Will hi5 Virtual Goods be the Real Billion Dollar Idea?

hi5 entered into the virtual currency space late last year, and it seemed like an all around good move for the social network. Having now delved into the world of virtual gifting, enabling easier virtual exchange was achieved by the offering of hi5 Coins, which can be applied to a great number of things representing supply and demand through the network in this sense. So where does that leave hi5 in the grand scheme of social networks? VentureBeat seems to think that virtual gifting could be he jackpot for hi5.

There are a few reasons why this could be the case. For starters, virtual gifting offers an opportunity to create some revenue and a business model beyond advertising. It seems like a no-brainer, given the necessity to create multiple streams of revenue for a good portion of web-based companies, along with the success of other virtual worlds and virtual gifting systems seen in the U.S. and in several Asian countries. What could be considered a web 2.0 social network in countries like China or Japan means that a service often comes at a premium, as the advertising market doesn’t sustain a web-based company as expected in the U.S.

And the reliance on advertising dollars is shifting in the U.S. as well. As the market has led to layoffs, a decline in venture capital and budget cuts across advertising campaigns, many web-based companies have turned to charging for premium services even more readily than before. Finding a way to easily fit that into an existing social network can be beneficial for companies like hi5 to not only stay in business but to grow as well.

Growth could eventually lead to dominance, and this is likely a goal for hi5. On a global scale, hi5 is among the more prominent social networks, and virtual gifting makes it that much more competitive with the likes of Facebook, MySpace, Friendster and Bebo. As virtual goods continue to be a booming business, there’s no reason for hi5 to not get in on the act. What we’re left with is a ready potential for an entire marketplace to be launched around a single network’s currency.

This is something Facebook and MySpace have been talking about for years, and it’s something that’s already been well established in virtual marketplaces like Second Life and Habbo. Moving a virtual currency beyond virtual goods, however, merely expands the potential of a given social network to become a centralizing economy for third party applications, services, direct sales and marketing, and user-generated buying and selling.

Having an ubiquitous platform by which to achieve such a centralized economy is something many companies have gone after, including Yahoo and eBay. hi5 has taken steps in this direction by enabling users to donate to Kiva through its network, and the possibilities beyond this are endless. Having such a platform supported in a cross-network sense, however, is an issue likely to be tackled by a third party developer.

It’s the cross-network potential I’m interested in exploring, for the expression and exchange of virtual goods and even services, though this may not come any time soon. We’re still struggling to see a cross-network cooperation that encourages a seamless experience for end users, though we’re working towards this in many ways, laying the groundwork even more for virtual goods to become a viable alternative to the direct advertising model.