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.
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