In-game advertising is showing up increasingly not only on PCs, the web, and game consoles, but also on mobile phones.

Major brands like Coca-Cola and Toyota have been advertising in online video games, attracting major companies such as Microsoft and Viacom to acquire the startups Massive and Xfire (see Redmond to Play Ad Game and Viacom Pays $102M for Xfire).

Alex St. John, chief executive of WildTangent, a company that develops online casual games, talked about the trend Tuesday at the Games & Mobile Forum 2006 conference in New York City. A former Microsoft executive, he helped develop the DirectX technology that became part of the Xbox game console.

He has been working with Coca-Cola to sponsor a game called Polar Bowler on his company’s WildGames site that allows users to insert animated Coke bottle caps into an on-screen coin slot as game tokens. “Casual gaming is a behavior, not a demographic,” he said.

Advertisers can sponsor particular content with the games, and game developers can sell micropayments to players that allow them to continue playing or reach a higher level in the game.

Dave Madden, executive vice president of WildTangent and chairman of the Interactive Advertising Bureau’s games committee, said in an interview Wednesday that the Microsoft-Massive and Viacom- Xfire deals help validate the industry.

“The growth of advertising in games is going to be huge,” he said. “Microsoft is one of many companies trying to figure out how to play in this space.”

Panelists at the conference addressed the growing popularity of games on mobile phones and how they were being used to promote brands. “Every major consumer brand and media property is embracing mobile,” said Mark Donovan, senior analyst at research firm M:Metrics.

Vibes Media CEO Alex Campbell ran one of the first mobile marketing campaigns back in 1998 to promote Pizza Hut via wireless pagers.

“As different players come into the market and as major brands start to embrace mobile as an advertising media, they try to shove other business models into the mobile marketing space,” he said. “Mobile is becoming more of a targeted advertising medium.”

Targeting Phone Users

One way to target cell phone users is through games. Neil Closner, president of Cascada Mobile, specializes in referral marketing through a Java application his company has developed.

“It started out as a way to help gaming companies get their games to become viral,” he said. “Two weeks ago, we launched a way to share other kinds of content, including video clips. We’re speaking to a lot of brands and they’re becoming more receptive to mobile.”

However, companies are seeing the text message as a limited way to get their message across, so Cascada is giving them the ability to put their logo, jingle, or characters in front of the consumer on the phone.

Soapbox Mobile CEO Dan Flanegan has signed deals with the youth-oriented mobile virtual network operator Amp’d Mobile and wireless video provider MobiTV.

“We’re being approached by more folks who aren’t looking at executing just a single campaign,” he said. “What they want to do is build out more of a strategy in mobile over the course of, say, an entire year and across multiple platforms.”

Natalie Farsi, vice president of media and entertainment at m-Qube, which was acquired last month by VeriSign for $250 million, said her company powers many applications on cell phone companies’ wireless portals. One of these is a news alert service for CBS (see CBS Offers Cell Phone News and VeriSign Buys m-Qube: $250M).

Her company has developed a wireless contest for the NBC TV show Deal or No Deal. “It integrated a contest within the show every night,” she said. “For $0.99 you have a chance to win $10,000 during that show and we’ll feature your name on the air. These are big campaigns and they show a lot of commitment. The revenue that they’re generating has been a big surprise to the networks.”

She said the TV networks are going through their programming lineups to identify other shows for which they can create similar moneymaking promotions.

Picky Editors

Carrie Seifer, director of emerging technologies at Condé Nast’s CondéNet service, said her media company, which publishes magazines like The New Yorker and Vanity Fair, is still trying to figure out the best way to leverage technologies like wireless and games without sullying the brands they have built over the years.

“These are editors-in-chief who are rightfully snobs about their brand,” she said. “The Vogue brand has been around for a long, long time, so they’re not just going to let a text-messaging campaign evolve. They’re extremely picky.”

Jane, GQ, and Teen Vogue are the furthest ahead in mobile applications within the Condé Nast stable. Mobile provides publishers with a way to make the magazine much more interactive and help compensate for some of the drop-off in ad revenue that many print media properties have seen. The goal is to sell either more advertising or more subscriptions.