Microsoft (NASDAQ:MSFT) may be a distant third in search engine advertising, but its Massive in-game ad network really knows how to slay the competition when it comes to reaching diehard gamers.

Massive is teaming up with Activision Blizzard's (NASDAQ:ATVI) site, where players of Blizzard's popular role-playing games come together for one-on-one virtual battles, to serve up in-game marketing.

Massive has mastered the art of getting brand advertisers into the game, refreshing Web-tethered titles with fresh ads whenever players go past things like in-game billboards, vending machines, and theater marquees. Massive is the exclusive broker for in-game ads on Xbox's 360 console, but the deal gives Microsoft a little more skin in the PC gaming market.

It's ironic, I know. The world's leading PC software company is a force in video game console sponsorships but weak inside the box. Google (NASDAQ:GOOG) is just too strong in cyberspace, and even the struggling Yahoo! (NASDAQ:YHOO) has a firm grasp when it comes to display advertising.

Then again, maybe Massive is Microsoft's key to making a difference. Xbox 360s, PS3s, and Wiis all offer Wi-Fi connectivity, making it a breeze for Massive to deliver in-game advertising for developers. Video games are one of the few resilient growth areas in retail, going by recent quarterly reports out of GameStop (NYSE:GME) and Blockbuster (NYSE:BBI). This comes at a time when year-over-year search engine traffic has surprisingly dipped. Advertisers hungry for young audiences should ramp up their in-game marketing efforts while scaling back elsewhere.

So go ahead and show Microsoft's Massive some love. It was a visionary Microsoft purchase two years ago. It's at the right place at the right time for a company that's been caught out of position before.

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