You’ve just set down your Xbox controller after wiping out the final boss. Now, time for an ad!
The folks at Patentlyze made me aware of a recent patent filing from Microsoft that hints at Xbox’s in-game advertising ambitions.
The filing, published earlier this month, outlines a concept for a content management system that would detect appropriate breaks in streaming gameplay — like completing a level — to insert an ad. Gamers could be rewarded for watching the ad with a credit that offers a set period of uninterrupted gameplay.
The usual patent caveats apply. Companies like Microsoft file many patents, and they don’t always materialize as products or indicate active business priorities. Still, the filing offers insight into how Xbox thinks the next chapter of its nascent in-game ad business could play out — and includes some funky diagrams.
Vincent Tessier, CMO of the gaming company 52 Entertainment, said the patent indicates Xbox is taking a leaf from mobile gaming apps, where the “rewarded video” format is popular. Rewarded videos are opt-in ads that offer viewers an incentive for watching, such as extra lives or in-game virtual currency.
They also command higher prices. The average CPM, or cost per thousand impressions, for a rewarded video ad was around $19.63 on iOS in the US, versus $9.64 for interstitial ads and $1.30 for banners, per a May report from the online gaming platform Playio.
“They’re trying to find low-hanging fruit,” Tessier said.
Xbox wants ads without the aggro
Perhaps wary of rattling the passionate gaming community, Xbox’s ad business has so far been taking baby steps in its expansion. In July, it announced it was testing a way for users to stream games for free by watching ads, rather than paying for a Game Pass subscription.
You have to jump through some hoops to try it out: You need to be a member of its fan-feedback community, Xbox Insiders. Opted-in members then watch two minutes of ads before joining the cloud streaming queue to play their game. They then get access to a one-hour cloud-gaming session.
Ad insiders told me back then that while offering access to cloud gaming solves legitimate use cases — from playing while traveling or accessing games without dedicated hardware — it’s still a small portion of the gaming pie, and wasn’t enough to build a scaled ad business.
Finding natural pauses within gameplay could open up more room for ad inventory — so long as they’re palatable to gamers and the reward for watching seems worth it. Xbox said this summer it wants to ensure ads create value rather than interrupt gameplay, and that it’ll hold ads to the same quality bar as its content.
An attempted turnaround of Xbox’s business began earlier this year under new CEO Asha Sharma. The Microsoft gaming division has cut thousands of jobs and is looking for ways to increase its profit margins.
“Every CEO loves advertising because it’s 100% margin,” Tessier said, pointing to the influx of advertising tiers from the likes of Netflix, Uber, and Amazon Prime Video.
For CMOs, in-game console advertising offers a largely untapped opportunity to reach highly engaged audiences on a big screen.
“The average American may not shop online every day, but there’s a very good chance they’re playing a game,” said Ryan Schulke, of the performance marketing company Fluent.
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