It may be one of the least known billion dollar markets. Virtual goods are the items purchased inside of an online community. Some virtual goods are decorative while others are functional. So, if the community is a car community, users would spend real money to buy shiny new rims to show off to other users. Or, a user could purchase a badge that furnishes them with extra privileges in that virtual world.

Representatives of four companies that are successfully making money from the sale of virtual goods spoke on the first panel at the Virtual Goods Summit this morning:

Tencent is a publicly traded Internet community that branched out from a Chinese instant messaging community.

Neopets was purchased by Viacom's MTV Networks two years ago and now there are 208 million virtual pets in the community. It's revenue is mostly derived from advertising but the company is experimenting with subscriptions and merchandising.

Habbo Hotel is operated by 3i and Benchmark-backed Sulake of Finland. Its a social virtual world where about 15% of the users pay for special clothes and furniture. It employs 200 full-time community managers.

Nexon is a privately held Korean company that recorded $230 million in revenue in 2005. 85% of its revenue is derived from the sale of virtual goods in two of its virtual worlds.

For more on the Virtual Goods Summit, see:
Peter Magnusson
Ralph Koster

Tags: habbo+hotel, vgsummit2007, vgsummit, neopets, 0700, nexon,via, vc, venture capital