Tuesday, November 10, 2009

How Much for a Can of Whoop Ass?


How much would you pay for a can of Whoop Ass? Regular Facebook users will recognize the Whoop Ass as a popular "virtual gift" in the networking site's Gift Shop. The price is 10 credits. That's $1 in Earth money. For the same price, you can buy a rose, a slinky, a troll doll, or your favorite team's mascot — all virtual. They're nothing more than icons you can post on a friend's page — pixels with a price tag. The surprising thing is how big the virtual goods industry has become. Merchandise-that-isn't-really-there is one the few bright spots in a dismal economy. By one estimate it brings in a billion dollars a year, just in the U.S. To put it in perspective, that's roughly what Americans spend on lipstick or Mini Coopers.
It wasn't so long ago that virtual goods were limited to "weapons" and "spells" that hardcore gamers bought, to the befuddlement of most everyone female or over 30. That started to change with Second Life, the networked simulation game. The currency of Second Life is called "Linden Dollars," with about L$266 to the U.S. Dollar. By that standard, many prices in Second Life are bargains. A Linden Dollar will buy a new hair style or tattoo for your avatar. That sounds really great, until you try to explain to a nonplayer exactly what it is you bought.

One of the attractions of Second Life is that you can play for free. You quickly discover that this is like saying you can live in Manhattan for free — by sleeping on friends' couches. Your Second Life avatar will be homeless unless you fork over $9.95 a month (real dollars) to get a premium account with 512 square meters of land. That's about enough for a small tract house. Intentionally or not, much of Second Life is a dead-on caricature of our society's obsession with real estate. The point of Second Life is to impress your virtual friends, and that generally means building a virtual McMansion. Larger properties are available for sale or auction and yes, there are Second Life home flippers.
"For outsiders, the selling of virtual goods — items with no actual value in the real world — might seem the very definition of a swindle," wrote Claire Cain Miller and Brad Stone in The New York Times. Actually, the virtual product business says a lot about the real-world price decisions we all make. The products may be imaginary but buyer psychology is pretty much the same.

The virtual merchants use a trick familiar to every world traveler. Confronted with an unfamiliar currency, we all splurge and tip more freely than we would, blinded by a smokescreen of exchange rates and prices strictly for tourists. To Americans overseas, yen or lira just don't seem like "real money." That's the reason for the virtual currencies. We normally feel a conflict between the desire to spend and the obligation to save. Spending is fun, and saving is what we do because we'll feel guilty otherwise. But once you buy Linden dollars, credits, or other virtual currencies, you're committed to spend. What else are they for? It's difficult to convert virtual currencies back to real money, and nobody feels a pang of guilt about not squirreling Linden dollars away in a 401(k). The exchange rates of virtual currencies are often intentionally confusing. To convert Linden dollars to U.S. dollars, you have to divide by 266. Much of the time, that's just too much bother. Instead, Second Lifers think in Linden Dollars, which is to say, they take cues from the prices they see posted in the virtual world. Your friend buys an island, and you want an island. It's only money — and fake money, at that.

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