Google said Wednesday that it's bringing its popular AdSense Web advertising platform to the small but hot casual game space, while promising to stay out of building or publishing games itself.

But questions remained about whether and how AdSense would be able to provide the same level of consumer targeting that advertisers prize -- and are willing to pay for -- with current deployments of the technology.

In a packed session at Casual Connect Seattle, the industry's leading North American conference, Google executives said its entry into the market will offer another way for game publishers -- especially the small ones that now dominate the casual game industry -- to make money from their creations.

"We are not in the content or hardware business," said Bernie Stolar, Google Game Evangelist.

"What, no gBox? No Google Live?" asked Greg Schaffer, team manager of in-game advertising at Google, sarcastically, in reference to the many rumors floating around Google's plans in the gaming space before the announcement.

"Nope. We are doing one thing, and one thing only: in-game advertising," replied Stolar, a former president of both Sony Computer Entertainment America and Sega of America.

Google's talk followed an announcement earlier in the day that MTV Networks' Nickelodeon Kids group plans to invest US$100 million in the next two years in building and selling online casual games aimed at kids and families.

Everyone wants to get in on the act

Google, MTV, Electronic Arts Inc. and Microsoft Corp., which declared its intentions the previous day, are all jumping into a burgeoning market that has yet to reach its financial potential.

The Casual Games Association claims 200 million people worldwide play casual games, defined as defined as quick-to-develop, easy-to-learn-and-play games that are played via or downloaded from the Internet.

Popular games include PopCap Games' Bejeweled and Sandlot Games' Cake Mania, as well as any number of traditional favorites such as Solitaire or Tetris.

Most are sold to customers on a "try-and-buy" basis. But the percentage of buyers that pay for a game after the free trial period expires hovers around 1-2 percent.

As a result, the industry as a whole is only expected to rack up $1.5 billion next year, according to the CGA.

By contrast, PC and video game consoles and related software generated $7.4 billion in sales in the United States last year, according to the Entertainment Software Association (PDF format) despite a much smaller number of players.

Game developers as well as operators of portals where customers can play and download casual games are eagerly adding other moneymaking options, such as micro-payments and advertising.

Most advertising for casual games today consists of banner ads placed in the Web browser around the window where the game is played.

Adding up eyeballs during level-ups

Google plans to offer targeted video ads before and after a game, as well as in the middle during breaks such as when a player clears a level, said Eva Woo, a member of the Google games advertising team in a separate briefing for press.

"Immersive ads are also something we would like to get into," she said.

What remained a mystery to listeners such as Luc Purdy, search engine marketing manager at Seattle-based Big Fish Games, is how Google would be able to ensure that AdSense serves up ads that fit with gamers' interests.

"How do they plan to determine relevancy?" he said.

Schaffer acknowledged the problem.

"The content of a game is not the same as a news article," he said. For instance, "nobody plays Diner Dash to find a diner" or get ads about plates served up to them, he said.

While allowing that "there are inefficiencies to serving up the right ad to the right user at this time," Schaffer promised that game publishers would still be able to maximize their revenue per ad impression by supplying demographic information on its players to Google's advertising team helpful for drawing "premium advertising."

Woo also said that skeptics should look closely at Google's $23 million acquisition earlier this year of AdScape Media, a small San Francisco firm that held "more than 20 patents all aimed at better targeting gamers," where Stolar and Woo both formerly worked.

On its Web site, Adscape is described as delivering "sophisticated demographic and geographic targeting" along with "dynamic delivery of advertising with plot and storyline integration" into games.

Translation: product placements into the game play itself, according to Jonathan Venier, director of marketing at NeoEdge Networks Inc., a competitor to Google in casual game advertising. The issue there, he said, is the limited types of ads can be smoothly integrated without "affecting the game play."