Electronic Arts Inc., the world's biggest video game publisher, said on Thursday it had struck deals with two in-game advertising providers, taking its first steps into the online advertising business.

Redwood City, California-based EA said its agreement with Massive Inc., which Microsoft Corp. (Nasdaq:MSFT - news) bought earlier this year, will include up to four video games. The first of those will be Need for Speed: Carbon, the latest iteration of its popular racing series due in late October.

Privately held IGA Worldwide Inc. will also deliver advertising in up to three EA games, starting with Battlefield 2142, a futuristic combat game slated for release in mid-October.

EA did not disclose financial terms of the agreements. The ads will appear in games in the United States and Europe.

You'll see more agreements like this with other titles in the future, said Chip Lange, EA's vice president of online commerce, adding that the company plans to negotiate with all providers of online in-game advertising.

It's too early for us to lock into a single solution, Lange told Reuters.

Lange said the young industry will likely continue to expand with new offerings from upstarts as well as large Web ad and media companies such as Yahoo Inc. and Google Inc., which bring in billions of dollars from online advertising revenue each year.

NEW ONLINE AD BOOM?

Some video game fans say that adding advertising to certain titles, particularly sports games and those that are set in urban landscapes, add realism. Others chafe at the idea of having ads in products that can cost up to $60.

Video game makers have placed ads in their products for years and are increasingly drawn to it because it promises to help offset rising game development costs.

Companies like Massive, IGA and Double Fusion use fast Internet connections accessed via personal computers or next-generation consoles like Microsoft's Xbox 360 to let game makers deliver an ever-changing array of ads on billboards, vending machines and other spaces within games.

That new type of advertising lets companies change ads within games. In the past, ads were written into the game code and often became stale with age.

Mainstream companies such as Coca-Cola Co. and Honda Motor Co. Ltd. have already signed up to get their ads in front of the sought-after young male demographic that is the bulwark of the games industry.

Market research firm Yankee Group has said in-game advertising is poised for explosive growth, forecasting revenue of $730 million by 2010, compared with $55 million last year.

Massive Chief Executive Mitch Davis was much more bullish - predicting revenue approaching $2 billion by the end of the decade.

Lange said the potential exists for fast growth, but took a conservative view: We don't see it in the near-term horizon.

California Software Advertising Marketing