• by Shankar Gupta , November 19, 2010

Last week, my colleague Josh Lovinson covered the new world record in the most expensive virtual goods transaction -- $335,000 for a virtual property in "Entropia," -- and the profusion of virtual goods that have been showing up in the gaming space this year.  

This week, virtual goods hit another milestone. "Smurfs' Village," a Farmville-esque iPhone app, unseated the amazing "Angry Birds" at the top of the app charts. "Angry Birds" costs 99 cents, while "Smurfs' Village" is free to play, so the entirety of its sales figures are based on in-game purchases of "Smurfberries," a currency that allows players to speed up their progress in-game. It's fundamentally similar to the mechanics offered by Zynga and a number of other developers on Facebook, allowing users to trade cash for progress.

The swift rise of "Smurfs' Village" highlights the willingness of consumers to engage in microtransactions in a free-to-play environment. Indeed, the game's overtaking of "Angry Birds" seems to indicate that as an aggregate, the players of each game seem more willing to buy things in-game than they are to spend money on the actual game itself.  

As virtual goods become more valuable to consumers, and the practice of purchasing virtual goods in games moves into the mainstream, brands have a major opportunity to provide consumers with a commodity tied to a brand without cannibalizing purchase of their own product. Branded virtual goods in games like "CafeWorld" have already started to crop up, and it won't be long before virtual in-game stores start to mirror real-world stores -- except that consumers will get the top brands for free.