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Originally published August 20, 2007 at 12:00 AM | Page modified August 20, 2007 at 2:03 AM

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Microsoft's message to digital advertisers: We're building one-stop shopping

If Microsoft were building a huge shopping mall for digital advertisers, the acquisition of Seattle-based aQuantive, completed last week...

Seattle Times technology reporter

About Massive

Company: Main offices in New York; other offices in Santa Monica, Calif., and elsewhere. More than 100 employees. Operates in the U.S., Canada, South Korea, Germany, France and the United Kingdom. The Microsoft subsidiary is part of the new Advertiser and Publisher Solutions Group.

Competitors: At least a dozen companies are serving various parts of the emerging in-game advertising market, including IGA Worldwide, Double Fusion, AdScape Media (purchased by Google in March) and Exent Technologies.

Budgets: Advertisers are spending $200,000 to $600,000 per in-game advertising campaign this year, more than five times what they spent last year. A prime-time TV commercial can cost $100,000.

Source: Massive, Yankee Group

Massive impact

Massive is bringing together more than 100 big-brand advertisers and 40 major names in video-game publishing.

Advertisers: 20th Century Fox, Coca-Cola, Dell, Discovery Networks, Ford, McDonald's, New Balance, Progressive Insurance, Panasonic, T-Mobile, Under Armour, U.S. Navy

Game publishers/studios: 2K Sports, Activision, Atari Electronic Arts, Take Two Interactive, THQ, Ubisoft, Vivendi Universal

Games on the network: More than 100 this year. Games do not stay on the network permanently. They are removed as they get older and fewer people play them.

Advertising campaigns: More than 200 as of July

Source: Massive

If Microsoft were building a huge shopping mall for digital advertisers, the acquisition of Seattle-based aQuantive, completed last week, would be the opening of an anchor tenant.

An earlier Microsoft purchase, in-game advertising company Massive, is probably closer to a cutting-edge boutique: It's not bringing in the big dollars yet, but there's potential, and it's key to attracting more shoppers to the mall.

In-game advertising fits the broader company strategy of offering one-stop shopping for advertisers who want to reach consumers of digital media in all its forms, said Cory Van Arsdale, a Microsoft veteran installed as CEO of Massive in January.

Massive and mobile-advertising company ScreenTonic, another Microsoft acquisition overseen by Van Arsdale, are now part of the newly created Advertiser and Publisher Solutions Group.

The challenge before Microsoft, freshly bulked with talent and technology from aQuantive, is to knit together the many shops in its digital advertising mall, including MSN.com, Windows Live services, Internet search and third-party sites such as Facebook.

To capitalize on this scale, Microsoft is developing a unified system for order entry, reporting, billing and other elements advertisers want across all media.

"Your ideal, long-term, is to be able to have that all represented on the back end by a system that makes it faster, easier, better and consistent for the advertiser," Van Arsdale said.

Microsoft, along with its chief rivals Google and Yahoo, is investing heavily in the technology to reach that ideal.

Each separate business is full of its own complexity and nuance, as this look at Massive's model reveals.

Deal maker

Massive essentially brokers deals between advertisers and video-game publishers, who have an incentive to seek new revenue sources.

After taking out the $12 million to $20 million cost of game development, licensing, marketing and fees paid to Microsoft, Sony and Nintendo for being on their platforms, "a good title might make somewhere in between six and 10 bucks on a $60 sale," Van Arsdale said.

"So if you can get $1, $2, $3 [in advertising revenue] you're starting to be very material for them in terms of helping their bottom line."

On the other end of the business, Massive and at least a dozen direct and indirect competitors are working to educate advertisers about what in-game advertising is and how it works. It's still a small piece of the digital advertising pie, which is estimated at $30 billion to $40 billion this year, but it is projected to grow dramatically.

Van Arsdale's message to advertisers: We've got who you're looking for.

"The audience, for better or for worse, is spending a lot of time playing games," he said. "Males 18 to 34, they spend five to six hours more per week than they do browsing the Web."

Forget about a comparison to time spent with traditional media such as television or — wince — newspapers.

Game players — the all-important audience — make up the third constituency.

Lots of players

A report last month from the Yankee Group estimated there are 350 million gamers over age 13 worldwide. Console gamers, those playing on the Xbox and PlayStation, average 26 years old. More than two-thirds of this group is male.

