By Jon Fortt
July 13, 2007

We said in the latest issue of Business 2.0 that ads in online games are about to become a much bigger deal – and apparently investors agree.

IGA Worldwide, one of the in-game advertising network operators John Gaudiosi wrote about in his What Works piece for us, Wednesday announced that it has raised $25 million from an assortment of public and private investors. GE/NBC Universal’s Peacock Equity and KTB Ventures led the series B round along with existing investors Easton Capital, Morgenthaler Ventures, Intel Capital and DN Capital.

In our story we note:

IGA isn’t the only player watching those trends; some of the biggest names in digital marketing are betting heavily on the genre.

Last year Microsoft (MSFT) bought Massive, the leading in-game ad broker, for a reported $200 million. Earlier this year Google (GOOG) snapped up in-game ad shop Adscape Media for $23 million. Massive and other ad brokers, like IGA, allow agencies to buy space in many games at once, much as they would TV time.

Meanwhile, major agencies like Ogilvy, Omnicom (OMC), and Publicis (PUB) are focusing more on games. Publicis has recently expanded its games ad group from two people to 10. These moves aren’t just for bragging rights; Parks Associates estimates that the in-game ad market will be worth more than $600 million in three years, up from $120 million last year.

The in-game advertising landscape has the potential to get really interesting, as online games become more mainstream with consoles like Microsoft’s Xbox 360 and Sony’s (SNE) PlayStation 3, and advertisers gain the ability to dynamically insert ads into the action.

IGA will have quite a fight on its hands; Microsoft’s online gaming ad division, Massive, is getting pretty smart and aggressive about the business. IGA investor Greg Blonder told VentureBeat that Microsoft doesn’t have the cultural DNA to put ads into games in a way that users are comfortable with, but that’s not the impression I got while editing our story. Some of the smoothest examples of ad integration – like in Splinter Cell and MLB 2K – were from Massive. And at least one of the biggest flubs so far, the out-of-context billboards in Battlefield 2142, were from IGA.

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