• by Mark Walsh  @markfwal, August 17, 2009

With ad-supported models for social networks still unproven, the sale of virtual currency and virtual goods has become an increasingly attractive option for social sites.

myYearbook is among those that are already embracing the virtual economy. The teen-focused social network introduced its own virtual currency called Lunch Money in 2007 to drive engagement and boost game play. Users can now also buy Lunch Money directly or earn it by taking a survey or other some action on behalf of marketers.

The site's Lunch Money Theater, for instance, lets people earn currency by watching movie trailers and filling out a brief questionnaire afterward. Movie studios and other advertisers pay myYearbook on a cost-per-action basis for users who take up their offers.

Extending that strategy, myYearbook Monday formally unveiled a new subscription service providing special benefits including monthly virtual currency allowances, higher currency earning power, and exclusive virtual gifts. The site is selling the new VIP Club subscriptions at three levels for $6.99, $9.99 and $19.99.

"The freemium strategy has been an extremely successful part of myYearbook's monetization strategy, and we remain bullish on the additional revenue possibilities that this model will bring," said Geoff Cook, CEO of myYearbook, in a statement. The company says its virtual currency and goods business now accounts for one-third of revenues, with overall sales up 120% so far this year over 2008.

After quietly launching the VIP Club service a couple of months ago, Cook said the uptake of 2% to 3% of myYearbook members has met expectations, since only a small fraction of users are likely to sign up for the premium program. He estimated 5% enrollment as a realistic goal for converting users to the paid service.

The freemium model typically calls for as little as 5% to 10% of users to pay for an upgraded version of a free service for the effort to break even or make a profit.

Started in 2005 by Cook's then-high school-age siblings, David and Catherine, myYearbook caters mainly to the 13- to 17-year-old demographic with a social platform featuring user profiles and sections covering games, quizzes, TV, dating and charitable causes, among others. The site had about 5 million unique U.S. visitors in July, with traffic flat over the last year, according to comScore figures.

myYearbook has tried to set itself apart from larger rivals like Facebook and MySpace by positioning itself as a place to meet new people rather than connect with an existing group of friends. So in a recent user survey, "flirting and dating" ranked as the most popular activity on the site, along with playing games and having fun.

It also showed that 91% of myYearbook users are also on MySpace, and about two-thirds are on Facebook. Less than one-third are also on Twitter, with survey results backing up the prior finding that teens just ain't digging the microblogging service.

Like myYearbook, Facebook is also expected to expand its virtual currency and virtual gift business to help bolster its advertising revenue. The social network already has a virtual credit system ($1 buying 100 credits) for procuring items in its virtual gift store.

Facebook this spring confirmed that it would begin testing a "universal" virtual currency that would also let users make purchases within applications on the site. Social network hi5 launched a similar program in March.

Developers this year will generate an estimated $300 million to $500 million in revenue from transactions within apps on Facebook that currently offer payment options via credit card, PayPal and other providers such as Offerpal Media and SuperRewards.