Incoming Viximo CEO Sees a Burgeoning Economy of Virtual Goods

Online publishers who want to let their users exchange virtual gifts—think singing Santa e-cards at Christmas or animated hearts for Valentine’s Day—can turn to Viximo, a two-year-old startup in Cambridge, MA, for both the virtual goods themselves and the microtransactions system needed to distribute them. And now Viximo is turning to a new leader to spearhead its expansion.

The company announced today that Dale Strang, an online media and advertising veteran, has taken over as CEO. Strang replaces acting CEO Dayna Grayson, a principal at Viximo backer North Bridge Venture Partners, who had stepped into the CEO role after the departure of Viximo’s first CEO, Rob Frasca, last spring.

A virtual good is any digital object—a video, an icon, a piece of clothing for a game avatar—that helps people express themselves in an online interaction, add bling to their online persona, or increase their enjoyment of a game. U.S. consumers spent $1 billion on such items in 2009, according to Inside Network, a market research company focused on Facebook and social gaming sites. Strang says he sees these purchases as a potential substitute for dying revenue streams (such as subscriptions) in the publishing world.

“In the print world we used to take it for granted that users were willing to pay for certain interactions,” Strang tells Xconomy. “They’d buy a copy of a magazine, for example, or a subscription. That made for a healthy, balanced business model. But the Internet hasn’t had that. I view the virtual goods microtransaction explosion as an answer for that.”

"Girl's Best Friend" virtual gift

Strang says more and more online publishers are looking at online communities where there is a brisk trade in virtual goods, such as MySpace and Facebook, and deciding that they want to build their own virtual economies. But it’s harder than it looks, he says.

“Some people have implemented an online currency, but they can’t quite get it right. Other people may have problems integrating their currency with a payment system. Others may have huge holes in the content that they provide. The strategy that has evolved for Viximo is to do all the hard parts for our partners, while they do their main job, engaging with the audience.”

Viximo’s clients have 60 million network members in aggregate, with social networking sites BlackPlanet.com and SmartDate.com and sports site FanIQ among the newest users of the Viximo platform. The startup offers customers a soup-to-nuts solution, including a huge catalog of virtual items designed by freelance digital artists; currency systems that let people buy virtual currency with cash or earn rewards through various online activities; payment systems that ensure that the money from currency purchases makes it back to publishers; and analytics software that shows publishers which items are selling best.

Just how “micro” are the microtransactions involved in virtual goods exchanges? That varies. Interscope Records, the label behind rock singer/songwriter phenom Lady Gaga, uses Viximo’s technology to power the Lady Gaga Gift Shop on Facebook. Most items in the store, such as an animated picture of Lady Gaga wearing TV-shaped sunglasses, cost … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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