The market for in-game advertising on games consoles is expected to reach $80m (£40m) this year but increase to more than ten times that by 2011, according to a new report.

The study, by ABI Research, forecasts that $852m will be spent on dynamically served ads within video games by 2011, as publishers and their console partners look to reach gamers that have connected their devices to the web.

The report also predicts downloading to form a major revenue stream for vendors such as Sony and Microsoft. It predicts the casual and classic game download market for consoles will grow from $93m this year to $1.1bn by 2011.

Research director Michael Wolf said:

“In the past, static advertising meant that publishers and their ad partners could not create real-time marketing messages.

“With the incorporation of ad clients directly into game engines — and through connections to ad servers — advertisers will be able to deliver advertising that reaches audiences in-game and through the walled garden game network.”

While it is estimated that ads are only being served to between 20% and 30% of console games at the moment, ABI Research expects this to increase to over 50% within two years.

But projections for the market vary widely. A study by Yankee Group (via ClickZ) found in-game ad spending reached $56m last year and predicted it would grow to $732m by 2010.

However, another projection, by Parks Associates, reckons it will reach only $432m by the same date.

Massive, the Microsoft-owned video game ad firm, is more bullish – it released some commissioned research earlier this month that it says showed uplifts in brand metrics through in-game advertising.