Rumors of the deal were first reported at Joystiq. The New York based-UGO, and its owned and operated properties, have over 35 million monthly unique visitors  and focuses on the gamer lifestyle: games, movies, TV shows, music, comics, technology, gadgets, gear, girls and sports.

The deal between UGO, which was acquired for more than $100 million by Hearst Corp in 2007, and Ziff Davis Games Group will also result in layoffs.  Ziff-Davis has said it was shutting down gaming magazine Electronic Gaming Monthly.

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Double Fusion and Gearbox Software announced today that they have entered an interactive advertising partnership. Double Fusion, a game advertising network, will provide Gearbox, a gaming company, with the technology it needs to support interactive ads in soon-to-be released Gearbox games.

“Double Fusion is committed to working with game companies across the full spectrum of gaming, from hardcore to casual, and in connecting advertisers to their gaming audiences in a way that is appropriate and adds value to gamers,” said Jonathan Epstein, president and CEO, Double Fusion. “Gearbox is one of the gold standard developers focused on the highest production value titles targeted at core gamers, and we’re very excited to be working with them.”

Gearbox’s top games include Halo, Tony Hawk, Half-Life, Counterstrike and .

“Double Fusion is a successful trail-blazer in the race to connect advertisers with interactive entertainment audiences,” said David Eddings, VP of licensing, Gearbox Software. “We’re incredibly focused on authenticity and we believe our partnership with Double Fusion and their advertising partners will allow our game worlds to have all the plausibility of the real world. The advertisers, in turn, bring value that will enable us to invest even more in creating the best possible video game experiences.”

Double Fusion provides marketers and ad agencies with a range of in-game, around-game and Web-based solutions to engage and sell ads to the hard-to-please gamer demographic.

How is Engagedifferent? Their platform allows brand to target their audiences geographically by serving companies on regional and local levels, on a market-by-market basis. First to test the company’s offerings is none other than SUBWAY, the ubiquitous fast-food chain, which hopes to target men in the 18 to 34 demographic in several designated market areas including San Francisco, Las Vegas and Sacramento.

“Since it’s a relatively new medium, many companies are unaware of the promotional reach and creative flexibility video game advertising can provide when trying to target the elusive 18- to 34-year-old male audience,” said David Smith, Vice President of Business Development for Engage, in a release. “When done correctly — and the in-game ads contextually support the game environment — we’re finding gamers are in favor of video game advertising because it enhances the realism of the game play. As a result, our clients are discovering that in-game advertising is connecting well with their key customers.”

Engage boasts that with only three weeks ofadvertising in an un-named but “popular” game, SUBWAY achieved more than 19,000 eyeball hours of exposure and reached 31,000 unique gamers.

“Not only was the campaign incredibly effective in connecting with our target audience, but it was cost effective as well,” said Shawn Hazeghazam, a local advertising board chair for SUBWAY. “Our post-campaign survey showed a 94 percent ad recall among our target audience. For every penny we paid, our brand received one minute of exposure. This in-game program really delivered for us, at a fraction of the cost of traditional advertising mediums.”