Virginie Chesnais serves as the chief marketing officer at Happydemics, a platform that specializes in ad‑tech analytics. For many years, gamers have been skeptical about the presence of advertisements within video games, and their concerns are not without merit. The reputation of in‑game ads is mixed at best; players frequently encounter redirects to unrelated websites or apps, misleading content, or poorly designed close buttons that are difficult to locate, all of which contribute to a frustrating experience. A recent study conducted by eMarketer highlighted the severity of the issue: more than half of respondents—52%—said they would stop playing a title if they were bombarded with multiple intrusive ad elements.

Losing half of an audience at the moment you are trying to engage them is hardly an effective strategy for any publisher or platform. Nevertheless, advertisements do not have to be synonymous with annoyance.

The same research revealed a more optimistic side: one in five gamers indicated they would actually increase the amount of time they spend with a game if the in‑game advertising was of a high quality and felt relevant. This suggests that, when executed thoughtfully, ads can enhance rather than detract from the overall experience. Xbox is currently experimenting with an ad‑supported game‑streaming service, and the broader context of rising costs for playing video games makes the prospect of well‑crafted ads especially appealing. The idea of offering a hybrid model—where players can either pay a subscription fee for an ad‑free experience or tolerate brief, non‑intrusive ads for a lower cost—mirrors the successful tiered approaches employed by major streaming platforms such as Netflix and Disney+.

Those services have demonstrated that a dual‑track revenue model can generate substantial income while still attracting price‑sensitive consumers. If Xbox’s experiment proves successful, the company stands to gain in two major ways.

First, it could preserve its existing subscriber base by providing a cheaper entry point for those unwilling or unable to pay full price. Second, it would unlock a completely new revenue stream that could prove vital at a time when the brand faces mounting financial pressures. The relevance of this discussion is underscored by the fact that console gaming is increasingly being positioned as a premium entertainment service. Prices for new consoles, flagship titles, accessories, and downloadable content (DLC) have all been climbing steadily, creating a financial barrier for the average gamer.

In its own announcement, Xbox explicitly noted that advertising, when handled correctly, could lower the cost of entry for many players. Mobile gaming already offers a clear precedent: many free‑to‑play titles rely on ad‑supported tiers that allow users to enjoy the game without an upfront purchase, often in exchange for watching short video ads or engaging with sponsored content.

Translating that model to the console space could open up a new pathway for gamers who might otherwise be priced out of the ecosystem. Importantly, the ad‑supported option would be entirely optional.

Players who prefer an uninterrupted experience could still subscribe to a paid tier, while those who are comfortable with occasional advertising could benefit from reduced fees. This two‑tier system aims to retain loyal fans while simultaneously broadening the audience by making games more accessible. Although there is currently no public survey data specifically about Xbox’s upcoming ad model, industry intuition suggests that a large majority of gamers would tolerate a 30‑second advertisement if it meant gaining an hour of gameplay on a beloved or new title. Xbox’s internal data and market research likely support this assumption.

Data from Happydemics covering 285 in‑game campaigns across the United Kingdom and North America indicate that in‑game advertisements consistently outperform traditional TV, social media, and online display ads in terms of 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.

Xbox’s proposed "around‑the‑game" advertising—ads displayed before the game loads rather than embedded within the gameplay itself—adds another layer of intrigue. Our research shows that these pre‑game placements achieve higher recall and attribution scores compared with ads that appear directly inside the game world. This distinction matters because while viewers can often recall ads seen on TV or scrolling through a social feed, they do not always link those ads to the correct brand.

Gaming, however, appears to create a stronger brand‑ad association, which may explain why companies like EA and Xbox are increasingly exploring ad‑based revenue models. It is crucial to note that Xbox’s ads would be pre‑game, not in‑game. Traditional in‑game ad formats tend to excel further down the conversion funnel, driving improvements in brand image, consideration, interest, and overall likability. A combined approach—leveraging both pre‑game and in‑game ads—could theoretically deliver the best of both worlds for advertisers, though it also risks generating additional pushback from players who are sensitive to any form of interruption.

Xbox has emphasized that any ads shown will be non‑intrusive. By placing ads before the game begins, the platform aims to preserve the immersive experience once gameplay starts.

This approach benefits both gamers, who can enjoy uninterrupted sessions, and advertisers, who want their messages to be part of a positive experience rather than a disruptive nuisance. Relevance will be key.

No gamer wants to see an advertisement for cat food when they do not own a cat, or a promotion for a game they have already completed. Contextual, targeted ads that align with a player’s interests will be essential to prevent users from abandoning the session at the first sign of irrelevant content. When done correctly, this relevance can provide brands with a highly effective channel to reach new audiences while keeping players satisfied.

Nevertheless, Xbox is venturing into largely uncharted territory. There are two primary unknowns: how players will ultimately react to pre‑game advertising, and whether the revenue generated will be sufficient to sustain the model over the long term.

The move toward ad‑supported game streaming reflects the boldness of Xbox CEO Asha Sharma, who has shown a willingness to experiment and take calculated risks. Time will reveal whether this gamble pays off.

Historically, many gaming ad campaigns have been built around the classic "watch an ad, get an extra life" mechanic. Xbox’s proposition differs: it asks players to watch an ad in order to access a game they already own, rather than offering a direct in‑game reward. Our existing data set does not yet provide clear insight into how this will be received. However, broader research on ad format perception indicates that when users recall an advertisement, they often describe the experience using terms such as "non‑intrusive" and "immersive." These descriptors were among the most frequently selected positive attributes in recent surveys.

For Xbox—and any future platform that adopts similar strategies—focusing on these two qualities will be essential to gaining player acceptance. In my view, Xbox will not be the first nor the last company to experiment with this hybrid ad model.

Advertising in video games has existed for years, but it has rarely been implemented with the player’s convenience as the primary consideration. Should Xbox succeed in delivering a seamless, optional ad experience that respects the gamer’s time and preferences, it could set a precedent for other publishers and open up new revenue avenues while making video games more affordable for everyday consumers.