Back in July Google took it’s ‘Second Life’ competitor product ‘Google Lively’ out of barn and brought it out into the light of day.  Back in March of 2007 the king of search acquired Adscape for a cool $23 Million.  Putting two and two together here, it’s easy to see that Lively could very well be a testing ground for a Google in-game advertising network.

As with a number of other Google properties, these two seem to be right back where they started from: on the shelf.  Sure Lively is public and anyone can join and ‘play’, but is anyone?  After the initial hype and marketing push, active users on the platform remain sparse.  I’ll admit that I gave it a go briefly after the initial launch, found myself in some deserted and creepy ghost town areas, and haven’t been back since.  Likewise, Adscape has been eerily quiet since the acquisition.  Kind of like a sleeping tiger, or is it more like the crouching tiger?

Chris Morris at Forbes.com recently published an article concerning Google’s increasing look at further monetization via in-game advertising.

“The way Google works is they try a lot of different things, and they’re OK with putting out sub-par products initially to get things moving,” says Colin Sebastian, senior vice president of equity research at Lazard Capital Markets. “People are pretty forgiving of that … since they’re good at upgrading their products.”

“Given all the employees they have and the company’s policy of encouraging side projects, I would be very surprised if there wasn’t somebody in Google who’s not approaching [gaming] as an opportunity,” Sebastian says. “Of course, there are a number of hurdles that have to be cleared before it reaches the outside world.”

Google’s Dean of Games, Bernie Stolar, formerly from SCEA and Sega stated back in July 2007 that the big G was interested solely in the advertising potential of games—nothing else.  While this has been seen as a ‘downplay’ by a large number of reporters, what else are we talking about here?  Isn’t Stolar’s comment about ‘just advertising potential’ enough to sound a few bells and whistles around the gamescape?

Morris points out that Pogo.com and RealArcade players tend to be women over the age of 35 and are already used to seeing advertising in their games.  Well of course they are, Pogo and RealArcade are both free-to-play portals supported by in-game advertising.  Morris’ point is valid here, but he also steps out on the wrong limb by stating that Google/Adscape could easily acquire a top tier developer and court hardcore PC gamers.  Morris proposes that this segment might be willing to put up with it in exchange for a free top tier game.  I’m going to have to stand up and be counted in this one and firmly disagree.  While according to the recent NPD report, Extreme and Avid (for ease of nomenclature, let’s call them ‘Hardcore’) gamers make up the smallest percentage of players, they ARE often the most vocal, especially when it comes to the area of discontent.  Given the nature of ‘casual’ gamers, this segment often goes uncounted, and the hardcore gamers win out.  While in-game advertising might be acceptable to those that have been introduced to the gaming world via free-to-play portals, die hard fraggers are never going to give up gaming realism in exchange for something for free.

So while Google may be ‘just browsing’ (Chrome pun intended) the potential of in-game advertising, they’ve got a very hard challenge ahead of themselves if they plan on simply pulling another Google move; purchase a hot (gaming) property, stick it full of adsense ads and take it to the bank.   Gamers are a tricky bunch, Google’s going to have to work a little magic to get this one right….if they do at all.