds and immersive games are already using virtual goods in novel ways beyond profile customization and online gift-giving. The Pan-Mass Challenge, a bike ride benefiting cancer research, last month launched an avatar-based fundraiser networking application on its website. Sayagle Inc., a location-based services provider, launched in private alpha last month, has future plans to reward frequent users with virtual ‘pets,’ endowed with artificial intelligence designed to fetch and filter desired goods and services.
The American Red Cross has held fundraising events in the 3-D virtual world Second Life, raising money through the auction of donated virtual goods, said John Lester, a customer strategist in the 30-person Cambridge office of Second Life publisher Linden Lab Inc. “These synthetic environments, the things that happen in them are very permeable,” he said.
The expansion of virtual goods into new online areas should be expected because it’s no different than any other creative work online, said Eric Rice, a Silicon Valley-based new-media consultant who spent four years building environments and designing virtual goods in Second Life.
The value of virtual goods shouldn’t be dismissed, he said. “If you hate Second Life, that’s fine,” Rice said, “but just realize when you’re doing all this stuff on Twitter and you start customizing your blog theme, you’re doing the same thing.”
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