Next innovation? When in-game ads and virtual goods merge

In a recent report, research firm Screen Digest says that in-game advertising will hit $1 billion by 2014. Not bad, but nowhere near virtual goods, which may already be worth $5 billion in Asia alone.

Virtual goods have a low barrier to entry but a huge swath of virtual-world competition is trying to monetize users. Game play, branding, and the overall offering have to all mesh for virtual goods to sell well.

In-game advertising is complex and there are a few major players that control the games, consoles, and monetization, putting up some serious barriers to entry. To date, most in-games have been custom deals that are lucrative but don't scale well.

I've written in the past that standards will drive in-game advertising growth as it's currently too difficult to deal with the varied walled-gardens of both console and online games. And there are some interesting experiments under way, including a recent IGA deal with Posterscope to simultaneously run in-games on billboards. I'm not convinced it makes sense, but it is a cool attempt to bridge the physical and virtual worlds.

The next big innovation will be when in-game ads and virtual goods merge--allowing users to interact with ads to purchase products.

Follow me on Twitter @daveofdoom

[Random_Walk]

Not really seeing it here... the reason why is simple: Most games require concentration while you play them, and if you're busy playing the game, you're not really going to be buying stuff from within it (unless the game requires that).

I know that, at least with first-person-shooters and other fast-paced games, you're busy trying to grab the flag, or kill the enemy, or...? You're not going to be standing around the level in an online server going "hmm.... you know? I think I could use that expansion pack. let me put this gun/sword/trout down and buy one..."

[Kesteral]

Most online games have a separate area where players can shop and socialize; fighting is usually not allowed in these areas. This is the ideal place for ads, since people are already browsing and in a buying mood, at least for in game items.

[cwbutler]

daveofdoom?

lol

[daverosenberg]

Thank you. The name was given to me by a friend--we used to cover Black Sabbath's "Hand of Doom" in our surf band.

[dacopper]

I was very skeptical about effectiveness of in-game ads. Besides being a mere annoyance, they didn't attract my attention much... until I played FarCry 2 for a while. Now I totally want a Jeep Liberty and there's a 50% chance I buy one unless, of course, Jeep ceases to exist in the next several months and there's a good chance in that too.