Virtual Product Placement: Pros, Cons, and Considerations (2024)

If you’ve ever seen the 1995 romantic comedy You’ve Got Mail, you may remember the couple falling in love over email using AOL. You may also recall how in Steven Spielberg’s 1982 sci-fi classic, E.T., Elliott Taylor uses Hershey’s Reese’s Pieces to lure E.T. to his home.

These are classic examples of product placement, an advertising strategy that boosts brand affinity and awareness by involving brands in content. But traditional product placement is expensive and permanent. A small shoe company can’t compete with Nike to be Forrest Gump’s footwear of choice. Likewise, Gmail can’t just be added into You’ve Got Mail for today’s streaming audiences.

Virtual product placement (VPP) can solve both problems, making product placement a more flexible and accessible option for businesses of all sizes. Here’s what it is, how it works, and how it can help you reach target audiences and boost sales.

What is virtual product placement?

Virtual product placement (VPP) is a digital advertising strategy in which a company uses artificial intelligence (AI) video editing technology to add branded products to still digital images or video footage. For example, an espresso machine company might use VPP to add one of its products to the background of a cooking influencer’s Instagram Reel.

Unlike traditional product placement—which involves filming or photographing physical products during content production—virtual placement is part of the post-production process. This means content creators aren’t directly interacting with advertised products, but it also makes VPP more flexible than traditional methods. Content owners can monetize existing libraries, and advertisers can select or change placements based on contemporary viewer data and immediate business needs.

Benefits of virtual product placement

VPP is a relatively new advertising strategy, but it’s quickly gaining popularity. Amazon announced beta-testing of its new VPP program in 2022 with a scene from the TV show Bosch featuring a virtually integrated bowl of M&M’s. Streaming services like Netflix and Peacock and several social-focused startups have also launched VPP programs in recent years.

According to Priscilla Von Sorella, the head of marketing at virtual product placement agency Mirriad, companies are excited about VPP because it works.

“Major advertisers like H&M, L’Oréal, Lexus, and others are using VPP to drive performance for their campaigns,” she says, adding that VPP helps companies reach audiences and drive impact.

Here’s an overview of the benefits:

A less intrusive viewer experience

VPP is an effective way to reach contemporary audiences. Priscilla points to findings from research firm Kantar, which found 86% of viewers avoid video advertising across broadcast TV, streaming, and online video (sometimes muting their TVs during ad breaks or installing ad blockers on their browsers).

“Unlike traditional ad formats, virtual product placements and advertising don’t interrupt the viewing experience,” Priscilla says.

The study reports 83% of viewers describe virtual formats as natural and 79% view them as non-intrusive. Priscilla attributes the effectiveness of VPP ads to these qualities.

“[VPP placements] blend seamlessly into the content, fostering positive perceptions among audiences and creating a more immersive and natural experience for viewers,” she says.

In fact, Priscilla says that studies show viewers prefer in-content advertising 10 times more than traditional TV ads such as TV spots. Another study found that positive ad experiences can boost online purchase rates by 40% and in-store buying by 27%.

This means that if your product is in the background of a successful TV show or YouTube video, your audience isn’t going to look away when it appears on screen—they may even have a more positive impression of it.

Targeted campaigning

Unlike traditional placement methods, VPP lets brands select ad channels based on current consumer behavior. This improves audience targeting by allowing businesses to respond to various viewer patterns.

For example, a skincare brand partnering with a beauty influencer may choose to advertise its acne treatment on TikTok and its anti-aging cream on Facebook. Using VPP, the brand can place different products in videos on different platforms based on where each target audience spends time.

Higher sales and marketing performance

Virtual product placements boost sales and improve brand favorability. According to Amazon, the M&M’s placement in Bosch increased the company’s brand favorability by 7% and boosted purchase intent by 15%.

Drawbacks of virtual product placement

VPP is an emerging technique. Best practices and norms are still evolving, and consumer attitudes might change as VPP becomes more common. Here are two potential issues to watch out for:

Audience blowback

Imagine watching The Wizard of OZ and seeing Dorothy land next to a Pizza Hut, marvel at a Cartier-branded Emerald City, and douse the Wicked Witch of the West in Pepsi Blue. Ham-fisted virtual ads might turn off viewers, and too many may cause them to tune out, or even resent, the ad type.

No room for interactions and explanations 

Because VPPs are added in post-production, the content creators don’t get to interact with the product. This means while viewers get to see it in the background, they don’t necessarily understand the brand or what it represents.

Moreover, there’s no way to demonstrate the product in action. For complex products that may require a demo or explanation for users to understand their value, a VPP may not be the best fit.

Considering the VPP opportunity: Is it right for you?

VPP is a relatively new strategy, but it’s already outpacing traditional methods. Analysts estimate that VPP in film and television accounted for 63% of US product placement in 2023.

Product placement is also becoming increasingly popular overall, as audiences continue moving away from linear TV with ad breaks in favor of subscription video-on-demand (SVOD) services and social media platforms. VPP is poised to grow as these trends continue.

Consider these factors before taking the plunge into VPP:

Budget

Virtual placements can be effective in multiple industries and for a variety of products.

“VPP has proven to show excellent performance across all categories,” says Priscilla, whose firm serves clients in retail, automotive, fast-moving consumer goods, alcohol, and financial services.

It’s also affordable for many small and early-stage businesses. Although premium content placement campaigns can cost more than $750,000, single influencer placements can be less than $1,000.

Business stage and goals

The strategy is best suited to companies with an existing brand awareness. In-content ad placements can remind viewers of your company, but they’re not an effective way to educate audiences about who you are. Priscilla recommends VPP for improving mid-marketing funnel metrics—such as open rates, click rates, and repeat site visits—and encouraging conversions. It’s not the best option if your primary objective is top-of-funnel awareness.

If you’re considering this strategy, an ad vendor or agency specializing in VPP can help you understand placement options and campaign goals.

Audience

Finally, it’s important to note how to use virtual product placements on different platforms to reach different types of consumers. You can change the featured product in a TV show on a streaming platform with no effect on viewership. However, changing a product on a social media video or Reel requires reposting the video, wiping out previous views and engagements.

So, when you’re choosing what product to feature on a YouTube video or Instagram Reel because that’s where your audience spends the bulk of their time, you may want to consider longevity. It’s probably best not to change the featured products on these often, if at all.