Would You Use Real Money to Buy Virtual Products?

By Miranda Marquit (Staff Writer), on February 24, 2010

I recently read an article in The New York Times (hat tip for bringing it to my attention: MAPping Company Success) about the increasing trend of using real money to pay for virtual goods. The article also addresses the rise of credit, via a company called Kwedit.com, to pay for virtual purchases online. This article got me thinking about how we use money.

Photo by Ivan Walsh via Flickr

Paying Real Money for Virtual Goods

We live in a society now that pays real money to purchase virtual goods. (The nature of our fiat monetary system, and whether it constitutes “real” money is a subject for another time; for this discussion, we’ll just accept that it is real.)

According to Inside Network, a research firm quoted in the article, last year people paid $1.03 billion for products that don’t exist outside of the virtual world. These are products like the magical armor my brother-in-law pays $10 for in his MMO so that his avatar can be better protected when he goes on raids, and the pet food and accessories that can be bought in kids’ online worlds to help them care for their furry virtual friends.

In Second Life, there is even an exchange rate between Linden dollars and U.S. dollars. You can use U.S. dollars to “buy” Linden dollars in order to make purchases in Second Life (you can also buy gold to make purchases in a variety of MMOs). You can even convert your Linden dollars — money you might have earned from a virtual store, selling virtual products — into U.S. dollars. Of course, it takes a lot of Linden dollars to equal one U.S. dollar. But the fact remains: The virtual economy is expanding.

But would you pay real money to buy something that doesn’t actually exist in the real world? The only thing you get out of this type activity is the feeling of enjoyment. And that is the point. The New York Times article explains the purpose of these games:

Systems like these — known in the industry as nurturing games — are built to require regular investments of time and, for fullest enjoyment, money. … They feature living digital property — the crops in FarmVille or the fish in Happy Aquarium — that can die without care and feeding.

If you become attached to the game, and want to excel, and want to experience more, you have to spend money. Personally, I wouldn’t spend money on virtual goods that I couldn’t hold in my hand. But is it any different than spending money on the fleeting enjoyment of good meal at a restaurant, or the relaxation and well-being that evaporates two hours after a massage? As long as you live within your means, and are using the money from your entertainment budget, is it really hurting anything?

Using Kwedit for Virtual Goods and Services

Another item featured in this article is the fact that it is possible, in some online worlds and games, to use credit. Kwedit.com provides a “Kwedit Promise” that you can make use of to buy virtual goods and services. You can fulfill your obligation by using a credit or debit card later, or by sending payment in a special envelope. The point, of course, is that you can instantly get what you want in the game, without interrupting play in order to get it.

And now, through a deal with 7-11, you can actually print out a barcode and take it to the convenience store to pay. This new method actually makes it possible for children to make a “Kwedit Promise” and then fulfill it without parental involvement. They can just schlep down to the 7-11 with their allowance and fulfill their Kwedit obligation.

Of course, Kwedit can’t really enforce these payments in the real world; it’s not like this is real credit. And Kwedit offers its own scoring formula, so that users start out with a low limit, only able to get a few dollars. As they make payments, though, they can have access to more Kwedit. I can see some of the value in such an arrangement, since it has the potential, to a certain degree, to teach children about responsible credit use. They learn that if they don’t meet their obligations, they will be limited as to what they can do in the game.

But it also perpetuates the idea of easy money and instant gratification. It’s easy to get Kwedit, easy to charge, and kids don’t have to save up to buy anything in the game. Plus, they are using real money to buy virtual goods. And who’s to say that something like Kwedit won’t someday be used as part of your credit profile? After all, lenders are already beginning to look at Twitter and Facebook for clues about your financial habits. Perhaps someday the real money you spend in the virtual world will come back to haunt you in the real world.

What do you think? Would you spend money on virtual items? And is Kwedit a good idea?

Recommended articles:

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• When to Use a Credit Card Instead of a Debit Card
• Using Credit Cards To Rebuild Your Credit
• Can a Prepaid Credit Card Help Your Credit Score?
• 9 Job Hunting Tips For Facebook Users
• How To Talk To Your Partner About Money

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Miranda is a journalistically trained freelance writer and professional blogger working from home. She is a contributor for Mainstreet.com, Personal Dividends and several other sites. You can also find her at The AllBusiness Personal Finance Corner.

All posts by Miranda Marquit (Staff Writer)

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