The deal was estimated to be valued at $200 million to $400 million.
The acquisition underscores the belief among video game execs that the industry could become a large new medium for advertising.
Two-year-old startup Massive has 80 employees in Santa Monica, Calif., and New York, and is one of the pioneers of videogame advertising emulating Internet advertising models.
Massive sells the opportunity for companies to insert their brands on billboards, posters, soda cans and other elements within video games. Massive then transmits those advertisements over the Internet and inserts them into the environments of games as users are playing.
Microsoft has spent the past three years investing heavily in its own Internet search business. It now is building a version that is similar to Google's ad-brokering service that links advertisers to search results. Microsoft is beta testing its ad-brokering service, called AdCenter, in several markets.
Microsoft could tie its brokering service with Massive's network, with a goal of having one online service that advertisers can go to buy ads across a broad range of Microsoft products.
