NeoEdge is announcing today that it has appointed Nolan Bushnell, the father of the video game industry, as its chairman as the company launches an open advertising network to support casual games. Mountain View-based NeoEdge has a technology that allows game publishers and developers to wrap ads around existing games without changing the games or the game development process, said Alex Terry, CEO of NeoEdge.

In an interview, Bushnell said, “I believes strongly in the casual games space. It is one where all of the people are, but it hasn’t been where the money is. The types of games you find are really fun. But it has struggled for an advertising model that makes sense.”

Typically, casual fans play downloadable games on the PC. Most of those games offer a free trial, but less than one percent of them pay the $20 or so required to unlock the full game. But if the publishers can reap advertising money from ads that either precede or are built into the level changes in a game, they can monetize the games better across the entire audience, Terry said.

NeoEdge introduced its technology for ad-supported casual games earlier this year and it has signed up 20 publishers who are using it in 200 current games. As part of the announcement today, Terry is announcing the Neo Ads ad network that matches advertisers with specific games.

“We wrap the ad technology around the games and the publisher don’t have to worry about implementing it in the development process or sell ads,” Terry said. “We do it for them and send them a check for the ads.”

NeoEdge’s ads are rich media ads such as videos that run as a game installs, before it starts up, during the intermission or level change, and in the post-game report. Terry says that game publishers can expect to triple the revenue per game with the ad-based model in comparison to the try-before-you-buy model.

“This really solves the problem of the crappy conversion rates in game trials,” Bushnell said. “It could increase the size of the whole marketplace.” Parks Associates has predicted that game advertising will grow from $370 million in 2006 to $2 billion by 2012.

NeoEdge was started five years ago and has raised $20 million to date. It has 50 employees, with half the company in Toronto and half in Mountain View. The company can expect competition from Google, which bought Adscape earlier this year, as well as traditional ad-based stalwarts such as Wild Tangent and Exent Technologies.