Latin American virtual goods business to hit $517M in 2012

Latin America’s virtual goods market is expected to grow to $517 million in revenues by 2012, according to a market study by SuperData Research and PlaySpan.

The fastest-growing market in the region is Brazil, which had $165 million in virtual goods revenues in 2010. That’s why the market has drawn the interest of social game companies such as Zynga and venture capitalists looking to cash in on an emerging market that is hitting its stride.

On Monday, Zynga launched its own prepaid social game cards in conjunction with Miami-based Mentez, which runs a cash-based payment network in Latin America.

Virtual goods have taken off in Asian online games and in social games on Facebook. Users play these games for free under a free-to-play business model, but they pay small amounts of real money for virtual goods.

The virtual goods market in Latin America is currently $336 million, with Brazil account for $165 million, or 49 percent, of the market in 2010. The market is expected to grow 50 percent to $517 million in 2012. That means it’s going to be attractive to lots of expanding social game companies.

After Brazil, the next-largest virtual goods markets in the region are Colombia at $44 million, Mexico at $42 million, Argentina at $19 million, and Peru at $15 million.

The average revenue per user is highest in Brazil at 85 cents per capita spending per year, well above the region’s average of 60 cents. Brazil has high internet penetration, with 110 million users. The internet population has doubled every  three years in Brazil since 2002.

But in contrast to Western countries, credit cards are not common in Brazil. Based on PlaySpan’s data from its Ultimate Pay payments platform, bank transfers account for 45.7 percent of virtual goods purchases. Credit cards and debit cards are 26.7 percent; prepaid cards are 22.6 percent, PayPal is 4.4 percent and other is 0.6 percent.

The preference for cash opens up major opportunities for developers and publishers to focus their promotions on gifting seasons and pay cycles, said Joost van Dreunen, president of SuperData Research. Karl Mehta, chief executive of PlaySpan, which was recently acquired by Visa, said the data shows that the Latin American market presents developers with very different opportunities compared to the rest of the world. Over time, the region is likely to become easier and easier to monetize.

The companies calculated the size of the market by getting data from the World Bank, the Brazilian census, and PlaySpan’s database of gamers who make payments for virtual goods.