Report: Microsoft working on ad system for Xbox games

Call of Duty: Warzone
Call of Duty: Warzone (Image credit: Activision)

What you need to know

  • Per a report from BusinessInsider, Microsoft is building a system for Xbox games.
  • The system would allow specific companies to put ads into free-to-play games.
  • Microsoft is reportedly wary of irritating users and is building a "private marketplace" for this system.

Update, April 20 (12:26 pm ET): Per BusinessInsider, Sony is also planning a similar ad system.

Microsoft may be looking into a new way of providing advertisement services in Xbox titles.

According to a report from BusinessInsider, Microsoft is working on an ad system for Xbox games, expanding its adtech reach and allowing advertisers to display ads within specific games. According to two sources familiar with the plans, this system might, as an example, allow a company to advertise on a billboard within a racing game.

The sources also indicated that this system is meant to be live in the third quarter, and that Microsoft is not interested in taking a cut of the ad revenue right now, with the revenue instead shared between the game developer and the adtech company. The system also seems to be meant specifically for free-to-play games. Microsoft currently allows advertising on the dashboard of consoles like the Xbox Series X|S.

The report also indicates that Microsoft is cautious about building this system, and is wary of irritating players through ads, choosing to build out a "private marketplace" for specific brands to add ads into games without altering the gameplay experience. The ads are also reportedly not based on customer data or behavior research.

The report notes that analysts believe Microsoft's impending acquisition of Activision Blizzard will aid in this pursuit of an building out an Xbox ad network. The deal is worth almost $70 billion and is currently slated to finalize sometime before June 2023.

Update, April 20 (12:26 pm ET) — PlayStation too

According to BusinessInsider, Sony is also planning a similar ad system for PlayStation games. This system, which has been in development for at least 18 months, could reportedly launch by the end of 2022.

Samuel Tolbert

Samuel Tolbert is a freelance writer covering gaming news, previews, reviews, interviews and different aspects of the gaming industry, specifically focusing on Xbox and PC gaming on Windows Central. You can find him on Twitter @SamuelTolbert.

