Will Gen Y Pay for Virtual Branding?

Cyworld, a wildly popular social networking site started in Korea, has recently announced a partnership with gaming advertising agency Double Fusion to allow its users to download branded content to be placed in their user-generated “miniroom.”

Around since 1999 but relatively new to the US, Cyworld immediately draws comparisons to the massively popular MySpace. But, while MySpace is supported by banner, button, and flash advertising begging for attention on every page, Cyworld uses an alternative approach to making money.

Instead of finding advertisers to pay per click, Cyworld’s business model involves the user trading real-world money for virtual currency, known as Acorns, via a service like PayPal. These Acorns can then be used to purchase content for the user’s “miniroom” and “minime” avatar. With most items costing between five to ten Acorns and the current exchange rate at ten cents per Acorn, it is relatively cheap to acquire interesting items to customize one’s Cyworld “miniroom.”

Now, the creative minds at Double Fusion have found a way to leverage the massive 20-million member Gen Y audience present at Cyworld and integrate advertising seamlessly into the “miniroom” environment. Double Fusion will secure advertisers, such as Microsoft for example, and develop unique content for use in Cyworld based on real world items. Hypothetically, A user will use some Acorns to purchase a virtual Xbox 360, branded and authentic, to customize their “miniroom.”

By allowing users to pick and choose the brands they wish to associate with, the user becomes the gateway for advertising messages and advertisers are given validity that the advertising is working. While this seems to be an effective way to incorporate advertising in the consumer-generated content realm, it will be interesting to see if users are willing to pay more to acquire branded virtual items (indicating better taste?) rather than the generic Cyworld virtual items (a la Wal-Mart brand). Or will they shun the process altogether?

I predict that if Cyworld is as popular in the US as it is in Asia, materialism will prevail. Gen Y users will be salivating over that virtual Coach bag for 10 Acorns.

This concept creates new horizons for advertising as millions of Gen Yers embrace the virtual landscape through online communities or multiplayer gaming. Will consumer companies need to create new departments for production and assimilation of virtual products? Will virtual product placement become a standard in interactive media buying? Only time will tell.

Check out this article on Yahoo Finance for more on this topic.