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Think Big. Move Fast.

Eric Reis, one of the co-founders of IMVU, posted last week on the three key decisions you have to make when thinking about virtual goods business models:

UGC or First Party content?

First Party – more control, but higher costs and harder to anticipate what users will want

UGC – Massive breadth of content, but have to put systems in place to deal with adult content and copyrighted content

Subscription or a la Carte payments?

Subscriptions – Greater game balance between rich and less rich players, lower fraud rates

A La Carte – Easier to monetize players without credit cards (e.g. teens)

Merchandising or Gameplay?

Gameplay – Virtual goods are functional, part of the core game mechanics, and confer benefit in the game. Demand is driven by game mechanics alone, and requires a delicate balance to ensure that players with money do not always beat players with time, skill and passion.

Merchandising – Virtual goods are not just functional, but also associated with self expression or attention in a noisy environment (see my previous post on the three use cases for virtual goods). This creates potential for greater demand for virtual goods, but requires the creation of a marketing and merchandising capability in the company.

Reis believes this framework can be used to describe any virtual goods business:

You can use these three questions to analyze existing businesses. For example, IMVU is a user-generated, a la carte, merchandising product. Habbo is first-party, a la carte, merchandising. Mob Wars is first-party, a la carte, gameplay. WoW is first-party, subscription, gameplay.

Read the whole thing.