As expected, the software maker announced it is buying Massive, a company that into video games.
"That Massive team will be joining Microsoft and the MSN group," said Robbie Bach, president of Microsoft's entertainment and devices group, speaking at the MSN Strategic Account Summit here. "They will become a key part in what we are doing in this space."
The financial terms of the deal were not provided.
Bach said that video game advertising is a potentially great opportunity, but also must be done carefully.
"Make sure whatever you do doesn't interfere with the game playing experience," he said. "Do not interrupt someone when they are gaming. It is a very immersive experience."
But he said, if you put the ads in the game, the ad message can be very effective.
"They get it, and they may not even know they got it," Bach said.
The announcement of the deal, which was reported last week by The Wall Street Journal, was timed to coincide with Microsoft's advertiser conference, which ends Thursday.
Earlier in the day, the software makerto transform its new from a paid search tool into a vehicle that can one day deliver all manner of advertising into Web sites, video streams and mobile devices.
The AdCenter product is still in its infancy, though. Last quarter, Microsoft saw its revenue per search fall as it switched more of its volume onto AdCenter and away from Yahoo's engine. Microsoft said it is now using adCenter for.