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Microsoft (NSDQ: MSFT), which we had heard was shopping its Massive in-game ad unit, is now reportedly shutting down the operation. Mediaweek says that Microsoft unsuccessfully tried to offload the unit to rival Double Fusion for a fraction of the between $200 million and $400 million it paid for it four years ago — and will now shut it down at the end of the month.
Massive, like other in-game ad companies, was hit hard by the recession. Microsoft let go 28 percent of its staff during a round of job cuts in May 2009. Last fall, however, Microsoft insisted that Massive was doing well, saying that the unit was seeing “double-digit year-on-year revenue growth” and remained “an important part” of Microsoft’s advertising offerings.
And, in another sign that the market was improving, both Double Fusion and another rival, IGA Worldwide, have both managed to raise significant new rounds of funding in recent months.
Mediaweek, however, says that Microsoft has higher hopes to make money from in-game video advertising via Xbox Live, since it gets to keep all the revenue it generates via that offering. And, while the category may now be once again growing, it’s still not taking off as fast as analysts (and Microsoft) had once expected. Screen Digest said a year ago that it expected in-game ad spending would top $1 billion by 2014. In 2006, there were expectations that the market would be bigger than that in 2009. Microsoft says it won’t comment on “rumors or speculation.”
— A sidenote: Maybe it’s cutback day at Microsoft? Microsoft announced this morning that is reducing its health coverage for employees, TechFlash says. It’s also folding its experimental Live Labs research group into Bing, a unit it had already downsized in April 2009.