Official: Google Buys Adscape

March 19, 2007 | By: James Brightman

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Google has finally announced today that it has indeed acquired in-game advertising company Adscape. Google said that it believes video games are the "perfect medium" to deliver targeted advertising. More within...

As has been suspected for months now, Internet giant Google has acquired in-game advertising firm Adscape. The Wall Street Journal first reported on the likely buyout back in January. Today, however, Google finally confirmed the news. Financial details were not disclosed; business publication Red Herring believes the price was in the range of $23 million.

By comparison, last year Microsoft purchased Massive Incorporated for roughly $200 million. That said, Massive was far more established in the in-game advertising space and actually had developed a network for advertising. Adscape on the other hand has a number of interesting technology patents but hasn't gone much beyond that.

"As more and more people spend time playing video games, we think we can create opportunities for advertisers to reach their target audiences while maintaining a high quality, engaging user experience," Google said in a statement on its site. "We think this rich environment is a perfect medium to deliver relevant, targeted advertising that ultimately benefits the user, the video game publisher, and the advertiser."

Adscape chairman of the board and former Sega of America and SCEA executive Bernie Stolar stated on his Google blog, "Our charge at Adscape has always been to honor the game that was developed and find new ways to enable that game to continue so others can enjoy it. That's why we are so stoked to join Google�because these guys get it, and are committed to helping us continue our mission."

Following the news, Lazard Capital Markets analyst Colin Sebastian said that the "acquisition of Adscape provides further validation of in-game ad market" and "while Adscape is one of the smaller in-game advertising networks (published reports indicate the acquisition was in the $20-$25 million range), we expect the company's patents and technology to allow Google to extend the reach of its Internet-based contextual ad network into casual and traditional console video games."

Sebastian specifically noted two factors that could really help push the in-game ads space forward: the new consoles and Nielsen's GamePlay Metrics.

"We believe the market for in-game advertising will increase significantly over the next 3-5 years, driven in part by the growth in online game networks such as Xbox Live and the PlayStation Network, along with ramping sales of next generation video game platforms (Xbox 360, PS3 and Wii). In addition, with 70% of the key 18- to 34-year-old demographic owning or playing video games, we expect advertisers to shift more spending to in-game ads from traditional media such as television and print. Specifically, we are conservatively estimating that the size of the in-game advertising market will increase to $563 million in 2010 in the United States, from roughly $140 million in 2006 (42% CAGR)," he said.

"Nielsen ratings of in-game ads could provide boost to market. We believe that the pending launch this year of Nielsen's GamePlay Metrics could help legitimize the in-game advertising market with a broader group of advertisers," Sebastian added. "Specifically, Nielsen is planning to provide metered video game usage and demographic data by game title, genre and platform so that advertisers can measure the return on investment (ROI) of their in-game ads. At this point, we believe CPMs on ads delivered into top video games are in the $20-$30 range."