Just a few months after launching Lively, Google has decided to terminate the customizable 3D social networking platform it had hoped would inspire the gaming industry with "passionate start-ups" focused on gameplay, not graphics or accessibility.

"We've decided to shut Lively down at the end of the year," reads a post on the Official Google Blog from the Lively team. "We want to ensure that we prioritize our resources and focus more on our core search, ads and apps business."

"Google has always been supportive of this kind of experimentation because we believe it's the best way to create groundbreaking products that make a difference to people's lives," the team explained. "But we've also always accepted that when you take these kinds of risks not every bet is going to pay off."

Online search giant Google has launched a new public beta of its popular AdSense advertising software, which will allow developers to integrate ads into their games.

Dubbed AdSense for Games, the program is currently only compatible with web-based Flash efforts and stems from a partnership with ad middleman Mochi Media. "We don't make games," reads Mochi's official site. "We make games profitable."

While Google has yet to state if it will expand the program into other gaming sectors, such as full-fledged retail titles, the company is believed to be eying that segment, especially given its 2007 purchase of in-game advertising firm Adscape Media.

"It's a huge stamp of approval for a major company to come in and say they believe in the online games ad market," Mochi Media chief executive Jameson Hsu told VentureBeat. "It should awaken all of the major media companies... Read more

Popular video-sharing site YouTube will soon begin to sell video games and music as part of a new advertising push, according to a Reuters report.

Through a partnership with Amazon.com, YouTube pages will feature a button that takes users to the online retailer, where they will be able to buy video games, songs, and music videos. The site will also offer an iTunes link for music downloads.

Acquired by search giant Google for $1.65 billion in 2006, YouTube is estimated to pull in $200 million via ad revenue across 2009, going by analyst predictions. That figure marks a stark contrast to the Google's own advertising revenues, which are expected to reach $27 billion in 2009.

Google Lively creative director Kevin Hanna has confirmed that, as speculated, the search giant has a long-term goal of creating an online game platform though its web-based 3D social networking software.

"There is a longer term goal of opening up the API so the architecture of Lively could be used as an online games platform," Hanna told GamesIndustry.biz, adding that the software will be "pushing the different genres of known game types" through future updates.

Though he could "neither confirm nor deny" if Google has any internal game projects in the works, Hanna expressed his belief that gaming is being bogged down by corporate-mandated features meant to generate mass-market appeal.

"It's sucking the life out of what should be the most creative and innovative medium out there," he explained. "I hope that [Lively] inspires those same 'passionate start-ups' and kids in college to actually go and produce games where they don't have to worry about the visual bar or the accessibility, because those things are already pre-established."

Update: Valve has issued a series of succinct responses that deny a Google buyout.

"Rumor," Valve marketing VP Doug Lombardi told Shacknews, while clarifying to MTV Multiplayer that the entire affair is a "complete fabrication."

Original Story: "Well placed sources" reportedly tell UK tabloid The Inquirer that software giant Google is primed to buy independent developer and Half-Life series creator Valve "any minute now."

If the dubious rumor is to be believed, Valve's PC digital distribution client Steam is a major factor in the acquisition, as many speculate that Google will further expand into content distribution and the gaming market.

"We do not comment on rumour and speculation," a Google representative told MCV. Valve has yet to provide an official response, as the rumor surfaced overnight.

Valve had previously said it was "happy to have that talk" should the company be approached with a buyout offer, though at the time, marketing VP Doug Lombardi stated that the studio was "doing pretty well" and was "really happy with what we're doing."

Faylor's Take: Anything is possible, I suppose, but I really don't see this happening.

Plus, as Blue's News points out, I don't exactly trust the "well placed sources" of a tabloid that specializes in speculation and sensationalism, not to mention one that rarely reports on games and is so far removed from the overall industry.

Google's recent expansion in non-traditional fields has Forbes wondering whether the search giant may be looking into a piece of the gaming market.

Forbes' Chris Morris speculates that Google Lively, the company's web-based virtual chat room, and the acquisition of in-game advertising firm Adscape may amount to early warning signs of a major play in the industry.

With Google's massive bank, Morris notes that the company could easily acquire several casual or serious game developers, using their games to sell Google-served advertisements.

"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," added Lazard Capital Markets analyst Colin Sebastian.

"Of course, there are a number of hurdles that have to be cleared before it reaches the outside world."

Internet giant Google is currently testing software that could bring the company's AdSense advertising protocol to PC and console games.

According to sources speaking to VentureBeat, the software is said to make use of a game's characters to introduce video ads, saying something similar to "and now, a word from our sponsor."

The advertising technology would make use of Google's contextual advertising system and is reportedly functional in console games, disc- and web-based PC titles, and games for mobile phones. The software has been in testing phases for several months.

Google first made its move on the market when it acquired in-game ad firm Adscape Media in late 2006. The company was led by former Sega of America... Read more