Microsoft to Expand into In-Game Ads

Microsoft is set acquire Massive, a start-up that places ads in video games, next week in a deal estimated at $200 to $400 million, according to the Wall Street Journal. Massive's advertising clients include Coca-Cola and Honda among others, and it has deals with game publishers Ubisoft, Take-Two Interactive, and THQ.

With publishers regularly connecting their games to the Internet, dynamic ads within those games are now possible. Previously, ads were sold in static form, but they quickly would become stale as they could not be changed based on new promotions.

However, with the advent of Internet-connected gaming, it has opened a whole new way of advertising, which Massive has begun to exploit. Ads can be targeted to a certain demographic, and even change based on the gamer's geographic location and time of day.

The in-game advertising market is still in its infancy, with companies spending only $56 million last year, up 64 percent from the previous year. But research firm Yankee Group says that by the end of the decade the market will balloon to a $700 million a year industry.

This massive growth would be the result of game makers expanding dynamic in-game advertising from mainly PC-based games to titles on next generation consoles such as the Xbox 360, PlayStation 3, and Nintendo Revolution.

Analysts see the Massive acquisition as a way for Microsoft to get a leg up on competitor Google by offering its advertising platform in unique ways.

The Redmond company would likely roll Massive's platform into its adCenter self-service advertising product, but neither Massive nor Microsoft is publicly commenting on the deal.