For social games, virtual goods have become the dominant business model. Players play the games for free, but they can play real money for virtual goods such as fuel for a tractor in FarmVille. But advertising is coming on fast as another leg for social gaming revenue.
Market researcher eMarketer estimates that advertisers will spend $220 million worldwide to advertise in social games and social apps this year, up from $183 million last year. The number will rise to $293 million in 2011. That doesn’t include mobile app ads. Those sound like small numbers, considering Inside Network estimates that virtual goods revenue in the U.S. alone will be $1.6 billion in 2010.
eMarketer says that its estimates may be too low as the social game business keeps growing. Next Up Research estimates that 80 percent of Zynga’s revenues come from virtual goods. Still, the company’s FarmVille game is attracting serious advertising attention.
“Advertising will be an important part of the business model,” said Zynga CEO Mark Pincus, speaking at the Fortune Brainstorm Tech conference in July 2010. But he said new types of advertising would have to be invented for the social game medium. Typical banner ads may not cut it.