Massive, Inc. — acquired by Microsoft (2006)
New York, NY
Massive pioneered the in-video advertising market. As game consoles began to connect to the internet in sufficient numbers in 2003, and video game revenues exceeded Hollywood revenues for the first time, the games became a medium for real-time digital advertising to a valuable, captive audience. Massive built the largest network of game publishers, and became the one-stop-shop for advertisers to get their message delivered inside of video games. Microsoft purchased Massive in the spring of 2006.
We first encountered Massive when Scott took a phone meeting with Mitch Davis, the CEO, and Katherine Hayes, the COO in late 2003. That was the venture capital nuclear winter, and capital was highly scarce for new early stage deals. Mitch and Katherine had been pitching hard, but investors pushed back harder. According to Mitch, the objections were threefold. 1) The publishers would never allow it, 2) the gamers would rebel, and 3) the console makers would destroy the economics. We diligenced the first two hard, and discovered that gamers would prefer real ads in many cases to the fake ads, and would love some variety in the game instead of seeing the same tired product placements. The publishers largely expressed skepticism that they would be the first to participate, but admitted that their fixed costs were too high, and didn’t justify the profits on most games and they would love an ongoing profit stream. The console makers were agnostic, saying they would love to have advertising revenue flow through their system and more power to Massive if they could pull it off. So we wrote the term sheet with Chip Meakem (now at Kodiak, but was at DFJ Gotham at the time) and set out looking for a 3rd partner to complete the B-round syndicate. Andy Zalasin at RRE stepped forward, and Massive began locking up publishers as soon as the round closed in May of 2004. One publisher, Atari, was particularly forward thinking, and Sarah Mcllroy, now CEO of our portfolio company Fashion Playtes, was handling the Massive deal for Atari at the time.
Neocarta ventures came in 6 months later to lead an unsolicited B round at a good step-up in value. Mitch and Katherine and the team had been executing flawlessly, particularly in creating buzz about the market opportunity and Massive’s leadership position. With the B round capital, Massive locked up most of the remaining game publishers (except Electronic Arts, who were holding out) and revenue began to build. Massive went from begging for capital to the belle of the VC ball. Everyone wanted a piece of the company, and the buzz increased ten-fold. A very high priced C round was seriously contemplated.
But additional money would never be required. In the fall of 2005, Microsoft began acquisition discussions that ended with a terrific (confidential) cash offer. The video-game ad market had emerged, Microsoft wanted to own the leader, and NAV’s strategy of betting early on emerging mass markets had another proof point, albeit an unusual one with a 2-year turn-around.
New Atlantic Ventures Team
- Mitch Davis, co-founder & CEO
- Katherine Hays, co-founder & VP of Strategy
- David Sturman, co-founder & CTO
- Massive, Inc.
- 627 Broadway, 7th Floor
- New York, NY 10012,
- Key Links
- Company Website