  • While I have said before that I care little about dashboard ads (that don't pop up or auto-play sound), in game ads are different. If it stays in free to play games, then I really don't care so long as it doesn't cause the game experience to suffer ( for example interrupting the game or causing loading between matches to take longer). I remember passive ads in Alan Wake and people where pissed, but I thought that was actually pretty normal.
  • An system for Xbox games? I thought correct grammar was a system. An is used before words that start with vowels. But the word irregardless is now in the dictionary so maybe I missed a change. As to the article I don't care about ads in FTP games, but any other games no way
  • Unh hunh. It will start with free games before being placed in all games because it makes so much money.
  • Yeah that is probably way accurate. However, there is a way to stop that as soon as it starts, but not as easily as stopping micro transactions in AAA games. The problem is that people won't even commit to stopping those while complaining.
  • I have no issues with targeted ads in games where it makes sense. I'm fine with a racing or sports game having changing advertisements where one would expect ads at a sports event or race (like the sides of the field/track or whatever). I'm also completely fine with a game set in the current day providing actual advertisements on billboards or whatever as that would be an accurate representation. But I don't want to be playing Sea of Thieves and suddenly get a pop up for Woolworths shopping centre. Or Mr Fenix advertising the latest McDonald's menu own in between locust killing.
  • I don’t hate this as long as it’s done tastefully. You mentioned sports and that’s actually one area I kind of want them. I wouldn’t mind stadiums having the real life ads in them. When they’re modeled with fake ads and companies always seemed weird to me. What wouldn’t be okay? Having to watch a video commercial for McDonald’s when you make a pitching change.
  • Ultimately it will end up in paid games too. I agree if ad placement in a game if properly done i.e billboards, placards, side barriers where you see generic adverts added by the developers would add to the immersive experience. Providing off course 1)the ads are not too off putting (not in your face about it). 2)Not offensive / inappropriate for children. I.e. No Gun advertising. Also by allowing users and parents to customise what are shown in these placards, billboards etc would go a long way. However if it results random, popping up adverts then a massive backlash would follow. Secondly, the game must function without an internet connection for instance if this is implemented in GTA 5 by Rockstar as no doubtly it would. Single player should run whilst in offline mode / Not physically connected to the internet. As I am weary this ad system could effectively become a DRM mechanism in disguise if it requires games constantly connected to the internet when they don't need to be. If that happens, a massive backlash will follow. Finally, it also should reduce the costs of games especially digital versions substantially as well. One of the primary reason I switched to PC gaming was the cost of digital games are still full price on consoles with barely any discounts. Whereas on Steam, Humble bundle etc there really good discounts especially on Steam.
  • I understand your point regarding single player titles and I can definitely see this as a means to enforce a kind of always online system. I am personally not fussed as my console is always online and I believe the issues with "always online" are largely mitigated by the fact that I would say the vast majority of people are always connected these days. That being said, I still wouldn't agree with this tactic being used even if it wouldn't necessarily affect me. Single player games should still be playable offline for the people who have no other option, in which case any advertising (again solely advertising that suits the environment of the game) wouldn't be tailored and would offer up whatever ad deals the developer has in place. That being said, I am keenly aware that this is a unicorn scenario and as much as I would like this to be the case I sincerely doubt it would be.
  • Yeah, if they can be done 'naturally' and be used to offset the increasing cost of game development, that is fine. I would rather be able to pay less for a game, but maybe see a character drinking a can of coke. But if it turns into a YouTube experience, that ain't cool.
  • If this comes to pass I'm done. Bad enough that games have skyrocketed in price, that they ship broken, buggy and laggy. Bad enough they hammer you with microtransactions and keep other things behind paywalls. I paid for a OneS, I pay for internet, I pay for Xbox Live Gold because I didn't find GamePass appealing for the cost. Why the hell should I put up with ads now? You younger gamers need to stand up and say enough of this bs, give us value for our money instead of squeezing us for every dime of revenue possible.
  • Game prices skyrocketed? Compared to what? Definitely not inflation, that's for sure. If you are talking about a $10 increase last year remember that it took 10 years from the last $10 increase.
  • This. In fact technically game prices in Australia have gone down not up. I don't know what prices were like in the US but I distinctly remember SNES games in the 90's being $120 to buy new which is higher than the average $100 RRP for games now (some games are $110 on the newer consoles). And this is completely ignoring the fact that the vast majority of stores that sell games do not sell them at RRP, places like Target, JB Hifi, Mighty Ape; they all sell brand new games anywhere from $90 down to as little as $70, and that's day of release. I preordered Elden Ring for $74 bucks (it's one of the ones that retails at $110), anyone who thinks games are too expensive these days is delusional.
  • You are not wrong, in fact if you click that link you will see an advertisement with a Sega game for $65 US. I distinctly remember seeing Super Mario RPG at Kmart for $70 or $80 new, and I think it was $50 or $60 every where else. Apparently retailers had a lot of power then when it came to pricing. I guess that is a positive of the digital market even though digital prices stay too high for too long.
  • FWIW: Currency fluctuations matter.
    I believe you're talking about the Australian dollar, which peaked in 2010 as the subprime crisis weaken the USD, which is the baseline currency for most product pricing.
