Virginie Chesnais serves as the chief marketing officer at Happydemics, an analytics platform focused on advertising technology. For many years, gamers have approached in‑game advertising with suspicion, and that wariness is not unfounded.
The reputation of ads in video games is mixed at best, often plagued by issues such as redirects to unrelated sites, misleading content, or the absence of an obvious way to close the ad. These irritations have contributed to a growing sense of frustration among players.
A recent study by eMarketer highlighted the severity of the problem: 52 % of respondents said they would abandon a game if they encountered several disruptive advertising elements. Losing more than half of your potential audience the moment you try to monetize them is hardly an effective strategy.
Nevertheless, advertising does not have to be a negative experience. The same research revealed a more optimistic finding – one in five gamers indicated they would play a title more often if the in‑game ads were of high quality and relevance.
This suggests that well‑crafted, unobtrusive ads could actually enhance engagement rather than diminish it. Enter Xbox, which is currently piloting an ad‑supported game‑streaming service at a time when the overall cost of playing is on a steady upward trajectory. If the company can deliver premium‑grade ads, it may have found a fertile niche within the gaming ecosystem. The rationale for a hybrid ad‑for‑games model is stronger than many assume, and it is already validated in the realm of linear media.
Services such as Netflix, Disney+, and other streaming platforms have demonstrated that offering both ad‑free and ad‑supported tiers can generate significant revenue while expanding the audience base. Should Xbox’s experiment prove successful, the company would not only preserve its paying subscriber base but also unlock a new, previously untapped source of income – a development that comes at a moment when the brand is seeking fresh financial streams.
This is particularly relevant because console gaming is evolving into a premium, high‑cost proposition. Prices for games, consoles, peripherals, and downloadable content have risen sharply, creating a financial barrier for the average player. When the cost of entry climbs, fewer people can justify the expense, and the market risks shrinking.
Xbox itself has argued that, when executed correctly, advertising can lower the barrier to entry and make gaming more affordable. The mobile gaming sector already provides a clear example: ad‑supported tiers allow players to experience games without paying large upfront fees, thereby widening the user base. Crucially, participation would be optional. Players who prefer an uninterrupted experience could continue to pay a subscription fee to avoid ads.
By offering a two‑tiered system, Xbox aims to retain its loyal community while simultaneously inviting newcomers who might be deterred by high upfront costs. 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 granted them an hour of gameplay in a beloved or new title. Xbox’s internal data likely supports this hypothesis. 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 in terms of recall and attribution.
Players are more likely to remember an ad they saw while gaming and to correctly associate it with the sponsoring brand. The distinction between “around‑the‑game” ads—those displayed before the game launches—and “intrinsic” in‑game placements becomes important here. Happydemics’ findings indicate that pre‑game formats achieve higher recall and attribution scores compared with ads embedded directly within gameplay. This suggests that showing an ad during the loading screen or menu, rather than interrupting the action, may be a more effective approach.
Why does this matter? While we can often recall ads seen on TV or scrolling through social feeds, those memories do not always translate into brand awareness or purchase intent. Gaming appears to occupy a unique space where ad exposure is more readily linked to the brand, which likely explains why companies like Xbox and EA are increasingly exploring ad‑based revenue models. It is essential to note that Xbox’s plan focuses on pre‑game advertising, not intrusive in‑game pop‑ups.
In‑game ad formats tend to excel further down the conversion funnel, boosting metrics such as brand‑image uplift, consideration, interest, and overall likability. A blend of pre‑game and in‑game ads could theoretically provide the best of both worlds for advertisers, though it also raises the risk of player pushback.
Xbox has pledged that any ads will be non‑intrusive. By placing commercials before the game begins, the company aims to preserve the immersive experience that gamers value. This approach benefits both the player—who enjoys an uninterrupted session—and the advertiser, who wants its message to be part of the experience rather than a disruption. Relevance will be key.
Nobody wants to see an advertisement for cat food when they don’t own a cat, or a promotion for a game they have already completed. Contextual, targeted ads that align with a player’s interests will reduce the likelihood of users abandoning the session and will provide brands with a high‑quality platform to reach new audiences.
Nevertheless, Xbox is venturing into largely uncharted territory. The first unknown is how players will react to this new ad model; the second is whether the revenue generated will be sufficient to sustain the initiative over the long term.
The decision to explore ad‑supported streaming reflects a bold, risk‑taking mindset from Xbox CEO Asha Sharma, who has demonstrated a willingness to experiment with unconventional ideas. Time will reveal whether this gamble pays off. Historically, many gaming ad campaigns have relied on a “watch an ad, earn an extra life” mechanic.
Xbox’s proposal differs: it asks players to watch a short commercial to access a game they already own. Our existing data set does not yet indicate how this specific trade‑off will be received. However, broader research on ad format perception shows that respondents frequently describe non‑intrusive and immersive ads as the most favorable.
If Xbox and future industry players aim to make gaming advertising a success, these two attributes—non‑intrusiveness and immersion—should be central to their strategy. My forecast is that Xbox will neither be the first nor the last company to test this model. Advertising in games is not new, but it has rarely been implemented with the player’s experience as the primary focus. Should Xbox manage to strike the right balance, it could pave the way for other developers and publishers to adopt similar approaches, ultimately making video games more accessible and affordable for everyday gamers.