This post in inspired by a question I answered on Quora about how VR will change advertising.

In short, VR is going to enable the design of more efficient and engaging physical advertisements. It is also a new medium and a new platform in which innovative brands can create valuable sponsored content.

Physical Ad Installations

VR is destined to change real-world physical advertising by enabling more effective placement of branded content. Shop configurations, store layouts and billboard placement, could all be done with data-driven sight-line and sentiment analysis. With a virtual reality headset and the right design and tracking software, you could A/B test physical ad installations before printing or constructing them.

To delve into some specific examples from my Quora answer: A lot of agencies that design print media, store layouts, and billboard advertising (like the kind you see in sports arenas, on the sides of buildings, or on signs in stores and above store shelves and store fronts) use 3D models to lay out the placement of colors, logos, and messaging before they print out the material and post it. 3D models (made with software like SketchUp) can be really helpful for both an agency and their clients to get a sense of how people will see their content when they approach it in the wild.

Evaluating many layouts and designs of print material in VR is far more efficient and cost effective. Imagine you are a representative for Coke and you want to compare how it looks to see your new ad behind home plate at the baseball stadium from front-row seats, or from the nosebleed section. Your advertising agency probably already made a 3D model to mock it up. Here is where VR comes in; you can either build or load the 3D model into VR and virtually sit in every seat in the stadium. As the manager of the project at Coke, you can sign off on the add placement and approve the product without your agency trying to communicate the effectiveness of the ad placement verbally; you'll just see it for yourself! You can get back to work and your advertising firm can return to doing what they do best, designing the actual advertisement and making sure your brand is well-received. You can imagine the same kind of process applied to a new store layout. Want to know if the signs announcing the new product line can be seen through the shop windows from the street? Just stick the model in VR and check it out before you put the effort into creating the signs and re-configuring your store.

In-VR Ads

Digital advertising in-VR will need to take on a new form, unlike what we see now on the web and on our connected devices. Undoubtedly, the prospect of banner advertising in VR is revolting. Someone made a spoof of a Google Glass add a while back that really hits home:

It's pretty painful - developers know that, and Google knows that. Lots of my colleagues in the industry fear that the above video foretells a bleak future and negative, frustrating ad experience in VR. Advertising agencies, brands, and marketing creatives deserve more credit; I think they are more innovative than this...

As applications have become more immersive (even though they're on 2D screens), advertising has become more integrated into the user experience. The banner ad is on its way out - just listen to Chris Dixon talk about it on the a16z podcast (Advertising vs. Micropayments in the Age of Ad Blockers) or look at Buzzfeed's novel (and very successful) advertising model of sponsor-driven content. Following this trend, I think that companies and brands will rather sponsor content integrated into virtual experiences than show frustrating banner ads. To support this claim: I was just talking with another company that is creating an experience for the GearVR where the user remains seated in a virtual room. The room needs props to make it look realistic - maybe a can of soda next to you, or a bucket of popcorn, or a flat-panel TV on the wall. They could make these objects completely brand-less or devoid of logos, but have chosen to monetize their software by product-placement of small items in the scene. When I tried the experience, this product placement wasn't over-the-top annoying, but instead provided an enhanced sense of realism. I felt more comfortable surrounded by recognizable branded objects than sitting in a a room unadorned with the trinkets and products I encounter in everyday real life. Rather than muddying up the experience with advertising, it totally made the experience better.

Although the above is just one example of how advertising could work in VR, there are lots of ways brands can promote VR content or make ads. The newest advertising in VR could be just a VR experience itself. What better way to promote your brand than sponsor the creation of amazing and interesting content? Patron produced an amazing VR experience which promoted their brand while telling a fun, engaging, interesting story of how Tequila has been made for centuries on their Jalisco hacienda. Either way, I am cautiously optimistic about the quality of advertisements in virtual reality because the model of traditional banner-advertising on websites has been proven ineffective (a topic for another question or post, but I could go into detail). Necessity is the mother of invention; there is a trend towards reinvention of the model to push sponsored content that is actually meaningful, relevant, and valuable to the consumer. Virtual Reality is an entirely new platform and provides an awesome opportunity for this innovation.