Fanatical farmers bought 800,000 new tractors yesterday and today they will buy another 800,000.

These may be virtual tractors, bought for FarmVille, a hugely popular online game on Facebook, but the money that the players are spending is real.

They hand over millions of pounds every day in hard cash on cows, seeds and farming equipment to make their digital smallholdings bigger.

FarmVille, created by Zynga, an online gaming company based in San Francisco, has become a web phenomenon, played by more than 56 million people within three months of its launch, making it the fastest-growing social game on the internet. After the United States, Britain has the most FarmVille farmers.

The cash spent by Zynga’s players on micropayments within FarmVille is one reason why Zynga is generating revenues of more than $150 million (£91.4 million) this year.

Virtual goods, once the province of online gaming only in the Far East, are becoming important drivers of income for dozens of web companies in the United States and Europe.

According to a new report, the American virtual goods market is set to surge past $1 billion this year, more than double the total for 2008. The Inside Virtual Goods report found that revenues could hit $1.6 billion next year as users become more comfortable making micropayments in web applications. Analysts say that the virtual goods market will be worth up to $6 billion worldwide this year, with gaming accounting for about 75 per cent.

In most social gaming scenarios, players can take part without payment, but, if they want to accelerate their progress or defeat a rival, they can pay up to $10 a time to buy goods that enhance their gaming experience. Microtransactions can be for virtual farm tools, poker chips, swords or pink cars.

Playdom is the biggest game developer on MySpace, with more than 25 million monthly active users. In one game, it sold more than $200,000 worth of pink virtual Volkswagen Beetles in two days.

Mark Pincus, co-founder and chief executive of Zynga, told the Web 2.0 Summit this week that there was a growing “app economy” on the web, where revenue came from users buying things directly inside web applications rather than the traditional indirect revenue model of online advertising.

Facebook, with its global reach of more than 300 million users, has been a main driver of the new economy. Thousands of web developers are using it as a platform to create features that take advantage of Facebook and others’ payment systems.

This week the company announced a new revenue stream — it will soon allow friends to send each other ten cent web songs to stream online or ninety cent songs as MP3 files that recipients can download as gifts from Lala, the online retailer. Customers can buy credits worth ten cents each with a credit card. The development bolsters Facebook’s existing gift offerings, which include virtual birthday cakes and pints of beer.

Also on Facebook is Playfish, a British online gaming company, which has several huge hits, including Who Has the Biggest Brain?. Pet Society, its most popular game, attracts 16 million players a month — more than World of Warcraft. Sebastien de Halleux, its co-founder, believes that online social gaming eventually could outshine console gaming.

In the virtual world of Second Life, which has fallen out of fashion but still has millions of devotees, residents spend $500 million a year on digital goods. UK residents spend more than £2 million a month “inworld”. The need for convenient and simple micropayments has led to a surge in companies such as Offerpal Media and SuperRewards, which promote ways to get social gamers and other internet users to part with cash for virtual entertainment. In two years, Offerpal has helped to facilitate 250 million microtransactions — more than half of them in gaming.

In another sign of the growing importance of the micropayment economy, PayPal, the online payment service owned by eBay, said this week that it would open up its software platform to enable outside developers to build innovative tools using the service. Scott Thompson, PayPal’s president, said: “We hope and expect to unleash the power of digital money regardless of the currency and regardless of the platform in any country in the world.”

PayPal is already a leading global financial transaction company. EBay reported this week that its virtual platform accounted for $17.7 billion in net transactions during the past three months. There are now 78 million active PayPal accounts — a 19 per cent increase year over year.

Meanwhile, FarmVille’s online gamers have not been buying only virtual tractors: in the past three weeks they have been buying special charitable seeds to raise money for Haitian children. In three weeks players spent $854,000 on the virtual sweet potato seeds and the company donated half the proceeds — enough to feed 500 children for a year.

If micropayments at that rate were added up over a year, the total would be $14.8 million, proving that virtual money is turning into a very profitable business.

Under the microscope

• Micropayments are being investigated by many companies and media businesses as a way of getting consumers to pay for online content, such as news. Experts are divided as to whether users might be happier paying subscriptions on a monthly or annual basis or, say, per article in a micropayment model

• Media companies, including News Corporation, parent company of The Times, are moving towards charging users of websites. Rupert Murdoch, chairman of News Corporation, has insisted that media companies cannot continue to produce quality content for free. News Corp has accused Google and others of stealing content by linking to it in search results without payment

• Google has responded by announcing that it is developing a payment technology platform, an extension of its Google Checkout online payment service, which would be available to content providers

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