Microsoft Reportedly Plans to Bring Ads to Free-to-Play Xbox Games This Year

Microsoft is planning to bring advertisements to free-to-play Xbox games and is currently evaluating adtech companies that could help manage the new in-game ad inventory and work with ad agencies, according to a report. The purported move would allow developers working on free games to sell ad space. It would also be likely to help Microsoft attract more developers to build new free-to-play games for Xbox, as they would get ad revenue through the new model.

Citing two people familiar with the development, Insider reports that Microsoft is working on a way to allow advertisers to place ads within free-to-play Xbox games. The ads are said to be aimed at not disrupting the user experience and would show up as, for instance, digitally rendered billboards in a car racing game.

It is unclear whether Microsoft would offer other types of in-game ad units, such as avatar skins and video ads. However, the report suggests that the ability to serve ads through free-to-play Xbox games could go live as early as the third quarter of 2022.

Microsoft is said to have no plans to take a cut of ad revenue from this model, though the purpose of the new ads seems to be making the Xbox platform more appealing to advertisers.

Ad revenue will be shared by game developers and adtech companies placing ads in free-to-play games, sources said.

Initial talks to build an in-game Xbox ad network are said to have started around 2018 or 2019, though the process reportedly accelerated in recent months thanks to the launch of the latest Xbox models — Xbox Series S and Series X — and the growth of free-to-play titles on the platform.

One of the prime concerns that Microsoft is said to have about this programme is the potential for gameplay disruption. The company is said to want to pick only select brands that would be able to place ads in free games, according to the sources cited by Insider. The Redmond company is also said to want to allow its chosen brands to work through a "private marketplace" that is not likely to be available to all advertisers, at least initially.

Microsoft also reportedly has no intention of letting advertisers use the data it collects from searches on Bing and behaviour on its websites and software to target Xbox gamers.

Exact details about whether Microsoft has already pitched the new Xbox ad offering to advertisers are yet to be revealed. Microsoft also did not confirm its plans in a statement given to Insider on the matter.

"We are always looking for ways to improve the experience for players and developers but we don't have anything further to share," the company said, according to the report.

Gadgets 360 has reached out to Microsoft for a comment and will update this article if the company responds.

Microsoft recently acquired Activision Blizzard, which has a native ad network, and adtech platform Xandr. Those two companies' assets are likely to help it kick off the new programme and bring new ad revenue models to Xbox over time.

The concept of showing ads within games is not new. Companies in the past have attempted this even in paid games. However, Microsoft's approach seems to be aimed at attracting developers to create more free games by natively supporting in-game ads from specific brands.

Last month, Microsoft revised prices for the Xbox Game Pass, PC Game Pass, Xbox Live Gold, and Xbox Game Pass Ultimate subscriptions in India. That move, which went into effect on April 1, might help convince more people to subscribe to Microsoft's gaming services on Xbox and PC.