The Wall Street Journal reported last week (subscription required) that a Microsoft acquisition of gaming ad company Massive was imminent. I know one of the VC investors in Massive, who pointed out that the article was of the “plans to” variety rather than the “has” sort (aka break out the champagne).

Nonetheless, I was keen to hear of the interest in Massive’s gaming ad platform. Though not an area that I’ve invested in to date or worked in before, it’s a space that I’ve been enamored with for a little while. So if you have the next great idea here, please drop me an email 🙂 Seriously though the old approach of hard coding product placement and advertising content in console and PC games is sub-optimal for advertisers, game publishers, and developers alike. A small handful of titles have done this w/ some success historically, among the best examples of which I’m aware is Sony’s Gran Tourismo franchise which has featured auto maker placements for years.

With gaming now predominantly on internet-connected platforms, a much better approach for all parties is possible with a system that dynamically serves ads. Game developers can insert small, standardized bits of code to enable ad insertion. Publishers can more easily monetize titles, even those with a comparatively small installed base which previously may have garnered little if any advertising (e.g. what Google AdSense has done for Joe Blogger or small obscure content sites).

Most importantly it becomes easier for advertisers to reach aggregated audiences. Platforms like this enable ad buying by demographic, time, even geography theoretically in addition to being able to provide more granular impression data. When you consider the fact that the console and PC gaming demographic is one which advertisers are keen to reach (and are having an increasingly difficult time doing so through traditional media channels), the opportunity to broker more and more ad dollars becomes a reality. I have rarely been accused of exceptional foresight or cleverness, but even I can see that the future economics of gaming will involve proportionately less software license fees and more advertising.

At any rate, hats off to you Massive and good luck on closing your deal…