    Big currency swings can make local prices change while producer revenue stays constant.
    Try this: BTW, international sales is why ads in games will always be limited: they only make sense in regions where the advertiser exists. This on top of other limitations on the net usefulness of ads.
  • I'm aware but I'm comparing games now to games in the 90's (hence why I said SNES) and the exchange rate was much the same then as it is now. And irregardless of businesses that choose to sell games significantly under RRP (I assume there are big name department stores that do the same thing in America, basically selling games cheaper, almost at a loss, because it isn't a huge revenue maker but it gets people in the store) that doesn't change the fact that the RRP for games now is lower than it was 25-30 years ago, that's unheard of in any industry. Also I would expect games with paid advertisements would have an online requirement, as much as it would be frustrating for many, in order to provide tailored advertisements. I assume that is you are offline while it would be nice if it just reverted to generic ads, I would say developers would enforce the online only rule.
  • 70 billion for that old half-dead mamoth of Activision-Blizzard-Whatever ,LOL . Microsoft rulers either lost their colective mind (they like Zerg) ,or they got good bribes in the process.
  • You have no idea what you are talking about, obviously. Candy Crush alone has $1.2 billion in revenue.
  • And even poorly run, ACTIVSION rains US$6-9B a year.
    Which is way more than the return from keeping the money lying fallow in tbe "cash stash".
    Also, the rate at which MS rakes in money, they'll make enough to pay for tbe deal while waiting for it to close. BETHESDA was paid for with just a couple month's worth of revenue. The driving force for MS purchases are availability and suitability (you won't see MS buying a car company, but they might buy into a media company. They co-owned MSNBC in its original unbiased form way back when.) Plus long term potential: MS's present is safe, purchases are to fortify the bottom line in times to come. Hence they buy security comsnies and game developers, deals thzt may not deliver full payout years away. When they might be needed.
  • It still gets some money ,because of players like you and that Apathy guy,who cling to old cliches like WoW, or Diablo,or StarCraft, (well
    he likes Candy Crush it seems,haha) but it was hemoraging for a long time.
    Blizzard and M$crosoft are two old relics of an bygone era,that we'd be Best to leave rotting in the ground.
  • Once again you show your ignorance. Even a crappy release of Call of Duty was still the top selling game of the year. Activision was never losing money until the recent scandal. Of course to their investors it is never enough, and they WERE on track to start really hurting their cash cow franchise in the long run by milking it dry. Your ignorance of Candy Crush is as expected. I only brought it up because it remains one of the top mobile games still to this day. A small piece of their pie and easily one written off by "gamers" like you, and it still rakes in cash annually.
  • Apathy guy ,really !? Candy crush ? Hahah. What are You , 5 ? And so,you became the local gaming expert lol. Blizzard îs long in putrefaction. It's games are drained,it's only a matter of time.
  • Businesses don't care about age groups they care about income. What you see as a franchise for five year olds they see as a 1.2 billion dollar a year cash cow. But I think you have made your stance abundantly clear with your level headed and thoughtful responses.
  • Nice reply, what are you 5? I'm sure the average age of CC's player base is closer to 50 than 5. Even if it were like you said it doesn't change the fact that it pulls in more money annually than most entire companies.
  • I hope they are working on a way to buy yourself out of seeing ads in a particular game. 10$ for the ad free experience? Sign me up! I don't need my hardcore gaming system to remind me of the exploitative mobile gaming space.
  • Any game ad system needs to work off live servers like Google and Bing's ad servers and they need to take game type, user age, and location in order to serve suitable and *effective* ads. Sports stadium ads in games broadcast (most, these days) often require digital realtime video effe, replacing local ads paid to the stadium operator with broadast audience ads paid to the video delivery service. No sense advertizing Joe's hot dog stand in places Joe doesn't do business. Any game ad system needs similar capabilities to deliver targetted ads. Then there is the matter of game and audience suitability.
    Even location-relevant family friendly ads wil not be well received in games aimed at younger players nor will there be much room for any ads in immersive games. Like, seriously, there won't be ads for female hygiene products in survival horror games. And who would dare advertise in OUTER WORLDS which spoofs corporations? Developers aren't fools and breaking their own game for a few (hypothetical) coins isn't going to happen. As discussed, real world ads only make sense inside a bare handful of game types--don't forget that advertisers are very skittish where they place tbeir ads. Few will want to advertise in fantasy or scifi games or many of the most popular genres. In contrast, free to play games might make sense with sponsored sessions, perks, skins, gear, or playmodes. Which many are *already* doing. In a technology-tracking sense, MS developing an ad serving system makes sense for attracting console and cloud versions of free to play games. (Also for phones, if the current political efforts to break the phone walled gardens actually happen. Not holding my breath there but MS might know better.) It might even be an important element for X-cloud on SmartTV, making tbe client useful (and profitable) even if folks don't signup for GAME PASS. Ad-supported free to play is real and it's not going away. But ads are not headed everywhere. Certainly not inside games. At most, they might show up in load screens and even tbat is a stretch. No need to overventilate, folks. 😉
  • Free to play with some ads that will likely be unobtrusive.... Sounds fair. If Microsoft is really being cautious and there's no reason to doubt that then it probably won't be a big deal. Plus the games are free so you gotta give a little