And you're off, zooming through virtual streets in a virtual car. You shift into a higher gear, careen around the corner of a Blockbuster Video store and narrowly miss a truck delivering Fanta. Onward, past virtual video billboards promoting new movies, your points rise, and the reward is a quick pit-stop to fill up with a brand name oil that makes your racer even more powerful.

The next time you play this video game, Blockbuster Video may be McDonald's, the Fanta truck could be replaced by one carrying Coca- Cola, and the brand name oil might be replaced by an alternative brand-name gasoline.

This, according to Guy Bendov, founder and interim CEO of Jerusalem-based DoubleFusion, is the future of advertising in the gaming industry, and his tiny nine-man start-up aims to lead the way.

Branded advertising in computer or video games is a niche that has been growing rapidly over the past few years. In 2003, in the US alone, some 108 million gamers spent over $10 billion on video games. In turn, advertisers now spend about $90 to $120 million on advertising in this media every year - a figure that research firms like the Yankee Group and Forester Research estimate will rise to $700m. by 2008.

Until now, advertisers could only insert their brands into a game before it went to the market. DoubleFusion's client server technology, however, enables game designers to leave space for ads. This allows brand name companies to treat computer games as an ongoing media, and insert media adverts online on a weekly or monthly basis after games are already on the market.

For the advertising industry, there are many benefits. Advertisers reach a new audience. They can choose the most popular and proven games in which to appear. Video game campaigns can be tested for efficiency and altered in real time according to user response. Media campaigns can be tailored for specific territories or audiences; a UK resident who buys a computer game in the US, but who installs it at home will receive ads for the UK market, for instance. Campaigns can be run at specific times, and on many games.

"This is a very valuable tool for advertisers," says Bendov. "We don't just introduce static billboards, but also video, animation, music, and even 3D products which can be changed and modified dynamically online."

He stresses, however, that ads included in games must be realistic, and contextually relevant to the game.

"It's very important that the integration of ads employs smart contextual positioning," he explains. "You can't insert a woman's brand into a hard-core racing game; it probably won't fit the audience."

As a result, he believes that this technology will be most relevant in sports games, or games set in an urban or modern environment. It will not be relevant, for example, in medieval or fantasy games.

So why is advertising on computer games so important? The real reason lies in the amount of time that 15 to 30 year olds - by far the largest target audience for advertisers - spend on the computer.

"In the past, people of this age group spent more time watching television, so advertisers reached them through this media," says Bendov. "Today, there is a new generation of people who grew up playing games on their PC or on game consoles, and prefer computer games to watching Friends or Seinfeld on TV."

TV viewership among men aged 18 to 34 declined by about 12% last year, while they spent 20% more time on games, according to Nielsen Media Research. In the past, the average age of a gamer was 15, now it is 29.

"The advertising industry lost these people," continues Bendov. "Between TV, print and Internet advertising, there is a certain gap, and that gap is being filled by computer games. Advertisers now understand that the way to reach this target audience is through games. We give them the tools to do this."

DOUBLEFUSION WAs founded in July 2004 at an incubator owned by Jerusalem Venture Partners (JVP), though work on the project began as early as January that year. Unlike many incubator companies, the four founders of DoubleFusion are all in their late 30s and early 40s, and are highly experienced hi-tech entrepreneurs. Bendov, for example, worked in a number of interactive media companies, while co-founder Dr. Hillel Rom (an expert in 3D) founded dMe3 and other companies. Jacob Ner-David, a third founder, set up Deltathree, and also co-founded Jerusalem Capital Partners.

The company raised $550,000 in seed money from JVP and private investors. Initially, it was interested in the whole field of electronic media and online advertising, but it decided to focus on the games industry first.

The company has now developed "version one" of its technology, and plans to launch in the second quarter of this year. The technology is being integrated into a number of games developed mainly by leading UK game companies, and the first of these should be on the market by the end of this year, according to Bendov.

Though this new market of dynamically changing in-game advertising is emerging for the first time this year, DoubleFusion is not alone. Massive Inc. is a New York-based firm that released its technology last October. The company has an office in California, and plans to open another in Europe. Like DoubleFusion, it is VC backed. In January it raised $10m. in a series C financing round, led by NeoCarta Ventures. Massive is already placed in 40 titles from eight publishers including Ubisoft, Vivendi Universal, and Legacy Interactive. There is also inGamePartners (IGP), another US company, which launched its video game advertising network late last year. Unlike Massive, which tends to pursues larger game publishers for non-exclusive deals, IGP is generally looking for exclusive agreements with small to medium-size publishers.

These are tough competitors, and because the games market is still very much US based, Doublefusion has a great deal of work ahead.

"Our main advantages lie in our technological capabilities," insists Bendov. "We offer better 3D elements, support animation, audio and movie production. The feedback we receive from game publishers is amazing."

DoubleFusion still has over a year left at the incubator, but Bendov has already begun to look for new financing. The company hopes to raise money from strategic investors in the US. As Bendov admits, DoubleFusion needs this money. It's a small Israeli start- up, thousands of kilometers from its target market.

"We have to move our HQ to our main market," says Bendov. "This takes money, and is the main reason we are going to a next round."

In the meantime, the company continues to build on the contacts it has already made with some of the largest ad agencies in the US. Bendov believes that making contact is the easy part of his job.

"The Jewish angle doesn't hurt in the advertising and media market," he admits.

The hardest part of his job right now, he adds, is "tying all the different knots together and mediating between the two markets of game publishing and advertising."

With such a young market, which is emerging only now, it is too soon to talk about market leaders. Bendov's main target this year is to show that DoubleFusion offers a good business, and that the company will be able to execute its business plan.

"If all the start-ups succeed, then the bigger guys will come in and reshape the entire market, just as they have with the introduction of any other new service or technology," he predicts.

Beyond this, in the years ahead, DoubleFusion also plans to move into branding in other digital media, like online movies and TV, and home entertainment systems.

Bendov has a great deal of faith in his company.

"I left a cushy job for this," he says. "Some might say I'm crazy, but we all felt that this is the next big thing. All the founders have family, and we are all very optimistic about what is happening here, because of the feedback we receive. Our technology comes at a perfect time for the industry.

"We are playing it safe, however. We know from past experience what to do and what not to do. Not everything will be a success, but we know that it's a mix, and that things take their own time."