IGA Worldwide Considers Buyout

IGA Worldwide, a company that inserts ads into video games, is struggling with the recession. The New York company is trying to close a new round of funding, but it has also put itself up for sale.

Chairman Justin Townsend is believed to favor a new funding deal, but won't rule out a sale either. However, Townsend also said IGA did not want to accept “low ball offers” to purchase the company.

Founded in 2004, IGA has high-profile deals with many game industry publishers, and announced its 30 millionth unique user in October of last year. However, the general downturn in advertising budgets forced IGA to lay off 25 percent of its staff in November, leaving it with about 45 employees, according to Townsend.

IGA has technology that allows game developers to designate spots inside games where ads can be run. Those ads can be inserted dynamically, meaning they are piped into the spots via an Internet connection. The ads show up in places such as billboards or moving vans inside a game. IGA created a network of advertisers it works with. It shares the money for the ads with the game publishers and console owners such as Sony.

Apart from the general advertising downturn, the company was also forced to create a new business model after guaranteed payments to publishers in exchange for advertising rights in games no longer became viable.

"We had to sit at the table and come up with a new business model that worked for all parties," said Townsend.

The company is now aiming for around $3 million in revenues per quarter, after reaching a low of $1 million following the credit crunch. Although the privately-held company does not publish its finances, it has been noted that the company made a loss of $11 million on revenues of $3 million in 2007, with the 2008 financial year expected to see losses of $26 million on revenues of $3.4 million.

Here’s the bigger question, are IGA’s problems its own doing, or are they inherent to the in-game ad industry as a whole? On the one hand, the video game industry is one of the few areas of the economy that remains resilient, with growing revenues. On the other, the ad industry has taken a hit, with brands less willing to spend money on advertising at a time when consumers are less likely to respond.

(via VentureBeat)