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Massive makes massive layoffs – up to 100 jobs go

By on May 6, 2009

Microsoft continues to make good on its promise to cut 5,000 jobs. Following the 1,400 job losses earlier this year (with many redundancies in Microsoft’s games division), Steve Ballmer, CEO of Microsoft has announced where the hammer will fall for the next 3,000 cuts.

Massive Incorporated, the in game advertising network acquired by Microsoft for an estimated $200-$400 million in 2006, will take a bashing. Venturebeat reports that Massive will take lose 75% of its staff, or approximately 100 people.

Following the news that IGA is in financial trouble, this could be very bad news for companies aiming to capitalise on the desire for brands to communicate with the core gaming demographic of males aged 18-34.

But I don’t believe it.

Advertisers have always gone where the eyeballs are, and there is always a way to make money from that. What IGA and Massive have done is to build a huge, technology-led infrastructure for inserting ads into games, often promising huge minimum-guarantees to publishers and developers in return for the right to push ads into certain games.

However, they have now discovered that:

  • Paying minimum guarantees is a land-grab strategy from the dotcom era – but requires very deep pockets and a high risk that you will never make your money back
  • The in-game ad market is much smaller than the equivalent Internet ad-serving market, which means that Massive and IGA are not Double Click.
  • Display advertising in games is no more recession-proof than any other form of display advertising

I still believe that advertisers want to reach gaming audiences, and will spend real money to do that. But I don’t believe that there is currently enough money in it to support that huge and competitive infrastructures that Massive and IGA have created.

So in essence, while there is bad news for Massive and IGA, I don’t believe it is the end of ad-funded gaming.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: