Are virtual worlds like Second Life and There.com about to feel a chill from advertisers? It depends who you talk with.
This week, an article in the Wall Street Journal reported that marketers are cutting back on digital and "experimental" ad buys, including video game advertising, cell phone advertising, and virtual world advertising.
Citing eMarketer numbers that showed marketing in emerging media was still a small percentage of ad spending when compared to overall online ad spending, the article indicated that the upcoming cutbacks will hit virtual world and social networking companies particularly hard. Lars Bastholm, an executive creative director, states:
"Virtual worlds are probably one of the things that haven't been proven effective just yet. I can't see us selling virtual worlds to anybody right now."
However, this doesn't mean virtual worlds are struggling for cash. IGN notes that a report from Virtual Worlds Management shows that $148.5 million were invested in 12 virtual world companies in the third quarter of 2008 alone, many of them aimed at a teenage audience. Moreover, Michael Wilson, CEO of Makena Technologies, creators of virtual world There.com, feels that virtual worlds actually offer a cost-effective solution for marketers looking to maximize their ad dollars in a struggling economy:
"The Wall Street Journal article was definitely an interesting read and it raised some good points about how companies are looking at their 'experimental' ad buys in a tough market. However, There.com has found that virtual world marketing campaigns are a very cost-effective way for brands to target an engaged audience and test new products, sometimes ahead of real-world production, which saves money in the long run.
"Additionally, our research shows that users spend much more time engaged with a brand in the virtual world as opposed to more traditional forms of advertising. The average amount of time a consumer spends interacting with a brand goes from mere seconds to close to 10 minutes, making the virtual environment a place where marketers are truly getting the most bang for their buck. Despite the economy, or in some cases as a direct result of it when consumers purchase virtual items as opposed to their more costly real-world counterparts, research has shown that the virtual goods market continues to flourish and it is currently estimated at $1.5 billion. Companies including bebe, Eberjay and K-SWISS all launched virtual merchandise campaigns within There.com in the last few months."
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