• by Laurie Sullivan , Staff Writer @lauriesullivan, October 11, 2010

In-game advertising offers benefits to brands, but with technology progressing with lightning fast speed it may not make sense to support a standalone company, but rather roll services into a publishers or an advertising business. It appears Microsoft execs might think similarly. On Friday, reports began surfacing the software giant will shut its in-game advertising unit Massive before the end of October.

Apparently, Massive General Manager JJ Richards has been seeking another job and the company's technology and sales team are being assigned to other projects. Microsoft declined to comment on rumors or speculation, but insiders suggest keeping vigilant on any pending official news.

It makes sense to me if the company rolls offerings once supported by Massive into its Xbox division or advertising and publishing business unit. One of its biggest clients moved services in-house earlier this year. The video game publisher Electronics Arts (EA) reported in March it would pull ad sales in-house and end its relationship with the in-game advertising company. But not all publishers support in-game advertising and it should remain an option for advertisers looking to connect with the video game community, especially as technology like Google TV and Apple TV become ubiquitous tools for advertisers that will include everything from video games to music to movies.

When Microsoft acquired Massive in 2006, the Wall Street Journal pegged the acquisition price between $200 million and $400 million. Demand for in-game advertising through Massive and rival Double Fusion peaked around that time, but since then ability to track and serve up ads through the entertainment hub Xbox Live, reaching about 25 million users globally, became a more attractive media buy for advertisers.

Lazard Capital Markets Analyst Colin Sebastian says in-game advertising still plays a role for brands, but perhaps the Internet services side of Microsoft can do more for the business. "Microsoft probably sees more monetization for services through Xbox Live in terms of downloads and micro-transactions vs. in-game advertising," he says.

In a conversation earlier this year with Massive's Richards, he explained a study supported by Massive and comScore demonstrating campaign results from a Bing advertising campaign. The numbers looked pretty impressive.

The findings suggest Massive's in-game advertising had a positive impact on consumer behavior. If you believe the results, after exposure to the Bing ads in-game, the percentage of gamers visiting and searching on Bing.com increased up to 108%, two-thirds of those were new Bing users.

As a side note, Richards also eluded to a reorganization of sorts that would closely tie in Xbox Live. I don't believe Microsoft would give up the technology, but I do believe they would roll it in to another business division, though they did mothball AdECN Exchange technology, swapping it out for real-time ad bidding platform AppNexus. I'm expecting a formal announcement by the end of the year. Stay tuned.