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[updated with new Microsoft comment] Microsoft announced a new round of layoffs today as it struggles to right itself after reporting tepid results last month. We’ve learned that Massive, the company’s in-game advertising business, suffered 28 percent like 75 percent layoffs.
Microsoft declined to comment yesterday on the Massive layoffs but offered a correction today, saying the layoffs were not as high as we thought.
Today’s cuts amounted to more than 3,000 jobs and are part of the 5,000 that chief executive Steve Ballmer said he planned to eliminate over 18 months. Counting the 1,400 jobs cut in January, Microsoft has gotten rid of most of the jobs that it had planned.
We don’t know how many people the 28 percent figure adds up to, as Microsoft hasn’t disclosed that. Microsoft acquired Massive for an estimated $200 million to $400 million in 2006. Massive was part of a new wave of ad networks aimed at the video game audience.
The argument made sense at the time. Young male gamers ages 18 to 34 weren’t watching much TV anymore. Advertisers sought to reach them through games. Massive could insert ads into game worlds where they could plausibly enhance the realism. One example: the Obama campaign put ads on billboards alongside the highway in the Burnout Paradise game.
But not every game genre could accommodate such ads, and the entire online ad industry has taken a hit during the current recession. Rivals such as IGA Worldwide have had trouble raising new rounds of money — IGA put itself up for sale. Other competitors include Double Fusion and Google’s AdSense for Games, while other game companies that depend on ads include Mochi Media, NeoEdge Networks, and, to some degree, Wild Tangent. Massive had the biggest jump on all of the in-game advertising rivals, so the cutbacks are almost like a commentary on the future of the entire industry.
It isn’t clear how much of a hit Microsoft’s game business is taking in the new round of layoffs. In the last round, the game business took a big share of the cuts as Microsoft closed its famed Flight Simulator game studio.