Microsoft is set to steal a lead on Sony in an important corner of the fast-evolving interactive games industry with the expected acquisition of Massive Inc, a company that places advertisements in online video games.

The New York-based start-up is the biggest of several new companies that are trying to build networks to link advertisers with the hard-to-reach young males who are spending an increasing amount of their time playing video games.

Placing ads over the internet into games while they are being played is already a proven concept, though it remains a rudimentary business, said Mike Goodman, a media and entertainment analyst at Yankee Group. “Money is flowing into this network, but it is not on the primary spend list” of the big advertisers, he said.

Despite that, the risk of losing touch with an important part of their audience has prompted other early moves by traditional media companies to find a way into video game advertising.

They include Viacom’s move earlier this week to buy Xfire, a company that operates a messaging service that connects games players.

The decision to buy Massive at such an early stage reflects an attempt by Microsoft to take a lead before the games industry’s other big players act, with Sony and Electronic Arts the most likely rivals to try to build or acquire in-house advertising networks, Mr Goodman added.

The first signs of a race among the games giants to build online ad networks echoes the more established search advertising systems already created by Google and Yahoo, with Microsoft struggling to catch up.

Like those networks, observers expect only a small number of companies eventually to dominate the business.

While the deal, which was first reported by the Wall Street Journal, has been agreed in principle, final details are still being worked out, said one person familiar with the process. Both Microsoft and Massive declined to comment.

Although Microsoft’s base of 13m-14m Xbox users is still smaller than the 100m-strong PlayStation audience, it has succeeded in signing up a higher proportion of its players to its online service, creating a fast-growing base of users.

More than 3m Xbox owners are believed to use the Xbox Live service, compared with about 5m online players on PlayStation.

Sony is expected to move towards a more centralised online games service when it launches PlayStation3 this year.

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