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I’m a bit late to this item (again, I’ll blame being out last week), but The Wall Street Journal (sub. required) reported over the weekend that Google is in talks with in-game ad placement firm Adscape Media. Here is Red Herring coverage if you don’t have a WSJ sub.

This is reminiscent of Microsoft’s acquisition last year of in-game ad placement firm Massive. Among other things, Massive brought Microsoft the ability to place virtual billboard ads throughout its virtual cityscapes in Virtual Earth 3-D  something we’ve only seen the very beginning of.

For Google, this could signal the desire to do something similar, or to move more into online gaming by brokering ads in video games through AdWords. Adscape could also bring the capability to form the basis of an AdSense-like network of game publishers that would “rent out” their space for Google to contextually place advertising. The majority of advertising in video games is currently display ads, such as billboards or kiosks that are planted throughout gamescapes, but this could eventually become more performance based.

Microsoft already has an edge in the gaming world, given its positioning with Xbox, which continues to be pushed as a central element to home entertainment systems (the most recent move came at CES with the announced partnership with AT&T to bundle IPTV set-top box capability into Xbox consoles).

Gaming continues to be a hot area, with strong end of year sales, according to NPD Group. In-game advertising could be the next frontier in targeted marketing given an attractive demographic of gamers (average age is 33), repetitive exposure (compared with movie or television product placement) and level of interactivity and immersion in the medium. We’ve covered many of these advantages here, here, here and here.

For Google this all makes sense given the company’s clear goal to offer advertising across all possible media and to be a one-stop shop for ad buys with both local and national reach. Its moves into radio, newspapers and video (note its announcement this week to expand the integration of video content into AdSense) make this clear.

The wild card in all this could be the 3-D virtual world gaming, being popularized by Second Life. The ability to create virtual avatars that can interact with other avatars and businesses offers intriguing possibilities for e-commerce, impression advertising and a whole new kind of local search. Some businesses such as Sun, IBM and AOL have already sniffed out the opportunity and have marketed themselves in Second Life. This is nothing new but continues to raise interesting possibilities.

The marketing integration will eventually become more and more interactive. Retailers, for example, could sell real clothing that virtual avatars  with the same body dimensions as their real-life counterparts  can actually try on and buy (and have shipped to game players in the real world). Second Life for now exists only with a virtual currency (exchangeable for U.S. dollars, which is how Linden Labs, the game’s owner, makes money), but the whole thing makes the mind wander about the possibilities for conducting e-commerce and local search in a much more robust way than we know it today (more of these possibilities for local are raised in the recent Advisory Microsoft’s Virtual Earth 3-D: A New Dimension for Local).

More coverage on Second Life this week from CNet, TechCrunch, two more from CNet here and here, and a rather extensive piece from Fortune. Our past blog coverage is here and here. Stay tuned for more.


Update: Here’s today’s New York Times piece on the integration of ads in online “casual games.”

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