In Asia the use of micropayments in games has resulted in a booming internet economy. It is suggested that the current market in Asia is about $5 billion per year. People buy gifts for friends, clothes for avatars and e-pets all for tiny amounts of money but will millions of users it all adds up.

Europe has also had a significant virtual market related to mobile (ringtones and music) and also now virtual worlds/games.  A great example is the Stardoll site which has 16 million registered accounts. The revenue model has not been advertising instead the site relies on virtual sales where users buy clothes for avatars and integrated sponsorship.

The US been much slower on the uptake. This year has seen a greater deal of interest and reports say that virtual good spending has nearly doubled this year to just over $1 billion. Given the size of the market in Asia there could clearly be room for significant growth here. So investors are looking on with interest!

Paypal is the largest payment processer of virtal transactions. It has nearly a 80 million active users in 190 countries using 19 currencies. Up until now it has had a fairly clumsy interface with Facebook the main social networking platform in the west. This is an area that has been much more developed in Asia with very easy to use payment systems being the norm.

However this week Facebook have released a new PayPal focused API which means that developers will be able to process PayPal payments on the page instead of making them leave to go to PayPal’s site. Facebook are already making significant amounts of money using virtual goods. By making transactions simple and quick to do Facebook must be set to make further gains in this area.

The rise of virtual goods is interesting in that it shows a real shift in culture in terms of the way people perceive their online presence. It all goes to show that being online is important to people. Businesses need to be where their customers are and increasingly this is clearly online.