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Microsoft showed off its Massive advertising platform in Times Square in New York on Tuesday.

The tech giant wanted to show the advertising world, which is gathered in New York for the annual Advertising Week conference, exactly how the dynamic in-game advertisements work.

(Credit: Warner Bros.)

Flashing high above 43rd Street were clips from a series of games that showed avatars stopping to view a movie trailer for the Hollywood blockbuster 300. A Toyota advertisement also lined the outfield wall in a baseball game that's played on Microsoft's Xbox game console.

"The idea is to have advertisements appear and fit in naturally to the games just as they would in real life," said Jay Sampson, vice president of North American and Asia Pacific sales for Massive, Microsoft's in-game advertising marketplace. "But these advertisements are also dynamic. So the ads can be updated or changed by the advertiser at any time."

Microsoft, which bought Massive in May 2006, is a leader in placing dynamic advertising in games. The market is filled with many smaller players, such as a company called Double Fusion. But it's also attracting other big technology names, including Google, which bought AdScape Media for $23 million earlier this year.

Analysts say the in-game advertising market is worth about $514 million today. And dynamic in-game dynamic advertising, which allows advertisers to change the advertisements at will, is expected to reach $675 million by 2012 in the United States, according to consumer research group Parks Associates.

Microsoft sees its early lead in the in-game advertising market as a strategic opportunity that fits well into the company's overall advertising strategy.

"Emerging media, like in-game advertising, is a huge component of our overall strategy," said Matthew Carr, senior director of Microsoft Digital Advertising Solutions. "We're already in a leadership position here. And we see this as being where the future growth will be."