Microsoft is planning to allow ads in free-to-play Xbox games

Microsoft is reportedly working on a way to show ads in free-to-play Xbox games. A report reveals that the tech giant is working with adtech companies to build an ad network for in-game inventories.

You get what you pay for. This is why many free-to-play games are seen as cash grabs with in-app purchases aka microtransactions for loot boxes, skins, in-game currency and companies rake in massive profits from live services. For example, Epic Games' Fortnite netted them over $9 Billion in its first two years alone. That's more money than most premium games make over their lifetime. So, you can see why companies opt to make such titles, and ads can definitely contribute to their coffers.

Microsoft wants to allow advertises to promote their products in free-to-play Xbox games

Microsoft already has an ad system in place on the Xbox dashboard, via Yahoo and Anzu. The new venture, which reportedly has been in the works since around 2018-2019, will likely open the door to more advertisers. An article by Business Insider (paywall), via Kotaku, says that the new system could go live by the 3rd quarter of this year, and that the Redmond company may not take a cut from the ad revenue. That means it could be up to the developers to decide whether to show ads or not. The upcoming ad network will display digital billboards like in a car racing game.

This isn't the first time a game company has tried this. Back in the 2000s, an ad company called Massive Incorporated, provided a way for brands to buy ad space to be promoted in the game's billboard ads. Microsoft acquired this company to explore this idea, though it was shuttered in a few years. Saints Row 2, Burnout Paradise, Madden NFL all had digital ad placements, and this was before the boom of free-to-play games and smartphones became the norm.

Some studios partner with a brand to promote its products in the game, like Death Stranding did with Monster Energy drink, though it has since been replaced with a generic in-game brand after their license expired. Product placements like these won't annoy people since they sort of blend in with the game, and aren't distracting. The report claims that Microsoft is concerned about ads irritating people while playing games on consoles, and wants to create "a private marketplace", that only allows ads from specific brands, without disrupting the gameplay. Hopefully this means no video ads, pop-ups or interstitials (full screen ads).

And then there is the question of privacy, Microsoft collects a lot of data with telemetry on Windows and Bing search queries. But it doesn't want advertisers to do the same, it wants to provide a system that prevents targeted ads by protecting user data. Microsoft acquired two companies recently, that could help build its ad network, Xander (from AT&T), and Activision Blizzard, which has an ad network in its platform.

If Microsoft did try something like this on PC, users can easily bypass it by editing the hosts file, or using a system-wide ad blocking program like AdGuard for Windows. Console users don't get access to such methods. Perhaps using something like PiHole or a DNS service could be a workaround for this annoyance, but these aren't readily available solutions for most users.

Some sites are reporting the news as Xbox games will have ads, but the keyword here, is "free-to-play games". I doubt that it will affect premium games for purchase and Gamepass titles, at least not single player, offline PC games, not without angering the majority of gamers anyway. This could however lead to other gaming companies to take strides in creating private ad marketplaces.

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