Virginie Chesnais serves as Chief Marketing Officer at Happydemics, an analytics platform that specializes in advertising technology. For many years, the gaming community has looked at in‑game advertising with suspicion, and that wariness is not unfounded.
The reputation of ads in video games is mixed at best; players often encounter redirects to unrelated websites or apps, deceptive messaging, or close buttons that are hard to locate, all of which contribute to a frustrating experience. A recent study conducted by eMarketer highlighted the severity of the problem: more than half of respondents—52 percent—said they would stop playing a title if they were bombarded with multiple disruptive ad elements. Losing half of an audience at the very moment you are trying to engage them is clearly a poor strategic move. However, the same research also revealed a silver lining: one in five gamers indicated they would increase the frequency with which they played a game if the advertisements embedded within it were of high quality and relevance.
This insight arrives at a pivotal moment for Xbox, which is currently piloting an ad‑supported game‑streaming service. As the overall cost of gaming continues to climb—thanks to higher price tags on consoles, games, accessories, and downloadable content—the prospect of well‑crafted, non‑intrusive ads could become a welcome solution for both the company and its audience. The argument for integrating a modest advertising component into gaming experiences is stronger than many industry observers realize, and it is already validated in the realm of linear media.
Services such as Netflix, Disney+, and other streaming platforms have demonstrated that a hybrid model—offering both ad‑free subscriptions and lower‑cost, ad‑supported tiers—can generate substantial revenue while expanding the user base. Should Xbox’s experiment prove successful, the company would not only preserve its existing subscriber base but also unlock a previously untapped stream of income at a time when additional cash flow is especially valuable.
The relevance of this development is underscored by the fact that console gaming is increasingly positioned as a premium entertainment service. The cumulative expense of purchasing a console, buying new releases, acquiring accessories, and paying for extra downloadable content has become a significant barrier for the average consumer. Xbox itself has acknowledged that, when executed correctly, advertising can lower the financial threshold required to access games. The mobile gaming sector has already illustrated this point: ad‑supported tiers allow players to engage with titles without having to make large upfront payments, thereby broadening the market.
Crucially, any advertising model Xbox adopts will be optional. Players who prefer an uninterrupted experience will still have the choice to pay a subscription fee that removes ads entirely. By presenting a two‑tier system—ad‑supported and ad‑free—Xbox aims to retain its loyal fan base while simultaneously making its ecosystem more approachable for newcomers.
Although concrete survey data on Xbox’s latest announcement is not yet available, it is reasonable to assume that a large majority of gamers would tolerate a brief, 30‑second commercial if it granted them an hour of gameplay on a favorite or newly released title. Xbox’s internal analytics likely confirm this hypothesis, given the company’s data‑driven approach. Supporting this optimism, Happydemics has compiled data from 285 in‑game advertising campaigns across the United Kingdom and North America. The findings consistently show that in‑game ads outperform traditional television, social media, and online display ads when it comes to recall and accurate brand attribution.
In other words, gamers are more likely to remember an ad they see within a game and correctly associate it with the sponsoring brand. One particularly interesting aspect of Xbox’s strategy is the emphasis on “around‑the‑game” placements—advertisements that appear before a gaming session begins rather than being embedded within the gameplay itself. Our data indicate that these pre‑game formats achieve higher scores for recall and attribution compared with intrinsic in‑game placements. This distinction matters because while viewers can often recall ads seen on TV or scrolling through social feeds, they do not always connect those ads to the corresponding brands.
Gaming appears to occupy a unique niche where ad recall translates directly into brand recognition, a factor that likely explains why companies like Xbox and Electronic Arts are increasingly exploring ad‑based revenue models. It is also important to note that Xbox’s ads will be pre‑game rather than in‑game.
In‑game ad formats tend to excel further down the conversion funnel, delivering stronger lifts in brand image, consideration, interest, and overall ad likeability. A hybrid approach that combines both pre‑game and in‑game ads could theoretically offer the best of both worlds for advertisers, though it also risks provoking greater pushback from players who are sensitive to interruptions.
Xbox has pledged that any advertisements will be non‑intrusive, a claim that is easy to understand. By placing ads before the actual gameplay starts, the company ensures that the immersive experience remains untouched during the core gaming session. This approach benefits not only players, who retain their focus, but also advertisers, who want their messages to be part of a seamless experience rather than a disruptive interruption.
Relevance will be another key factor. No gamer wants to be served an advertisement for cat food when they do not own a cat, or for a game they have already completed.
By delivering contextual, targeted ads that align with a player’s interests and behavior, Xbox can minimize the risk of users abandoning the platform at the sight of an irrelevant commercial, while simultaneously providing brands with an effective channel to reach new audiences. Nevertheless, Xbox is venturing into largely uncharted territory.
The first unknown is how the gaming community will react to the presence of ads, and the second is whether the revenue generated will be sufficient to justify a long‑term commitment to the model. The initiative 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 of our own gaming‑ad projects have relied on a “watch an ad, earn an extra life” structure, where the ad serves as a direct reward mechanism.
Xbox’s proposal, however, asks players to watch an ad simply to access a game they already own, a subtle but significant shift. Our current data set does not yet provide clear evidence on how this will be received. Nevertheless, broader research on ad format perception shows that when participants are asked to describe the most appealing qualities of an advertisement, terms such as “non‑intrusive” and “immersive” consistently rank among the top descriptors.
If Xbox—and potentially other platforms in the future—aim to make advertising a lasting component of the gaming experience, focusing on these two attributes will be essential. In my view, Xbox will neither be the first nor the last company to experiment with ad‑supported gaming models.
Advertising has been part of the gaming ecosystem for years, but it has rarely been designed with the player’s experience as the primary concern. Should Xbox succeed in delivering ads that feel natural, optional, and relevant, it could pave the way for other developers and publishers to adopt similar strategies, ultimately making video games more affordable and accessible for everyday players.