In-game ad firm IGA Worldwide lays off nearly a third of its employees

IGA Worldwide, a once-promising in-game advertising firm, has laid off an unspecified number of employees, VentureBeat has learned.

The New York-based company cut about seven of its 22 employees, according to two sources, who requested anonymity. The layoffs suggest that all is not well with the in-game ad business that focuses on PC games and consoles.

Justin Townsend, co-founder of IGA Worldwide, said in an email that the “one-third layoffs” was incorrect. But he declined to comment further. [Update: Townsend said that less than a quarter of the employees were laid off and more details will be announced later. This was due to a strategic realignment of the business and a focus on other priorities.]

Back in 2008, IGA Worldwide had 70 employees and it was reaching gamers on four platforms: the PC, Mac, Flash games, and the PlayStation 3. But in the meantime, much of the brand advertising has been moving into social games on Facebook and mobile games as well.

IGA’s financial backers include GE/NBCU, Intel Capital, Morgenthaler Ventures, Easton Capital, DN Capital, KTB Ventures, Translink Capital, Itochu Technology and Sumitomo/Presidio STX. Altogether, the company has raised nearly $30 million in two rounds. Townsend founded IGA Worldwide in 2004. Back then, in-game ads were hot and Microsoft paid hundreds of millions of dollars to buy the leading in-game ad firm, Massive. Google also entered the market and then pulled out.

Microsoft is now inserting ads into the Xbox 360’s dashboard and int some of its games on Xbox Live as well.