Evan Schuman's StorefrontBacktalk

It might be the ultimate in retail technology: A way to make huge profits by selling things that do not need to be acquired, stocked or shipped. But these items—perhaps a diamond-lined collar for a virtual pet or a special power in a shared game—are becoming big money. Virtual goods sales are projected to hit $5 billion this year, according to The New York Times.

But virtual goods are hardly free. The paper of record said the revenue was “all for things that, aside from perhaps a few hours of work by an artist and a programmer, cost nothing to produce.” Would they have said the same thing about a bestselling—albeit basic—applet? What is software other than the work of artists and programmers? The more important thing about virtual gifts, though, is what they say about the gift buyers. As Winston Churchill’s Web designer said, “Never before have so many spent so much on so little.” Is this pent up demand for immediacy? Entertainment? Is it a sign that consumers are now ready to embrace micropayments? Regardless, $5 billion is nothing to virtually sneeze at.