Virginie Chesnais serves as chief marketing officer at Happydemics, an analytics platform focused on advertising technology. For many years, gamers have looked at in‑game advertising with suspicion, and that wariness is understandable. The reputation of ads in video games has been tarnished by issues such as redirects to unrelated websites, misleading content, and the inability to locate a close button, all of which create frustration for players. A recent study conducted by eMarketer revealed that 52 % of gamers would abandon a session if they encountered multiple intrusive ad elements.
Losing half of an audience at the moment you are trying to engage them is hardly a winning strategy. However, advertisements do not have to be synonymous with annoyance. The same research indicated that one in five gamers would actually increase the frequency with which they play a title if the in‑game ads were of a high standard and felt relevant. Against this backdrop, Xbox is experimenting with a new ad‑supported game‑streaming service at a time when the overall cost of playing is on a steady upward trajectory.
High‑quality advertising could therefore find a natural home within the gaming ecosystem. The rationale for introducing an ads‑for‑games model is more compelling than many assume, and it has already been demonstrated in the realm of linear media.
Services such as Netflix, Disney+, and other streaming platforms have shown that offering an ad‑supported tier can generate significant revenue while still delivering a consistent user experience. Should Xbox’s experiment prove successful, it would not only preserve its existing subscriber base but also unlock a fresh, previously untapped revenue stream—a development the brand could greatly benefit from in the current financial climate. This issue is particularly salient because console gaming is increasingly being positioned as a premium offering. Prices for games, consoles, accessories, and downloadable content continue to climb, making it harder for the average consumer to justify the expense.
The result is a growing barrier that keeps many potential players on the sidelines. Xbox itself has stated that, when executed correctly, advertising can lower the cost of access to gaming.
The mobile‑gaming sector already provides evidence that ad‑supported tiers can introduce new players to the medium without requiring a large upfront payment. By offering a choice—pay‑free access with ads or an ad‑free subscription—Xbox hopes to retain its loyal fan base while simultaneously opening the door for newcomers who might otherwise be deterred by price.
Although there is no specific survey data on this particular announcement yet, it is reasonable to predict that a large majority of gamers would tolerate a 30‑second commercial if it meant they could play a favorite title or a brand‑new game for an hour. Xbox’s own analytics are likely to confirm this hypothesis.
Happydemics data drawn from 285 in‑game campaigns across the United Kingdom and North America demonstrate that in‑game advertisements consistently outperform television, social media, and other online formats when it comes to ad recall and attribution. In other words, players are more likely to remember an ad they see while gaming and to correctly associate it with the sponsoring brand. Xbox’s "around‑the‑game" approach—placing ads outside the actual gameplay, such as during the loading screen—adds another layer to this advantage.
Our research shows that these pre‑game placements generate stronger recall and attribution than ads embedded directly within the game world. This distinction matters because, while we may notice a commercial while scrolling through a social feed, that exposure does not always translate into a clear brand connection. Gaming, by contrast, appears to operate in its own league for these metrics, which likely explains why companies like Xbox and Electronic Arts are increasingly exploring ad‑based revenue models.
It is crucial to note that Xbox’s ads are not embedded within the game itself; they appear before the game begins. In‑game ad formats tend to excel further down the marketing funnel, delivering higher lifts in brand image, consideration, interest, and overall likability.
A hybrid strategy that combines both pre‑game and in‑game ads could theoretically give advertisers the best of both worlds, but it also risks provoking greater pushback from players who are sensitive to any interruption. Xbox has promised that the ads will be non‑intrusive, a claim that makes sense when the ads are shown prior to gameplay.
By keeping the commercial break separate from the immersive experience, the company aims to preserve the player’s focus while still delivering value to advertisers. This separation is important not only for the gamer but also for the brand, which wants its message to be part of the experience rather than a disruptive interruption.
Relevance will be another key factor. No one wants to see an advertisement for cat food if they don’t own a cat, or a promotion for a game they have already completed. By delivering contextual, targeted ads that make sense for each individual player, Xbox can reduce the likelihood that users will abandon the session at the sight of an irrelevant commercial, while simultaneously giving brands a highly effective platform for reaching new audiences.
Nevertheless, Xbox is venturing into largely uncharted territory. The first unknown is how players will react to the presence of ads in a traditionally ad‑free environment. The second unknown is whether the ad revenue generated will be sufficient to sustain the model over the long term.
The decision to explore ad‑supported game streaming reflects a bold, risk‑taking mindset from Xbox CEO Asha Sharma, who has demonstrated a willingness to experiment with new business models. Only time will reveal whether this gamble pays off. Historically, many gaming ad campaigns have relied on a "watch an ad, earn an extra life" structure.
Xbox’s proposal differs: it asks players to watch an ad in order to access a game they already own. Our existing data set does not yet indicate how this particular exchange will be received. However, broader research on ad‑format perception shows that when respondents are asked to describe the formats they remember, terms such as "non‑intrusive" and "immersive" rank among the most positive descriptors.
If Xbox—and potentially other platforms in the future—aim to make advertising a lasting component of gaming, they will need to focus closely on these two attributes. My forecast is that Xbox will neither be the first nor the last company to test this type of model.
Advertising within video games has existed for many years, but it has rarely been designed with the player’s experience as the primary concern. Should Xbox succeed in delivering a seamless, optional ad experience, it could pave the way for similar initiatives across the industry and, more importantly, make video games more financially accessible to everyday gamers.