In-game advertising refers to the practice of inserting ads in games and essentially in video games.
Originally, ad insertion was static in non connected game consoles and PC video games.
Nowadays, ad insertion may be static or dynamic for connected gaming. When static, the ad is seen by all players in the same way. When dynamically inserted, the ad may be addressed to specific targets as in online advertising and is delivered by an ad server. In this case, one is close to classic online advertising (e.g., one can see interstitial between two game levels).
For static insertion, the logic and effect are the same as product placement in movies or TV. The promoted product or service may appear in a specific situation and it may be more integrated in the game.
The development of advergaming explains itself mainly by the growing reach of the “games media”, more particularly among young people. Game vehicles have multiplied in recent years (e.g. social games, mobile games, MMOG, etc.).
Benefits of in-game advertising are:
advertising efficiency is favorably impacted by the play experience.
products may be promoted in context.
ad exposure may be very long and reitered many times.
players are focused and engaged, few are multitasking when playing.
Strictly speaking, in-game advertising is only a part of game advertising and differs from advergaming.
An IAB UK video showcasing the benefits of in-game advertising :