Virtual goods/gifts is the primary business model for social games. Advertising and offers are the other two means of monetization for the fast growing social gaming industry. Emarketer estimates the ad spend on social games in 2010 to be $220M.
For most social games, the primary revenue stream has not been advertising. Instead, virtual goods are dominant. However, companies such as Zynga and Playdom are realizing that their games are logical advertising destinations for marketers wanting to get the attention of rabid fans.
eMarketer expects that marketers will spend $220 million worldwide to advertise in social games and social applications in 2010, rising to $293 million in 2011. These figures do not include ads within mobile applications.
eMarketer’s estimates may end up being conservative as the social game business increases its footprint. According to Next Up Research, nearly 80% of Zynga’s revenues come from virtual goods. Even so, the large audience of games such as Zynga’s Farmville is attracting advertiser attention.
For companies such as Zynga, “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. However, he added that he believed that future social game advertising types would need to be “invented” rather than being the same things advertisers have already seen.