#virtualgoods

I just saw that Forbes has (rightly) compared Zuck to Ben Bernanke (head of the Federal Reserve), claiming that Facebook is analogous to a central bank. The reason being: Facebook Credits. They are $5 for 50 with which you can buy all sorts of wonderful things.

The basis of the story is that Facebook Credits have a variable exchange rate and drive a virtual economy. Facebook is estimated to make roughly half a billion dollars in 2011 from the currency, this is 11% of Facebook revenues that year. The point that Forbes makes is that Facebook creates and controls currency values within it's own environment, much akin to the Federal Reserve.

This is yet another example of why Virtual Goods are Good. These are the new paradigms for the coming wealth revolution. A virtual economy trading with virtual currency and virtual goods is exactly the same as the information revolution, i.e.: when the printing press made it affordable and profitable for the masses to read. This is simply the next step of that momentum.

Facebook's virtual economy is probably a little smaller than Barbados's economy. If they were to cut down on transaction fees, the currency will likely be valued by more online merchants, stemming it's growth.

You probably remember that story from a couple weeks back of the guy who paid $16K for a virtual sword for MMORPG, Age of Wulan. I bet you were thinking how much of a tool he must be, right? About that... he purchased what is known as a virtual good, m'kay.. projected to be a $2.9B industry this year! - Not such a tool after all!

In-stat reports the industry's staggering 3-year revenue growth-rate composite of 52% (2007-2010) is expected to double by 2014. I mean really, virtual goods is just as big as sporting goods! If this makes you uncomfortable, let me reassure you that virtual goods have intrinsic value in the natural world:

Virtual goods exist only as information; not real you say, two words for you: Maxwell's Demon. This thought experiment, devised by James Maxwell in the mid-19th century, introduced the notion that information could be treated as energy. Well guys, Nature published an experiment, confirming this to be true. Virtual goods = Information = E = mc² = Tangible goods. Hope that makes you feel better.

Besides, if you hold Zynga (NYSE: ZNGA) you are profiting from the revenues of virtual goods already. Don't hate on virtual goods and remember -