Microsoft plans to buy videogame-ad firm: report

By | April 26, 2006

From Reuters

LOS ANGELES (Reuters) – Microsoft Corp. (Nasdaq:MSFT – news) plans to pay $200 million to $400 million for Massive Inc., a privately held company that places ads in video games, the Wall Street Journal said on Wednesday.

The deal to buy the two-year-old start-up highlights the increasing importance of advertising in nontraditional media, the report said.

A Microsoft spokeswoman said the story is based on rumor and declined comment. A spokeswoman for Massive also declined comment.

Clients of Massive, which uses always-on Internet connections to place real-time ads in games, include Coca-Cola Co. (NYSE:KO – news), Honda Motor Co. Ltd. (7267.T) and other advertisers that are boosting spending for ads in video games.

There are high expectations for in-game advertising, because it offers the promise to again connect advertisers with the desirable young male audience, which has been abandoning television and other traditional media in favor of the Internet and video games.

In an interview with Reuters in December, Massive Chief Executive Mitchell Davis said forecasts from a variety of industry sources call for real-time game advertising revenue to grow into a $3 billion-plus global market by 2010.

The new generation of in-game ads offered by Massive and rivals like Double Fusion allow advertisers to run campaigns for specific periods of time, rather than buying a slot that is hard-coded into a game. That means billboards and storefronts in games can change over time to more closely resemble the real world that some games attempt to recreate.

Video game publishers, which are struggling with rising game development costs, hope that in-game advertising will come to represent a meaningful source of revenue.

Microsoft, which already runs a large advertising business around its MSN Internet unit, has won over gamers with its
Xbox Live service that connects gamers to the Web through its Xbox and newer Xbox 360 consoles.

In an effort to close the gap on online advertising leaders Google Inc. (Nasdaq:GOOG – news) and Yahoo Inc. (Nasdaq:YHOO – news), Microsoft plans to roll out a new advertising system called adCenter that sells ads across the company’s Web content and services.

In the future, advertisers will be able to place ads through adCenter across Microsoft’s other platforms such as Xbox consoles and mobile devices.

Massive’s advertising partners include game publishers THQ Inc. (Nasdaq:THQI – news), Vivendi Universal’s (VIV.PA) games unit, Take-Two Interactive Software Inc.’s (Nasdaq:TTWO – news) 2K Sports, NCsoft Corp. (036570.KS) and Konami Corp. (9766.T)

Shares of Microsoft rose 2 cents to $27.13 in afternoon Nasdaq trade.

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