Microsoft is developing a program that allows brands to advertise within free-to-play Xbox games, according to a Business Insider report. The program intends to boost Xbox’s limited ad inventory by adding games capable of hosting ads, allowing more developers to sell ad space on the platform.
Microsoft has yet to confirm these plans. A company spokesperson told Business Insider, “We are always looking for ways to improve the experience for players and developers but we don’t have anything further to share.” The publication wrote that information about the program, expected to go live in Q3 2022, came from sources familiar with the situation.
Ads likely to appear could be, for instance, digitally rendered billboards in car racing games, the sources told Business Insider. The sources also said Microsoft doesn’t plan to take a cut of Xbox’s ad revenue, so that game developers have more opportunity to profit.
If the ad program successfully launches, Microsoft will get a leg-up in its digital advertising scheme. Last December Microsoft bought Xandr, AT&T’s advanced advertising platform, for about $1 billion. The acquisition’s goal was to combine Xandr’s large pool of data analytics with Microsoft’s global advertising customer base.
Microsoft is building up its ad-tech stack to compete with the likes of Google, Amazon and Facebook, according to Shiv Gupta, managing partner at U of Digital, a digital marketing education website.
“In-game advertising on Xbox is a very unique way to get onto the most valuable advertising real-estate in the household, the large screen TV, and it is meaningfully differentiated from the competitive 'pre-roll around streaming content' play that the Googles, Amazons, and Rokus of the world are making,” he said.
Video gaming has increased in recent years, especially since the onset of Covid-19. As of July 2021, there was a total of 226.6 million video game players in the U.S. of all ages, Variety reported. With such a high volume of users in the market, game developers are looking to expand their audience reach via ads. TvScientific recently launched an advertising solution that allows developers to display ads through connected TVs.
Gupta added Xbox also provides Microsoft a testing ground for dynamic ad placement in the metaverse, an emerging area the company is looking to penetrate. Microsoft announced in January its plans to buy video game company Activision Blizzard for about $69 billion. The deal is currently undergoing an antitrust probe by the Federal Trade Commission.