Virtual product placement – game-changing gold mine for ad industry

Product placement is now a $23 billion industry – one of the reasons it’s expanding is that people aren’t paying much attention to traditional advertising. Now, there’s a new player in town: a virtual product placement added post-production.

A commercial break on TV? Time to grab a sandwich or to visit the bathroom. Ads incoming on YouTube? You can skip it after a few seconds.

People look for, if not ultimately find, numerous ways to avoid annoying ads – this, of course, was one of the reasons product placement came into being. It allows companies to basically eliminate the possibility that the consumer will not pay the much-needed attention and minimize the risk of annoying the viewer.

And yeah, who doesn’t really know that their favorite character on a TV show uses an Apple device, drives a Ford, and breaks her fast with Cheerios every morning? Advertisers are happy to be able to integrate brands into the actual content.

Now, technology is allowing the TV and film industry to take this one step further. Amazon and NBCUniversal announced earlier this year that they’re experimenting with virtual product placements that allow advertisers to include ads in a show after it’s finished production.

Painful planning

“Reaching a targeted audience inside the framework of a show when they are completely engrossed in the adventures of their favorite characters and storylines is the key to effective product placement,” Jamie Irwin, E-commerce Growth Expert at James & James, a fulfillment partner that specializes in growing eCommerce businesses, told Cybernews.

However, paid product placements are expensive and shrouded in uncertainty whether they will make good for the client. Figures cited within the industry range from $150,000 to high seven figures per order.

Besides, advertisers often don’t really know – or cannot possibly predict – how popular the show or the movie will be. And sometimes the director, who still has the final word in most cases, places a product according to her whim – not the purchaser’s.

There’s also a famous case of Peloton. A character in a fictional series And Just Like That had a heart attack while riding a Peloton bike and thus caused the real-life brand’s stock to drop sharply.

“Traditionally, brands needed to invest a large amount of money and time in campaigns which are impossible to iterate after they've been launched. If something doesn't work as expected, there is nothing that can be done,” Ryan Turner, who runs an Ecommerce Intelligence marketing agency, told Cybernews.

With traditional product placement ads, there’s also a risk for content producers who actually film product placement shots and painstakingly plan things beforehand.

“They sometimes have to reshoot – and it’s pricey – a scene with a different product if an advertising campaign falls through,” Bradley Thompson, a digital marketer at DigiHype Media, a Canadian digital marketing agency, told Cybernews.

Less expensive, more control

But more predictability is already here. Back in May, both Amazon and NBCUniversal announced that content in their streaming platforms would feature virtual product placements.

Amazon is using the beta ad product in its shows, such as the Bosch franchise, Leverage: Redemption, and Tom Clancy's Jack Ryan. Prime Video and the ad-powered Frevee service both use the novelty product – as does NBCUniversal’s platform Peacock.

As mentioned above, these kinds of ads are embedded within shows after production. For instance, a bag of M&M’s was digitally added to a bowl on a table in a Bosch episode.

There’s a lot of excitement in the air about the new feature. For starters, virtual ads can be less expensive and give advertisers more control – they can place a product in a show that they already know is popular.

The same goes for creators, as they have to spend less time thinking about product placements before releasing the content to the jungle of public judgment. Besides, to boost revenue, big entertainment companies can invite advertisers to embed products in their more popular legacy programming.

“Virtual product placement is a game changer,” Henrik Bastin, Chief Executive Officer of Fabel Entertainment and Executive Producer of Bosch: Legacy, says in the Amazon press release.

“It creates the ability to film your series without thinking about all that is required with traditional placements during production. Instead, you can sit with the final cut and see where a product could be seamlessly and naturally integrated into the storytelling.”

Chinwendu Opara, a digital marketer and advertiser, told Cybernews she thought virtual product placements were unintrusive and allowed viewers to “focus on the content without being distracted by advertising while still being able to see the advertisements in a digestible manner.”

“I also believe that virtual product placements are a great way for companies to market their products effectively. It's less sales-y, and It will allow them to put their products in film scenes that'll create the right type of energy and vibe for each specific product and their brand,” Opara said.

Finding the right balance

According to Amazon, numbers show that virtual product placements will be a success as soon as the practice switches gears. For example, a consumer brand that has tested the feature experienced a 6.9% increase in brand favorability and a 14.7% increase in purchase intent for their campaign.

Besides, the virtual reality headsets continue growing in popularity and so open up new opportunities for advertisers to connect with the audience, Jordan Edelson, the Chief Executive Officer of TradeZing, a live-streaming Web3 platform, told Cybernews.

“Audiences will be able to essentially visualize the item in a virtual space or in their physical space, helping users feel physically and emotionally impacted by the virtual item’s presence, and have a sense of familiarity when they encounter the item in a retail setting,” Edelson said.

However, many professionals also say there are risks. Yes, ads, in-scene ads, if shown on billboards in the background, are not that obtrusive – but is it really possible to effectively engage with customers in such a brief period?

The answer might be a larger presence of virtual product placement. But, again, no platform wants to disturb the viewing experience more than necessary – viewers want to be able to differentiate between original content and ads, and follow a seamless plot.

So the challenge for the innovative collaborations between content creators and advertisers is to make sure the dynamic ads still appear organically integrated within a program.

Robert Warner, Head of Marketing at Virtual Valley, a virtual team-building platform, and an official member of the Forbes Agency Council, an invitation-only organization for executives in public relations, media, creative, and ad agencies, thinks that the use of virtual product placement is not yet a one-stop shop, and targeted ads can also cause problems.

“Though novel, there is a danger that too many targeted ads or too many virtual commercials, in general, would turn off viewers. Consumers are growing suspicious of hyper-targeted marketing, and companies like Apple are taking steps to further restrict these types of adverts,” Warner told Cybernews.

Different regulations

The interesting thing is that for now, streaming platforms are basically free to do what they want with virtual product placement ads – at least in the United States.

That’s because US streaming services aren’t yet obligated to disclose product placements in programming – even though identifying select sponsorships as part of a broadcast television show is required by the Federal Communications Commission.

“Though novel, there is a danger that too many targeted ads or too many virtual commercials, in general, would turn off viewers,"

Robert Warner, Head of Marketing at Virtual Valley

However, platforms like Prime Video increasingly see the world as their playground, and in different countries, local legislation may prevent certain product placement types or at least require disclaimers.

“There will be some challenges around how this will work in different locations across the world – there is going to be a lot of variation. Brands are going to need to comply with all kinds of rules around which products are allowed to be placed in different regions, disclaimers, and more,” Turner, head of the Ecommerce Intelligence agency, says.

For instance, on the BBC, the publicly-funded British broadcaster, brands are blurred or hidden from the camera – that’s what the law dictates.

What’s more, companies and content creators will have to make deals about intellectual property rights – is it really possible and legal to simply alter a program or a bit of content?

Dynamism, again, might be the answer. It shouldn’t be too hard for content producers and streaming platforms to integrate an off-switch for virtual product placement ads in different markets.

The bowl can then be filled with M&M’s in the US, but it will be empty on the BBC.