Microsoft is building an advertising program for Xbox

    • Microsoft is creating a program to allow brands to advertise in Xbox games.
    • It is evaluating adtech partners to provide the technology for in-game ad placement.
    • Sources expect this capability to come online in the third quarter.

    Microsoft wants to allow advertisers to place ads inside free-to-play Xbox games, and is currently identifying ad-tech companies that can create the in-game inventory and work with ad agencies to place the ads, two people involved in the talks said. . .

    This new program will boost Xbox’s limited ad inventory by adding more games for brands to advertise in and allowing more developers to sell ad space.

    Those sources said those ads would be displayed, for example, as 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, such as avatar skins or video ads that play in game lobbies. Insider was also unable to determine if Microsoft has already released the Xbox offer to advertisers.

    Insider sources expect this capability to be available in Q3.

    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 have nothing else to share.”

    While mobile game ads are common, console game ads are rare.

    Xbox currently allows limited forms of advertising. Right now, advertisers can buy Xbox dashboard ads and can buy in-game ads in certain games, through third-party Yahoo and Anzu, respectively.

    However, this new program could open up Xbox to more advertisers who want to message people in games, because it will provide tools that any participating game developer can use to sell ads.

    The two sources said the tech giant did not appear to intend to take a cut of ad revenue and seemed more interested in building Xbox’s ad network. Ad revenue will be shared by the game’s developer and the ad technology company placing the ad, those sources believe.

    One of the sources speculated that Microsoft is currently not interested in collecting a portion of ad revenue because it wants to provide more money-making opportunities for developers who create free games.

    Microsoft began talks to build an Xbox in-game ad network around 2018 or 2019, but that process was accelerated thanks to the 2020 launch of the latest Xbox and the rise of free-to-play titles, the two sources said.

    Microsoft is concerned that inserting ads into Xbox games might irritate people who don’t expect to see ads when playing on consoles, so it’s moving cautiously and intends to create a “private market” where only Select brands can insert ads into games in a way that doesn’t interrupt the gaming experience, the two sources said.

    They also said that Microsoft is concerned about protecting its customers’ data, so other companies can’t use it.

    While Microsoft has a lot of consumer data, gleaned from Bing searches 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 that there are regulatory controls and privacy statements relevant to each platform and they are not cross-platform compatible,” the source said. “If I had to read between the lines, it would be like a 10-year goal, but that has serious hurdles and Microsoft is very strict with its data.”

    While Microsoft’s advertising ambitions have waxed and waned over the years, its Xbox plans underscore its current optimism. And it comes at a time when in-game advertising is picking up steam. NBCU, for example, 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 game agency OS Studios said he believes all major game companies will eventually create private ad markets. If Microsoft goes ahead with its plan to launch an in-game ad network, it could have invested in competitors like Sony’s PlayStation and Amazon.


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