Google looking to buy in-game ad firm?

[UPDATE] <i>The Wall Street Journal</i> reports that the search giant wants to expand its business into video games; source calls deal a "mismatch."

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Google could be in negotiations to buy San Francisco-based Adscape Media Inc, according to a report from The Wall Street Journal Online. The report lists sources as saying that the deal could be concluded as early as next week.

The deal, if successfully completed, could mean that Google would offer its hundreds of thousands of current advertisers the opportunity to also place ads within games.

In-game ads have been attracting more and more interest recently. Ad firm IGA Worldwide announced an agreement with Valve to provide "dynamic advertising" in the first-person shooter Counter-Strike in December, and Microsoft acquired in-game ad company Massive Inc for almost $200 million in May.

Adscape was founded in 2002 by former Nortel engineer Dan Willis, who was joined in 2006 by two former Sega executives, Bernie Stolar and Chris Gilbert. Stolar had previously been the president and COO of Sega America, and Gilbert was executive vice president of Sega's sales, marketing, and operations division. The company bills itself as "Real Advertising in the Virtual World" and uses a technology it calls RVG--Real World/Virtual World Gateway--which allows for two-way text, audio, and video communication to unlock rewards, download music, or enter sweepstakes.

However, the report quotes Adscape chairman Stolar as commenting that he had "spoken to every major player" about the possibility of a company acquisition but that no such deal was yet in the cards.

[UPDATE] A number of industry sources, speaking with GameSpot on background only, lent additional credibility to the rumors, but none of those sources saw much of an upside for Google, one going so far as to call the sale--which they called "95 percent likely"--a "mismatch."

Selling games is a "high-touch sale," the game industry exec said. Most publishers want approval over ads that appear in their games, and conversely, marketers want to know about the specific games their ads are appearing in--are cops getting blown away, are cars being destroyed, are violent acts being rewarded. Given the Google approach, regardless of the specific business model, is one based on automation, this exec sees a substantial disconnect in the acquisition.

Another source called the rumored deal a "fire sale." Stating the technology owned by Adscape has never been deployed, the source adding "this is not an asset sale, nor are they [Google] buying any publisher relationships...Google is not buying a business team and they [Adscape] don't have any ongoing revenue or income."

What Google does get, however, is a number of patents owned by Adscape, a technology team (based in Canada), and a client application for ad serving into games--which may be enough for the deep-pocketed enterprise with a penchant for acquisitions and a commitment to further building out an ad-based business. That goal was confirmed by a Google rep who yesterday told the Journal the search giant is "always considering new ways to extend Google's advertising program to benefit our users, advertisers and publishers...In-game advertising offers one such possible extension among many others."

An Adscape rep contacted today declined to comment on the alleged negotiations. Calls to Google staffers close to the acquisition also did not return calls.

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