Virtual Product Placement Infiltrates TV, Film, Games

U.S. advertisers have turned the practice of "product placement" into a lucrative market. This advertising phenomenon makes possible the insertion of an advertiser's product into a film, television program or video game.

The estimated value of the total product-placement industry in 2005 -- when you include other creative arrangements such as barter (where the use of the product becomes the actual payment) or gratis (where the placement happens to enrich the plot or boost the character's profile) -- was US$4.24 billion, according to Stamford, Conn., media and entertainment research and consulting firm PQ Media.

"Trends in the two major media -- television and film -- that account for more than 90 percent of the value of product placement seem to hold true to our predictions," said PQ Media Vice President Leo Kivijarv.

Further predictions are for the value of product placement to grow at double-digit rates in 2006, he noted.

Fueling the Fire

With advancements in technology, a hot outgrowth of traditional product placement has become "virtual" product placement, which employs software tools that allow products to be inserted, deleted and substituted without making any demands on scripts, cast members or production schedules.

With the right computer engineering, products roll on and off story boards and footage, offering promoters and content owners an alternative form of advertising.

What's fueling the virtual product placement fire? In a word, TiVo (Nasdaq: TIVO). American mass-media consumers are tired of boring, irrelevant, intrusive ads sandwiched between gripping stories with plot lines that can better be digested without reminders of what to do when your toilet bowl clogs or your mufflers go south -- and they now have the technology to do something about it. They can configure their entertainment systems so there are no commercial breaks.

Vendors, all the same, need to get their brands known and loved, and virtual product placement is an increasingly viable alternative. When it comes to computer-manipulated placements, the execution needs to look a lot better than just a cut-and-paste job. The viewer sees the product and may engage with it as part of the larger scene if it is placed successfully.

Negative Attention?

"If the quality is not there, the virtual placement will attract negative attention from the viewer, which is likely to result in a negative response," cautioned Allan Jaenicke, co-founder and managing director of Imagineer Systems, a UK-based provider of film and video post-production software tools. The company's "monet" placement station can perform virtual product placement for use in a broadcast, film or post-production setting.

"Both [cost-effectiveness and quality] are important when you consider the need for virtual product placements to be produced in higher volume and lower cost per placement compared to traditional 30-second spots," Jaenicke told the E-Commerce Times.

Imagineer's technology makes it possible to customize product-placement relevancy in a film or program to different geographic regions at the same time, he noted.

"We see larger broadcasters and content owners coming together this year to work out revenue models for exploring one of the significant benefits of virtual product placements, namely that they can be changed and adapted geographically as well as demographically. This provides additional revenue opportunities when programs are sold internationally," said Jaenicke.

Hot Spots

While films and television have been the hot spots for virtual product placement, marketers see lucrative dollar signs in bringing virtual product placement to other kinds of media too.

"Marketers continue to seek the most efficient methods to reach their target audiences, especially 18-to-34 years olds. They are looking at programs, films and other media," said Kivijarv of PQ Media.

Among those "other media" are video games. Interest in product placement integrated in video games is increasing, with proponents insisting gamers think ads in video games punch up the realism of the gaming experience. These positive reactions may in turn lead to positive brand awareness.

However, this reasoning may not always hold true. Such product placements risk overkill that can turn players away.

The Internet and video games "are media that have high consumer consumption among the coveted 18-to-34 market. That said, the success of these placements has yet to be determined," Kivijarv said.

In a recent survey on the issue, "half of the respondents said the placements gave the game a more realistic feel, but the other half complained that they were a distraction," he stated.

To be sure, marketers are becoming increasingly concerned that too much of a good thing can negate the good. The words "clutter" and "irrelevancy" are now frequently mentioned as risks that can yield negative results.

All the same, if 2006 becomes the year that product-placement gurus do something to avert errors and clutter, it could lead to greater profitability for those who can execute. To be effective will require thoughtful product placement -- "not just throw it in there and we are all set," said Jeff Greenfield, editor of Product Placement News and executive vice president of 1st Approach, a marketing firm.

In 2006, marketers will also be focused on another media hot spot: mobile video.

Looking Ahead

"Obviously, more and more content is being made available via mobile devices," said Jaenicke. "Once we start watching movies on a phone, where is revenue going to come from? Not traditional 30-second spots, as it would be unacceptable for a consumer to have to pay bandwidth charges to watch a commercial."

An offering that can combine free or low-cost advertising based television with mobile devices would be attractive and a good use of virtual product placement, Jaenicke believes.

"You can target the viewer demographically; for example, you can have three different versions of the same film or program to download and stream the most appropriate one to the viewer, based on knowledge obtained when they purchased their telephone," he said.

Still, it may be too early to nail with certainty the strength and speed in which virtual product placement will travel in the mobile-device marketplace. "Mobile entertainment is only in its infancy stage," said PQ Media's Kivijarv, "and advertisers have to be convinced that it is a viable alternative to other media. The small screen makes the seamless integration of a product into a scene extremely difficult."