Virginie Chesnais serves as Chief Marketing Officer at the ad‑technology analytics firm Happydemics. For many years, gamers have viewed in‑game advertising with suspicion, and that wariness is understandable.
The reputation of ads in video games is mixed at best; players often encounter redirects to unrelated sites or apps, misleading content, or dismiss buttons that are difficult to locate, all of which generate frustration. A recent study conducted by eMarketer revealed that 52 % of gamers would abandon a session if they ran into several intrusive ad elements. Losing half of an audience at the very 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 played a title if the in‑game ads were of high quality and relevance. Against this backdrop, Xbox is currently piloting an ad‑supported game‑streaming service at a time when the overall cost of gaming is climbing steadily. High‑caliber ads could therefore find a receptive niche within the gaming ecosystem.
The rationale for incorporating an advertising model into games is more compelling than many assume, and it has already been demonstrated in the world of linear media. Services such as Netflix, Disney+, and other streaming platforms have shown that offering a lower‑priced, ad‑supported tier can generate substantial revenue while still delivering a consistent product.
Should Xbox’s experiment prove successful, it would not only preserve its existing subscription base but also unlock a brand‑new, previously untapped revenue stream—something the company could certainly use given its recent financial pressures. This issue matters because console gaming is increasingly positioning itself as a premium experience. Prices for games, consoles, peripherals, and downloadable content continue to rise, creating a financial barrier for the average consumer.
Xbox itself has noted that, when executed correctly, advertising can lower the cost of entry to gaming. The mobile‑gaming sector has already demonstrated that ad‑supported tiers can provide a gateway for players who are unwilling or unable to make large upfront purchases. Importantly, any advertising model Xbox introduces would be optional.
Players who prefer an uninterrupted experience could simply pay a subscription fee to avoid ads, while those who are comfortable with occasional commercials could enjoy a reduced price. By offering a two‑tier system, Xbox hopes to keep its loyal fan base happy while simultaneously expanding accessibility for newcomers.
Although there is currently no public survey data on this specific rollout, it is reasonable to wager that a large majority of gamers would tolerate a 30‑second advertisement if it meant they could play a beloved title or a brand‑new game for an hour at no extra cost. Xbox likely has internal data supporting this assumption. Happydemics’ analysis of 285 in‑game campaigns across the United Kingdom and North America shows that in‑game advertising consistently outperforms 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 saw while gaming and correctly associate it with the sponsoring brand.
This is where Xbox’s “around‑the‑game” approach—ads that appear before the game starts rather than embedded within the gameplay—becomes intriguing. Our data indicate that pre‑game placements generate higher recall and attribution scores compared with intrinsic in‑game placements.
While traditional TV or social ads can be remembered, they do not always translate into a clear brand link for the viewer. Gaming appears to be in a league of its own in this respect, which may explain why companies like Xbox and Electronic Arts are increasingly exploring ad‑based revenue models. It is crucial to note that Xbox’s ads will be pre‑game, not in‑game. In‑game formats tend to excel further down the conversion funnel, delivering stronger lifts in brand image, consideration, interest, and likeability.
A hybrid model that combines both pre‑game and in‑game ads could, in theory, offer the best of both worlds for advertisers, but it also runs the risk of provoking greater pushback from players who value an uninterrupted experience. Xbox has promised that any ads will be non‑intrusive. By placing commercials before the gameplay begins, the company aims to preserve the immersive nature of the experience. This matters not only to gamers but also to advertisers, who want their messages to enhance rather than disrupt the user journey.
Relevance will be another key factor. Nobody enjoys seeing an advertisement for cat food when they don’t own a cat, or for a game they have already completed.
By delivering contextual, targeted ads that make sense for the individual player, Xbox can keep viewers engaged and provide brands with a high‑quality platform to reach new audiences. Nevertheless, Xbox is navigating uncharted waters.
The first unknown is how players will react to a new advertising layer; the second is whether the 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 innovative business models. Only time will reveal whether this gamble pays off. Historically, many of our gaming‑ad projects have revolved around “watch an ad, earn an extra life” mechanics.
Xbox’s proposal is different: it asks players to watch an ad simply to access a game they already own. Our existing data set does not yet indicate how this will be received.
However, broader research on ad‑format perception shows that when participants recall an ad, they frequently describe the experience as “non‑intrusive” and “immersive.” If Xbox—and potentially other platforms in the future—aim to make advertising a sustainable part of gaming, these two attributes will be essential metrics to monitor. My forecast is that Xbox will neither be the first nor the last company to trial this strategy. Advertising within games has existed for years, but it has rarely been designed with the player’s experience at the forefront.
Should Xbox succeed in delivering ads that feel seamless, relevant, and optional, it could pave the way for a new revenue paradigm across the industry, while simultaneously making video games more affordable and accessible for everyday players.