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 their concerns are not unfounded.
The reputation of ads in video games is mixed at best, plagued by issues such as redirects to unrelated sites, misleading content, or obscure close buttons that frustrate users. A recent study conducted by eMarketer highlighted that 52 % of players would abandon a session if they encountered several intrusive ad elements.
Losing half of an audience at the very moment you try to engage them is hardly an effective strategy. Nevertheless, advertisements do not have to be detrimental. The same research revealed that one in five gamers would actually increase the frequency with which they played a title if the in‑game ads were of a high calibre. In other words, quality matters.
Xbox is currently piloting an ad‑supported game‑streaming service, and the overall cost of gaming continues to climb. In this environment, well‑crafted ads could find a natural home within the gaming experience.
The argument for a hybrid "ads‑for‑games" model is more compelling than it might first appear, and it is already validated to a degree by linear media. Services such as Netflix, Disney+, and other streaming platforms have demonstrated that a steady revenue stream can be generated by offering both ad‑free and ad‑supported tiers. Should Xbox’s experiment succeed, it would not only preserve its subscription base but also unlock a previously untapped source of income—a development that could be crucial for the brand at this juncture.
This issue is especially pertinent because console gaming is evolving into a premium offering. Prices for games, consoles, accessories, and downloadable content are rising steadily, making it increasingly difficult for the average consumer to justify the expense.
The result is a growing barrier that prevents casual players from entering the ecosystem. Xbox itself has noted that, when executed correctly, advertising can lower the cost of access to gaming.
Mobile gaming has already shown that ad‑supported tiers can provide a gateway for players who are unwilling or unable to make large upfront purchases. By offering a free or low‑cost entry point, advertisers help subsidize the experience for those players.
Importantly, the model remains optional. Gamers who prefer an uninterrupted experience can still pay a subscription fee to avoid ads.
By providing a two‑tier system, Xbox hopes to keep its loyal fan base happy while simultaneously making games more approachable for newcomers. Although there is no concrete survey data on the current announcement, it is reasonable to assume that the majority of gamers would tolerate a 30‑second commercial if it granted them an hour of gameplay in a beloved or brand‑new title. Xbox likely has internal data supporting this hypothesis. Happydemics’ analysis of 285 in‑game campaigns across the United Kingdom and North America indicates that in‑game advertisements consistently outperform television, social media, and other online formats in terms of recall and attribution.
Players are more likely to remember an ad that appears within a game and correctly associate it with the sponsoring brand. This is where Xbox’s “around‑the‑game” approach—ads displayed before the game launches rather than embedded within the gameplay—becomes intriguing. Our data show that pre‑game placements enjoy a clear advantage in recall and attribution compared with intrinsic in‑game spots.
While traditional TV or social ads may be seen, they do not always translate into a strong brand‑to‑consumer link. Gaming, by contrast, appears to excel in this metric, which explains why companies like Xbox and EA are increasingly exploring ad‑based gaming models. It is essential to note that Xbox’s ads are not in‑game but pre‑game. In‑game ad formats tend to perform better further down the conversion funnel, driving higher brand‑image uplift, consideration, interest, and overall likability.
A combined strategy—leveraging both pre‑game and in‑game ads—could offer advertisers the best of both worlds, though it might also provoke greater resistance from players. Xbox has pledged that the advertisements will be non‑intrusive. By placing ads before the gaming session begins, the company aims to preserve the immersive experience once gameplay starts.
This approach benefits both the player, who enjoys an uninterrupted session, and the advertiser, who wants their message to complement rather than disrupt the experience. Relevance will be key. No one wants to see a promotion for cat food when they do not own a cat, or an ad for a game they have already completed.
By delivering contextual, targeted ads, Xbox can keep players from abandoning the session while giving brands a highly effective platform to reach fresh audiences. Nevertheless, Xbox is venturing into largely uncharted territory. The first unknown is how players will react to the presence of ads; the second is whether the revenue generated will be sufficient to sustain the model over the long term.
The move toward an ad‑supported streaming service 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 initiatives have followed a "watch an ad, earn an extra life" structure.
Xbox’s proposal differs: it asks players to view an ad in order to access a game they already own. Our existing data set does not yet indicate how this will be received. Research on ad‑format perception, however, shows that when respondents recall an ad, they often describe the format as "non‑intrusive" and "immersive"—the two most popular positive descriptors.
If Xbox and future industry peers aim to make advertising a lasting component of gaming, these two qualities will need to remain at the forefront of their strategy. My forecast is that Xbox will neither be the first nor the last platform to experiment with this model. Advertising in games has existed for years, but it has not always been designed with the player’s experience in mind.
Should Xbox succeed in delivering a seamless, optional ad experience, it could pave the way for other companies to follow suit, ultimately making video games more accessible to everyday gamers.