The deal was appropriately announced at a recent online advertising conference at Microsoft’s Redmond, Washington headquarters. Financial terms were not disclosed.

Microsoft said the acquisition will give it a competitive edge against search rivals like Yahoo and Google in the burgeoning online advertising space.

Massive’s technology inputs adverts into console and PC-based video games, including its own Xbox Live, using a live connection. It differs from traditional static and rigid adverts and product placements in games by allowing advertisers to switch around adverts presented.

Microsoft hopes to make such features available in other products including its MSN online portfolio. Massive’s technology will also become part of Microsoft’s adCenter sales platform.

Massive employs about 80 people. Since the company launched in October 2004 over 100 game titles have been hooked into Massive’s online advertising network. Current advertising clients include Verizon, Coca-Cola, and Dunkin’ Donuts.