According to two sources engaged in the negotiations, Microsoft wants to allow marketers to display advertising within free-to-play Xbox videogames, and it is now looking for digital marketing businesses that can design the in-game inventory and collaborate with advertising firms to insert the adverts.
This new initiative will expand Xbox's current advertising inventory by enabling more devs to sell ad space and by introducing new titles in which companies could promote their brands.
According to certain individuals, the adverts would appear as, for example, digital banners in an auto racing video game. It is unclear if Xbox will sell additional forms of in-game advertisements, such as avatar skins or video advertising that run in gaming lobbies. It is also unclear if Microsoft has presented the advert option to marketers.
According to sources, this feature is expected to be launched by Q3.
These initiatives have not been confirmed by Microsoft. "We are continuously searching for solutions to enhance the experience for gamers and developers, but we don't have much else to say," a spokesman commented.
Advertisements in smartphone games are fairly common, but they are unusual in console titles.
Xbox presently allows just certain types of advertisements. Companies may already buy advertisements on the Xbox dashboard and in-game adverts on certain titles through third-party providers Yahoo and Anzu, respectively.
Nevertheless, because this new initiative will give any interested game developer the tools to sell adverts, it may introduce Xbox to more sponsors that want to address players.
According to the two individuals, the technology corporation did not appear to be interested in receiving a piece of ad income and instead appeared to be more focused on expanding the Xbox ad platform. According to those sources, advertisement money will be split between the game creator and the adtech firm that displays the advert.
Insiders say Microsoft is not interested in taking a portion of advertising revenues right now since it tries to offer free-to-play game developers more money-making possibilities.
As two insiders mentioned, Microsoft began discussions to create an Xbox in-game advertising network in 2018 or 2019, but the initiative has been expedited due to the 2020 launch of the new console unit and the rise in free-to-play games.
Microsoft is concerned that inserting advertisements into Xbox titles will upset users who don't expect to see adverts when playing console games, so it is taking steps carefully and plans to introduce a "private marketplace" in which only chosen brand names can input adverts into games in a way that does not interrupt the gaming experience, according to the insiders.
They also added that Microsoft is worried about the security of its users' data, so other firms will be unable to utilize it.
While Microsoft collects a lot of customer information from Bing searches and activity on its websites and apps, one of the individuals claimed Microsoft had no intention of allowing marketers to use that information to target consumers on Xbox in the near future.
"The issue with that is that there are regulators and privacy releases that are specific to each system and are not cross-platform compliant," the insider explained. "From what I've read, it's pretty much a 10-year goal, but it's tough because Microsoft is extremely concerned about privacy."
While Microsoft's advertisement goals have grown and faded over time, its intentions for Xbox highlight the company's present optimism. The move also coincides with the increasing popularity of in-game advertising. NBCU, for example, is at the beginning of a collaboration with the in-game ad startup Anzu.
According to industry expert Eric Seufert, Microsoft's purchases of Activision Blizzard (which has an advertising network) and digital marketing company Xandr might contribute to the development of a huge advertising system.
OS Studios CEO John Higgins anticipates that all big game firms will eventually build private advertising marketplaces. According to him, if Microsoft follows through on its intention to build an in-game advertising network, it will draw money away from its rivals such as Sony or Amazon.
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