Xbox Ads: A Blueprint for Ad-Supported Gaming

By Mike Florence, Chief Strategy and Planning Officer, dentsu Media

Streaming video services including Netflix and Amazon Prime Video have proved that viewers now largely accept the value exchange inherent in watching a few ads if it’ll save them some money. Now gaming is getting in on the action, too. 

Xbox has announced a new test for ad-supported cloud gaming, during which Xbox Insiders – fans who test unreleased system updates, games, and features – will be able to stream the games they own for free with ads. Xbox claims the gaming experience will remain unchanged, with ads playing before sessions begin. Players will see a two-minute block of multiple ads, before one hour of uninterrupted gameplay. Countdown warnings will then alert players, and if they want to continue playing, they must select a new block of ads to watch before resuming. 

This model – which is currently being piloted on a voluntary basis – could set the future standard for ad-supported options in gaming. However, in order for it to be a true success one thing is clear: ads need to add value to the gaming experience, not friction.

Designing a player-first experience

In-game advertising, including placements and free-to-play models, has existed for decades. To be effective, this new model needs to keep players front-of-mind; otherwise, the entire experience is disrupted. It’s a shift from advertising within games to attention economics. Ads will need to be high-impact and at a low frequency. Players will only welcome well-curated advertising if the interruption factor is low.  

Timing is crucial here. Two minutes of uninterrupted ads may mean that players are likely to switch off their attention and start scrolling on their phone until it’s time to resume gameplay. As a result, grabbing the viewers’ attention in the first few seconds of the ad break will be critical. 

Netflix’s decision to introduce an ad-supported tier five years ago was met with criticism at the time. Many customers didn’t want their viewing experience to be broken up by ads. For Amazon Prime’s ad rollout, customers were frustrated because they had already paid for a membership that had promised ad-free viewing. Yet audiences adjust. Today, Netflix’s ad-supported tier has 250 million viewers worldwide, up from 190 million, and Amazon Prime Video’s ad-supported audience has grown by 15%. 

Once initial frustration subsided, marketers and viewers reaped the rewards, with greater targeting across genre, geography and viewing preferences leading to more personalised experiences, thanks to the data available through these streaming platforms. Gaming offers similar potential. Gaming platforms can provide signals around play styles, genres, engagement habits and communities, creating richer audience understanding than many conventional media channels. 

It’s game on for brands

Brands that become the early adopters of ad-supported gaming will have a head start in understanding how this new environment works. Gaming platforms have evolved far beyond simple entertainment. Moving forward, the winners will be those that understand gamers and their motivations, meeting them where they are. Fundamentally, gaming is a community where brands are invited in and not imposed. For advertisers that means earning attention through relevance and adding to the experience, rather than interrupting it.

The new trial poses important questions around what a fair value exchange between players, platforms and brands will look like over the next few years, and how advertisers can leverage this next generation of media. The success of ad-supported streaming has shown that audiences are willing to accept advertising when it lowers costs and respects their experience. Gaming is unlikely to be any different. 

For brands, success will depend on understanding the context in which people are playing, respecting the community they are part of, and delivering content that earns attention rather than demands it. As ad-supported models continue to expand across entertainment, the winners will be the brands that show up to contribute value and enhance the gaming experience, versus those that just show up.