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Virtual goods offer an alternative to material consumption as social lives move to online networks

26 October 2009 Aalto University

Millions of people are spending real money on virtual clothes in online hangouts, digital items in multiplayer games and presents for their friends in social networking sites. This digitalisation of consumption is an inherent consequence of the increasing involvement of communication technology in everyday social activities, says Helsinki Insititute for Information Technology HIIT Researcher Vili Lehdonvirta. Lehdonvirta's thesis "Virtual Consumption" will be examined on 30 October at Turku School of Economics, Finland.

- You don't have to be an Internet addict or live in an online community to appreciate virtual goods. Today, around 10 percent of users in a typical online service are likely to be spending money on microtransactions, such as virtual items and gifts. Much of this spending relates to social activities involving friends and family, says Lehdonvirta.

In public discourse, spending real money on virtual goods is frequently dismissed as an irrational fad or as a result of abusive marketing. But Lehdonvirta's thesis suggests that the fundamental drivers of virtual consumption are found in individuals' social and hedonic motivations.

- People buy virtual goods for the same reasons as they buy material goods. In online spaces, virtual goods can function as markers of status, elements of identity and means towards ends in the same way as material consumer goods do in similarly contrived physical spaces, says Lehdonvirta.

In his doctoral thesis, Lehdonvirta also considers the economic and ecological consequences of the digitalisation of consumption. According to Lehdonvirta, the present economic downturn may turn out to be a boost to virtual consumption, because consumers spend more time at home and favour small purchases over large ones. The ecological sustainability of virtual consumption depends on whether it continues to spur additional computer hardware purchases or whether it substitutes material consumption by providing an alternative use for money.

- From a macroeconomic perspective, it does not matter what consumers buy, as long as they keep on spending. Virtual consumption might offer an ecological way out of this consumer society's dilemma, says Lehdonvirta.

According to Lehdonvirta's thesis, people in East Asian countries such as Korea, China and Japan have been quicker to adopt virtual consumption styles.

- What is considered as an appropriate way to spend your time and money varies between cultures and changes over time. Perhaps in three years' time, virtual consumption is considered rational in the West, and the rationality of filling your house with expensive objects starts to be questioned, ponders Lehdonvirta.

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