It was reported yesterday that software maker Microsoft was in talks to acquire in-game advertiser Massive Inc. People familiar with the deal expect an announcement to come sometime next week and to be valued at around $400 million.

As game publishers seek out stable income streams, in-game advertising is an attractive and viable option. By including Massive Inc.’s technology in current and future game releases, game companies are able to realize profit even after consumers walk out the door with their games.

Analysts are speculating that Microsoft is planning to integrate Massive’s in game advertising technology in to its own bid driven ad platform and to possibly scale the technology into its Xbox 360 console in an effort to compete with current advertising powerhouses Google and Yahoo.

Dynamic in-game advertisements are relatively new to the growing game market. While publishers seem to welcome the technology with open arms the practice raises rather serious privacy and game performance issues that also need to be considered. While Massive Inc. declares that no personally identifiable information is passed to their servers, anonymous game play statistics and ad view information is passed back to Massive with no ability for the user to turn those options off. Although there is no indication of such, it should be taken in to account the policy may change under Massive Inc.’s new owner.

Another point to consider is that Massive’s technology uses system resources that may be better used by the games themselves.