Most APAC digital goods sold outside region

Some 97 percent of Asian digital goods are sold to consumers outside of region, highlighting how virtual goods have opened up global marketplace to regional content providers, says PayPal exec.

Some 97 percent of payments for digital goods offered by merchants in Asia-Pacific were sold to customers outside the region, demonstrating that the World Wide Web is now a truly accessible market for content providers in the region.

Referring to payments transacted by PayPal, the company's vice president of global product strategy, Sam Shrauger, noted that in comparison, in the first half of 2010, total cross-region transactions from Asia-Pacific merchants clocked in at only 69 percent.

And the digital goods market is expected to boom in the coming years, Shrauger said in an interview with ZDNet Asia. Citing further figures from GigaOM Pro, he noted that the global digital goods market will more than double in four years, growing from US$17 billion last year to reach US$36 billion in 2014.

The company defines digital goods as items that were previously distributed physically but have since been digitized and can be distributed online. These product categories include music, videos, newspaper, magazines and games.

While PayPal processed US$2 billion worth of digital goods last year, this product segment still accounts for only 2.7 percent of total payment transactions which totaled US$71 billion.

Experiment, experiment, experiment
Because digital goods is still a relatively new category, Shrauger advised content providers to experiment on ways to monetize their products.

Digital goods, he said, are changing business models as well as the way users consume content.

Some merchants may see digital goods as a threat to their business but there is tremendous opportunity as the Web allows content providers to package and monetize their goods differently, he noted.

Pointing to music as an example, he said music used to be packaged into 10 tracks on a CD when it was sold in the physical distribution model. But with digital distribution, content provider can now sell each track individually.

The consumption habits of consumers have also changed with the popularity of Web-connected mobile devices, he added. Consumers are no longer limited to accessing the Internet on their computers as they are now able to transact and consume digital goods on-the-go with their mobile devices.

Shrauger said: "Consumers are starting to consume digital goods in a different way [compared to physical goods]. It means that providers of content need to figure out how consumers are going to pay for value in that channel."

He suggested they take cues from game developers, whom he said are on the "cutting edge" of the digital goods trend.

"If you look at people who are developing games, all they do is experiment with how to monetize their games in a way that is most effective. In some cases, it is free-to-play, subscription-based or a hybrid of both," he observed.

Shrauger also noted that content providers need to understand how their customers are willing to pay, and not simply copy other market players.

As a payment service provider, he said PayPal wants to be the "vehicle" for these content providers as they experiment on the best ways to monetize their digital goods.

"We want to provide the best payment experience possible and we know that there isn't one answer for that, so the best way is to provide flexibility for content providers to customize and find their way into that," he added.

To help content providers monetize their wares, PayPal in July last year opened up APIs (Application Programming Interfaces) on its developer platform, PayPal X, to enable developers to embed the company's global payment system into their apps and platforms. It did likewise for its "mobile payments library" in April this year, allowing developers to support the in-app payment for mobile devices.

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