Ad spending is likely to increase substantially as more kids and teens spend time in virtual worlds and as more marketers create campaigns for those environments.
Parks Associates estimated in June 2007 that $15 million was spent advertising in virtual worlds in the United States in 2006 and projected that it would rise tenfold to $150 million in 2012. The figures did not include marketer-branded virtual worlds. They also did not include other revenue sources, such as micro-transactions or subscription fees.
"Second Life has received the most attention from marketers, but traffic levels there are dwarfed by those at virtual worlds that are specifically aimed at children and teenagers," said Debbie Williamson, senior analyst at eMarketer.
Parks includes virtual worlds in its video game ad spending estimates. It estimated that marketers spent $370 million in the US on video game advertising of all types in 2006, making virtual worlds about 4% of the total market.
Another perspective on virtual world ad spending can be gained by looking at revenues for MMOG games, such as World of Warcraft.
According to Screen Digest, the total market for MMOG games in North America and Europe reached $1 billion in 2006, with 87% of revenues coming from subscription fees and the remainder from e-commerce and advertising. In North America and Europe, subscription revenues were $875 million in 2006.
Factoring out subscription revenue, it amounts to $125 million in e-commerce and ad revenue for MMOG games in the two continents.
The growth of virtual world ad spending will be tied closely to the growth of video game spending and social network spending.
eMarketer estimates that marketers will spend $1 billion worldwide in 2007 on advertising within video games, including static, dynamic and rich media ads, product placement and advergames. The figure excludes mobile games.
"In the short term, the high development costs of creating an advertising presence in virtual worlds will weed out those who want to dip in and out with simple ads such as banners," Ms. Williamson said.
"Much of the current revenue at social network sites comes from this kind of advertising, which is far easier to buy and does not require extensive development work," she said.