Virtual goods have become a runaway industry as gamers the world over show they’re willing to pay real money for virtual room decorations, pets, swords and cars. Now a startup called Mixamo is betting that gamers will pay for virtual movement, too.

You could, for instance, pay for animations to make your avatar, or virtual character, the hottest moonwalker on the dance floor. Sound far-fetched? Nazim Kareemi (above, left) and Stefano Corazza, (above right), don’t think so. They are the chief executive and chief technology officer, respectively, of the San Francisco-based company.

Mixamo has two businesses. It is already selling its virtual animations to game developers. The animations can shave a huge amount off the time it takes to create movement for a virtual character. For $23, for instance, developers can buy the software code to make a character take a shot while jogging in a soccer game. To create a similar one-second animation from scratch, a developer would have work for a considerable amount of time and expend as much as $121. This is an established business that has been gaining momentum for a year. The average price a developer will pay for a motion is $20 to $25 as a one-time purchase. A subscription lowers the cost to around $6 per motion.

The other business Mixamo will eventually pursue is selling virtual animations directly to consumers, who could create their own custom characters and use them in their own games. That will likely take longer to get off the ground. But game developers could probably build such a business directly into their games. That is, they could give away their games for free and charge players who want to customize their characters and game experiences in the most realistic way.

The technology comes from the mind of Corazza, who developed it over four years while he was getting the second of his doctorates (one in mechanical engineering, another in bioengineering and computer vision) at Stanford University. He co-founded it in 2008 with Kareemi, who previously founded Canesta, which makes motion-sensing chips that are used in variety of consumer products now. Corazza studied the physics of human animation and figured out how to create software tools that can capture the motion of real humans as they’re filmed from multiple angles, and translate that into motions for animated characters.

Most animations have used markers, such as the lights on the actor in the picture above, to capture imagery. Mixamo uses that, but it also developed “markerless motion capture” tools that can capture whole body movements more accurately. It uses a big motion capture stage in its headquarters and has used it to create a full library of animated character movements. Game developers can buy these movements and painlessly graft them into the bodies of the characters they create. Corazza says the hard part is making the motions work in any character, regardless of what that character looks like.

“It normally takes hours to create a dancing motion,” Corazza said. “Now it takes a second.”

The company launched the service less than a year ago and it has plenty of paying customers. Its technology is being used in Big Collision Games’ Online Soccer Champions. Other customers include Buddy Poke, Trigger, Gamers First, Sport Science, My Virtual Girlfriend, nDreams, Jump Core Productions, Touch KO, Fluid Animation, Bot Colony, Great Tides Interactive and Digital Flux Entertainment. Developers can shop through a store of motions organized into sections such as Combat, General Motions, Sport, Dance and Animals.

Kareemi says that Mixamo has a number of unannounced deals and is talking to the major video game companies. Some of the companies are working on business models where they will sell motions as virtual goods inside games. Gamers will be able to create their own characters in these titles with varying degrees of realistic motion. Meanwhile, Mixamo is working on its own service where it let users create characters and body movements for $39. The animation tools are simple. If you want your character to be fatter, you can slide a scale to the left. If you want the character to be skinny, you can slide it to the right. At some points, as game developers come to allow it, users will be able to upload their own custom characters into games.

Mixamo raised $5.5 million in funding in July, 2008 from Keynote Ventures and Granite Ventures. It licensed patents from Stanford University and has filed for its own as well. The company has 18 employees. Games that used Mixamo characters have been downloaded more than 50 million times now. Over time, Corazza says his company wants to perfect the animation of human faces. That’s a tough problem, but the company has plenty of business to do on simpler stuff in the meantime.