How You Can Win In The Digital Goods Marketplace

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Photo: Wikimedia Commons

There’s no question about it, content is going digital.Apple’s recent announcement that it plans to take a 30 per cent cut from publishers for their digital content has sparked a heated debate around the best way to pay and get paid for digital content.

While I’ve already shared my thoughts on Apple’s plan (in short, it’s a lose, lose for publishers and
consumers), I think there’s another related and timely topic that warrants some attention as well.

People talk a lot about ‘traditional media’ moving to digital as everything from books, to magazines,
to newspapers are becoming readily available in a digital format. What many fail to realise is that the
fastest growth is being seen by the pure play digital content providers.

It’s the World of Warcrafts and Zyngas of the world that are on the cutting edge of monetizing digital
content, not those in the music or news industries. Zynga is only a four year old company that was
founded in 2007 and is a major PayPal merchant. With the Game Developers Conference set to kick-off
in San Francisco next week; in-game monetization will certainly be a hot topic.

One of my favourite anecdotes is that John Deere sells a few thousand tractors each year, meanwhile,
FarmVille sells something like 500,000 tractors a day! This illustrates a fundamental difference in making
a virtual vs. physical sale.

When it comes to selling physical goods, the challenge is ensuring you convert at checkout. Making a
sale on a virtual item requires convincing someone to buy something in the first place. This can only be
achieved by providing in-context offers and making the purchase process dead simple. Our open web
approach and PayPal for Digital Goods offering allows us to do just that.

The result?

We saw $3.4 billion in PayPal Digital Goods TPV in 2010 (a more than 50% year-over-year increase)
and our digital goods optimised product only became generally available in January. A recent report
from Inside Virtual Goods found that PayPal processes about 50 per cent of all direct payments for
virtual goods within social apps and games. That’s with the old product, imagine what it will be like
now that we have a solution that’s been optimised to solve the specific problems faced by digital goods

The bottom line is that while Apple and Google are making media headlines for their walled garden
approaches, game publishers and other digital content providers are making real money today by
teaming with PayPal to sell hundreds of thousands of virtual items every single day.

Perhaps it’s time to start following the leaders…

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