Casual gamers skew older, with an average age of 36, and are split evenly between men and women.

Van Arsdale said Massive is committed to presenting advertising that improves the player's experience, rather than detracts from it. That means content appropriate to the game.

"So if you're doing a 'Rainbow 6' [counterterrorism, first-person shooter] game in the middle of New York City and you have zero ads in Times Square, you're not adding to the value of the game," he said.

And beyond just having the ads, they have to be up-to-date, so instead of a billboard pitching a "Lord of the Rings" DVD box set — so 2004 — it's a billboard pitching "300" or "Rush Hour 3."

"Every day it changes, which is very similar to what happens in Times Square in real life," Van Arsdale said. "That's what we strive for."

Sports stadiums and NASCAR vehicles — clogged with advertising in real life — are another natural fit for in-game ads, albeit one fraught with complex licensing and rights deals among the teams, stadiums, leagues, game publishers and advertisers.

Massive announced earlier this summer that top publisher EA Sports is adding popular titles such as "Madden NFL 08," "NASCAR 08," and "Tiger Woods PGA TOUR 08" to its network.

Improper fit

By the same token, Massive isn't interested in putting advertising in games where it doesn't fit, including titles such as "Harry Potter," or "Gears of War," which, Van Arsdale notes, is "set 300 years in the future on a different planet."

That doesn't mean there aren't advertising opportunities associated with fantasy and science-fiction titles. But they may fall in a different category of video-game advertising.

Around-game advertising includes promotions on game Web sites; multiplayer game-session sponsorship (the results page at the end of a race could be brought to you by Gatorade, for example); tournament sponsorship; and game give-away promotions.

Microsoft is forging ahead in this category with cross-promotion deals for "Halo 3," one of the most-anticipated new titles for the coming holiday season and widely considered unsuitable for in-game advertising.

Earlier this month, the company announced a "Halo 3" branded flavor of Mountain Dew, as well as promotions with Pontiac, Comcast and Burger King.

Massive is focused on placing ads within the games.

Static in-game advertising can include billboards, logos and product placements — cars and cellphones are prominent examples — that are typically hard-coded into the game; they'll be there from the first time it's played until the last.

One drawback: These static or fixed ads must be built into the game early in its development, sometimes as much as a year or 18 months before it goes to testing.

Van Arsdale sees the biggest opportunity in dynamic in-game ads, and the Yankee Group report backs him up.

Static ads and product placements made up two-thirds of the $77.7 million in global revenue generated by in-game advertising in 2006. But dynamic in-game ads are poised to grow much faster — more than tripling this year alone — and become the dominant component of the category.

In this model, game developers use Massive software to build advertising space into the game. It might be a billboard, a poster, a vending machine or a pizza box.

The ad content displayed in that space can be changed via the Internet in much the same way display ads on Web pages are served up fresh with each visit to a site. All of the current-generation video-game consoles have the ability to connect; Yankee Group estimates half of them will.

This gives advertisers flexibility to start and stop campaigns within games and avoids the monotony of hard-coded advertising, Van Arsdale said.

During a gaming session, Massive keeps track of how long an ad is legible to the player (not too far away, not off at an oblique angle). Ten seconds counts as one "impression." Advertisers tend to buy space based on the number of impressions it will yield.

Van Arsdale said Massive aims to present about five minutes of advertising for every hour of game play. And, he boasts, the player isn't going to hit fast-forward or head to the kitchen for a snack during the ad because the game doesn't stop.

Network building

Massive is building a network of games that feature the technology for dynamic ads. Van Arsdale expects to have 100 titles by the end of the year. Rather than inking advertising deals one game at a time, this allows Massive to sell advertisers to a broad swath of people who are playing games across its network.

Van Arsdale compares it to a cable channel.

"I've got a huge network of people every night playing games," he said, adding that the audience can be sliced and diced by the type of games they're playing. Some advertisers want space only in "mature" titles, or sports titles, or titles rated "E" for everyone.

Massive is aiming to add more games to the network and line up business on platforms from Microsoft competitors Nintendo and Sony. So far, the Massive network includes only Xbox and PC games.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2007 The Seattle Times Company

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