- Microsoft is building a program to let brands advertise in Xbox games.
- It is evaluating adtech partners to provide the technology for in-game ad placement.
- Sources expect this ability to go live by the third quarter.
Microsoft wants to let advertisers place ads inside free-to-play Xbox games, and it is currently identifying adtech companies who can create the in-game inventory and work with ad agencies to place the ads, said two people who are involved in the talks.
This new program will boost Xbox’s limited ad inventory by adding more games that brands can advertise in and by allowing more developers to sell ad space.
Those sources said those ads would show up as, for instance, digitally rendered billboards in a car racing game. Insider was unable to learn if Xbox will also offer other types of in-game ad units, like avatar skins or video ads that play in gaming lobbies. Insider was also unable to determine if Microsoft has pitched the Xbox offering to advertisers yet.
Insider’s sources expect this capability to be live by the third quarter.
Microsoft did not confirm these plans. A spokesperson said,”We are always looking for ways to improve the experience for players and developers but we don’t have anything further to share.”
While ads in mobile games are common, ads in console games are rare.
Xbox currently allows limited forms of advertising. Right now, advertisers can buy ads on the Xbox dashboard, and they can buy in-game ads on certain games, through third parties Yahoo and Anzu respectively.
This new program however could open up Xbox to more advertisers who want to message people in games, because it will provide tools any participating game developer can use to sell ads.
The two sources said the tech giant did not seem intent on taking a cut of ad revenue, and that it seemed more interested in building out the Xbox ad network. Ad revenue will be shared by the game developer and the adtech company that places the ad, those sources believe.
One of the sources speculated Microsoft isn’t currently interested in collecting a cut of ad revenue because it wants to provide more money-making opportunities to developers who make free-to-play games.
Microsoft started talks to build an Xbox in-game ad network around 2018 or 2019, but that process accelerated thanks to the 2020 release of the latest Xbox, and the boom in free-to-play titles, the two sources said.
Microsoft is worried inserting ads into Xbox games could irritate people who don’t expect to see ads when playing on consoles, so it’s moving cautiously and intends to create a “private marketplace,” where only select brands can insert ads into games in a way that doesn’t disrupt the gameplay experience, the two sources said.
They also said Microsoft is concerned about securing its customers’ data, so other companies can’t use it.
While Microsoft has loads of consumer data, collected from searches on Bing and behavior on its sites and software, one of the sources said Microsoft has no immediate plans to let advertisers use that data to target people on Xbox.
“The problem with doing that is there are regulatory controls and privacy releases relevant to each platform and they’re not cross-platform compatible,” the source said. “If I were to read between the lines, it’d be like a 10-year goal, but that has serious hurdles and Microsoft is really strict about their data.”
While Microsoft’s ambitions in advertising have waxed and waned over the years, its plans for Xbox underscore its current bullishness. And it comes at a time when in-game advertising is gaining steam. NBCU, for instance, is in the early stages of a partnership with in-game advertising company Anzu.
Industry analyst Eric Seufert said Microsoft’s acquisitions of Activision Blizzard (which has an ad network) and adtech platform Xandr, could help Microsoft build a large ad network.
CEO John Higgins of gaming agency OS Studios said that he believes all major gaming companies will eventually create private ad marketplaces. If Microsoft follows through with its plan to launch an in-game ad network, it could take spend that might have gone to competitors like Sony’s PlayStation and Amazon’s
, he said.